Tales from this insane real estate market

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flyfishers83
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Joined: Fri Jun 07, 2019 6:08 pm

Re: Tales from this insane real estate market

Post by flyfishers83 »

The market to buy rental properties has been silly around me with houses I wouldn't touch having multiple offers sight unseen. Just yesterday, my neighbor stopped by to let me know he's moving. Got an unsolicited offer for close to 50% more than he paid for his house like 15 months ago. The neighbor two house away also got an unsolicited offer for similar money. We don't want to move, but was told we could probably sell for 50% over what we paid 2 years ago. I keep being surprised, as I live in a town of 16,000 with the closest real airport 2 hours away. It's the biggest town in the area, but still a small town. Didn't expect these kinds of things to happen.
1rl9DS5gl2
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Joined: Wed Jun 26, 2019 2:22 pm

Re: Tales from this insane real estate market

Post by 1rl9DS5gl2 »

I follow the Burlington Vt market pretty closely. I'm aware of a house that listed in 2016 for $650K. It sold a little under 2 years later for $608K. It hit the market again at $899K last week and was under contract in 3 days. Until the sale is finalized I won't be able to see what the actual sales price was but I wouldn't be surprised if it went for $1 million or more. Strange times.
scifilover
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Re: Tales from this insane real estate market

Post by scifilover »

DW went for a walk a couple of days ago....saw a sign for a house for sale.....no flyers so she came home with the address.....I looked it up on Zillow.....home sold 6-23-20 for $565k....sold again 12-24-20 for $875k......now listed for ......$1.495k....3000 SF....suburb of Seattle.....out of about 3000 homes in this area, only 2 others listed for sale.....
Isabelle77
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Joined: Thu Dec 17, 2015 1:43 pm

Re: Tales from this insane real estate market

Post by Isabelle77 »

scifilover wrote: Tue Apr 27, 2021 8:44 am DW went for a walk a couple of days ago....saw a sign for a house for sale.....no flyers so she came home with the address.....I looked it up on Zillow.....home sold 6-23-20 for $565k....sold again 12-24-20 for $875k......now listed for ......$1.495k....3000 SF....suburb of Seattle.....out of about 3000 homes in this area, only 2 others listed for sale.....
Yep, we're in SW Washington and there's a home near us that closed for 900K in 12/2019. Pending at 1.5mil in a few days this past week.
TheoLeo
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Joined: Mon Apr 02, 2018 11:39 am

Re: Tales from this insane real estate market

Post by TheoLeo »

Why is the real estate market insane while in the stock market "nobody knows nothin"? Also there is a lot of advice in this thread on waiting a little longer for the market to cool off. Is it really so easy to time the real estate market compared to stocks? What happened to time in the market beats timing the market?
Tingting1013
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Re: Tales from this insane real estate market

Post by Tingting1013 »

TheoLeo wrote: Tue Apr 27, 2021 12:36 pm Why is the real estate market insane while in the stock market "nobody knows nothin"? Also there is a lot of advice in this thread on waiting a little longer for the market to cool off. Is it really so easy to time the real estate market compared to stocks? What happened to time in the market beats timing the market?
Exactly!!!!!!
mikejuss
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Re: Tales from this insane real estate market

Post by mikejuss »

TheoLeo wrote: Tue Apr 27, 2021 12:36 pm Why is the real estate market insane while in the stock market "nobody knows nothin"? Also there is a lot of advice in this thread on waiting a little longer for the market to cool off. Is it really so easy to time the real estate market compared to stocks? What happened to time in the market beats timing the market?
A house is not an investment; it's a place to live.
Tingting1013
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Joined: Mon Aug 24, 2020 5:44 pm

Re: Tales from this insane real estate market

Post by Tingting1013 »

mikejuss wrote: Tue Apr 27, 2021 12:39 pm
TheoLeo wrote: Tue Apr 27, 2021 12:36 pm Why is the real estate market insane while in the stock market "nobody knows nothin"? Also there is a lot of advice in this thread on waiting a little longer for the market to cool off. Is it really so easy to time the real estate market compared to stocks? What happened to time in the market beats timing the market?
A house is not an investment; it's a place to live.
Choosing to buy and own your home is absolutely an investment decision. Otherwise you can just rent.

Buying converts a living expense into an asset and therefore into net worth. Renting keeps it as a living expense.
Last edited by Tingting1013 on Tue Apr 27, 2021 12:43 pm, edited 1 time in total.
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jfn111
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Location: Minnesota

Re: Tales from this insane real estate market

Post by jfn111 »

TheoLeo wrote: Tue Apr 27, 2021 12:36 pm Why is the real estate market insane while in the stock market "nobody knows nothin"? Also there is a lot of advice in this thread on waiting a little longer for the market to cool off. Is it really so easy to time the real estate market compared to stocks? What happened to time in the market beats timing the market?
Because anyone who has ever bought a house considers themselves a real estate expert. That's why all these type of threads have 10 pages. :shock:
IMO
Posts: 1318
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Re: Tales from this insane real estate market

Post by IMO »

tfunk wrote: Sun Apr 18, 2021 3:44 pm
anoop wrote: Wed Apr 14, 2021 4:21 pm Calculated Risk doesn't think the boom as bad as the housing bubble.
https://www.calculatedriskblog.com/2021 ... iller.html
The author states this boom is similar to the late 70's or late 80's but nothing like the housing bubble.

We bought our first house in the LA area in 1989. Low inventory, multiple people touring open houses. Not with offers over listing price like now but still a frenzy to buy. We paid $240,000. Immediately went down in value it seemed at the time - three years later we got it reappraised for $190,000 in order to reduce our taxes - a 20% reduction in value. Finally sold it 14 years later in 2003 for $352,000 - about 3% appreciation per year from our purchase price. Zillow says it is worth $840,000 now. About 4.75% increase annually including the 2008-2009 bust (14% in just the last year alone).

Point being, house values go up, they go down. Buying a house should satisfy a need for stability and building up equity long term. Short term (3-5 years), no one knows where prices will go. You have to be lucky to buy at the bottom or unlucky to buy at the top.
Have family that bought a similar priced home (a rental) at that time in the same market. What I remember at the time was another housing craze. The same old story, the land is going to run out, housing can and will go to the level/cost of the astronomical Japanese housing market. It certainly wasn't from low mortgage interest rates as I believe rates were over 7% if I remember correctly?

Then it crashed. In hindsight, I'm not even sure why the market crashed? It never gets talked about/analyzed much. I don't think it was due to easy lending becuase back then you had to have 20% downpayments. I think the original plan was to flip the rental in about 4 yrs time.

Alot of stress about selling at a loss or holding on to give the market time to recover. As you said, it took quite a long time to recover. Fortunately they did hold on for the long term and still own the property. But ironically, as you note, 4.75% annual increase. Definitely not bad, but the total stock market would have done better (however, the debt was leveraged with a mortgage but as I noted, mortgage rates weren't that low).

And I agree, people should always be thinking long term. The above family experience taught me early on that while it seems a "sure thing" it's not. Will this current housing crisis drop significantly, drop just a little, stay stable for long periods, continue on what seems unstainable year or year increase, or do something else is really anyone's guess.

People who buy and have to move sooner than long term later (job loss/transfer, etc) may find that the home did not appreciate like housing has in the last year or so, that their monthly mortgage payment amounted to little actual equity, and that there are large fees/expenses involved in selling a home.

Time will tell how this all plays out . . .
rascott
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Re: Tales from this insane real estate market

Post by rascott »

flyfishers83 wrote: Mon Apr 26, 2021 10:44 pm The market to buy rental properties has been silly around me with houses I wouldn't touch having multiple offers sight unseen. Just yesterday, my neighbor stopped by to let me know he's moving. Got an unsolicited offer for close to 50% more than he paid for his house like 15 months ago. The neighbor two house away also got an unsolicited offer for similar money. We don't want to move, but was told we could probably sell for 50% over what we paid 2 years ago. I keep being surprised, as I live in a town of 16,000 with the closest real airport 2 hours away. It's the biggest town in the area, but still a small town. Didn't expect these kinds of things to happen.


I don't understand why people would sell to an unsolicited, private offer (unless this is a very unique property). If he wanted to actually sell it for that price..... put it on the open market FSBO via Zillow.... and see who else would pay it (or more).

I get multiple calls daily asking to buy one of my houses, I don't even bother answering them. Because I know any offer is going to be lower than what offering it on open market would bring if I did want to sell any of them.
majiaknight
Posts: 187
Joined: Tue Jan 26, 2016 2:55 pm

Re: Tales from this insane real estate market

Post by majiaknight »

ASpenderInRecovery wrote: Tue Mar 23, 2021 8:11 pm - There are no rules in this real estate market
- What people are willing to pay is totally unrelated to the underlying value, lot, size, condition of the home
- Every home sells for over asking, you have to be willing to overpay (10-20%) to buy a home right now
I think this is no surprise to most people on this forum as most of Bogleheads' core stock index holding e.g. S&P500 is up 47% from a year ago during the pandemic which is also crazy. One friend of mine bought 3 new construction SFH ($300-$400K range) in NC/SC early this year trying to diversify their portfolio and reduce their stock exposure when mortgage rate was historically low.
Jaylat
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Joined: Sat Mar 12, 2016 11:11 am

Re: Tales from this insane real estate market

Post by Jaylat »

Our neighbors, a nice older Korean couple, are putting their North San Diego County house up for sale for $2.08 million (distant sea view, 5 bedrooms, 3600sf). They probably paid $500,000 20 years ago. They run two dry cleaning stores here and are very hardworking, frugal people.

They are moving to LA and bought a similar size house in Brentwood for $4 million. Actually, their son, a hedge fund owner, bought it for them. He paid $20 million in taxes alone last year, and bought his Beverly Hills place for $15 million, paying cash. He wants his parents nearby and money is no object.

Even though they got the house for free, their RE taxes will jump from well under $10,000 to over $40,000 a year.
maryslifestrategies
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Joined: Wed Jul 01, 2020 5:19 am

Re: Tales from this insane real estate market

Post by maryslifestrategies »

May I add a question to the tales from the insane real estate market: has the average time from offer to closing changed? Any and all insights would be welcomed!
Scotttheking
Posts: 240
Joined: Wed Apr 09, 2008 7:58 pm

Re: Tales from this insane real estate market

Post by Scotttheking »

I am buying a house. Can verify market is insane. Didn’t feel like waiting any longer. Now for market to stay insane until I sell current house.
PowderDay9
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Re: Tales from this insane real estate market

Post by PowderDay9 »

TheoLeo wrote: Tue Apr 27, 2021 12:36 pm Why is the real estate market insane while in the stock market "nobody knows nothin"? Also there is a lot of advice in this thread on waiting a little longer for the market to cool off. Is it really so easy to time the real estate market compared to stocks? What happened to time in the market beats timing the market?
Because the long-term return on real estate is sightly above inflation. Much less than the long-term return on stocks. It's not that much of a surprise when stocks go up 20-30% in a year. It is much more so when real estate does.

Also people don't borrow $1M to buy SP500 but they do this for houses all the time, amplifying the risk of buying something that just substantially increased in price.
skierincolorado
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Re: Tales from this insane real estate market

Post by skierincolorado »

Stuff around here has been listing for 530-550 and selling at 600. Under 460 a year ago.
khram
Posts: 172
Joined: Sat Dec 16, 2017 1:36 am

Re: Tales from this insane real estate market

Post by khram »

A lot of great anecdotes in this thread. I'm renting but have seen the craziness. A coworker made a huge profit on his house in just a couple years, I forget how much it went up. But he also bought into the higher price on his next home. My old boss bought like a million dollar house in a not so expensive city. Didn't seem like a fancy house, I guess a little bit big. A friend of mine bought a new house in a small city and the competition was insane, people are buying sight unseen.

Some of the people I know sold off their RSUs or other stocks they owned for the down payment. That's fine of course, but they didn't just have all this cash sitting around, and had the stock market not recovered quite quickly, they wouldn't have been able to buy (and they would have had to explain this to their wife and maybe their kids, or else take money from 401k etc. and pretend it's all fine). This also tells you they're probably not the type with a few million stashed away in taxable index fund assets. They probably max out their 401ks/IRAs, hold on to their RSUs, and spend what I would regard as an insane amount on the big house, lots of kids, etc. I doubt they'll be retiring early. I know someone who worked part-time at a gym and had some WFH job before the pandemic. No idea what she made, but if she was working side hours at the gym, I doubt she was making that much in her regular job. And based on some things she said, she didn't know much at all about stocks/investing/etc. But she was talking about how she had to upgrade to a $600k house (MCOL area) because she had a kid now. That would've been pre-pandemic prices, so probably $800k now. There are certainly a lot of rich people in the US, but I still think most people are up to their eyeballs in debt, and many can somehow get approved for mortgages that they shouldn't be taking on.

I'm paranoid about buying a house. Whenever I move apartments, it is of course to solve a problem, either lack of space, or bad management, etc. Yet every time I move there ends up being a new problem or two I hadn't considered. As I've never owned a house, I would feel very uncomfortable buying a house without vetting it, having to make an offer same-day, or having to offer $100k+ over asking price. So I get a bit paranoid about the problems I didn't think of if I were to buy a house, especially since it's harder to move out of a house than an apartment. The mania is just insane.

So I'm going to sit out on the sidelines. The interest rates of course make an impact. I couldn't believe it the other day when I saw some mortgage rates charts from the 70s and 80s, and interest rates were 13% or 17% or something like this. If the bubble doesn't burst, we'll be having 80%+ of the country not owning a house and cramming into apartments. People on the upper part of the K are doing well, but most people haven't seen wage increases in decades. And maybe it's strange anyway. In much of the world, people live in much tighter quarters, the idea of having 2-5k sqft for 2-6 people seems a bit strange. I expect to see more of a shift to multigenerational housing in America.

I don't particularly dislike apartment living. Mostly having a big garage where I could put some of my workout gear would be nice, and not having to deal with some of the dumb things apartment management somehow thinks is a good idea. I guess I'm watching in a bit of amusement at the mania.

I also think moratorium has been extended through June now? I don't follow it too closely since I've been paying my bills. But people aren't going to sell if they don't have to pay their bills. Once it expires, we'll see how it all plays out.

One person mentioned that with all the COVID deaths, there may have been a transfer of wealth. Considering adverse COVID outcomes have disproportionately affected the poor, I doubt that has much impact. But boomers are entering the age where they're starting to die of other causes, and this is going to be a historic transfer of wealth, slowly over the next couple decades.
Sasquatch1
Posts: 73
Joined: Tue Feb 18, 2020 9:19 am

Re: Tales from this insane real estate market

Post by Sasquatch1 »

softmax wrote: Tue Mar 23, 2021 8:52 pm I feel you. It's unfortunate to be in this market and sometimes I feel bad for being a millennial (how come we work so hard but the quality of life is rapidly declining???).
I think as long as your cashflow is sufficient to help you achieve your financial goals, it's probably a better idea to continue shopping. Nobody really knows what will happen to this market.
I promise you that is the news propaganda in your head. We do not work near as hard or have near as low quality of life as people did 30-50 years ago. Not even close on average. Go ask your dad or grandpa what it was like before credit cards and easy debt.

When you needed the money or couldn’t buy it, or when their interest rates were 15%!

A lot of blue collar workers use to rent because they couldn’t afford to buy, now all those have been able to buy houses within the last 20 years much easier.

The only reason we work hard and aren’t left with as much free expendable money is because now days we have a BAD case of the WANTS!.

It’s no longer “what does it cost?” It’s now only “how much is the note?”
LINY
Posts: 15
Joined: Tue Oct 13, 2020 4:31 pm

Re: Tales from this insane real estate market

Post by LINY »

The big push in demand is urban residents seeking more space to work from home and no need to worry about a commute. With that being said, a lot of firms are now calling employees back into the office. I really wonder how that is going to impact the market. I have a friend who’s commute went from 35 minutes to over an hour. He’s said,”I’m working from home and I need office space, if my boss calls me back in the office full time. I’ll just find a job that allows for WFH”...

Also, working for a small lender I have to laugh when people say “Underwriting standards have improved drastically since the last bubble”. Which they have, with out a doubt. But with the insane amount of volume is nearly impossible to be so detailed. Many deals are slipping though the cracks. In other words, a lot of applicants don’t have the same spending patterns as bogelheads. Mostly a ton of debt and high incomes.

In conclusion, I think the current market may taper in the next 3-6 months as cities reopen and employers revamp their work from home policies.
alfaspider
Posts: 3555
Joined: Wed Sep 09, 2015 4:44 pm

Re: Tales from this insane real estate market

Post by alfaspider »

IMO wrote: Tue Apr 27, 2021 12:51 pm
tfunk wrote: Sun Apr 18, 2021 3:44 pm
anoop wrote: Wed Apr 14, 2021 4:21 pm Calculated Risk doesn't think the boom as bad as the housing bubble.
https://www.calculatedriskblog.com/2021 ... iller.html
The author states this boom is similar to the late 70's or late 80's but nothing like the housing bubble.

We bought our first house in the LA area in 1989. Low inventory, multiple people touring open houses. Not with offers over listing price like now but still a frenzy to buy. We paid $240,000. Immediately went down in value it seemed at the time - three years later we got it reappraised for $190,000 in order to reduce our taxes - a 20% reduction in value. Finally sold it 14 years later in 2003 for $352,000 - about 3% appreciation per year from our purchase price. Zillow says it is worth $840,000 now. About 4.75% increase annually including the 2008-2009 bust (14% in just the last year alone).

Point being, house values go up, they go down. Buying a house should satisfy a need for stability and building up equity long term. Short term (3-5 years), no one knows where prices will go. You have to be lucky to buy at the bottom or unlucky to buy at the top.
Have family that bought a similar priced home (a rental) at that time in the same market. What I remember at the time was another housing craze. The same old story, the land is going to run out, housing can and will go to the level/cost of the astronomical Japanese housing market. It certainly wasn't from low mortgage interest rates as I believe rates were over 7% if I remember correctly?

Then it crashed. In hindsight, I'm not even sure why the market crashed? It never gets talked about/analyzed much. I don't think it was due to easy lending becuase back then you had to have 20% downpayments. I think the original plan was to flip the rental in about 4 yrs time.

Alot of stress about selling at a loss or holding on to give the market time to recover. As you said, it took quite a long time to recover. Fortunately they did hold on for the long term and still own the property. But ironically, as you note, 4.75% annual increase. Definitely not bad, but the total stock market would have done better (however, the debt was leveraged with a mortgage but as I noted, mortgage rates weren't that low).

And I agree, people should always be thinking long term. The above family experience taught me early on that while it seems a "sure thing" it's not. Will this current housing crisis drop significantly, drop just a little, stay stable for long periods, continue on what seems unstainable year or year increase, or do something else is really anyone's guess.

People who buy and have to move sooner than long term later (job loss/transfer, etc) may find that the home did not appreciate like housing has in the last year or so, that their monthly mortgage payment amounted to little actual equity, and that there are large fees/expenses involved in selling a home.

Time will tell how this all plays out . . .
I think a lot of what happened in 1989 as today is a demographic lump:

Image

We are now getting into a period where there is a distinct hump for people who are getting into their peak homebuying years (30s). Even those who aren't home buyers are getting to the age where they no longer want roommates, and so are still putting more demand on housing. Where's the other hump? People who are in their 60s, who were in peak homebuying years in the late 1980s. That could point to a period of 5-7 years with a lot of housing demand.
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