Where are residential real estate prices heading?

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milosz19
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Where are residential real estate prices heading?

Post by milosz19 » Tue Jun 30, 2020 3:47 pm

My wife and I have been thinking of buying a new house, but we are in no hurry since we are content with our current residence.

As Covid 19 hit the US and the job losses followed, I said to my wife “let’s not rush, the prices are going to go down.” Now, I am staring to doubt myself, given the interest rates and stimulus. What do you guys think?

(We are located in Houston)

gr7070
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Re: Where are residential real estate prices heading?

Post by gr7070 » Tue Jun 30, 2020 3:56 pm

They're going up long term.

Very difficult to say where over the next six+ months.

There's plenty of named economists forecasting a reasonably short recovery, but with tens of millions unemployed and that number not improving drastically short-term it is tough to so that intuitively.

Texas has added concern locally with regard to the oil industry, Houston especially.

If you're interested in moving watch your local market in the areas you are interested in so you are knowledgeable and prepared to act when conditions are favorable.

ChiKid24
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Re: Where are residential real estate prices heading?

Post by ChiKid24 » Tue Jun 30, 2020 4:01 pm

milosz19 wrote:
Tue Jun 30, 2020 3:47 pm
My wife and I have been thinking of buying a new house, but we are in no hurry since we are content with our current residence.

As Covid 19 hit the US and the job losses followed, I said to my wife “let’s not rush, the prices are going to go down.” Now, I am staring to doubt myself, given the interest rates and stimulus. What do you guys think?

(We are located in Houston)
Housing prices usually lag economic turns. Interest rates and stimulus definitely help, but at some point the stimulus and mortgage protection programs are going to run out and people are going to have trouble making mortgage or rent payments. To me this means we'll see a decline though I won't speculate on the timing given the govt may continue to step in to prop things up. If you are truly content and in no hurry, then I'd continue to wait. I know before the pandemic many said the real estate market was overvalued, so I can't see how this could lead to higher prices if you wait. All that said, real estate is very local and I am not familiar with the market dynamics in Houston. Good luck!

GmanJeff
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Re: Where are residential real estate prices heading?

Post by GmanJeff » Tue Jun 30, 2020 4:01 pm

I think anyone who tells you which directions prices will go in the future, whether for equities, bonds, real estate, or tulips, is either clairvoyant or just guessing. Historically, over long periods of time, inflation results in the prices of most things rising, but in the kind of time frames you're probably thinking of, not necessarily.

Further, pricing of residential real estate involves individual properties in specific locations, which can be affected by lots of non-macroeconomic trends and influences.

I would not make my home purchase contingent on speculation about the direction of general residential real estate prices over the next few years.

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Re: Where are residential real estate prices heading?

Post by LadyGeek » Tue Jun 30, 2020 5:53 pm

This thread is now in the Personal Finance (Not Investing) forum (real estate).
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ohboy!
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Re: Where are residential real estate prices heading?

Post by ohboy! » Tue Jun 30, 2020 6:53 pm

Buy if you can afford a home that you would be happy to live in for many years to come. Prices are high but interest is low. If anything those two may reverse but I don’t see housing getting much cheaper in real dollars unless there is an exodus.

rich126
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Re: Where are residential real estate prices heading?

Post by rich126 » Tue Jun 30, 2020 6:54 pm

Short term they are up due to a serious lack of supply. Most people who don't absolutely have to move, don't care to have strangers in their house right now. I know that is true in several markets I'm familiar with. And due to the lack of inventory when a nice house is on the market it is likely to get multiple offers which means a premium price for the seller.

I think mid-term they will drop. Too many economic problems, lots of people out of work. Rent in some markets is already decreasing.

I may be selling soon but if I do I don't know what I will do. Buying with limited inventory doesn't appeal to me and renting and then buying is an extra move that is painful. I might get rid of most of my stuff, rent a place and rent furniture and then buy something down the road.

Of course no one knows for sure.

tomtoms
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Re: Where are residential real estate prices heading?

Post by tomtoms » Tue Jun 30, 2020 6:58 pm

It is difficult to speculate without knowing the location really well. I don’t have any experience with Houston.

I am a RE investor. My brother and I own close to 10 rental properties...all single family homes just outside of a big city.

The latest national data shows home prices went up 4.7% year to year in April. I believe this is largely driven by 1) low inventory; 2) low interest rate; 3) millennials are getting older and are buying; 4) change of housing perception due to the pandemic (a house is no longer a place where you just sleep)

https://www.cnbc.com/2020/06/30/coronav ... -says.html

You are going to see an apt/condo price decline in some big expensive cities like SF and NYC (due to work from home) but generally speaking, single family homes in the suburb are going to do well in the future.

I was a stock guy before I got into the RE investing game. My tenants pay for all expenses and after > 4% annual appreciation, I have been making at least 20% return per year based on appreciation alone. I am not even including mortgage pay down by my tenants, extra rent money, generous tax benefits. I have a good team including an excellent property manager who has been managing the properties well.

I don’t think my experience has been an outlier. Anyone who looks at the data knows how well rental properties, especially single family homes, having been doing.
Last edited by tomtoms on Tue Jun 30, 2020 7:14 pm, edited 3 times in total.

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arcticpineapplecorp.
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Re: Where are residential real estate prices heading?

Post by arcticpineapplecorp. » Tue Jun 30, 2020 7:00 pm

milosz19 wrote:
Tue Jun 30, 2020 3:47 pm
My wife and I have been thinking of buying a new house, but we are in no hurry since we are content with our current residence.

As Covid 19 hit the US and the job losses followed, I said to my wife “let’s not rush, the prices are going to go down.” Now, I am staring to doubt myself, given the interest rates and stimulus. What do you guys think?

(We are located in Houston)
what made you think they'd go down? Was it something like, "Foreclosures are going to go through the roof and we'll have a repeat of 2008 when there were too much supply to meet demand"?

A couple of months ago there was a story on marketplace that talked about how prices weren't going to change soon (and could even go higher) because:
if there already was a shortage of homes on the market to meet demand (keeping prices high) what do you think happens when homebuilders can't build because they have to stay home due to covid? That makes even more of a shortage (so prices go higher).

The point is, there's a lot of factors at play and you can't try to guess what's going to happen. Trying to is called timing the market. It doesn't work. You might get lucky now and again, but you shouldn't confuse outcome with strategy.
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tvubpwcisla
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Re: Where are residential real estate prices heading?

Post by tvubpwcisla » Tue Jun 30, 2020 7:14 pm

Building stopped during the real estate crash in 2007 - 2008 and also slowed during Covid. I think the supply problem will drive land and housing prices higher over the next several years. It's a great time to own property. No one knows for sure; however, here is a vote for "it's going higher."

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drk
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Re: Where are residential real estate prices heading?

Post by drk » Tue Jun 30, 2020 7:23 pm

Aside from all the temporary stuff, there two huge factors protecting home prices:

1. Equity: people have *way* more of it than they had in 2008, so there won't be a vicious cycle of forced selling and underwater mortgages
2. Demographics: the biggest generations in history are entering their prime home-buying years during a chronic supply shortage

In the near-term, prices could go up, down, or nowhere. But I wouldn't bet on a significant fall.

brianH
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Re: Where are residential real estate prices heading?

Post by brianH » Tue Jun 30, 2020 7:29 pm

I think this is going to be very location dependent. Very HCOL, dense areas will probably see a significant decline as people flee from the areas hardest hit by corona and civil unrest. Many companies are work-from-home for the foreseeable future, and now that the genie is out of the bottle, it's going to be difficult for many of them to go back to requiring 5-days/week in the office for the employees that have proven they can work (mostly) remote.

I think the real winners will be outer-ring suburban areas with lower COL, larger houses, decent-sized yards, good internet connectivity, and near/in smaller towns with some retail, bars, and restaurants that can be an option when things get back to normal.

It's a bit of a perfect storm for dense, overpriced cities, because the last few months have made the downsides of such an environment painfully obvious. Couple this with the fact that the large millennial cohort is now entering prime childbearing years, and I think you'll see a mass suburban migration.

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Cubicle
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Re: Where are residential real estate prices heading?

Post by Cubicle » Tue Jun 30, 2020 9:28 pm

Pure speculation: small dip later this year, next year same as current. Household budget issues will really crop up after summer.
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Re: Where are residential real estate prices heading?

Post by Sandtrap » Tue Jun 30, 2020 9:39 pm

In demand areas with desirable homes: up.

Low demand areas with marginal homes: down.

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Re: Where are residential real estate prices heading?

Post by IMO » Wed Jul 01, 2020 1:28 pm

On one hand, when you look at various real estate markets, one wonders if one could even save enough per year to keep up with the price appreciation. In other markets, things can stay slow for years and years. Just hard to predict without knowing which specific market.

I think the real question is "are salaries headed in the same direction as housing costs?" When housing costs often go up in areas, salaries seem to go up also. So when people complain about places like SF housing costs/renting costs, I think sure your rental cost was $24K more a year or your mortgage cost was $60K more a year than less expensive areas, BUT your relative salary level increase more than compensated for that increase in housing cost.

It all seems relative. Seems like every time someone talks about a job position in SF, they are talking about base salary of $300 to $500K "easily" . . .

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