Love Letters. Real Estate

[goeduck]

The market is certainly cooling off here. Yes, houses are often selling fast, but I'm also seeing "price reduced" signs going up.

I get an automated message in my email every day filtered for houses that I may be interested in investing in. I would say that about 15% of them are "price reduced". Six months ago, only the junkers were reduced. Prices are still on the bubble, but hopefully on the back side headed lower. I am sure they will not go back to where they were pre pandemic, but the craziness is just driving up housing and property taxes for everyone which here are linked to comparable sale prices.

 

[MoKelly]

I get an automated message in my email every day filtered for houses that I may be interested in investing in. I would say that about 15% of them are "price reduced". Six months ago, only the junkers were reduced. Prices are still on the bubble, but hopefully on the back side headed lower. I am sure they will not go back to where they were pre pandemic, but the craziness is just driving up housing and property taxes for everyone which here are linked to comparable sale prices.

Given all time low mortgage interest rates and all time stock market highs, it seems there will never be a more favorable time to buy a house.

This cycle has lasted quite a while.

Nothing lasts forever.

MoKelly

 

[grsthegreat]

I wouldn’t buy a house at these inflated rates if mortgage rates were0.00005%. Houses that were 110,000 last year are priced in the 300’s.
in a year it will be back down. Seen it too many times to count.

we sold my wife’s grandfathers house years ago during a previous bubble.got nearly 750 grand for a 60 year old fixer upper. A few years later it was appraised around $400k.

 

[Sigarms]

That depends. Was it actually on the market at $200k Before “all this crap hit”? Or was that just a WAG? Probably just a WAG or a CAD value. The term “average value” is also a wild card.

Now if the $200k was the actual last purchase price and the $275k was an actual purchase price that would be a $75K increase in market value over that time period based on specific sales data.

The terms “average” and “median“ values are helpful as general terms but too many people then try to pin that “value” on a specific property and RE is to unique to do that accurately in 90+% of cases.

I'm surprised you're not dealing in percentages.

75K increase over market value vs 150k increase in market value doesn't tell you at all who made more gross profit.

Since I'm clueless on the housing market, what is the average increase of percentage in sell price vs original buy price broken down?

Time also has to be a consideration. Buy a house in 1970 for 20K and sell it for 200K 50 years later vs buying a house in 2015 for 200k and then selling it for 380k in 2021 as example. Both homeowners made the exact same amount of profit (less all the real estate crap), but one average a 30k per year profit where as the other averaged 6k a year. Yes, understood I'm probably missing numerous variables to factor in as well.

No matter how much math you throw into this, it all comes down to what someone is willing to spend.

Guy from San Diego may think he's getting a steel of a lifetime for a 2,000 square foot house on 2 acres for 350K in my area, whereas I think it's hogwash and would never pay it. That said, I probably would fall over dead on the price of the same house and land in San Diego LOL

 

[California]

... I probably would fall over dead on the price of the same house and land in San Diego LOL

Don't faint. Santa Rosa is an hour north of San Francisco.

A hellish commute but lots of work-from-home new arrivals recently.

Real Estate

Publication=”PressDemocrat”Section=”Real Estate”SectionFullName=”/Business/RealEstate/”Pagelayoutname=”DefaultLayout”Grid=”PDSubsection” …

www.pressdemocrat.com

In the Under $500k story:

According to the latest Compass real estate reports, the median home price in Sonoma County is $825,000. With a median income of only $81,018, the monthly mortgage for a house at this price would occupy over 50%* of one’s monthly income.

 

[Sigarms]

50% of ones monthly income for a house doesn't leave one with much spending money, not including car insurance, fuel, food and utilities and taxes.

That's kind of borderline insanity.

 

[MoKelly]

50% of ones monthly income for a house doesn't leave one with much spending money, not including car insurance, fuel, food and utilities and taxes.

That's kind of borderline insanity.

If the income quoted is pretax, given California high tax rates the 50% would actually be much higher if calculated on take home income.

Insanity is correct.

MoKelly

 

[California]

The high median price homes bought and sold now are often bought by retirees from SF, or the wealthy who have investment income along with salary. And the median price is inflated by a lot of very expensive places, as illustrated in that advertising section. The median income people are living poorer with long commutes, or many to a house. (Lots of farm labor here). Not the same people.

Putting median income and median home price sales today in the same sentence is just for shock value.

The point is to show how decent housing is nearly impossible to find to buy today, even this far from a major city. Where the disparity is even greater. I suspect lots of the best and brightest techie kids in the Bay Area (SF and Silicon Valley) have their housing supplemented by parents so that they don't have to live an hour+ away. I know of several cases ....

 

[California]

Something I overlooked in comparing median income vs median home prices above:

Many people, perhaps the majority, have seen the value of their home appreciate far faster than their income. So while the median-income person couldn't afford to buy the median house today, the expensive house he owns now was affordable back when he actually bought it.

Only the new families starting out and newcomers to California are facing the extreme un-affordability. People who have been here a while and have seen their property tax increases restrained by Prop 13 to 3% (corrected, 2%) per year, aren't hurting like those who have to buy today.

 

[dieselcrawler]

Interesting thread... relevant in my case, as we have received an offer to buy our farm at over double what we paid 8 years ago. The offer is from a gas company needing access to a well site, and willing to pay us, and let us stay on the property for 1 year while we buy a new farm and move...

The real estate prices being what they are make finding a suitable property with the land, house, and buildings we require is nearly impossible in our local area, even with the generous offer, and ability to make a "cash deal", we would likely have to relocate several hours away.

But its tempting... and I'm not gonna want to sit on my front porch in a cloud of dust from well truck traffic going down my driveway.

 

[goeduck]

The real estate prices being what they are make finding a suitable property with the land, house, and buildings we require is nearly impossible in our local area, even with the generous offer, and ability to make a "cash deal", we would likely have to relocate several hours away.

That is exactly the problem, if you sell at these prices you have to buy at these prices. These are odd times with everything adjusting due to the impact of the pandemic. Where it will settle, no one knows.

Immigration is creating a demand for housing which drives up prices, that is a factor as well.

 

[Sigarms]

That is exactly the problem, if you sell at these prices you have to buy at these prices. These are odd times with everything adjusting due to the impact of the pandemic. Where it will settle, no one knows.

Immigration is creating a demand for housing which drives up prices, that is a factor as well.

Completely agree with you.

However, what we've found is condo pricing in a "nice" community isn't as bad as we thought vs homes and land pricing right now.

Since my father in law passed early this year, my MIL is thinking about moving about 20 minutes away, as she is currently about a 70 minute drive away.

Seems like with her modest stone house, she could make a pretty pretty vs about 7 years ago what they paid for the house, and move into a "retirement" community that has everything for her and still put a decent amount of money into the bank to boot.

She's in her mid 70's, and they've had someone doing their lawn care for the last 3 years or so, and being by herself, things are getting harder for her. That said, a somewhat unique situation with a older single homeowner whose spouse has died.

 

[plowhog]

So while the median-income person couldn't afford to buy the median house today, the expensive house he owns now was affordable back when he actually bought it.

... property tax increases restrained by Prop 13 to 3% per year ...

Agree with your observation, although Prop 13 restricts to 2% per year ...

 

[check]

The high median price homes bought and sold now are often bought by retirees from SF, or the wealthy who have investment income along with salary. And the median price is inflated by a lot of very expensive places, as illustrated in that advertising section. The median income people are living poorer with long commutes, or many to a house. (Lots of farm labor here). Not the same people.

Putting median income and median home price sales today in the same sentence is just for shock value.

The point is to show how decent housing is nearly impossible to find to buy today, even this far from a major city. Where the disparity is even greater. I suspect lots of the best and brightest techie kids in the Bay Area (SF and Silicon Valley) have their housing supplemented by parents so that they don't have to live an hour+ away. I know of several cases ....

Absolutely right, California. None of this affects us right now, because the only figures that count are when you buy and when you sell. I wouldn’t want to buy in Toronto right now. Average detached price is $1.42 million - and that is just the average!

So what do your kids do? Bank of Mom and Dad, it seems.

On the other hand, prices of water front property here in cottage country (2.5 hrs NW of Toronto) have doubled during the pandemic. People are wanting to “escape from Alcatraz” in my view, and this new “4th wave” of Covid is not helping things.

 

[Sigarms]

So what do your kids do? Bank of Mom and Dad, it seems.

Find a place they can afford either by renting or buying if they aren't already renting or own to begin with.

Now, if they are living with you now, and pricing is stupid high for either of the above, you wait the market out for a while.

 

[Pixguy]

I agree Sig, we want a place out in the woods and preferably on water so we made an offer on an overpriced lake house (more like a camp) that we'd upgrade but offered about 75% of asking and what we feel it's worth. We'll probably lose out on it, and save myself a lot of work, but that's ok, we're not paying ridiculous prices, we can wait. And No, no love letter. Lol

 

[California]

Agree with your observation, although Prop 13 restricts to 2% per year ...

Thanks for catching that, I went back and corrected my post to 2%.

I voted against Prop 13 when it was enacted, its pretty much a war by the boomers against the younger generation buying their first home. "I've got mine so s--- you". No wonder they are PO'd.

But I've benefited personally, tremendously. I inherited a half-interest in this orchard and paid cash into Dad's estate to be Sis's inheritance, for the other half. County assessor said so long as the next owner is a direct descendant then 100% of the tax relief goes to the new owner and it doesn't have to be our primary home. I pay about 1/5 the property taxes of more recent neighbors. Thanks neighbors!

Similar for our home in town over in the Central Valley. Zillow shows comparables at 10x what we paid in 1978. Taxes are far lower than recent neighbors. If we ever move, the Prop 13 tax relief will carry forward to our next home.

Much of the support for passing Prop 13 was corporations that locked in their tax rate at the time, again, making things more difficult for newer competitors.

 

[Jstpssng]

MSN

 

[Sigarms]

I agree Sig, we want a place out in the woods and preferably on water so we made an offer on an overpriced lake house (more like a camp) that we'd upgrade but offered about 75% of asking and what we feel it's worth. We'll probably lose out on it, and save myself a lot of work, but that's ok, we're not paying ridiculous prices, we can wait. And No, no love letter. Lol

Thing is, it seems you understand what the market price is and you DON'T have to have it. Thing is, you wanted it at 75% of the asking price, and you knew it.

Thing is, I'm a horrible negotiator on pricing. Give me a price, I'll say yes or know, and if the person asks me what price I was thinking, I'll tell them what I'm willing to pay for it.

To some extent, the housing market has been kind of like the gun market of late LOL

 

[Jstpssng]

To some extent, the housing market has been kind of like the gun market of late LOL

Which is why I'm not buying guns or real estate right now.