Real Estate Bubble?

[harley]

You do have to spruce up the house in any market to sell it for the right price. Fresh coat of paint, carpet, take care of deferred maintenance, deep cleaning, declutter and/or move out. Having said that, I have always done buy first sell later approach. It's just easier to move and no double move. Yes, you do have to come up with the extra down payment and carry two mortgages so there is that.

Sometimes the right price is what you can get for not having to spruce up the house. When I inherited DM's house it was a pit. Out in the country, far from support and amenities, and 30 years of poor maintenance and aging. I sold it as is, and I'm sure I could have spent more and made (even?) more. But the price difference was worth it to me to not have to deal with all that crap. Personally, I think the buyer overpaid, but that's because I know what it would take to turn that place into a house I'd consider living in.

 

[Scuba]

Hard to know when the timing is right, but we are very glad we bought our place in the So CA desert in late 2019 rather than waiting. Prices have accelerated dramatically since we bought. A place in our neighborhood similar to ours sold within a couple of weeks for a price around 70% higher than what we paid.

Regarding rentals, our coastal condo just rented out for 10% above what our 2019-2020 tenant was paying. New tenant signed a two-year lease and started paying rent a month before moving in just to make sure he got our place. There was another interested tenant who hesitated one day on committing to two years. That cost him the opportunity to live there.

 

[pjigar]

Sometimes the right price is what you can get for not having to spruce up the house. When I inherited DM's house it was a pit. Out in the country, far from support and amenities, and 30 years of poor maintenance and aging. I sold it as is, and I'm sure I could have spent more and made (even?) more. But the price difference was worth it to me to not have to deal with all that crap.

Hassle vs better profit. There is a whole industry who would trade hassle for a tidy profit. Prefect house is a requirement in our high end neighborhood. Never mind the buyer who would rip half of the stuff out after the sale is completed.

 

[LRDave]

Real estate sales, and real estate rentals, both markets are just a couple of the symptoms of the federal government serial trillion dollar printing press spending programs. $1 today will be worth only 75 cents next year (or next month). Shades of Weimar Germany.

Bolded is hyperbole. And $1 today = $0.75 next year is not Weimar Germany.

 

[RetireeRobert]

Bolded is hyperbole. And $1 today = $0.75 next year is not Weimar Germany.

I didn't say it "was" Weimar germany. Don't know what the word "shades" implies?

 

[Keim]

I didn't say it "was" Weimar germany. Don't know what the word "shades" implies?

Pretty long shade. Their inflation rate was 322%. Per month.

 

[stephenson]

As always, Wiki is pretty darn good!

Couple of books my professor liked and taught with:

"Weimar, A Cultural History," 1980, Walter Laqueur

"Weimar and the Rise of Hitler." 1979, A. J. Nicholls

 

[figuy1]

It's hard to say whether it's a bubble that will burst and prices drop, will they just not grow as quickly in the future after the market cools off.
With interest rates on 30-year mortgages, the last 2.5 years dropping from roughly 4.75% to 2.75%, payments on the same mortgage have dropped 22% so people have much more buying power now than they did a few years ago. In other words, even if houses have gone up 30% percent the past two years, mortgage payments might have barely gone up more than inflation. Also, the stock market is going up even faster than most real estate markets so it takes fewer and fewer shares to afford the down payment even with housing prices going up so quickly.

I think for a lot of the markets that are hot now such as the mountain west region, it will depend on if work from home becomes a more permanent thing or will some of the bosses try to get back to "normal" and try to cut loose some of the people who moved away from home base.

 

[ivinsfan]

What's interesting is a lot of these won't be able to deduct all the interest they pay due to the caps on home value the feds recently put into play.


So yes payments might be lower but they would have to pay some of it with after tax dollars.

 

[REWahoo]

Back on topic, the residential real estate market in Texas has a long history of gradual appreciation at best, roughly keeping up with inflation. Those of us living here have watched other markets (like California) experience huge increases in valuation with a sense of awe, knowing that could never happen here. Of course "never say never" because it has.

It started in hot spots like Austin and has now spread everywhere. First hand example, the house across the road from us, a 4 BR, 2,700 SF single story home with a pool on 5 acres. It also has an 800 SF building used by a previous owner who had an eBay business.

The current owner purchased it three years ago for $490k and has made no improvements. He put it on the market a few days ago, asking $675k and told me this morning he had a contract for $690k. That's nuts.

I keep seeing articles saying we aren't in a bubble and giving all the perfectly logical reasons for the huge run-up in prices. Whenever I read them I end up hearing "this time it's different". And we all know how historically accurate that statement has been.

 

[chassis]

California, PNW and Manhattan markets get headlines. Sometimes also Florida.

The vast majority of the country sees boring price growth for principal dwellings. It’s so boring that headlines usually aren’t written about it.

We’re not in a primary dwelling bubble now. Lots of reasons why.

 

[Sunset]

California, PNW and Manhattan markets get headlines. Sometimes also Florida.

The vast majority of the country sees boring price growth for principal dwellings. It’s so boring that headlines usually aren’t written about it.

We’re not in a primary dwelling bubble now. Lots of reasons why.

Due to the bubble
Our house is after nearly 20 yrs worth 25% more than we paid for it.
No housing inflation here...

 

[REWahoo]

We’re not in a primary dwelling bubble now. Lots of reasons why.

When I see a property that has appreciated in value an average of 3%/yr over a 20 year period suddenly increase 40+% over the past three years, I'm more than a little skeptical.

 

[ExFlyBoy5]

We’re not in a primary dwelling bubble now. Lots of reasons why.

Bubble? Well, depends on your definition I suppose. Ridiculous amount of housing inflation over the last 18 months? My DW who is "in the biz" over several states across the country is calling it "stark raving mad"

 

[Walt34]

I keep seeing articles saying we aren't in a bubble and giving all the perfectly logical reasons for the huge run-up in prices. Whenever I read them I end up hearing "this time it's different". And we all know how historically accurate that statement has been.

My DW who is "in the biz" over several states across the country is calling it "stark raving mad"

Yabut... This time it's really, really different!

I'm starting to see some articles about large employers telling employees that they need to get their respective butts back in the offices. And lots of employees responding by saying "Take your job and shove it..."

It'll be interesting to see how this all pans out. I can say that because I'm not interested in working, buying real estate, or selling any.

 

[W2R]

It'll be interesting to see how this all pans out. I can say that because I'm not interested in working, buying real estate, or selling any.

Exactly!!! I am sitting on the sidelines with popcorn, watching all this great real estate entertainment.

Right now our plan is to never move or look for a job, ever again.

 

[braumeister]

Right now our plan is to never move or look for a job, ever again.

One of my neighbors (in his 80s) says "The only way I'm leaving this house will be with a toe tag attached."

 

[W2R]

One of my neighbors (in his 80s) says "The only way I'm leaving this house will be with a toe tag attached."

Well said!!! That's what we are thinking, any way.

 

[finnski1]

One of my neighbors (in his 80s) says "The only way I'm leaving this house will be with a toe tag attached."

yeah I always tell my wife that the only way I'm leaving this house is "feet first on a stretcher"
Of course I now have to monitor her online shopping for any medical supply stores.

 

[Another Reader]

Got my homeowner's insurance bill in the mail this morning. Up over 90 percent. About a month ago, I got a letter from State Farm about how all these services to protect us from wildfires were being added to our policies.

About an hour after I opened the letter, I got an automatic notification of a 30 plus acre wildfire a couple of miles away. CalFIRE was on top of it and there wasn't a lot of wind, so no big deal.

I recently raised my insured value to $500 per square foot of enclosed living space. Not sure I could rebuild for the insured value, even with the automatic 10 percent building cost protection on top. A lot similar to mine would go for at least $500k. Contractors can't meet demand already. So there are multiple factors driving prices in the Bay Area, not just low interest rates or people working from home.

My thinking is a lot of what has driven prices skyward here for decades is moving into the more desirable markets across the country. Not enough existing supply, constraints on new supply, and more people in the market, i.e. demographics. Interest rates are juicing prices, but the underlying demand is very strong.

 

[rodi]

As mentioned earlier in this thread - we've been watching the local market with the idea that if the right place came along, we'd downsize sooner than an our ideal timing. (Have re-thought this and won't make any moves for at least two years.)

One of the homes that caught our attention was listed at a (very much) stretch price for our budget - but checked off 100% of DH's boxes and 75% of mine. It also had a sentimental side to it - same street (but closer to the beach) that my grandparents lived when I was growing up. We decided we'd go look at it - but it went pending before we could get to see it. Judging by the shortness of pending to sold - it must have been a cash offer... For $205K over the asking price!!!!!
https://www.redfin.com/CA/San-Diego/1151-Missouri-St-92109/home/5133745

 

[SecondCor521]

I recently raised my insured value to $500 per square foot of enclosed living space. Not sure I could rebuild for the insured value, even with the automatic 10 percent building cost protection on top. A lot similar to mine would go for at least $500k. Contractors can't meet demand already. So there are multiple factors driving prices in the Bay Area, not just low interest rates or people working from home.

This puzzles me. Would you not rebuild on the same lot if your house burned down? The usual thinking around here is that you only need to insure the structure "because dirt doesn't burn" (which is probably not true, but the idea being that even if the house is completely gone there's still a buildable lot there that you own.)

https://www.redfin.com/CA/San-Diego/1151-Missouri-St-92109/home/5133745

Wow. The ocean is really expensive.

 

[rodi]

This puzzles me. Would you not rebuild on the same lot if your house burned down? The usual thinking around here is that you only need to insure the structure "because dirt doesn't burn" (which is probably not true, but the idea being that even if the house is completely gone there's still a buildable lot there that you own.)

That's my understanding as well - not only do you already own the land - chances are there are utilities to the site already - which is another 'fresh lot' cost of building. But... If *construction* costs are $500/sf in your area - then it makes sense.

Friends found a lot that had a burnt down home on it, in an established sought after neighborhood. They still spent plenty building their dream home - but having the utilities in place definitely saved them about $100k by their estimations.

 

[Another Reader]

This puzzles me. Would you not rebuild on the same lot if your house burned down? The usual thinking around here is that you only need to insure the structure "because dirt doesn't burn" (which is probably not true, but the idea being that even if the house is completely gone there's still a buildable lot there that you own.)



Wow. The ocean is really expensive.

The house is worth about $1.8 million today. 32 years old, no remodelling. Rebuilt to current standards and tastes, it would be over $2 million. But I likely can't build it for the maximum insured value of the structures.

 

[RetireeRobert]

One of the homes that caught our attention was listed at a (very much) stretch price for our budget - but checked off 100% of DH's boxes and 75% of mine. It also had a sentimental side to it - same street (but closer to the beach) that my grandparents lived when I was growing up. We decided we'd go look at it - but it went pending before we could get to see it. Judging by the shortness of pending to sold - it must have been a cash offer... For $205K over the asking price!!!!!
https://www.redfin.com/CA/San-Diego/1151-Missouri-St-92109/home/5133745

Thanks for the link! Using "street view" at the link, I took a nice walk toward the ocean.

That house also checks off a lot of my boxes too (except for laundry in garage, and the gas range). But, it's sold already.