General Discussion
Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsI think real estate inflation may be hitting its peak.
Since we bought a new place last year, I've been following sales of properties like the one we bought - typical 2-bedroom suburban split-level townhomes in quad unit developments.
We paid top dollar in a hot market a year ago. Since then, a couple more townhomes in this small development have been for sale. One sold shortly after we bought ours, along with another one in an adjacent development, for about the same price we paid. Now, however, there is another unit for sale in our development, with the asking price about the same as we paid. It has been sitting there for almost two months. When we bought, there were multiple offers on our place the first weekend it was on the market. We outbid the others and got it. Now, a virtually identical unit sits unsold. That is a change.
Why? Well, interest rates for home mortgages have gone up, for one thing. Maybe people are being more cautious, as well, due to other worries about the economy.
Now, this is an example near the bottom of the residential real estate market, of course, and I'm not following more expensive properties, so I don't know what's happening on that end of the market.
It may just be that this is the beginning of a slowdown, at least in part of the real estate market in my area. I don't know. We'll see.
Peacetrain
(22,875 posts)Our 34 year old son wants to buy a home but the housing prices have been so out of sight (not to mention the tax man cometh one of these days with higher taxes for the property we live on.. sigh).. keeping my fingers crossed he can find something..
MurrayDelph
(5,294 posts)Until the escrow closes on the house we're selling in L.A.
MineralMan
(146,288 posts)I think it will close.
EYESORE 9001
(25,933 posts)New development will slow too, so it may balance out.
Jirel
(2,018 posts)In my area, there are virtually no signs of the market cooling. The ONLY one Ive seen is a really run-down property a block from us not selling within a week of going in the market.
We tried to buy our neighbors property at a foreclosure sale a year ago. We wouldve tried to buy directly from her, but she no longer lived there, and we couldnt reach her. The sale was canceled in the last moment, as a buyer had reached her well before (the property never even hit the market). It went for double what she had been asking a couple years earlier, when we were in no position to buy.
The hundred+ year old house was in some disrepair, and probably needed $50k of work, less if some was DIY. Instead, the new owners, who insisted they were going to live there but were heavily into the AirBnB business, immediately hired half the contractors in the area (not exaggerating - I got the scoop from our contractor, who had turned them down), and sank $150k+ into the property. Not content with leveling the foundation and repainting, they replaced all windows, tore out most of the interior (a crime, as the house had several relatively rare antique features), tore off the entire exterior, re-insulated, and replaced the lovely old siding with some modern sheet material. Every ounce of antique beauty on that house was gone.
They never moved in. I think there were a handful of AirBNB guests (kept on the down-low) before they flipped it. The Californians who bought it are nice people, but overpaid by some obscene sum. At least theyre staying.
But thats the story all over our town. Just recently, the drug house that you couldnt sell for $170k before, just went for $400k. The speculative buying is nuts, and were all just waiting for the bubble to burst.
genxlib
(5,524 posts)The prices are just not supportable by the underlying economics. Especially with interest rates going up.
MineralMan
(146,288 posts)It's not going to be a sudden thing, but in my part of the market, sales have slowed. Prices will inevitable go down a bit.
Right now, people are reconsidering their plans, I imagine. Should be interesting to watch.
Johnny2X2X
(19,060 posts)It's a supply and demand issue, there still isn't enough supply and that won't change for years maybe. I think you'll see prices level off, but what's as important is that you won't see the crazy bidding wars as often soon.
If you own a home, stay in it! Do whatever it takes to stay.
The biggest gating issue to people buying a home is still having the down payment plus closing costs. You'll need $10K saved at the absolute minimum to get into even the most modest home with FHA financing (3.5% down). Owning vs renting, it still makes sense to own even with 5.5% interest rates or higher. The monthly payments are still less no matter what you end up paying than renting right now. Saving the $10-20K people need is the problem.
I own a decent home, 2800 sq feet on a half acre in a good area. I pay $1165 a month for my mortgage financed at 2.75%. My sister rents a townhouse that's nowhere near as nice as my home in the same area and pays $2000 a month. She'd love to get into a home, her payment would surely be lower even at today's prices. But she can't save up the $15K or so it would take in our area to get her into a house. It's a vicious cycle for her right now, her rent keeps getting raised so she falls behind on bills and has to use her savings.
Demovictory9
(32,454 posts)Vinca
(50,269 posts)might come along we would be interested in downsizing to that didn't cost a small fortune. Needless to say, we're still in our giant house which we could have sold at the peak of the bubble for big bucks. Anyhow, suddenly more listings are appearing and they aren't being scooped up overnight. Prices have yet to come down, but if properties start to linger on the market they no doubt will. There are a whole lot of cash buyers in our market since Covid began. I assume it's well off people coming from the cities to rural New England and it seems if you're in an area with high speed Internet - our town - they pay a premium for properties, cash on the barrelhead. Locals can't compete with them since sellers are more inclined to take the loot rather than wait for mortgage approval for another buyer. Maybe it's starting to change.
Demovictory9
(32,454 posts)MineralMan
(146,288 posts)I imagine the market is different in every area. Here in the Twin Cities, it has been very hot, and my place is in the lower end of the market. So was our previous house. We were downsizing and our existing home and the one we bought were pretty much a wash on price. So, it wasn't a really difficult purchase for us.
You're right about people selling in high value areas and moving out into markets where they can downsize and end up with a nice cash balance. Lots of boomers making the retirement move right now. So, that's affecting sales in the places they're moving to, for sure.
It's still going to be a volatile market, I think, but I suspect it's on the verge of slowing.
spinbaby
(15,089 posts)The mass conversion of properties to Air b&bs is fairly new, as is the buying up of properties by large corporations. Both of these factors make this not an ordinary housing bubble.
Quixote1818
(28,930 posts)Here is one of several: https://time.com/6178366/house-prices-us/
MineralMan
(146,288 posts)MiniMe
(21,714 posts)That's going to affect prices. So in a way, I'm surprised that people aren't bidding on the house, they may not be able to afford it next week
MineralMan
(146,288 posts)from people who can buy with cash, but higher interest rates are going to lock out first-time homebuyers for sure. On the lower end of the market, that may affect prices quite a bit. People downsizing will still be looking for places, though, where they can cash out of their more valuable home and move into something cheaper while retaining a bit of cash to add to their retirement investments.
Rents are skyrocketing, too, so there will be people buying rental properties, as well. It's just that the mad rush to buy looks like it might be slowing down a bit.
MiniMe
(21,714 posts)I don't have a mortgage. Of course, if you are locked into a mortgage, you should be fine.
peggysue2
(10,828 posts)I have noticed reductions on smaller, less attractive homes and in the $1 million+ market but for the mid-range houses with the amenities we want, my husband and I still haven't had any luck. We just put a bid in Delaware--north Wilmington area--on an extended ranch. Nice old neighborhood, beautiful property and surprisingly low taxes. The Open House was mobbed.
Sadly, we're anticipating we'll be beat once again.
Hoping the market cools shortly.
MineralMan
(146,288 posts)We had to bid 12% above asking to get our place, even with a cash deal.. We missed several others.
peggysue2
(10,828 posts)We need it.
At least we're out of Tennessee. So, there's that.
Harvey Wineburger
(38 posts)The average rate on the popular 30-year fixed mortgage rose 10 basis points to 6.28% Tuesday, according to Mortgage News Daily. That followed a 33 basis point jump Monday. The rate was 5.55% one week ago.
Rising rates have caused a sharp turnaround in the housing market. Mortgage demand has plummeted. Home sales have fallen for six straight months, according to the National Association of Realtors. Rising rates have so far done little to chill the red-hot home prices fueled by historically strong, pandemic-driven demand and record low supply.
https://www.cnbc.com/2022/06/14/30-year-mortgage-rate-surges-to-6point28percent-up-from-5point5percent-just-a-week-ago.html
MineralMan
(146,288 posts)FakeNoose
(32,634 posts)I still think "For Sale by Owner" is the best way to buy a house. I was quite lucky 25 years ago when I bought my house that way, and I've never regretted it. Maybe I'll feel differently when it's time to sell this place, but I don't think so.
MineralMan
(146,288 posts)I agree, though. When I handled the sale of my parent's farm, after they died, it had already been sold, but was in escrow. It was about to fall through. I got in touch with the buyer and we cooperated to complete the sale. The broker had given up.
Tree Lady
(11,457 posts)That's when we bought. My neighbor just posted house up for sell yesterday $470,000.
Was more than I thought it had gone up. 3 bedrooms 1600 square feet.