Interest rates control house prices. Right now the selling trend will continue since rates are so low. The Fed just announced they have no plans to push rates up until maybe 2022.
THat's what the creepy banker dude was trying to say to me yesterday, but I don't pretend to understand it. Was basically saying when rates are higher, the banks in their bottomless graciousness have more money to loan out to people, but when rates are low they don't make any money. The poor dears. Fugk the banks, fugk the landlords and absentee homeowners.
Quit hatin’ on people for making $$ Gruff, It’s not a bad thing. They like spending it which winds up in our pockets eventually.
Trickle down is non-sense. Capital is spent with the intention of minimizing trickle down. That is the basis of capitalism. I'm not against capitalism but we can't delude ourselves with the idea large wealth aggregations are good for everyone.
The problem with large aggregations of wealth is the large aggregation of power that follows. That power is ALWAYS used to reduce everyone else's power. That is what gives us the oligarchy.
Gruff was talking about landlords and a local banker. Don’t think he was talking about bezos, Gates, Soros etc….
In different parts of the country, the surge is fueled by different influences. CA has been surging for years for many reasons. Same with the states that people are moving to from CA.
But here in VA I am very confident that, other than low rates, it is mainly driven by a string of covid related influences: supply shortage of building supplies causing a short supply of new homes, eviction moratorium causing homes to remain off the market that otherwise might be available, to a huge degree people looking to flee the city.
The price of raw land in my area just got back to pre-2008 levels in the last year or so, then surged ahead. But, the housing market may be cooling. Having liquidated two rentals, and not head any other projects sucking my money for the last 2 years, I am cash heavy. I will be buying land when the time is right. Not as an investment but for the pure enjoyment of it.
Ive been thinking the same. We're in for some interesting times and yet most Americans seem oblivious and keep buying more toys, more vacations, new vehicles, houses they can afford.
People have a paradigm that long term property just goes up in price, well, because it has for the better part of our entire lives. A certain amount of modest property inflation should be expected, but what we've seen is the combined effect of that modest inflation coupled with the down trend in rates since the 70s. Most people alive today have not experienced the impact of a longer term up trend in rates and it's impact on property prices. We may be seeing the perfect storm of factors that could cause that trend reversal to happen.
The driving factor for increasing property values is banking. Used to be people were(wisely) opposed to debt. The standard was on weeks salary for a mortgage. At a time when you took home a higher percentage of your wage. And 15 years was a long mortgage.
Today, people have the "gotta have it now's". They only care about keeping debt close to income. Mortgages are 30 years.
Mix all that with stupid low interest, and the low interest allows them to... borrow more. It all combines to push up prices. Now the $100k home is $150k. Over 30 years they will be pushing a half mill on the thing, especially if they are typically stupid. And they are buying the same house as a couple years ago.
Funny how things have/haven't changed. People that bought homes in the 70's paid 10% interest. OMG! But for 10 or 15 years. Today it's only a few percent. But figure mortgage insurance due to a small down, And a 30 year loan, maybe some other stupid thrown in...
Both ended up paying back 3 times what they borrowed.
I laugh like hell at these discussions. Everyone forgets financing cost. Buy a house, pay back 2-3x what was borrowed. Sell house for 2 1/2x purchase price. Brag on the money they made.
Ugh, no! You broke even. Maybe lost. Figure taxes, repairs, improvements.... You probably lived there much cheaper than renting, considering sale price. But you didn't make a whole lot.
Flipping, rentals, other investing are different. Hopefully!
Parents who say they have good kids..Usually don't!
Ive been thinking the same. We're in for some interesting times and yet most Americans seem oblivious and keep buying more toys, more vacations, new vehicles, houses they can afford.
People have a paradigm that long term property just goes up in price, well, because it has for the better part of our entire lives. A certain amount of modest property inflation should be expected, but what we've seen is the combined effect of that modest inflation coupled with the down trend in rates since the 70s. Most people alive today have not experienced the impact of a longer term up trend in rates and it's impact on property prices. We may be seeing the perfect storm of factors that could cause that trend reversal to happen.
The driving factor for increasing property values is banking. Used to be people were(wisely) opposed to debt. The standard was on weeks salary for a mortgage. At a time when you took home a higher percentage of your wage. And 15 years was a long mortgage.
Today, people have the "gotta have it now's". They only care about keeping debt close to income. Mortgages are 30 years.
Mix all that with stupid low interest, and the low interest allows them to... borrow more. It all combines to push up prices. Now the $100k home is $150k. Over 30 years they will be pushing a half mill on the thing, especially if they are typically stupid. And they are buying the same house as a couple years ago.
Funny how things have/haven't changed. People that bought homes in the 70's paid 10% interest. OMG! But for 10 or 15 years. Today it's only a few percent. But figure mortgage insurance due to a small down, And a 30 year loan, maybe some other stupid thrown in...
Both ended up paying back 3 times what they borrowed.
I laugh like hell at these discussions. Everyone forgets financing cost. Buy a house, pay back 2-3x what was borrowed. Sell house for 2 1/2x purchase price. Brag on the money they made.
Ugh, no! You broke even. Maybe lost. Figure taxes, repairs, improvements.... You probably lived there much cheaper than renting, considering sale price. But you didn't make a whole lot.
Flipping, rentals, other investing are different. Hopefully!
We bought our first house in 1981 for less than the price of a new truck and had an adjustable mortgage rate. I'm thinking we paid over 18% interest rates on our loan, after putting 20% down and $3k in an escrow CD account for insurance and taxes. I think the $3k CD ended up being over $10k in the 11 years it took us to pay that house off.
I think we are missing the one critical part of the equation that is making real estate go nuts: human nature. I think it is correct to point out factors such as sustained low interest rates, influxes from foreign cash buyers, reduction is supply from C19 (and previously, from delayed responses from the 2008 - 2011 real estate recession).
The major factor why we are seeing (economically) bizarre behavior by buyers is much the same as it was in previous real estate booms. In the land boom of the late 8-0's iot was peop;e buying land as a hedge for inflation. In 2008, it was a "can't lose in real estate" mindset, fueled by "lending innovations" such as NINJA loans.
Today, the emotion is fed by a generation of millenials who have grown up in the "everybody gets a trophy" era. They have never gotten their pee-pee whacked for being stupid. There is no fear of failure, mommy and daddy will bail the out if it goes sideways. Add to that a Zeitgeist of FOMO, fear of missing out, fueled by foreign and corporate cash buyers. People think they have no choice but to join the bidding war and throw insane amounts or money at sellers to "be able to get a house". It's a form of mass-hysteria. Some markets, like California, are quite cyclical, and when things are cooling down (like they are right now), all it takes is one little corner of the market to start creeping down, and the whole thing will lock up, as the usual scenario for the housing market is not for prices to fall as much as for buyers to disappear. When a market stagnates like that, it's not unusual for prices to be flat for close to a decade, until inflation has sapped away the excess from the market.
We called it "stagflation" in the '70's The emotion of the peoiple changed to one of gloom and despair, and it took Ronald Reagan to pull the nation out of it along with draconian interest rate policies. but the biggest change was people believing they could again. So I look more towards sentiment than fundamentals right now, because the fundamentals do not explain the market.
Ive been thinking the same. We're in for some interesting times and yet most Americans seem oblivious and keep buying more toys, more vacations, new vehicles, houses they can afford.
People have a paradigm that long term property just goes up in price, well, because it has for the better part of our entire lives. A certain amount of modest property inflation should be expected, but what we've seen is the combined effect of that modest inflation coupled with the down trend in rates since the 70s. Most people alive today have not experienced the impact of a longer term up trend in rates and it's impact on property prices. We may be seeing the perfect storm of factors that could cause that trend reversal to happen.
The driving factor for increasing property values is banking. Used to be people were(wisely) opposed to debt. The standard was on weeks salary for a mortgage. At a time when you took home a higher percentage of your wage. And 15 years was a long mortgage.
Today, people have the "gotta have it now's". They only care about keeping debt close to income. Mortgages are 30 years.
Mix all that with stupid low interest, and the low interest allows them to... borrow more. It all combines to push up prices. Now the $100k home is $150k. Over 30 years they will be pushing a half mill on the thing, especially if they are typically stupid. And they are buying the same house as a couple years ago.
Funny how things have/haven't changed. People that bought homes in the 70's paid 10% interest. OMG! But for 10 or 15 years. Today it's only a few percent. But figure mortgage insurance due to a small down, And a 30 year loan, maybe some other stupid thrown in...
Both ended up paying back 3 times what they borrowed.
I laugh like hell at these discussions. Everyone forgets financing cost. Buy a house, pay back 2-3x what was borrowed. Sell house for 2 1/2x purchase price. Brag on the money they made.
Ugh, no! You broke even. Maybe lost. Figure taxes, repairs, improvements.... You probably lived there much cheaper than renting, considering sale price. But you didn't make a whole lot.
Flipping, rentals, other investing are different. Hopefully!
The market has always cycled here in Southwest Florida. I have been here since 86 in commercial real estate and I have been through 3 full cycles and we are near the top of my forth. Near the top of every cycle I heard experts say this time was different and there will be no correction. Every cycle was different and the correction occurred for different reasons, at slightly different time spans and to different degrees. But there was always a cycle.
One thing they all had in common was that money to buy got harder to borrow. Once the banks tighten up the market stalls , inventory increases and prices correct. Older cash buyers with paid off or tons of equity in homes or properties depend on younger buyers with less equity to be able to borrow to buy.
People that can move are selling in high priced areas and moving to areas that they can get a nice home for less. A lady I date is in residential real estate. At her New Years eve party I met a gentleman who recently sold his smallish ranch style house in a so so location in California for $2.2 mil. He bought a $2.1 mil beautiful house here on the water in an upscale area that is three times the size of the Cali house. He latched on to me as he quickly identified me as a fellow conservative.
The market has always cycled here in Southwest Florida. I have been here since 86 in commercial real estate and I have been through 3 full cycles and we are near the top of my forth. Near the top of every cycle I heard experts say this time was different and there will be no correction. Every cycle was different and the correction occurred for different reasons, at slightly different time spans and to different degrees. But there was always a cycle.
One thing they all had in common was that money to buy got harder to borrow. Once the banks tighten up the market stalls , inventory increases and prices correct. Older cash buyers with paid off or tons of equity in homes or properties depend on younger buyers with less equity to be able to borrow to buy.
People that can move are selling in high priced areas and moving to areas that they can get a nice home for less. A lady I date is in residential real estate. At her New Years eve party I met a gentleman who recently sold his smallish ranch style house in a so so location in California for $2.2 mil. He bought a $2.1 mil beautiful house here on the water in an upscale area that is three times the size of the Cali house. He latched on to me as he quickly identified me as a fellow conservative.
I cant speak to what happens in other areas.
Most folks can't afford to pay the $62,000 in yearly taxes and insurance on his new to him house. Add in maintenance, power and water he probably pays north of $100,000 yearly for the privilege of living on the water in Florida. I don't know how people can afford to pay the taxes and mortgage on new property purchases in Florida.
...People that can move are selling in high priced areas and moving to areas that they can get a nice home for less. A lady I date is in residential real estate. At her New Years eve party I met a gentleman who recently sold his smallish ranch style house in a so so location in California for $2.2 mil. He bought a $2.1 mil beautiful house here on the water in an upscale area that is three times the size of the Cali house. He latched on to me as he quickly identified me as a fellow conservative.
I cant speak to what happens in other areas.
This has been the case around my general area for years. The folks who moved off to the East and West coasts and big cities back in their younger years, retire, sell their high dollar properties there, move back, buy or build much bigger and better homes in prime locations and typically still have a tidy sum left over. Even with the high prices of homes in most all areas now, including this area, homes are still comparatively a good bit cheaper here.
We have an entire generation of buyers who only know low interest rates. For the most part these rates have been low since 2008. For the last 13 years consumers are used to low rate home loans as well as 0 - 4% auto loans for good credit scores. Pulling the plug on these low rates will create a serious recession and Uncle Sam knows it.
I'm not sure what is fueling the upswing in property prices. I just talked to our new neighbor who bought some acreage next to ours. He paid 5 times what we did per acre in 2014, He was ecstatic to get the property and told me he could already flip it for a huge profit. And the kicker is he only lives a few miles away and isnt someone moving from a high priced state into ours. He plans to build a new "forever" house and expects it to be completed within 6 months. Time will tell, A lot of people are flush with cash and either dont trust the markets or are unhappy with low rates of returns from a bank and are buying assets. They are not making any more land.
My biggest fear is when I die my wife will sell my guns for what I told her they cost.
My wife has finally conceded to move to Northern MI where I am from. She has had an open invitation to take a position at her sister station. She never considered it until our first grandchildren are now up there. Her area would put her smack in the middle of them. Problem is just like what is said previously. Houses are way over priced. When homes up there are selling for more than what they are in my area, things are out of wack. I told the wife lets just sell, put our stuff in storage and rent. Things are going to burst and home prices will plummet. If we can wait it out I think they will soon be reasonable. Biden will make sure of that!
Sold a home last fall, 4 offers the first evening, we let it ride one more day, got more than asking and buyers paid all of closing. We actually didn't take the highest offer, we took the sure thing and closed in 30 days no problem.
...People that can move are selling in high priced areas and moving to areas that they can get a nice home for less. A lady I date is in residential real estate. At her New Years eve party I met a gentleman who recently sold his smallish ranch style house in a so so location in California for $2.2 mil. He bought a $2.1 mil beautiful house here on the water in an upscale area that is three times the size of the Cali house. He latched on to me as he quickly identified me as a fellow conservative.
I cant speak to what happens in other areas.
This has been the case around my general area for years. The folks who moved off to the East and West coasts and big cities back in their younger years, retire, sell their high dollar properties there, move back, buy or build much bigger and better homes in prime locations and typically still have a tidy sum left over. Even with the high prices of homes in most all areas now, including this area, homes are still comparatively a good bit cheaper here.
maybe not for less, but for less in taxes in neighboring counties for sure. Those taxes and utilities add up. I bought twice the house, 3 times the land and my taxes are half what they were at the old house. Utilizes are are easily half too.
I put off refinancing since we just bought the house less than two years ago, but back in May I did the math, got 15 year with a great rate and put another chunk down on it also. My goal is to have it paid off before the first born goes to college in the 6 years. We'll see but it sure is nice to have so much equity in it so quick.
March 2018 I bought a 1bed1bath1car garage condo 3miles from the Auburn campus for $95,000. Today it's worth about $135,000.
July 2020 I bought 25 acres about 15 minutes outside Auburn, Alabama for $107,000. Exactly a year later, a 20 acre tract due west of me is being listed at $230,000.
This housing market, it doesn't seem like it can keep this going forever.
