Home Price Appreciation in Weak Economy

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Home Price Appreciation in Weak Economy

Postby DTalos » Mon Apr 15, 2013 6:05 pm

Why are single family homes in desirable neighborhoods of metro Phoenix selling for over $200 a sq ft, sometimes into the $300 a sq ft range? Seems awfully expensive, considering the current economic recession. Many of these homes are "flips" where the most recent sale occurred in the last three months, and now the same house is priced at over $100,000 more. Are people really paying the huge mark-up/profit that house flippers and sellers are seeking? When you look at a property's sales history, many current list prices are nearing peak pricing of 2005-07. If buyers have easy access to what a seller paid for a property, why are they rewarding a flipper with so much profit or a seller who did practically nothing to the house, with a profit? Is emotional buying taking over? Sometimes, houses that look like they've had very few interior upgrades or aren't "flips" are selling for over $100,000 more than two years ago in metro Phoenix despite the area's weak economy and employment levels. Are people just accepting this unjustified by economic fundamentals mark-up and paying it? Here is a random house in the Phoenix suburb of Scottsdale that has a huge current asking price compared to the selling price of two years ago. What gives?

http://www.redfin.com/AZ/Scottsdale/797 ... e/27328611
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Re: Home Price Appreciation in Weak Economy

Postby Honobob » Mon Apr 15, 2013 6:19 pm

Um. SUPPLY AND DEMAND?
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Re: Home Price Appreciation in Weak Economy

Postby Honobob » Mon Apr 15, 2013 6:21 pm

Um. SUPPLY AND DEMAND?
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Re: Home Price Appreciation in Weak Economy

Postby EmergDoc » Mon Apr 15, 2013 6:23 pm

The change from buyer's market to seller's market has been amazingly fast in my opinion.
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Re: Home Price Appreciation in Weak Economy

Postby Honobob » Mon Apr 15, 2013 6:28 pm

EmergDoc wrote:The change from buyer's market to seller's market has been amazingly fast in my opinion.

Just like it's happened every decade for at least the last 6. Why would anyone be surprised?
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Re: Home Price Appreciation in Weak Economy

Postby Scooter57 » Mon Apr 15, 2013 6:36 pm

Prices are driven by comps, but a few speculators buying can cloak the fact that there is very little volume buying at the current price, and fewer families. Check out what a normal number of sales would be for this time of year and how many sales have closed at these new high prices.

Also check who is buying. Is it families or speculators? I have read that investment firms bought up a lot of property hoping to profit from it, but finding the carrying costs higher than expected many are selling now. Don't be the victim of real estate pump and dump!
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Re: Home Price Appreciation in Weak Economy

Postby Dibbels81 » Mon Apr 15, 2013 6:37 pm

We're getting this crazed home buying frenzy in Las Vegas, too. I was lucky enough to buy a home in late 2011 when they were selling for a 1/3 of the price from only 6 years ago. Houses in my neighborhood are now selling for 40% more than what I paid for mine, with literally dozens of offers within 24 hours of listing.
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Re: Home Price Appreciation in Weak Economy

Postby Random Poster » Mon Apr 15, 2013 6:38 pm

Don't overlook the impact of Alberta-oil-money buyers. Lots of Albertans have second homes in Phoenix.
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Re: Home Price Appreciation in Weak Economy

Postby Calm Man » Mon Apr 15, 2013 7:45 pm

Look at what is happening to gold. This is likely a bounce in a long-term real estate bear market. People in the real estate industry or those homeowners who want to feel like their home values are appreciating will disagree with me. If you think it is insane (I do on this matter) don't buy. If you are wrong, so be it.
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Re: Home Price Appreciation in Weak Economy

Postby DTalos » Tue Apr 16, 2013 12:30 am

Honobob wrote:Um. SUPPLY AND DEMAND?



There's a huge supply of houses in metro Phoenix as the area was badly affected by the housing crisis and many people are underwater on their homes. I don't see how demand can ever surpass supply in this market, especially with the weak economy and stagnant income. There are only so many outsiders that can sustain this market.
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Re: Home Price Appreciation in Weak Economy

Postby norookie » Tue Apr 16, 2013 7:27 am

I do not have a link, but know one or two banking institution lending offices and terms have become easier, as in less skin in the game for the purchaser. :? Will they never learn.
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Re: Home Price Appreciation in Weak Economy

Postby Default User BR » Tue Apr 16, 2013 10:49 am

DTalos wrote:
Honobob wrote:Um. SUPPLY AND DEMAND?

There's a huge supply of houses in metro Phoenix as the area was badly affected by the housing crisis and many people are underwater on their homes. I don't see how demand can ever surpass supply in this market, especially with the weak economy and stagnant income. There are only so many outsiders that can sustain this market.

Then the market would sort it out. Do you think buyers are raising offers out of sympathy?


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Re: Home Price Appreciation in Weak Economy

Postby momar » Tue Apr 16, 2013 10:55 am

DTalos wrote:
Honobob wrote:Um. SUPPLY AND DEMAND?



There's a huge supply of houses in metro Phoenix as the area was badly affected by the housing crisis and many people are underwater on their homes. I don't see how demand can ever surpass supply in this market, especially with the weak economy and stagnant income. There are only so many outsiders that can sustain this market.

It sounds like it is a supply problem. http://www.bizjournals.com/phoenix/news ... l?page=all
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Re: Home Price Appreciation in Weak Economy

Postby awval999 » Tue Apr 16, 2013 11:54 am

momar wrote:
DTalos wrote:
Honobob wrote:Um. SUPPLY AND DEMAND?



There's a huge supply of houses in metro Phoenix as the area was badly affected by the housing crisis and many people are underwater on their homes. I don't see how demand can ever surpass supply in this market, especially with the weak economy and stagnant income. There are only so many outsiders that can sustain this market.

It sounds like it is a supply problem. http://www.bizjournals.com/phoenix/news ... l?page=all


The supply problem shoved median Valley home prices to $170,000 in February -- up by 36.5 percent year-over-year, and by nearly 5 percent from the previous month, the report showed

Guess I'd never be buying a house in Phoenix. Up 36.5% y/o/y. LOL. I'd hate myself for not jumping on it last year.
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Re: Home Price Appreciation in Weak Economy

Postby harrychan » Tue Apr 16, 2013 1:11 pm

No matter the economy, people need places to live. After the housing bust, a lot of people learned their lesson and tightened their fiscal responsibility and positioned themselves to be able to buy homes. With low interest rates and lack of short sales / foreclosures, it caused the supply to dry out.
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Re: Home Price Appreciation in Weak Economy

Postby ThatGuy » Tue Apr 16, 2013 1:44 pm

There is very little volume being turned over currently, at least in the Bay Area, which translates to higher prices for what little there is on the market.

I've received multiple flyers in the mail in the past month from realtors trying to drum up business. ThatGal was accosted (nothing aggressive) outside our home by an agent who had a xerox of the recent sales in the area, and he highlighted a comp to show what we could get for our house. Of course, when I looked at the list, it was by far the highest price per square foot.
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Re: Home Price Appreciation in Weak Economy

Postby momar » Tue Apr 16, 2013 4:55 pm

ThatGuy wrote:There is very little volume being turned over currently, at least in the Bay Area, which translates to higher prices for what little there is on the market.

I've received multiple flyers in the mail in the past month from realtors trying to drum up business. ThatGal was accosted (nothing aggressive) outside our home by an agent who had a xerox of the recent sales in the area, and he highlighted a comp to show what we could get for our house. Of course, when I looked at the list, it was by far the highest price per square foot.

Same experience here (east bay). Almost no inventory, many offers above asking, lots of cash bids. After 3 years of flat prices, we saw 20% in the last 6 months of 2012.
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Re: Home Price Appreciation in Weak Economy

Postby DTalos » Wed Apr 17, 2013 7:05 pm

Default User BR wrote:
DTalos wrote:
Honobob wrote:Um. SUPPLY AND DEMAND?

There's a huge supply of houses in metro Phoenix as the area was badly affected by the housing crisis and many people are underwater on their homes. I don't see how demand can ever surpass supply in this market, especially with the weak economy and stagnant income. There are only so many outsiders that can sustain this market.

Then the market would sort it out. Do you think buyers are raising offers out of sympathy?


Brian



No I don't. Despite the weak economy with personal wealth and income levels dropping, there must be a group of investors and savers with a lot of cash on hand who think the economy and the real estate market will improve enough to cover their carrying costs.
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Re: Home Price Appreciation in Weak Economy

Postby Default User BR » Wed Apr 17, 2013 8:24 pm

DTalos wrote:No I don't. Despite the weak economy with personal wealth and income levels dropping, there must be a group of investors and savers with a lot of cash on hand who think the economy and the real estate market will improve enough to cover their carrying costs.

So, supply and demand, as stated before. It's possible that the demand is due to speculators, but it's demand none the less.


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Re: Home Price Appreciation in Weak Economy

Postby lightheir » Wed Apr 17, 2013 8:39 pm

DTalos wrote:
Default User BR wrote:
DTalos wrote:
Honobob wrote:Um. SUPPLY AND DEMAND?

There's a huge supply of houses in metro Phoenix as the area was badly affected by the housing crisis and many people are underwater on their homes. I don't see how demand can ever surpass supply in this market, especially with the weak economy and stagnant income. There are only so many outsiders that can sustain this market.

Then the market would sort it out. Do you think buyers are raising offers out of sympathy?


Brian



No I don't. Despite the weak economy with personal wealth and income levels dropping, there must be a group of investors and savers with a lot of cash on hand who think the economy and the real estate market will improve enough to cover their carrying costs.


There are actually a lot of these buyers. They're not the typical mom and pop families you are thinking of.

Here are two major groups you likely have overlooked that are driving up home prices in the US:

1. International buyers. Often very wealthy. These folks have scooped up nearly 30-40% of the property on sale in the Bay Area of CA in the past year, even if they have no intent of living in these properties more than rarely. Truth is that US real estate, even in pricey Palo Alto, is still downright cheap compared to urban properties in the rest of the world, and if you're an Chinese or Russian new money person, the political risks of having your money in property in the mainland where the gov't can take it from you without explanation or compensation is worth the trouble of investing it in US real estate, in an area you could conceivably escape to if the political environment became unfavorable for whatever reason.

2. Real estate investor groups and/or hedge funds. These guys are coming into the market in highly foreclosed areas hard to scoop up discounted real estate for rental properties.

Alas, this just makes it that much harder for people who actually want primary residences to purchase.
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Re: Home Price Appreciation in Weak Economy

Postby stratton » Tue Apr 23, 2013 6:43 pm

lightheir wrote:2. Real estate investor groups and/or hedge funds. These guys are coming into the market in highly foreclosed areas hard to scoop up discounted real estate for rental properties.

Right now is probably the best investment environment for single family rentals in 20 years. Add in 10 year US Treasuries paying 1.7% and a 4% or 5% yield on rentals looks positively great.

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Re: Home Price Appreciation in Weak Economy

Postby jeffyscott » Sun Apr 28, 2013 6:06 pm

DTalos wrote:Sometimes, houses that look like they've had very few interior upgrades or aren't "flips" are selling for over $100,000 more than two years ago in metro Phoenix despite the area's weak economy and employment levels.


Case-Shiller index does show Phoenix up about 25% from Jan 2012-Jan 2013, but it's still take about another 80% increase to get back to the 2006 peak :shock: .

http://www.standardandpoors.com/indices ... --p-us----
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Re: Home Price Appreciation in Weak Economy

Postby deanbrew » Mon Apr 29, 2013 8:14 am

jeffyscott wrote:
Case-Shiller index does show Phoenix up about 25% from Jan 2012-Jan 2013, but it's still take about another 80% increase to get back to the 2006 peak :shock: .-


Yeah, you can't look solely at the low point in a market like Phoenix's (or Las Vegas or Florida). Home prices plummeted so much in some markets that you also need to look at prices from 2000-2008, as well as demographics and construction prices. Even if prices increased dramatically over the past year, that doesn't necessarily mean the market is overheated, it just may be a correction to an overdone crash. Are prices back up to the point where new construction is economically feasible? Is there job and population growth? I don't know the answers to these questions in Phoenix, but you need to look at more than one year's price change.
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Re: Home Price Appreciation in Weak Economy

Postby lightheir » Mon Apr 29, 2013 1:44 pm

deanbrew wrote:
jeffyscott wrote:
Case-Shiller index does show Phoenix up about 25% from Jan 2012-Jan 2013, but it's still take about another 80% increase to get back to the 2006 peak :shock: .-


Yeah, you can't look solely at the low point in a market like Phoenix's (or Las Vegas or Florida). Home prices plummeted so much in some markets that you also need to look at prices from 2000-2008, as well as demographics and construction prices. Even if prices increased dramatically over the past year, that doesn't necessarily mean the market is overheated, it just may be a correction to an overdone crash. Are prices back up to the point where new construction is economically feasible? Is there job and population growth? I don't know the answers to these questions in Phoenix, but you need to look at more than one year's price change.


I actually use the signs that when hedge fund managers are scooping properties en masse, they're probably on to something that we don't know quite yet. At the same time, if you start trying to do the same, you'd probably find yourself in direct competition with them with their deep pockets, so it doesn't really help you in terms of knowing what to do - the trick is getting there BEFORE the hedge fund guys, which is more luck than anything else.
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Re: Home Price Appreciation in Weak Economy

Postby Imperabo » Mon Apr 29, 2013 2:48 pm

It's my opinion based on personal experience that prices got pushed below their "natural" level by changes in the appraisal process. Appraisers were baking in assumptions about a falling market into their valuations, which became a self-fulfilling prophesy. I sold a house a few years ago that got immediate multiple offers up to $40k above the appraisal, but I had to lower the price so they could get the loan. Clearly, the price that a willing buyer and a willing seller agreed upon was not setting the market. I predicted at that time than whenever the perception of falling markets finally shifted (probably because houses were priced at the cost to built) the prices would rebound rapidly. Now I'd like the 40k back that was stolen from me. . .
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Re: Home Price Appreciation in Weak Economy

Postby deanbrew » Mon Apr 29, 2013 3:01 pm

Imperabo wrote:It's my opinion based on personal experience that prices got pushed below their "natural" level by changes in the appraisal process. Appraisers were baking in assumptions about a falling market into their valuations, which became a self-fulfilling prophesy. I sold a house a few years ago that got immediate multiple offers up to $40k above the appraisal, but I had to lower the price so they could get the loan. Clearly, the price that a willing buyer and a willing seller agreed upon was not setting the market. I predicted at that time than whenever the perception of falling markets finally shifted (probably because houses were priced at the cost to built) the prices would rebound rapidly. Now I'd like the 40k back that was stolen from me. . .


Hmmm, I'm wondering who had a gun against your head or who kidnapped your child. You were not a willing seller?
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Re: Home Price Appreciation in Weak Economy

Postby Imperabo » Mon Apr 29, 2013 3:10 pm

deanbrew wrote:
Imperabo wrote:It's my opinion based on personal experience that prices got pushed below their "natural" level by changes in the appraisal process. Appraisers were baking in assumptions about a falling market into their valuations, which became a self-fulfilling prophesy. I sold a house a few years ago that got immediate multiple offers up to $40k above the appraisal, but I had to lower the price so they could get the loan. Clearly, the price that a willing buyer and a willing seller agreed upon was not setting the market. I predicted at that time than whenever the perception of falling markets finally shifted (probably because houses were priced at the cost to built) the prices would rebound rapidly. Now I'd like the 40k back that was stolen from me. . .


Hmmm, I'm wondering who had a gun against your head or who kidnapped your child. You were not a willing seller?


That's not a fair comment. When people sell a house they are generally just looking for the market price. It's not like they are only willing to sell if they can get a certain price (usually). If I had waited the price would have declined further, for exactly the reason I described.
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Re: Home Price Appreciation in Weak Economy

Postby billern » Mon Apr 29, 2013 4:31 pm

I live in California and the local market does not seem rational. As someone who does not have a need to own a house yet, I've decided to wait the market out on this one and keep my savings invested in the stock market which has higher expected returns. Worst case I'm wrong and I'll have to buy a more expensive house in a couple years.
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Re: Home Price Appreciation in Weak Economy

Postby jeffyscott » Mon Apr 29, 2013 4:33 pm

deanbrew wrote:Hmmm, I'm wondering who had a gun against your head or who kidnapped your child. You were not a willing seller?


Sounds like there was a willing buyer and a willing seller at a price that was $40K higher than the price at which there was a willing lender. Thus the bank, through their appraiser set the price, not the buyer and the seller. I think the bank blowing up a deal by saying they would not loan any money unless the buyer comes up with another $40K in cash qualifies as a "gun" of sorts.
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Re: Home Price Appreciation in Weak Economy

Postby deanbrew » Mon Apr 29, 2013 4:43 pm

If I had "multiple offers" well above a certain price, I would not accept that low price that I thought was unreasonable. Did none of the offers include a sizable down payment where appraised value isn't so important? Was there only one lender and one appraiser in this market? Did anyone point out any errors in the appraisal or hire another appraiser?

Sorry, but blaming the appraiser seems both too easy and incomplete.
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Re: Home Price Appreciation in Weak Economy

Postby lightheir » Mon Apr 29, 2013 6:04 pm

billern wrote:I live in California and the local market does not seem rational. As someone who does not have a need to own a house yet, I've decided to wait the market out on this one and keep my savings invested in the stock market which has higher expected returns. Worst case I'm wrong and I'll have to buy a more expensive house in a couple years.


No easy answer here, but I will add as I mentioned above, that a lot of the desirable areas of CA are getting huge amounts of interest from Asian and other Eastern buyers, particularly because US real estate in CA is downright discounted compared to the crazy rates you're seeing in Hong Kong, Beijing, Taiwan, England, and elsewhere. When you've got that much cash bidding for homes, it raises the comps of all the houses in the area.

I think it's a very good idea not to dive in too riskily into the housing market as you can never predict when these things will change, but I will add that had I waited a measly one year to buy my home in Norcal, I would have been looking at a 20%+ price appreciation and would have been completely priced out of my current home. It's really volatile now, but there unfortunately was an element of market correction from the downturn (prices here didn't even drop at all during the recession though) and I suspect another comparably sized dip like that isn't going to happen in the near future, at least within the next few years.

I did know when I bought that it was a good time to be a buyer as nobody was buying - it seems to usually pay off in finance to be counter the prevailing wisdom.
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Re: Home Price Appreciation in Weak Economy

Postby Curlyq » Mon Apr 29, 2013 10:10 pm

In my area, we went from over 4,000 properties on the MLS, to about 400 now. 400 homes represents roughly a one month supply. There are still thousands of homes in the shadow inventory. Not sure when they'll get released.
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Re: Home Price Appreciation in Weak Economy

Postby backofbeyond » Mon Apr 29, 2013 11:00 pm

Ok for you Real Estate gurus out there: Any idea on how to forecast the Phoenix market?

I’ve done a lot of demographic studies on when baby boomers may be retiring and possibly moving to places like the Southwest.

According to my research, on paper, around the year 2022, the “hump” of BB will be in the retirement range of 62-65. So that may be the best time to sell based soley on retiree demos.

Noted I used the magical words, "may” and “possibly”.

The reason I’m asking is I have a cattle ranch on the outskirts of Phoenix that I’ve owned for almost 20 years. And I hope to sell it during the next “boom” :P
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Re: Home Price Appreciation in Weak Economy

Postby Valuethinker » Wed May 01, 2013 10:02 am

backofbeyond wrote:Ok for you Real Estate gurus out there: Any idea on how to forecast the Phoenix market?

I’ve done a lot of demographic studies on when baby boomers may be retiring and possibly moving to places like the Southwest.

According to my research, on paper, around the year 2022, the “hump” of BB will be in the retirement range of 62-65. So that may be the best time to sell based soley on retiree demos.

Noted I used the magical words, "may” and “possibly”.

The reason I’m asking is I have a cattle ranch on the outskirts of Phoenix that I’ve owned for almost 20 years. And I hope to sell it during the next “boom” :P


Water. I imagine water rights is a key factor? No subdivisions without water.

From memory, the peak of the Baby Boom was 1956. So 2016 would be the year that bunch turns 60. The high Canadian dollar has undoubtedly helped Phoenix-- all those Alberta snowbirds.

If we watch what happened in Canadian housing prices (especially in Ontario) they hit an all time real peak in 1989, the year the 1961 Baby Boomer bought his/ her first home. They then crashed, and have only now (in what looks like another bubble) reached their previous peaks in real terms (crossed that line in about 2004/ 5 I think). Although the Baby Boom continued until the spring of 1964 (it ended 9 months earlier in the US, because the Pill went on sale in the USA 9 months earlier), 1961 was the last really big year of the Baby Boom-- I think 1963 was about half the births of 1956?

(Alberta had an oil bubble in the early 1980s, like Texas, and I think even in Calgary, homes then took about 20 years to catch up on their prices then. AFAIK despite boom economics, neither Edmonton nor Calgary has done anything that looks like a bubble this time, although the whole country looks overheated compared to the USA).

By extension, in 2021 those same 1961 Boomers will be selling, driving down Canadian housing prices, which will give them less firepower to buy in Phoenix.

My guess, such as it is, is that you want to be thinking of getting out around 2018 ie wel before 2020 at which point most of the BB will be over 60.

If the US tightens up on immigration, and given the decline in cross border migration in the last 5 years, another major source of demand in the Sunbelt ie young Hispanic families, will also be drying up.

Lower housing prices and lower equity returns probably mean more BBs will try to work longer, before moving to their final retirement homes. Also the end of the DB pension scheme has hit most late Boomers- -those 401ks are looking pretty measly by comparison.
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Re: Home Price Appreciation in Weak Economy

Postby jeffyscott » Wed May 01, 2013 6:10 pm

Valuethinker wrote:Although the Baby Boom continued until the spring of 1964 (it ended 9 months earlier in the US, because the Pill went on sale in the USA 9 months earlier), 1961 was the last really big year of the Baby Boom-- I think 1963 was about half the births of 1956?


Nothing nearly so extreme, US births by year:

1956 - 4,218,000
1957 - 4,308,000
1958 - 4,255,000
1959 - 4,295,000
1960 - 4,257,850
1961 - 4,268,326
1962 - 4,167,362
1963 - 4,098,020

Read more: Live Births and Birth Rates, by Year | Infoplease.com http://www.infoplease.com/ipa/A0005067. ... z2S55RrU42

Also interesting to see at that link that, while the rate today is much lower,I the number of births per year is about the same as during the "boom".
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Re: Home Price Appreciation in Weak Economy

Postby backofbeyond » Wed May 01, 2013 7:08 pm

Valuethinker....I couldn't agree more with your water and Canadian comments. A vast amount of my neighbors near my ranch are from Canada, so you are spot on. I hope they continue to get the word out and keep land prices climbing for years ahead.

However, like Jeffy posted, those are pretty much the numbers that I've researched over the years. I actually have it all graphed out to show the high points, but again, from my analysis the early 2020's will be when the BB will be hitting the high water mark for "nomral" age of retirement. As mentioned above, this is only a guestimate of potential market prices. About 15% of the ranch I own is in shares with my siblings, who are older than I. So we've agreed to start subdividing in two years to help them out with the retirement. So that will give me insight on what maket prices really are.

Thanks to both of you for your input. Appreciate all chrystal balling! :P
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Re: Home Price Appreciation in Weak Economy

Postby WhyNotUs » Fri May 03, 2013 10:29 am

Lows were too far below replacement and rental value
BIG blocks of investor dollars going into rentals in select markets- ex. Phoenix
Low interest rates and tax policy make these attractive relative to other investments
Lack of building during 2009-2012
Human nature- combined above create a sense of urgency which attracts the sheep and a reinforcing loop is created
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Re: Home Price Appreciation in Weak Economy

Postby Valuethinker » Fri May 03, 2013 3:15 pm

jeffyscott wrote:
Valuethinker wrote:Although the Baby Boom continued until the spring of 1964 (it ended 9 months earlier in the US, because the Pill went on sale in the USA 9 months earlier), 1961 was the last really big year of the Baby Boom-- I think 1963 was about half the births of 1956?


Nothing nearly so extreme, US births by year:

1956 - 4,218,000
1957 - 4,308,000
1958 - 4,255,000
1959 - 4,295,000
1960 - 4,257,850
1961 - 4,268,326
1962 - 4,167,362
1963 - 4,098,020

Read more: Live Births and Birth Rates, by Year | Infoplease.com http://www.infoplease.com/ipa/A0005067. ... z2S55RrU42

Also interesting to see at that link that, while the rate today is much lower,I the number of births per year is about the same as during the "boom".


Thank you!

Good stuff.

I think the Canadian drop off may have been sharper-- will check at some point. Canadian Baby Boom started later (it took longer to move the troops back from Europe). I do recall the drop after 1964 was particularly sharp.
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Re: Home Price Appreciation in Weak Economy

Postby Imperabo » Fri May 03, 2013 4:21 pm

deanbrew wrote:If I had "multiple offers" well above a certain price, I would not accept that low price that I thought was unreasonable. Did none of the offers include a sizable down payment where appraised value isn't so important? Was there only one lender and one appraiser in this market? Did anyone point out any errors in the appraisal or hire another appraiser?

Sorry, but blaming the appraiser seems both too easy and incomplete.



Effectively, yes, there was only one lender and one appraiser. All of the buyers for my market were going for FHA loans. The FHA doesn't allow a second appraisal for 6 months, I believe.
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Re: Home Price Appreciation in Weak Economy

Postby Clearly_Irrational » Fri May 03, 2013 4:46 pm

Housing stock in the Portland, OR area has shrunk considerably over the last six months. The value of my existing properties has gone up 31% over the last 12 months. (Take that stock market!) The market seems to be fragmented though, different types of properties are experiencing different rates of growth with some sill in decline.
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Re: Home Price Appreciation in Weak Economy

Postby MnD » Fri May 03, 2013 5:57 pm

More anecdata.............
Denver - One of the smaller homes on my block had 14 above asking price offers on the first day it was listed a few weeks ago.
We never dropped that much but the current prices overall seem to be at or above the past market peak.

Supply is very tight so anything decent that comes on the market is mobbed with offers - people seem to think prices will just keep going higher.
It's possible - the last time we ran out of supply following a real estate bust, prices went up around 10% a year pretty reliably for 1991-2000.
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Re: Home Price Appreciation in Weak Economy

Postby tfb » Fri May 03, 2013 6:07 pm

Imperabo wrote:Effectively, yes, there was only one lender and one appraiser. All of the buyers for my market were going for FHA loans. The FHA doesn't allow a second appraisal for 6 months, I believe.

A willing buyer who can only get a loan from FHA isn't really a qualified buyer. Someone with little skin in it can be very much willing to lose the lender's money.
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Re: Home Price Appreciation in Weak Economy

Postby Valuethinker » Sat May 04, 2013 11:04 am

MnD wrote:More anecdata.............
Denver - One of the smaller homes on my block had 14 above asking price offers on the first day it was listed a few weeks ago.
We never dropped that much but the current prices overall seem to be at or above the past market peak.

Supply is very tight so anything decent that comes on the market is mobbed with offers - people seem to think prices will just keep going higher.
It's possible - the last time we ran out of supply following a real estate bust, prices went up around 10% a year pretty reliably for 1991-2000.


The lag between supply and demand in most US metropolitan markets is (guess) only about 18 months?

Consider:

- housebuilder either has land, or has to buy land and get zoning permission (guessing takes typically 2 years?)
- house has to be built (6 months max, but seasonal depending on weather conditions)

Most housebuilders have a 'land bank' of permitted land.

The 3rd restraining factor might be availability of credit to housebuilders/ shortage of subcontractors and labour. That should not be a big constraint right now (although unskilled labour was often immigrant/ illegal, at least at the peak of the boom).

Contrast to 1991-2000:

- US economy is not recovering strongly from recession - dropping unemployment
- lending to homebuyers is probably not getting easier the way it was then (a steady downward fall in mortgage rates and probably easing of borrowing rules, post the S&L debacle)
- there is an 'overhang' of homes in negative equity, in repossession or bought by investors. As prices rise, they will start to sell

Balanced against this there is a 'millennial' generation that has not had a chance to buy a house, yet-- demographic pressure building up.

My guess (and only that) is you get in most markets 1-2 years of +10% growth as demand and supply rebalance, and then probably a flattening out to 'normal' ie c. 5% pa growth. But it really will depend on which market.
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Re: Home Price Appreciation in Weak Economy

Postby WhyNotUs » Sun May 05, 2013 9:52 pm

One data point- 53% of all closings in Las Vegas last month were to absentee owners. Has averages 50%+ for more than a year. Amazing impact on local home market.
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Re: Home Price Appreciation in Weak Economy

Postby Watty » Sun May 05, 2013 10:55 pm

Many of these homes are "flips" where the most recent sale occurred in the last three months, and now the same house is priced at over $100,000 more.


Even in a normal market part of the price difference could be that the last sale was a by distressed seller or foreclosed house that was sold at a discount and the current sale price is not a distress sale.
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Re: Home Price Appreciation in Weak Economy

Postby 3CT_Paddler » Sun May 05, 2013 11:12 pm

Here in Atlanta its amazing how quickly the switch has flipped in many areas. I think inventory was slowly working its way down, but the last three months, demand has shrunk good inventory big time. Someone else mentioned the market being fragmented, and I would second that. A good home in a good school district is going very fast at or above asking price. But there are still many areas that are pre-2000 levels on a nominal price basis.

Also in the past 6-12 months a fairly large contingent of large investor groups have been buying up homes in the area to rent (which I am not a fan of in a residential neighborhood). Even if it does help overall price appreciation in the short term, in the long term, it typically is bad for the neighborhood.
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Re: Home Price Appreciation in Weak Economy

Postby Valuethinker » Mon May 06, 2013 2:48 am

3CT_Paddler wrote:Here in Atlanta its amazing how quickly the switch has flipped in many areas. I think inventory was slowly working its way down, but the last three months, demand has shrunk good inventory big time. Someone else mentioned the market being fragmented, and I would second that. A good home in a good school district is going very fast at or above asking price. But there are still many areas that are pre-2000 levels on a nominal price basis.

Also in the past 6-12 months a fairly large contingent of large investor groups have been buying up homes in the area to rent (which I am not a fan of in a residential neighborhood). Even if it does help overall price appreciation in the short term, in the long term, it typically is bad for the neighborhood.


Free markets at work. Money chasing returns.

In the short run it's very good news for prices. A widely echoed theme is that people trying to buy houses, investors go there first.

It's hard to forecast what that does in the medium term. Maybe we are in a new era where institutional investors own large amounts of housing (non apartment) and more people rent, fewer own. More likely, in 3-5 years I would imagine these investors want to sell-- doubtless individual demand will have returned by then.

IN the short run it contributes to strong pricing/ price spikes. In the medium term maybe it flattens out pricing? As interest rates rise, perhaps it just gets less attractive.

Like all these ideas, I suspect the first movers into the market will make a bundle, and the late comers will get hurt. Houses *cost* to own and keeping them maintained etc. requires a lot of maintenance, management etc.
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Re: Home Price Appreciation in Weak Economy

Postby whomever » Mon May 06, 2013 7:42 am

Clearly, the price that a willing buyer and a willing seller agreed upon was not setting the market.


I thing 'willing buyer' really means 'willing buyer, who actually has the money'. I might be willing to pay a billion dollars for the Hope diamond, if I had a billion dollars. But that doesn't mean the Hope diamond is worth a billion, because I don't have a billion, and no one in their right mind would loan me the billion either.

I get that it hurts, though. We tend to look at the beneficial features of markets, like valuable optimal allocation of assets, but that looks best in a stable market. Markets also have bugs, like jumping around arbitrarily which randomly divide people into winners and losers.
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