Tales from this insane real estate market [Home sales]

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hotscot
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Re: Tales from this insane real estate market

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Mind telling me about your music system?
I have upgraditis.
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Re: Tales from this insane real estate market

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ASpenderInRecovery
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Re: Tales from this insane real estate market

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TheDogFather wrote: Fri Sep 10, 2021 12:05 pm
rascott wrote: Thu Sep 09, 2021 5:37 pm Home listing came live at 10a. Was inside the home before 2p. Called listing agent at 230p to present very aggressive offer.

Listed at $590k.

Home was already sold at 11a, sight unseen, cash, no contingencies, $100k over asking.

Didn't even get the offer in front of the sellers.
Where was this?

We are putting our house on the market at the beginning of October in northern Virginia, and very curious if the market is slowing. After significant price increases and many houses seeing quick sales, inventory is low again.
I’m the OP to this thread and also live in Northern VA. Rest assured that updated homes are still selling quick and way over asking! Two weeks ago I made an offer on a nicely updated house listed at $1.15M. Sellers had 2 days of private tours, canceled the scheduled open house, and accepted an offer for 100k over list with no contingencies. I’m too conservative to waive all contingencies so I missed out on that one. I am seeing outdated homes sit on the market for 30 days and require 5% price reductions to sell, but I’d argue those homes were overpriced to begin with.

I hope you have similar success with your home sale!
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Re: Tales from this insane real estate market

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I forget what your question is...
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Re: Tales from this insane real estate market

Post by Inframan4712 »

noraz123 wrote: Fri Sep 10, 2021 1:40 am
rascott wrote: Thu Sep 09, 2021 5:37 pm Home listing came live at 10a. Was inside the home before 2p. Called listing agent at 230p to present very aggressive offer.

Listed at $590k.

Home was already sold at 11a, sight unseen, cash, no contingencies, $100k over asking.

Didn't even get the offer in front of the sellers.
This is truly insane, just as the thread title suggests.

What surprises me the most isn't the waived contingencies, all cash offer, or $100k over asking. It's that the sellers didn't wait a day to accept an offer. Or even a few hours.
As a recent seller who accepted a cash, no-contingency offer at 12% over actual appraised value (because we did a refinance two months before selling), and who also had other people who wanted to see the house because this is a desirable location, I can say the offer ticked all the boxes and we could move on with our lives.

An all cash (eliminating risk of appraising too low), no-contingency (eliminating difficult buyers who either nickel and dime you to death or walk away at the last minute) offer is too good to pass up.
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unclescrooge
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Re: Tales from this insane real estate market

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mikejuss wrote: Sun Oct 17, 2021 5:32 pm
tim1999 wrote: Sun Oct 17, 2021 5:00 pm Right now, Zillow and Opendoor are furiously buying everything under 500k that they can get their hands on in my area for stupid high prices, it has intensified in the last two months, the big private equity rental house companies are still buying too. And some of the properties that Zillow and Opendoor are buying get quickly sold to the big rental companies. It seems like owner-occupant types are sitting things out right now (or are getting outbid by the big money investors). When Zillow and Opendoor put their purchases back on the market (after doing nothing besides paint and maaaaaaaaybe some cheap flooring) at even higher prices, they sit and nobody buys them. All of the homes with the longest "days on market" here are owned by I-buyers.
If they sit and no one buys them, what is the game plan of Zillow and Open Door?
They will make it up on volume. 😆
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unclescrooge
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Re: Tales from this insane real estate market

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Beensabu wrote: Sun Oct 17, 2021 5:20 pm
tim1999 wrote: Sun Oct 17, 2021 5:00 pm Right now, Zillow and Opendoor are furiously buying everything under 500k that they can get their hands on in my area for stupid high prices, it has intensified in the last two months, the big private equity rental house companies are still buying too. And some of the properties that Zillow and Opendoor are buying get quickly sold to the big rental companies. It seems like owner-occupant types are sitting things out right now (or are getting outbid by the big money investors). When Zillow and Opendoor put their purchases back on the market (after doing nothing besides paint and maaaaaaaaybe some cheap flooring) at even higher prices, they sit and nobody buys them. All of the homes with the longest "days on market" here are owned by I-buyers.
That's the herald of higher rents to come. If they can't sell to turn the profit, they'll eventually rent, and that'll push rents up in the local market (either fast or slow, depending on inventory). Then the lack of affordable housing situation that creates results in the next run of willing buyers at what would previously have been considered astronomical prices. Seen it.
Can you explain this more please? In theory, if you flood the market with rental properties, that should depress rents.
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Re: Tales from this insane real estate market

Post by Ron Ronnerson »

LINY wrote: Sun Oct 17, 2021 2:02 pm People keep saying the underwriting isn’t as extreme as is 2005. Which is true.

However, many banks are still willing to go about 40% debt-to-gross income. It’s 43% at the bank I got pre-approved at. Assume 30% for taxes. That’s only 27% for retirement, livings expenses, healthcare, home expenses, etc.

Doesn’t that seem high to most people? How sensitive will these buyers be to rate increases?
Debt-to-income ratios haven't changed all that much recently as far as I know. I refinanced earlier this year and I think the lender said total debt could be as high as 45%. The amount of equity in the home, credit score, job history, and bank accounts are looked at pretty carefully nowadays so they do weigh all these other factors (and more) into their consideration.

In any case, I really wouldn't assume that most folks are paying 30% for taxes. Something like 44% of people paid no income tax in 2019 and that number went up to 61% last year. Here's an article about it: https://www.cnbc.com/2021/08/18/61perce ... -says.html

I will share my 2019 numbers as an example. My gross income was $115k (and I also got $10k from other sources that don't count as income) and I spent about a third of income on PITI + HOA dues. I saved around 40% of my income that year (closer to 50% if we include mortgage principal). The numbers may not appear to make much sense without details about taxes. This is what I paid in taxes in 2019 (married filing jointly with one child): $1500 in federal income tax, $0 in California income tax, $0 toward social security, $1600 toward Medicare.

Our taxes dropped a lot in 2020 & 2021 due to legislation that's been passed recently. We are getting a larger subsidy toward health insurance now, a larger child tax credit, and a bunch of stimulus checks on top (totaling exactly $10k). Most of us not only don't pay income taxes these days, but it's actually quite the opposite. I think I'm pretty typical in that regard.

Try the numbers again using something like 15% for taxes instead. Now much more of the income would be available for expenses and retirement. Keep in mind that the average savings rate has been around 6-7% (before the pandemic). I'm over-generalizing a bit but most people hardly save much at all for the future and many don't pay all that much in taxes either. Banks know this. While it doesn't mean a person should take the biggest loan they can qualify for, banks do have their reasons as well for being willing to lend so much.
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Beensabu
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Re: Tales from this insane real estate market

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unclescrooge wrote: Sun Oct 17, 2021 7:04 pm
Beensabu wrote: Sun Oct 17, 2021 5:20 pm
tim1999 wrote: Sun Oct 17, 2021 5:00 pm Right now, Zillow and Opendoor are furiously buying everything under 500k that they can get their hands on in my area for stupid high prices, it has intensified in the last two months, the big private equity rental house companies are still buying too. And some of the properties that Zillow and Opendoor are buying get quickly sold to the big rental companies. It seems like owner-occupant types are sitting things out right now (or are getting outbid by the big money investors). When Zillow and Opendoor put their purchases back on the market (after doing nothing besides paint and maaaaaaaaybe some cheap flooring) at even higher prices, they sit and nobody buys them. All of the homes with the longest "days on market" here are owned by I-buyers.
That's the herald of higher rents to come. If they can't sell to turn the profit, they'll eventually rent, and that'll push rents up in the local market (either fast or slow, depending on inventory). Then the lack of affordable housing situation that creates results in the next run of willing buyers at what would previously have been considered astronomical prices. Seen it.
Can you explain this more please? In theory, if you flood the market with rental properties, that should depress rents.
Sure. Investment groups/companies tend to buy properties with primary and secondary purposes. Primary purpose is minimal "updates" and resell for profit as long as the trend of higher and higher prices continues. If there are no buyers at the higher price, then the secondary purpose is rental income (until a time when a higher price worth the investment can be met). They rent at the highest price the market can bear. SFHs tend to be more desirable than apartments and condos. When these investment groups buy up housing, they are effectively decreasing the inventory available for rent (because some % of individual owners will tend to rent vs live in the home). As those homes sit unoccupied trying to sell, inventory remains low for long enough that rents go up. At some point, rents get high enough that it's worthwhile for the investment groups to start renting out some those unoccupied homes instead of letting them all sit vacant trying to sell. It happens slowly rather than all at once (because there's usually just a handful of groups operating a particular locale and they're careful to manage the inventory they make available) -- thus there is no flood, and the higher rents are sustained. Eventually, those who can afford it decide they're better off buying high than paying high (and potentially ever increasing) rents. This has been happening in VHCOL areas for awhile. It's spreading.
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Re: Tales from this insane real estate market

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unclescrooge wrote: Sun Oct 17, 2021 7:02 pm
mikejuss wrote: Sun Oct 17, 2021 5:32 pm
tim1999 wrote: Sun Oct 17, 2021 5:00 pm Right now, Zillow and Opendoor are furiously buying everything under 500k that they can get their hands on in my area for stupid high prices, it has intensified in the last two months, the big private equity rental house companies are still buying too. And some of the properties that Zillow and Opendoor are buying get quickly sold to the big rental companies. It seems like owner-occupant types are sitting things out right now (or are getting outbid by the big money investors). When Zillow and Opendoor put their purchases back on the market (after doing nothing besides paint and maaaaaaaaybe some cheap flooring) at even higher prices, they sit and nobody buys them. All of the homes with the longest "days on market" here are owned by I-buyers.
If they sit and no one buys them, what is the game plan of Zillow and Open Door?
They will make it up on volume. 😆
Hmm--they'll be a long time in making a profit in such a scenario.
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Re: Tales from this insane real estate market

Post by LINY »

Beensabu wrote: Sun Oct 17, 2021 4:08 pm
LINY wrote: Sun Oct 17, 2021 2:02 pm People keep saying the underwriting isn’t as extreme as is 2005. Which is true.

However, many banks are still willing to go about 40% debt-to-gross income. It’s 43% at the bank I got pre-approved at. Assume 30% for taxes. That’s only 27% for retirement, livings expenses, healthcare, home expenses, etc.

Doesn’t that seem high to most people? How sensitive will these buyers be to rate increases?
It was 40% for me 7 years ago. So that's been normal. Housing is expensive. You deal with it.

Pretty sure most people know better than to take out an ARM these days.
I meant more for conventual financing. Rates are around 3% today and slowly climbing. If home prices keep increasing along with rates. Won’t that squeeze out most buyers?
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Re: Tales from this insane real estate market

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Ron Ronnerson wrote: Sun Oct 17, 2021 8:25 pm
LINY wrote: Sun Oct 17, 2021 2:02 pm People keep saying the underwriting isn’t as extreme as is 2005. Which is true.

However, many banks are still willing to go about 40% debt-to-gross income. It’s 43% at the bank I got pre-approved at. Assume 30% for taxes. That’s only 27% for retirement, livings expenses, healthcare, home expenses, etc.

Doesn’t that seem high to most people? How sensitive will these buyers be to rate increases?
Debt-to-income ratios haven't changed all that much recently as far as I know. I refinanced earlier this year and I think the lender said total debt could be as high as 45%. The amount of equity in the home, credit score, job history, and bank accounts are looked at pretty carefully nowadays so they do weigh all these other factors (and more) into their consideration.

In any case, I really wouldn't assume that most folks are paying 30% for taxes. Something like 44% of people paid no income tax in 2019 and that number went up to 61% last year. Here's an article about it: https://www.cnbc.com/2021/08/18/61perce ... -says.html

I will share my 2019 numbers as an example. My gross income was $115k (and I also got $10k from other sources that don't count as income) and I spent about a third of income on PITI + HOA dues. I saved around 40% of my income that year (closer to 50% if we include mortgage principal). The numbers may not appear to make much sense without details about taxes. This is what I paid in taxes in 2019 (married filing jointly with one child): $1500 in federal income tax, $0 in California income tax, $0 toward social security, $1600 toward Medicare.

Our taxes dropped a lot in 2020 & 2021 due to legislation that's been passed recently. We are getting a larger subsidy toward health insurance now, a larger child tax credit, and a bunch of stimulus checks on top (totaling exactly $10k). Most of us not only don't pay income taxes these days, but it's actually quite the opposite. I think I'm pretty typical in that regard.

Try the numbers again using something like 15% for taxes instead. Now much more of the income would be available for expenses and retirement. Keep in mind that the average savings rate has been around 6-7% (before the pandemic). I'm over-generalizing a bit but most people hardly save much at all for the future and many don't pay all that much in taxes either. Banks know this. While it doesn't mean a person should take the biggest loan they can qualify for, banks do have their reasons as well for being willing to lend so much.
I think Bogelheads aren’t the ones that I’d worry about. Saving over 40% of your income is not typical. As you stated the pre-pandemic average savings rate was 6/7%.

I work within the credit department for a small bank. Mainly commercial real estate. However, some residential. Us along with most financial institutions don’t hold 30 year mortgages anymore. We sell them off. Hence when I hear “this time is different/banks do more due diligence”. I have to question is this actual inside knowledge or an opinion. I have many friends in lending who concur. They are short staffed and told to “push the deal though”. A lot of boxes go unchecked.

Most deals I see aren’t even close to 2005-2008. NINJA loans, non-QMs, etc. But some of the underwriting is a little questionable. Again, these aren’t Bogelheads. These are people who are leveraged as high as they can be. And we still allow 43% debt-to-income.

Just my personal view, 43% of my previous-tax income going toward housing. Wouldn’t leave much left if anything (income loss/inflation) causes those margins to compress more.
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Re: Tales from this insane real estate market

Post by Ron Ronnerson »

LINY wrote: Sun Oct 17, 2021 9:26 pm
Just my personal view, 43% of my previous-tax income going toward housing. Wouldn’t leave much left if anything (income loss/inflation) causes those margins to compress more.
Yeah, I don’t disagree that 43% looks to be on the high side but perhaps when someone has enough equity in the house and a good credit history, the bank assumes that the person is strongly incentivized to make sure that their mortgage gets paid. I think debt-to-income ratio is an important thing to look at but it is still only one variable and just doesn’t provide the whole picture. I should mention that I’m in a VHCOL area and that probably influences my perspective. People tend to spend much of their income on housing around here while other expenses, as a percent of gross income, tend to not be so bad.
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Re: Tales from this insane real estate market

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Last weekend we were driving down the coast from wine country. Stopped in Ventura for lunch. Happened upon a home just listed for sale. Called our realtor and saw it that night. Made a full price non-contingent offer. We were outbid and the buyer is going to allow sellers two full months after closing before they have to vacate, free rent.

No sweat for us as it was going to be a vacation home. We have a nice home now so we are not stressed that our offer wasn't accepted. Price point was just over a million.
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Re: Tales from this insane real estate market

Post by mikejuss »

sergeant wrote: Sun Oct 17, 2021 11:54 pm Last weekend we were driving down the coast from wine country. Stopped in Ventura for lunch. Happened upon a home just listed for sale. Called our realtor and saw it that night. Made a full price non-contingent offer. We were outbid and the buyer is going to allow sellers two full months after closing before they have to vacate, free rent.

No sweat for us as it was going to be a vacation home. We have a nice home now so we are not stressed that our offer wasn't accepted. Price point was just over a million.
Wow, you're one decisive fellow. I'm sure there's a house on which you can make a noncontingent offer that will be accepted. Next time, just add 10% or 20% to the ask price.
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Re: Tales from this insane real estate market

Post by TimeTheMarket »

ASpenderInRecovery wrote: Sun Oct 17, 2021 6:34 pm
TheDogFather wrote: Fri Sep 10, 2021 12:05 pm
rascott wrote: Thu Sep 09, 2021 5:37 pm Home listing came live at 10a. Was inside the home before 2p. Called listing agent at 230p to present very aggressive offer.

Listed at $590k.

Home was already sold at 11a, sight unseen, cash, no contingencies, $100k over asking.

Didn't even get the offer in front of the sellers.
Where was this?

We are putting our house on the market at the beginning of October in northern Virginia, and very curious if the market is slowing. After significant price increases and many houses seeing quick sales, inventory is low again.
I’m the OP to this thread and also live in Northern VA. Rest assured that updated homes are still selling quick and way over asking! Two weeks ago I made an offer on a nicely updated house listed at $1.15M. Sellers had 2 days of private tours, canceled the scheduled open house, and accepted an offer for 100k over list with no contingencies. I’m too conservative to waive all contingencies so I missed out on that one. I am seeing outdated homes sit on the market for 30 days and require 5% price reductions to sell, but I’d argue those homes were overpriced to begin with.

I hope you have similar success with your home sale!
I wouldn’t buy a used car without looking under the hood for leaks. These people buying a million dollar house without any contingency are simply making bad decisions. Most will be fine (most home inspections don’t find a great deal of issues), but it is just unwise behavior. Eventually all this stuff will cool down.
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Watty
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Re: Tales from this insane real estate market

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TimeTheMarket wrote: Mon Oct 18, 2021 6:53 am These people buying a million dollar house without any contingency are simply making bad decisions. Most will be fine (most home inspections don’t find a great deal of issues), but it is just unwise behavior.
Not that I would I would do it even if I had the money but when you are are dealing with a million dollar property in an expensive area buying it without an inspection may not be as risky as it sounds. The reason is that in many expensive areas a million dollar home is often a $250K house on a $750K lot. In a low cost area in the midwest or southeast an identical property might only cost $300K since it would be a $250K house on a $50K lot.

If it turns out to need a $50K repair then that is only a 5% difference in the price of a million dollar property.

It might seem counter intuitive but buying a $300K property without an inspection in a low cost area would be more risky.
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Re: Tales from this insane real estate market

Post by tim1999 »

I just saw a new article in the WSJ online this morning that Zillow is putting a temporary hold on buying homes for itself, possibly through the end of 2021. Homes they already have under contract to buy will still close. They blame a shortage of on-the-ground workers and vendors in their operation. Personally I think they realized they just overpaid in a hurry for a bunch of junk that isn't moving in a slightly cooling market, and want some time to sort it out.
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Re: Tales from this insane real estate market

Post by LawEgr1 »

Just moved last month

Old house listed in desired / good school district. Had 7 offers in one day all over ask, 15 showings, and took an offer $30k over ask (7.5% over, or $440k). Many contingencies removed or stretched. 1500ft2, 100 year old home, 1.5 bath and 3 bed, 5000ft2 lot and almost $8k yearly taxes. Great community. Purchased the home at under $400k 1.5 years ago. Offer accepted by 9p that same evening.

We went to put an offer in on a house in the same neighborhood as our new one, that was listed at $670k and went as an all cash offer that same night for $740k. Our realtor said the sellers realtor said to not bother unless we could be all cash and move our offer up 'significantly'. We figured that house wasn't for us 8-)

Fortunately a house in our new neighborhood went for sale a few weeks later and we purchased said new home at 2.4% over ask, desired / good school district, or $640k and competed with 3 offers in one day and required escalation clause that fortunately wasn't necessary because a fourth offer backed out last minute that would've driven the price up significantly. Unsure how many showings our new house had.

We couldn't believe how many people showed up to purchase our old home, but I guess that's the value of school district / location.
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Re: Tales from this insane real estate market

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Watty wrote: Mon Oct 18, 2021 8:05 am Not that I would I would do it even if I had the money but when you are are dealing with a million dollar property in an expensive area buying it without an inspection may not be as risky as it sounds. The reason is that in many expensive areas a million dollar home is often a $250K house on a $750K lot. In a low cost area in the midwest or southeast an identical property might only cost $300K since it would be a $250K house on a $50K lot.

If it turns out to need a $50K repair then that is only a 5% difference in the price of a million dollar property.
It's also a function of the value of knowing most of the typical home inspection issues. Coming to a seller in many markets with a $10k price reduction request for a bad HVAC/roof/whatever will get you laughed out of the room, as the seller speed dials the next interested buyer on the list.

Friends of mine are going through a nightmare 'money pit' scenario right now. In addition to needing tons of foundation work that requires hand digging in a crawlspace, every time a wall is ripped down, more issues are found. I think they're currently in the hole (pun intended) for about 50%+ of the original purchase price (on a half-million property.) This was on a 'to the studs' full rebuild of an older property by a contractor, where the home inspector gave it a clean bill of health. He said it has 'good bones', apparently.
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Re: Tales from this insane real estate market

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tim1999 wrote: Mon Oct 18, 2021 8:57 am I just saw a new article in the WSJ online this morning that Zillow is putting a temporary hold on buying homes for itself, possibly through the end of 2021. Homes they already have under contract to buy will still close. They blame a shortage of on-the-ground workers and vendors in their operation. Personally I think they realized they just overpaid in a hurry for a bunch of junk that isn't moving in a slightly cooling market, and want some time to sort it out.
Agreed. I got a shockingly high offer from Zillow for one of my properties. I would have netted more than I believed I could get someone to even pay (so before all transaction costs) on the open market. My property was a leased up rental so I decided to wait.

I saw a house a few doors down that Zillow bought for a crazy-high price and then 10 days later listed for $10k less than they'd just paid. They then dropped the price by another $11k after a week. It's still on the market.

I started getting letters from realtors talking about how they "arranged" sales in my area for record amounts. Yup, they were just selling to Zillow.

I just had an exchange with someone a few days ago, "I don't know how Zillow's business plan is sustainable." Three days later, they've stopped buying. The free money party is over, I think.
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Re: Tales from this insane real estate market

Post by mikejuss »

rocket354 wrote: Mon Oct 18, 2021 10:53 am
tim1999 wrote: Mon Oct 18, 2021 8:57 am I just saw a new article in the WSJ online this morning that Zillow is putting a temporary hold on buying homes for itself, possibly through the end of 2021. Homes they already have under contract to buy will still close. They blame a shortage of on-the-ground workers and vendors in their operation. Personally I think they realized they just overpaid in a hurry for a bunch of junk that isn't moving in a slightly cooling market, and want some time to sort it out.
Agreed. I got a shockingly high offer from Zillow for one of my properties. I would have netted more than I believed I could get someone to even pay (so before all transaction costs) on the open market. My property was a leased up rental so I decided to wait.

I saw a house a few doors down that Zillow bought for a crazy-high price and then 10 days later listed for $10k less than they'd just paid. They then dropped the price by another $11k after a week. It's still on the market.

I started getting letters from realtors talking about how they "arranged" sales in my area for record amounts. Yup, they were just selling to Zillow.

I just had an exchange with someone a few days ago, "I don't know how Zillow's business plan is sustainable." Three days later, they've stopped buying. The free money party is over, I think.
Yeah, how is selling something for less that they bought it for going to work out for Zillow in the long run? :confused
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tim1999
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Re: Tales from this insane real estate market

Post by tim1999 »

mikejuss wrote: Mon Oct 18, 2021 10:58 am
rocket354 wrote: Mon Oct 18, 2021 10:53 am
tim1999 wrote: Mon Oct 18, 2021 8:57 am I just saw a new article in the WSJ online this morning that Zillow is putting a temporary hold on buying homes for itself, possibly through the end of 2021. Homes they already have under contract to buy will still close. They blame a shortage of on-the-ground workers and vendors in their operation. Personally I think they realized they just overpaid in a hurry for a bunch of junk that isn't moving in a slightly cooling market, and want some time to sort it out.
Agreed. I got a shockingly high offer from Zillow for one of my properties. I would have netted more than I believed I could get someone to even pay (so before all transaction costs) on the open market. My property was a leased up rental so I decided to wait.

I saw a house a few doors down that Zillow bought for a crazy-high price and then 10 days later listed for $10k less than they'd just paid. They then dropped the price by another $11k after a week. It's still on the market.

I started getting letters from realtors talking about how they "arranged" sales in my area for record amounts. Yup, they were just selling to Zillow.

I just had an exchange with someone a few days ago, "I don't know how Zillow's business plan is sustainable." Three days later, they've stopped buying. The free money party is over, I think.
Yeah, how is selling something for less that they bought it for going to work out for Zillow in the long run? :confused
I know that Zillow and the other I-buyers often charge sellers a large percentage fee plus repair costs that are deducted from the price that Zillow buys for. So what shows up as Zillow having bought for 400k, they may have actually paid 375k for. So, Zillow can turn around and list this house for 385k, and if it sells for near that, they still theoretically can make money, especially if the buyer uses Zillow's title company and lender. I'm also suspicious of whether Zillow actually makes any of the repairs that they charge the original seller for. Unfortunately what I'm seeing happen recently is that house they bought for 400k on paper, 375k net, in a neighborhood where the comps are 350-365k, gets listed for 385k and sits for a couple months, maybe with a price cut, to a point that I highly doubt they are making any profit even if they get a cut of the ancillary title and lending revenue.

If they have stopped charging sellers that large fee and that 400k is the acutal price paid for these homes they are relisting at 385k, then they are really going to be in trouble IMO.
ADower
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Re: Tales from this insane real estate market

Post by ADower »

Wife and I bought our home in 2019 for $545k. Received an offer for $995K a month ago or so.
mikejuss
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Re: Tales from this insane real estate market

Post by mikejuss »

ADower wrote: Mon Oct 18, 2021 1:16 pm Wife and I bought our home in 2019 for $545k. Received an offer for $995K a month ago or so.
The problem is that unless you're looking to downsize or to move to a lower-cost-of-living area, such offers aren't very meaningful.
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phxjcc
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Re: Tales from this insane real estate market

Post by phxjcc »

tim1999 wrote: Mon Oct 18, 2021 11:56 am
mikejuss wrote: Mon Oct 18, 2021 10:58 am
rocket354 wrote: Mon Oct 18, 2021 10:53 am
tim1999 wrote: Mon Oct 18, 2021 8:57 am I just saw a new article in the WSJ online this morning that Zillow is putting a temporary hold on buying homes for itself, possibly through the end of 2021. Homes they already have under contract to buy will still close. They blame a shortage of on-the-ground workers and vendors in their operation. Personally I think they realized they just overpaid in a hurry for a bunch of junk that isn't moving in a slightly cooling market, and want some time to sort it out.
Agreed. I got a shockingly high offer from Zillow for one of my properties. I would have netted more than I believed I could get someone to even pay (so before all transaction costs) on the open market. My property was a leased up rental so I decided to wait.

I saw a house a few doors down that Zillow bought for a crazy-high price and then 10 days later listed for $10k less than they'd just paid. They then dropped the price by another $11k after a week. It's still on the market.

I started getting letters from realtors talking about how they "arranged" sales in my area for record amounts. Yup, they were just selling to Zillow.

I just had an exchange with someone a few days ago, "I don't know how Zillow's business plan is sustainable." Three days later, they've stopped buying. The free money party is over, I think.
Yeah, how is selling something for less that they bought it for going to work out for Zillow in the long run? :confused
I know that Zillow and the other I-buyers often charge sellers a large percentage fee plus repair costs that are deducted from the price that Zillow buys for. So what shows up as Zillow having bought for 400k, they may have actually paid 375k for. So, Zillow can turn around and list this house for 385k, and if it sells for near that, they still theoretically can make money, especially if the buyer uses Zillow's title company and lender. I'm also suspicious of whether Zillow actually makes any of the repairs that they charge the original seller for. Unfortunately what I'm seeing happen recently is that house they bought for 400k on paper, 375k net, in a neighborhood where the comps are 350-365k, gets listed for 385k and sits for a couple months, maybe with a price cut, to a point that I highly doubt they are making any profit even if they get a cut of the ancillary title and lending revenue.

If they have stopped charging sellers that large fee and that 400k is the acutal price paid for these homes they are relisting at 385k, then they are really going to be in trouble IMO.
Bloomberg just had a story that Zillow has stopped flipping houses (buying for themselves and re-selling).

Here: https://www.bloomberg.com/news/videos/2 ... flip-video
phxjcc
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Re: Tales from this insane real estate market

Post by phxjcc »

More nonsense:

ZIP3= 934xx

Previous high sale in neighborhood was $680 for 1600 sq ft; completely renovated.

New listing 1310 sq ft, all original builder grade; listed for $710; disappointed it didn't sell in 7 days, pulled the listing to do upgrades; received an offer for $725 as-is after it was pulled from market; before any upgrades. Only one for sale in neighborhood.

ZIP3=922xx
Previous high sale in neighborhood was $1.11 on an asking prices of $1.0.

New listing for $1.4; only one for sale in neighborhood.

There is still NO inventory here in Central/Southern Cal.
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rocket354
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Re: Tales from this insane real estate market

Post by rocket354 »

tim1999 wrote: Mon Oct 18, 2021 11:56 am
mikejuss wrote: Mon Oct 18, 2021 10:58 am
rocket354 wrote: Mon Oct 18, 2021 10:53 am
tim1999 wrote: Mon Oct 18, 2021 8:57 am I just saw a new article in the WSJ online this morning that Zillow is putting a temporary hold on buying homes for itself, possibly through the end of 2021. Homes they already have under contract to buy will still close. They blame a shortage of on-the-ground workers and vendors in their operation. Personally I think they realized they just overpaid in a hurry for a bunch of junk that isn't moving in a slightly cooling market, and want some time to sort it out.
Agreed. I got a shockingly high offer from Zillow for one of my properties. I would have netted more than I believed I could get someone to even pay (so before all transaction costs) on the open market. My property was a leased up rental so I decided to wait.

I saw a house a few doors down that Zillow bought for a crazy-high price and then 10 days later listed for $10k less than they'd just paid. They then dropped the price by another $11k after a week. It's still on the market.

I started getting letters from realtors talking about how they "arranged" sales in my area for record amounts. Yup, they were just selling to Zillow.

I just had an exchange with someone a few days ago, "I don't know how Zillow's business plan is sustainable." Three days later, they've stopped buying. The free money party is over, I think.
Yeah, how is selling something for less that they bought it for going to work out for Zillow in the long run? :confused
I know that Zillow and the other I-buyers often charge sellers a large percentage fee plus repair costs that are deducted from the price that Zillow buys for. So what shows up as Zillow having bought for 400k, they may have actually paid 375k for. So, Zillow can turn around and list this house for 385k, and if it sells for near that, they still theoretically can make money, especially if the buyer uses Zillow's title company and lender. I'm also suspicious of whether Zillow actually makes any of the repairs that they charge the original seller for. Unfortunately what I'm seeing happen recently is that house they bought for 400k on paper, 375k net, in a neighborhood where the comps are 350-365k, gets listed for 385k and sits for a couple months, maybe with a price cut, to a point that I highly doubt they are making any profit even if they get a cut of the ancillary title and lending revenue.

If they have stopped charging sellers that large fee and that 400k is the acutal price paid for these homes they are relisting at 385k, then they are really going to be in trouble IMO.
Someone selling at $400k on the open market would still have transaction costs. Between realtor fees, transfer taxes, whatever repairs might be requested/needed, netting $375k might still be just as good. Especially if that $400k offer is higher than anything they would have received on the open market.

To put some numbers on my Zillow experience, the house they made an offer on I was, at the time, thinking maaaybe I could get someone to pay $450k for it. Zillow came in with a $480k offer, with $13k in fees, so $467k net. The next step was they'd have someone go through it and identify necessary repairs. Then they'd let me know the final number before I would have to commit to anything. I was told the typical repair costs, while varying from house to house, is often in the $3-4k range. But you can see that anything up to even $17k would have been fine with me (which I can't imagine they could have found with a straight face; the house was in good shape with all flooring recently replaced, interior recently painted, HVAC just replaced, and lawn recently manicured). Having a tenant I did not want to disrupt with inspections, I called the process off at that point.

If I compare their ~$460k net offer to an uncertain $450k gross offer from the open market where I have to put in a lot of effort in hiring an agent, and staging and showing and negotiating, etc, etc, and then pay out fees and taxes, it's a no-brainer. In fact, so much so, that I felt it was way too good to be true. Which is what I think we're seeing. Whatever Zillow says, I think they are overhauling the house-purchasing arm of their company. Flipping homes is too good of a business to not be in, but there's no way they can continue doing what they've been doing.
ADower
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Re: Tales from this insane real estate market

Post by ADower »

mikejuss wrote: Mon Oct 18, 2021 1:19 pm
ADower wrote: Mon Oct 18, 2021 1:16 pm Wife and I bought our home in 2019 for $545k. Received an offer for $995K a month ago or so.
The problem is that unless you're looking to downsize or to move to a lower-cost-of-living area, such offers aren't very meaningful.
Absolutely, thats is why we didn't sell it :)
BillWalters
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Re: Tales from this insane real estate market

Post by BillWalters »

The paper wealth is fine, I suppose, but I love where I live and have no plans to leave, so all this madness just increases my property tax. The equity probably won’t be realized until we die.
moneyflowin
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Re: Tales from this insane real estate market

Post by moneyflowin »

Ron Ronnerson wrote: Sun Oct 17, 2021 8:25 pm
LINY wrote: Sun Oct 17, 2021 2:02 pm People keep saying the underwriting isn’t as extreme as is 2005. Which is true.

However, many banks are still willing to go about 40% debt-to-gross income. It’s 43% at the bank I got pre-approved at. Assume 30% for taxes. That’s only 27% for retirement, livings expenses, healthcare, home expenses, etc.

Doesn’t that seem high to most people? How sensitive will these buyers be to rate increases?
Debt-to-income ratios haven't changed all that much recently as far as I know. I refinanced earlier this year and I think the lender said total debt could be as high as 45%. The amount of equity in the home, credit score, job history, and bank accounts are looked at pretty carefully nowadays so they do weigh all these other factors (and more) into their consideration.
When I bought my home in the late 90s, banks generally qualified you for 30-34% DTI, even with an 800 FICO and 20-30% down. I was very surprised to learn from a mortgage broker that banks now qualify people for over 40% DTI with only 10-15% down. To me that's lunacy. 40-45% DTI with a low down gives the borrower zero wiggle room in the event of a recession or housing bear market.

As for the argument, "Don't worry, banks have advanced underwriting algorithms and know what they're doing"... That's EXACTLY what I heard in 2005.

If rates were 4.25% and banks required 33% DTI instead of 43%, you can chop 20% off the prices of homes. Rates and underwriting standards are the driver of this crazy appreciation
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Re: Tales from this insane real estate market

Post by BillWalters »

That’s just not the reality right now. Everything that hits the market in desirable locations has cash offers over list. This is absolutely not due to loose underwriting, it is due to educated people with money all wanting to live in the same supply constrained markets.
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Re: Tales from this insane real estate market

Post by JBTX »

Beensabu wrote: Sun Oct 17, 2021 8:41 pm
unclescrooge wrote: Sun Oct 17, 2021 7:04 pm
Beensabu wrote: Sun Oct 17, 2021 5:20 pm
tim1999 wrote: Sun Oct 17, 2021 5:00 pm Right now, Zillow and Opendoor are furiously buying everything under 500k that they can get their hands on in my area for stupid high prices, it has intensified in the last two months, the big private equity rental house companies are still buying too. And some of the properties that Zillow and Opendoor are buying get quickly sold to the big rental companies. It seems like owner-occupant types are sitting things out right now (or are getting outbid by the big money investors). When Zillow and Opendoor put their purchases back on the market (after doing nothing besides paint and maaaaaaaaybe some cheap flooring) at even higher prices, they sit and nobody buys them. All of the homes with the longest "days on market" here are owned by I-buyers.
That's the herald of higher rents to come. If they can't sell to turn the profit, they'll eventually rent, and that'll push rents up in the local market (either fast or slow, depending on inventory). Then the lack of affordable housing situation that creates results in the next run of willing buyers at what would previously have been considered astronomical prices. Seen it.
Can you explain this more please? In theory, if you flood the market with rental properties, that should depress rents.
Sure. Investment groups/companies tend to buy properties with primary and secondary purposes. Primary purpose is minimal "updates" and resell for profit as long as the trend of higher and higher prices continues. If there are no buyers at the higher price, then the secondary purpose is rental income (until a time when a higher price worth the investment can be met). They rent at the highest price the market can bear. SFHs tend to be more desirable than apartments and condos. When these investment groups buy up housing, they are effectively decreasing the inventory available for rent (because some % of individual owners will tend to rent vs live in the home). As those homes sit unoccupied trying to sell, inventory remains low for long enough that rents go up. At some point, rents get high enough that it's worthwhile for the investment groups to start renting out some those unoccupied homes instead of letting them all sit vacant trying to sell. It happens slowly rather than all at once (because there's usually just a handful of groups operating a particular locale and they're careful to manage the inventory they make available) -- thus there is no flood, and the higher rents are sustained. Eventually, those who can afford it decide they're better off buying high than paying high (and potentially ever increasing) rents. This has been happening in VHCOL areas for awhile. It's spreading.

This is really interesting and I've been wondering about this. I live in North TX and home prices, historically comparatively cheap, have been going up a lot. In our area low and medium end houses have probably shot up around 20% over the last year. I have looked at Zillow and realtor.com as I occasionally entertain buying a house for young adult child instead of continually forking out rent. Been doing so for a year or so. Decided not to buy for some seemingly good reasons, that are still valid. But dang I wish I'd bought a year ago when looking. Homes in the $240-250k range a year ago now selling around $300k. I'd have more than recovered all out of pocket expenses, mortgage, taxes, home maintainance etc from price appreciation.

These homes often are under contract a day or two after being listed. It does seem to be slowing a bit, but still hot.

I've wondered how is it all of these homes are being purchased as rentals, but the rental prices of the homes have been going up too. Seems like supply would outstrip demand and put downward pressure on house rents but the opposite is happening.

Also, apartment rentals have heated up a lot and it's darn near impossible to find an apartment rental at a reasonable price.
Ron Ronnerson
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Re: Tales from this insane real estate market

Post by Ron Ronnerson »

moneyflowin wrote: Mon Oct 18, 2021 7:10 pm
Ron Ronnerson wrote: Sun Oct 17, 2021 8:25 pm
LINY wrote: Sun Oct 17, 2021 2:02 pm People keep saying the underwriting isn’t as extreme as is 2005. Which is true.

However, many banks are still willing to go about 40% debt-to-gross income. It’s 43% at the bank I got pre-approved at. Assume 30% for taxes. That’s only 27% for retirement, livings expenses, healthcare, home expenses, etc.

Doesn’t that seem high to most people? How sensitive will these buyers be to rate increases?
Debt-to-income ratios haven't changed all that much recently as far as I know. I refinanced earlier this year and I think the lender said total debt could be as high as 45%. The amount of equity in the home, credit score, job history, and bank accounts are looked at pretty carefully nowadays so they do weigh all these other factors (and more) into their consideration.
When I bought my home in the late 90s, banks generally qualified you for 30-34% DTI, even with an 800 FICO and 20-30% down. I was very surprised to learn from a mortgage broker that banks now qualify people for over 40% DTI with only 10-15% down. To me that's lunacy. 40-45% DTI with a low down gives the borrower zero wiggle room in the event of a recession or housing bear market.

As for the argument, "Don't worry, banks have advanced underwriting algorithms and know what they're doing"... That's EXACTLY what I heard in 2005.

If rates were 4.25% and banks required 33% DTI instead of 43%, you can chop 20% off the prices of homes. Rates and underwriting standards are the driver of this crazy appreciation
I don’t disagree that 43% seems high but my comment above was just in response to some assumptions that I think are a bit too general. Specifically, we can’t assume everyone’s tax rate to be at or around 30% and also shouldn’t assume that people want to set much aside for savings. The fact of the matter is that most people don’t pay much in taxes and hardly save anything.

The underlying assumptions can really change the numbers. For example, if we assume that 43% goes toward housing, 30% for taxes, and 15% for savings goals, that would leave only 12% to live on. However, if you keep the 43% for housing and adjust taxes down to 15% and savings down to 7% (figures which I think are probably closer to reality for a lot of folks), now you have 35% remaining to be allocated to non-housing expenses. That may perhaps not be great, but it’s way better than 12%.

In any case, since the actual situation will vary for everyone, I think a nuanced approach is best. Debt-to-income is important to consider and I said as much in a prior post. I just think it doesn’t tell the complete picture. I demonstrated this by providing my actual numbers as an example. My effective tax rate including federal income tax, state income tax, and FICA added up to less than 3% of my gross income of $115k in 2019. In the past couple of years, due to covid-related legislation that’s been passed, the number would be negative after accounting for increased tax credits and stimulus checks that were issued. I have 33% of gross income going toward housing, leaving 67% for taxes, savings, and other expenses. Instead of 30% for taxes as assumed, let’s use my actual numbers of 3% (from 2019). Doesn’t that 27% difference between the assumed tax rate and the actual tax rate change things?

Also, since I’m in a VHCOL area, housing costs are high but my non-housing costs aren’t all that bad. That’s the reality for a lot of people in my area and most of them aren’t defaulting on their loans despite a lot of mortgage debt. I just think a holistic view that accounts for regional differences, amount of equity in the home, credit history, as well as debt-to-income ratio and other factors should be considered.

The max debt-to-income ratio that I was allowed in 2010 when I purchased my home wasn’t much different than when I refinanced in 2021 so it didn’t change much over the past decade, at least in my experience. Perhaps we’d be better off if the max was the same as when you bought your home in the 90s because, like I said, 43% does seems a bit on the high side. I still stand by my claim, though, that this one number doesn’t tell the whole picture.
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Beensabu
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Re: Tales from this insane real estate market

Post by Beensabu »

tim1999 wrote: Mon Oct 18, 2021 8:57 am I just saw a new article in the WSJ online this morning that Zillow is putting a temporary hold on buying homes for itself, possibly through the end of 2021. Homes they already have under contract to buy will still close. They blame a shortage of on-the-ground workers and vendors in their operation. Personally I think they realized they just overpaid in a hurry for a bunch of junk that isn't moving in a slightly cooling market, and want some time to sort it out.
phxjcc wrote: Mon Oct 18, 2021 1:40 pm Bloomberg just had a story that Zillow has stopped flipping houses (buying for themselves and re-selling).

Here: https://www.bloomberg.com/news/videos/2 ... flip-video
They know what they're doing. Shifting to phase 2. Maybe they offload a few extra properties at a slight loss at the transition point, to get their numbers right for the next stretch.

The next corporate/investment buying spree will be when prices come way down, and they will be competing against each other at auction swooping up short sales and foreclosures with cash. At that point, flipping for $ will be phase 2. With phase 1 being keeping rental inventory low and rents high. It's win win for them. Real estate investment groups are in charge of the rental markets they target.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
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unclescrooge
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Re: Tales from this insane real estate market

Post by unclescrooge »

phxjcc wrote: Mon Oct 18, 2021 1:40 pm
tim1999 wrote: Mon Oct 18, 2021 11:56 am
mikejuss wrote: Mon Oct 18, 2021 10:58 am
rocket354 wrote: Mon Oct 18, 2021 10:53 am
tim1999 wrote: Mon Oct 18, 2021 8:57 am I just saw a new article in the WSJ online this morning that Zillow is putting a temporary hold on buying homes for itself, possibly through the end of 2021. Homes they already have under contract to buy will still close. They blame a shortage of on-the-ground workers and vendors in their operation. Personally I think they realized they just overpaid in a hurry for a bunch of junk that isn't moving in a slightly cooling market, and want some time to sort it out.
Agreed. I got a shockingly high offer from Zillow for one of my properties. I would have netted more than I believed I could get someone to even pay (so before all transaction costs) on the open market. My property was a leased up rental so I decided to wait.

I saw a house a few doors down that Zillow bought for a crazy-high price and then 10 days later listed for $10k less than they'd just paid. They then dropped the price by another $11k after a week. It's still on the market.

I started getting letters from realtors talking about how they "arranged" sales in my area for record amounts. Yup, they were just selling to Zillow.

I just had an exchange with someone a few days ago, "I don't know how Zillow's business plan is sustainable." Three days later, they've stopped buying. The free money party is over, I think.
Yeah, how is selling something for less that they bought it for going to work out for Zillow in the long run? :confused
I know that Zillow and the other I-buyers often charge sellers a large percentage fee plus repair costs that are deducted from the price that Zillow buys for. So what shows up as Zillow having bought for 400k, they may have actually paid 375k for. So, Zillow can turn around and list this house for 385k, and if it sells for near that, they still theoretically can make money, especially if the buyer uses Zillow's title company and lender. I'm also suspicious of whether Zillow actually makes any of the repairs that they charge the original seller for. Unfortunately what I'm seeing happen recently is that house they bought for 400k on paper, 375k net, in a neighborhood where the comps are 350-365k, gets listed for 385k and sits for a couple months, maybe with a price cut, to a point that I highly doubt they are making any profit even if they get a cut of the ancillary title and lending revenue.

If they have stopped charging sellers that large fee and that 400k is the acutal price paid for these homes they are relisting at 385k, then they are really going to be in trouble IMO.
Bloomberg just had a story that Zillow has stopped flipping houses (buying for themselves and re-selling).

Here: https://www.bloomberg.com/news/videos/2 ... flip-video
Zillow had 3800 homes across 25 markets, or roughly 150 home per market.

It might make sense to overpay for the last several homes, just to set comps for the other 145 homes. Even if it sells the last several homes at a loss, it could make those up on the other homes sitting on the books.

Also, if they aren't paying the traditional 2.5% commission to their their own agents on the buy and sale, that's 5% saving per flip.
Also, you can get a binder on the title insurance. If you you're going to flip a house, you pay a little extra on the purchase and nothing on the sale.
portfolio123
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Re: Tales from this insane real estate market

Post by portfolio123 »

BillWalters wrote: Mon Oct 18, 2021 7:30 pm That’s just not the reality right now. Everything that hits the market in desirable locations has cash offers over list. This is absolutely not due to loose underwriting, it is due to educated people with money all wanting to live in the same supply constrained markets.
I guess what I still don't understand (made a similar post a couple months ago), is what's different now that's causing a supply constraint? Lack of new construction? People not wanting to sell their homes since they'd need to pay up for something new?

Haven't educated people with money always wanted homes in good school districts, move-in-ready, etc.? Why over the past year or so is it such a mad rush whenever a new, good property is listed?
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Darth Xanadu
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Re: Tales from this insane real estate market

Post by Darth Xanadu »

portfolio123 wrote: Tue Oct 19, 2021 10:55 pm
BillWalters wrote: Mon Oct 18, 2021 7:30 pm That’s just not the reality right now. Everything that hits the market in desirable locations has cash offers over list. This is absolutely not due to loose underwriting, it is due to educated people with money all wanting to live in the same supply constrained markets.
I guess what I still don't understand (made a similar post a couple months ago), is what's different now that's causing a supply constraint? Lack of new construction? People not wanting to sell their homes since they'd need to pay up for something new?

Haven't educated people with money always wanted homes in good school districts, move-in-ready, etc.? Why over the past year or so is it such a mad rush whenever a new, good property is listed?
I am no expert by any stretch, but my sense (no data whatsoever to support this assertion) is that homebuilders have scaled back quite a bit since the 08 housing crisis. So I do think lack of inventory is a key driver here.

The seismic shift to work-from-home has opened up huge demand in certain demographic markets. That said, it seems that prices are up big everywhere so who knows to what extent this is a factor.
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Sandi_k
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Re: Tales from this insane real estate market

Post by Sandi_k »

Ben Carlson has a couple of great articles on why this is not a bubble, including supply, demand, and better cash positions of the buying public...

https://awealthofcommonsense.com/2021/0 ... ng-bubble/

https://awealthofcommonsense.com/2021/0 ... ng-bubble/
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Re: Tales from this insane real estate market

Post by Kookaburra »

An 1,800 sqft brand new house in a nearby neighborhood (Oregon) sold in April, 2021 for $1.0M. Just 6 months later, it is now up for resale (no improvements other than a fridge added) for $1.4M. So, 400K = 40% price appreciation in 6 months, or 80% annualized. Yea, I can kiss my hope of ever owning a home goodbye. Glad I played by the rules, studied hard, worked hard, and saved for it my whole life.
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Beensabu
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Re: Tales from this insane real estate market

Post by Beensabu »

Kookaburra wrote: Tue Nov 23, 2021 1:28 am An 1,800 sqft brand new house in a nearby neighborhood (Oregon) sold in April, 2021 for $1.0M. Just 6 months later, it is now up for resale (no improvements other than a fridge added) for $1.4M. So, 400K = 40% price appreciation in 6 months, or 80% annualized. Yea, I can kiss my hope of ever owning a home goodbye. Glad I played by the rules, studied hard, worked hard, and saved for it my whole life.
Sellers are overpricing their homes right now. Get depressed if it sells for listed price or higher. It probably won't. Watch it sit and feel better.
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manatee2005
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Re: Tales from this insane real estate market

Post by manatee2005 »

portfolio123 wrote: Tue Oct 19, 2021 10:55 pm
BillWalters wrote: Mon Oct 18, 2021 7:30 pm That’s just not the reality right now. Everything that hits the market in desirable locations has cash offers over list. This is absolutely not due to loose underwriting, it is due to educated people with money all wanting to live in the same supply constrained markets.
I guess what I still don't understand (made a similar post a couple months ago), is what's different now that's causing a supply constraint? Lack of new construction? People not wanting to sell their homes since they'd need to pay up for something new?

Haven't educated people with money always wanted homes in good school districts, move-in-ready, etc.? Why over the past year or so is it such a mad rush whenever a new, good property is listed?
Stock market gains.
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ASpenderInRecovery
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Re: Tales from this insane real estate market

Post by ASpenderInRecovery »

OP here, and I’m back to report that the housing market in Northern VA is still hot. Just bid on and lost my 6th house in 12 months despite offering 5% over asking and waiving all contingencies. I’m beginning to think I’ll need to save for another few years and build my own house once material prices normalize. I hope others are having better luck than me!

I did read in the WSJ that in October we hit a 15 year high for home sales in the US. Any guesses on when demand will start to subside? Perhaps when interest rates start creeping up next year?
rich126
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Re: Tales from this insane real estate market

Post by rich126 »

ASpenderInRecovery wrote: Tue Nov 23, 2021 4:22 am OP here, and I’m back to report that the housing market in Northern VA is still hot. Just bid on and lost my 6th house in 12 months despite offering 5% over asking and waiving all contingencies. I’m beginning to think I’ll need to save for another few years and build my own house once material prices normalize. I hope others are having better luck than me!

I did read in the WSJ that in October we hit a 15 year high for home sales in the US. Any guesses on when demand will start to subside? Perhaps when interest rates start creeping up next year?
Unfortunately when things get hot you get a ton of investors/flippers involved and it creates more demand. I saw a chart recently showing the number of homes sold to investors is at/near an all time high. I think the number was close to 25% of all sales. Certainly would vary by location.

Depending on your age, it might be best to simply sit back and wait for things to settle down. Things will change at some point, it always does.
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MoonGlow
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Re: Tales from this insane real estate market

Post by MoonGlow »

Realtor here in the greater Boston area. I bought a house for a client 25k over asking price. 3 months later they had a life changing series of events and asked me to sell the house. With zero improvements and only 3 months of ownership we sold the property for 50k over asking price which gave them 65k profit in 3 months. Market here is still smoking hot


MoonGlow
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ASpenderInRecovery
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Re: Tales from this insane real estate market

Post by ASpenderInRecovery »

MoonGlow wrote: Tue Nov 23, 2021 10:17 am Realtor here in the greater Boston area. I bought a house for a client 25k over asking price. 3 months later they had a life changing series of events and asked me to sell the house. With zero improvements and only 3 months of ownership we sold the property for 50k over asking price which gave them 65k profit in 3 months. Market here is still smoking hot


MoonGlow
That is ridiculous. Good for your clients. Are you seeing many appraisal issues? I’ve read that some agents are having issues with deals falling through due to low appraisals and clients being unwilling to cover the difference. Unsure if that’s a factor in my area because you can’t win a contract with appraisal contingencies so if you walk you lose your earnest money deposit.
ChrisC
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Re: Tales from this insane real estate market

Post by ChrisC »

rich126 wrote: Tue Nov 23, 2021 4:29 am
ASpenderInRecovery wrote: Tue Nov 23, 2021 4:22 am OP here, and I’m back to report that the housing market in Northern VA is still hot. Just bid on and lost my 6th house in 12 months despite offering 5% over asking and waiving all contingencies. I’m beginning to think I’ll need to save for another few years and build my own house once material prices normalize. I hope others are having better luck than me!

I did read in the WSJ that in October we hit a 15 year high for home sales in the US. Any guesses on when demand will start to subside? Perhaps when interest rates start creeping up next year?
Unfortunately when things get hot you get a ton of investors/flippers involved and it creates more demand. I saw a chart recently showing the number of homes sold to investors is at/near an all time high. I think the number was close to 25% of all sales. Certainly would vary by location.

Depending on your age, it might be best to simply sit back and wait for things to settle down. Things will change at some point, it always does.
The OP might be waiting for a long, long time in NoVa. It’s not primarily investors or flippers diving up the housing prices there in that area. In the inner DC suburbs, which may now include Vienna and Tysons area, real estate is scarce, buildable lots few and far, and the Metro expansion has resulted in higher prices for many who don’t want to be stuck on I95, 495 or 66. And job growth is at a blistering pace with the area becoming an IT hub, Amazon HQ 2 in Arlington, and likely super-charged economic growth in government-related programs with new programs. And when I visit the area, I’m just amazed at the tear-downs occurring in these inner DC suburbs.

While I generally believe FOMO can be an ill-advised attitude to follow, in some cases it might make sense to buy now, if you can.
vested1
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Re: Tales from this insane real estate market

Post by vested1 »

BillWalters wrote: Mon Oct 18, 2021 6:08 pm The paper wealth is fine, I suppose, but I love where I live and have no plans to leave, so all this madness just increases my property tax. The equity probably won’t be realized until we die.
While I was in the backyard doing some yard work my neighbor's wife came over and congratulated me for getting a contract so soon on the sale of our house. I laid this off to loose lips by our real estate agent, as I didn't even know it had been signed at that point. But that's another story.

I responded that, if it were true, hopefully it would raise the value of those homes nearby, like theirs. I said this mainly because her husband was standing there, and when he originally found out that we were selling, and at what price we were asking, commented that he wondered what he could get for his house. He made no comment of encouragement about our prospective sale.

He did however mumble that the sales price of our house would only result in the raising of his property taxes in response to my positive speculation after the comment by his wife.

Raising his property taxes wasn't my intention, and I would suggest that everyone is responsible for making their own decisions about their real estate. It is, after all, theirs to do with what they'd like. Blaming others for their good fortune serves no purpose.

The house closed yesterday for a great price at asking, 34% net profit when the cost of remodeling was deducted, in 2 years and 3 months since we bought it for cash. We couldn't be happier, and we'll be moving in to our new house in a week. No mortgage and no regrets. Hopefully the new neighbors will appreciate us raising their home values by paying the asking price. It's called supply and demand.
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ASpenderInRecovery
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Re: Tales from this insane real estate market

Post by ASpenderInRecovery »

ChrisC wrote: Tue Nov 23, 2021 2:34 pm
The OP might be waiting for a long, long time in NoVa. It’s not primarily investors or flippers diving up the housing prices there in that area. In the inner DC suburbs, which may now include Vienna and Tysons area, real estate is scarce, buildable lots few and far, and the Metro expansion has resulted in higher prices for many who don’t want to be stuck on I95, 495 or 66. And job growth is at a blistering pace with the area becoming an IT hub, Amazon HQ 2 in Arlington, and likely super-charged economic growth in government-related programs with new programs. And when I visit the area, I’m just amazed at the tear-downs occurring in these inner DC suburbs.

While I generally believe FOMO can be an ill-advised attitude to follow, in some cases it might make sense to buy now, if you can.
I've definitely been trying just missing the mark. Originally, I underestimated the demand and didn't realize that waiving inspection and appraisal contingencies is table stakes to be taken seriously. It's a tough pill to swallow paying 5-10% over asking, waiving all your protections, and risking a 50k+ underappraisal. Perhaps in the long run it won't matter given the strength of the job market in the DC Metro area that continues to power the suburb expansion.

To make this actionable I'd love to hear from anyone that has successfully won a contract in 2021 in a HCOL area. How much over asking did you offer? Did you waive all contingencies? What was the size of your down-payment?
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Ketawa
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Re: Tales from this insane real estate market

Post by Ketawa »

ASpenderInRecovery wrote: Tue Nov 23, 2021 3:35 pm To make this actionable I'd love to hear from anyone that has successfully won a contract in 2021 in a HCOL area. How much over asking did you offer? Did you waive all contingencies? What was the size of your down-payment?
I purchased a co-op in downtown DC in February 2021. I knew the building I wanted to buy in and was successful on my first try.

I had up to about 25% available for a down payment in the price range I was looking. This is a little complicated because of the underlying mortgage with a co-op. Deducting the underlying mortgage, which is financed by the co-op and paid through co-op fees, I had more like 34% available for a down payment.

The place I looked at had been on the market for about 10 days. I submitted an offer at 3% below asking. Another offer came in on the same day. I used an escalation clause to offer up to 2% over asking. I based this on comparing the unit to others in the same building.

My offer waived the inspection contingency. I asked my agent if it would be worthwhile to waive appraisal or financing contingencies, and he advised against it. I wasn't worried about the appraisal since I had plenty for a down payment, but financing can be tricky for a co-op because few banks offering mortgages on them, so I didn't press the issue.

The seller accepted my offer even though my cap was $1K below the competing offer. They said they appreciated my occupation (I'm in the military and I believe the seller was in TSA management). I know the competing bidder was only planning on 10% down. I don't otherwise know anything about the competing bidder's finances, so it's possible that my larger down payment was a factor, as well.

This may not be very informative since I was shopping at the height of the pandemic in a co-op building, which didn't see the astronomical price increases of SFHs.
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