Stupid question

[happyhoix]

Why have housing prices made such a big jump in just a few years?

I live in a low cost of living area. The house next door sold for about $200k three years ago. A nice young couple bought it, sis some minor upgrades (added a barn door in the master bath, new siding, new bath vanities, a lot of paint) and put it in the market for 500 this week. Even saying they spent 100k on remodeling, that’s a huge jump in 3 years.

It’s not the only house in the neighborhood to do that. A 2 bedroom on an awkward sloped lot is on the market for 430. Another one with an unmowable front yard but 3 bedroom is asking 460 - sold about 10 years ago for around 200.

Is it a housing shortage? Irrational bump in the market that will crash at some point?

[minnesotapaintlady]

Well, I'm sure the sub 3% loans had a lot to do with it.  People could afford a much higher payment so could offer more.  Prices are dropping here and houses are sitting longer with the loans over 6%.

[chiver78]

I have no idea, because our prices are still rising.     I paid $425k, got the house reappraised for the purposes of cancelling PMI and it came in at $495k (which is what I told the guy I needed to meet 80% LTV) and Redfin told me this week it's value is now $577k. whoever would pay $577k for this house needs their head examined, but I'm appreciative of the fact that I was able to ditch PMI within a year after only putting 5% down. if I'd had to refinance in order to have the house revalued, no way my interest rate would still be 3%. 

[laterbloomer]

In my area it's because working remotely is suddenly a real thing for a lot of people. So those that lived in the big cities to be close to work can suddenly sell for big bucks, buy further out much cheaper and they are using the excess to buy investment properties in my small city. It's really messing with our housing prices and rents because they can't wrap their heads around our traditional costs and are paying and charging substantially more than the locals used to.

[nidena]

So many factors play into this equation...

In 2000, there just under 210 million adults in the U.S.  In 2020, that number had increased to more than 250 million.  source  Which equals higher demand.
Fewer children are being born but the average age at death is older so people are living longer which means their occupying they're houses for longer and further impacting availability of vacant houses.

Thousands fewer homes have been built in the last 15 years (since the housing crash)  source  Which contributes to the shortage.

Add in increased costs and that further reduces the number of houses being built, as well as fewer apartments.

In short, there are millions more folx looking to buy homes in a supply pool of only thousands and you have your basic supply and demand scenario.

If you want to dig in further, an online search of "Why are there so few houses for sale?" will net you lots of recent articles about the topic.

[billisonboard]

Jun 8, 2023 8:43:01 GMT -5 laterbloomer said:

In my area it's because working remotely is suddenly a real thing for a lot of people. So those that lived in the big cities to be close to work can suddenly sell for big bucks, buy further out much cheaper and they are using the excess to buy investment properties in my small city. It's really messing with our housing prices and rents because they can't wrap their heads around our traditional costs and are paying and charging substantially more than the locals used to.

They are selling to whom for big bucks? That is a piece I don't understand. The OP talks about "on the market for..." Okay, you can ask for any price, but who is willing/able to pay it?

[jerseygirl]

Lots more people needing places to live. House prices are still increasing here in north NJ. Lots of folks working from home instead of commuting into NY.
But what’s really changing is numbers of apartment complexes being built. Small towns that never had these now have 2-3 large complexes going up. And rents starting around mostly $2500 to $3000and up.
Although the state has mandated every town have affordable housing so about 10-15% of these apartments are ‘affordable’ which here in a HCOL area is still pretty high. The rest are market rate. Thinking nearness to Manhattan still a factor even with WFH. Also lots of good paying jobs even in the suburbs and lots of highways. NJ population about 8.9 million in 2020 compared to about 7.7 in 1990 (about a generation from birth to wanting a house). So lots more people

[Tiny]

I was starting to see the jump in housing prices in late 2018 thru 2019. My sibling and I were looking for another "fixer upper" to buy and fix up. We were looking at areas in 4 different states. And all 4 of them had rising prices for houses that were usually on the low end since the housing bubble burst in 2008. We were having trouble getting in a winning bid on houses - flippers and general contractors were scooping up houses at an amazing rate (and paying higher prices).



If I had to say what was feeding the rising prices:

Low mortgage rates (3% and less).
Flippers and the demand for HGTV'd houses.
A whole generation of adults who had only rented and wanted a move in ready house that had everything they wanted already in it.
A lack of houses/apartments/condos/townhouses having been built since 2008.

And then just plain old DEMAND: 
I'd also say Boomers - moving out of large suburban family homes - into large suburban family homes in the area they retired to.
Of all the 55+ yo people I know who have either both a second home (near their kids) or who have moved to their "retirement home" none of them have purchased a smaller home - usually it's a BIGGER home.
I think in another 10 or 15 years there will be more family sized homes on the market as the current crop of retiring Boomers die off.

As for the people "fleeing the city" - I think that's just a nice "sound bite". I think what really happened is that the 30 somethings who were living in down town or downtown-ish areas got to the stage where they decided to have children. The hustle and bustle and always doing something every night of the week - doesn't really fit with the idea of starting a family (and staying home more - or doing more "at home" things with family and friends. A more "suburban" house (a house with a back yard not on a main street) starts looking good better than a small 1 or 2 bedroom condo/apartment on the 11th floor of a high rise building.  Or the rented apartment in a 2 or 3 flat in a neighborhood of all apartment buildings that's within walking distance of bars, restaurants, small stores - so a constant stream of people and cars on the streets. and a high density of people/noise/trash/bad behavior.   All of which isn't so bad when you are young and part of the noise/leaving trash behind/bad behavior.  Once you aren't part of that - you don't want to live there so much.   


Also, I suspect the first year of the Pandemic caused a lot of people who retained their jobs to have a year of spending less - which meant they saved up that "down payment" (or added to the one they were working on).    And so by 2021 and 2022 they were in a better position to buy a house... 


I'm gonna add:  no one wants a starter home "that they will make their own".  I see lots of first time buyers, buying houses that have all the bells and whistles and just like a freshly cleaned apartment are "move in ready" - the new owner just needs to put in their furniture and start hosting fancy parties for their friends and relatives.   


(it's weird - because I see lots of youtube videos for temporary things you can do to make your "rental" yours.  But if you buy a house - it will already have all those things (new drawer pulls and the backsplash you always wanted behind the kitchen sink)  the house you buy will already look like "you". ). 

[minnesotapaintlady]

Jun 8, 2023 9:53:51 GMT -5 Tiny said:

Of all the 55+ yo people I know who have either both a second home (near their kids) or who have moved to their "retirement home" none of them have purchased a smaller home - usually it's a BIGGER home.
I think in another 10 or 15 years there will be more family sized homes on the market as the current crop of retiring Boomers die off.

Same. The boomers have not been downsizing as predicted.  My mom and stepdad built a house at least twice the size of the one that had 3 kids in it when they were in their mid 50's.  Then just last year in their mid-70's my Dad and stepmom did the same (although it's a townhouse with no yard, but the house itself is 1000 sf bigger than their old 4 br 3 bath. 

[The Walk of the Penguin Mich]

Jun 8, 2023 9:53:51 GMT -5 Tiny said:

I was starting to see the jump in housing prices in late 2018 thru 2019. My sibling and I were looking for another "fixer upper" to buy and fix up. We were looking at areas in 4 different states. And all 4 of them had rising prices for houses that were usually on the low end since the housing bubble burst in 2008. We were having trouble getting in a winning bid on houses - flippers and general contractors were scooping up houses at an amazing rate (and paying higher prices).



If I had to say what was feeding the rising prices:

Low mortgage rates (3% and less).
Flippers and the demand for HGTV'd houses.
A whole generation of adults who had only rented and wanted a move in ready house that had everything they wanted already in it.
A lack of houses/apartments/condos/townhouses having been built since 2008.

And then just plain old DEMAND: 
I'd also say Boomers - moving out of large suburban family homes - into large suburban family homes in the area they retired to.
Of all the 55+ yo people I know who have either both a second home (near their kids) or who have moved to their "retirement home" none of them have purchased a smaller home - usually it's a BIGGER home.
I think in another 10 or 15 years there will be more family sized homes on the market as the current crop of retiring Boomers die off.

Here’s the problem I see.  People who want to downsize when they retire can’t.  It’s just that the housing is NOT available.  I know one couple who ‘downsized’ to a house that was 300 sq ft more than what they already owned.  However, it was a single level, and on the water.  Smaller homes that you can use in retirement simply are scarce.  So people compromise and upsize.  Just like what we are doing.  We have 2800 sq ft, which is way too big for us.  However, we can live on one level and it’s decently handicapped accessible.  

It’s not just the size, but how the house can be used.  

[Deleted]

To me it seems to be a confluence of many things, that have really messed up the housing market.  

Inflation.  When inflation started to go up, Labor and materials to build a house went way up with it.  As inflation went up, money started moving into real estate as a hedge against inflation.

Interest rates.  Interest rates going to all time lows, made it so borrowers could afford the higher price and started to bidding up houses.

Supply. There weren't enough houses built after the 2008 crash.  At the same time household size is getting smaller and the largest generation is hitting home buying age.  The boomers aren't moving out of their homes and are instead buying second homes.  Now people aren't selling and giving up their 2% interest rate.  

Rentals.  A lot of homes that would be available have been converted to rentals.  Some as short term air bnb's, which don't contribute to the housing supply at all.  Corporations have also started buying single family homes to use as rentals. 

[Cheesy FL-Vol]

Jun 8, 2023 10:47:28 GMT -5 @pooks said:

To me it seems to be a confluence of many things, that have really messed up the housing market.  

Inflation.  When inflation started to go up, Labor and materials to build a house went way up with it.  As inflation went up, money started moving into real estate as a hedge against inflation.

Interest rates.  Interest rates going to all time lows, made it so borrowers could afford the higher price and started to bidding up houses.

Supply. There weren't enough houses built after the 2008 crash.  At the same time household size is getting smaller and the largest generation is hitting home buying age.  The boomers aren't moving out of their homes and are instead buying second homes.  Now people aren't selling and giving up their 2% interest rate.  

Rentals.  A lot of homes that would be available have been converted to rentals.  Some as short term air bnb's, which don't contribute to the housing supply at all.  Corporations have also started buying single family homes to use as rentals. 

I agree with pooks. I am a bit confused on the pricing though. We bought ours summer 2020 at 188k (3/2 with 2-car basement garage 10 year old house w/5 acres). 6 months ago, the real estate sites were valuing it at around 360k. I was just looking around the area this weekend and the sites are now valuing at around 290k. I checked a house a couple miles from here built in the 40s, a 3/1 on 10 acres, and they are asking almost 600k. I am scratching my head wondering who is buying with interest rates so high.

[movingforward]

I bought my townhouse in 2017 for $263K and refinanced in 2021 for 2.99%.

Homes like mine are now selling for 400K - 420K. The market here is absolutely crazy.

They are building new townhouses behind my neighborhood that, in my opinion, are big for a townhouse. The smallest floor plan is 2200 sq ft and prices are starting at 525K. The largest is 3200 sq ft and I have no idea the cost on those.

Houses seem to keep getting bigger and more expensive. A builder friend was explaining it to me but I got a little lost as to the reasoning other than it is just as easy to build something larger and charge more for it, as it is to build something smaller and not make as much money off of it. I'm sure there is more to it than that, but that is what I gathered in my tiny brain. At any rate, retirees attempting to downsize are having somewhat of a problem.

I'm not sure who is buying anything where I live now as the average home is $600K but the average salary is around $70K. Then you have a bunch of people who refinanced the last couple of years so they are just staying put because their mortgage is so low that it makes no sense to buy anything new. I will say there seem to be a lot from CA, and other states, moving here that sold their homes and are able to come here and pay cash for a house. We are full now, stop moving here! LOL!

[dannylion]

The eventual selling price will be a better indicator of current price levels than the asking price.  If other comparable homes in the area are on the market for less or are selling for less, then that home may be on the market for a long time.  If they get the price they are asking, then it will be an indicator of a huge regional price jump, but until then, it's just speculation.  

[anciana]

The way things are going with salaries not keeping up with the cost of living, housing is just going to be harder to get. If things keep up this way, our kids might never be able to afford to buy a house or rent a decent place.

[wvugurl26]

The prices are crazy here. DH paid $202k for a 1400 square foot townhouse in 2014. Currently they are selling for $300ish. We would like a house bigger and better laid out for our needs. It seems like more than sufficient square footage for 2 people but the layout just doesn't work. There is a major lack of storage. It's 3 bedrooms, 2.5 baths.

We have been looking around and there is nothing under $600k.

A friend let us know her neighbor was listing his house. It had everything on our desired list but natural gas basically. We don't need a 4 acre lot but that's what it was on. The guy bought in July 2020 for $370k. 4 bedrooms, 3.5 bathrooms 3600 square feet. 2 car garage. He did pretty much gut it but we'll say $120k max for that. It listed at $685k. Coming soon on 5/30, listed 6/2 and under contract on 6/6. Selling price? $700k CASH, 10 day close.

When I heard that was the selling price, I gave up mentally. We are just stuck. I can't even begin to compete and we are DINK and make better than average household income for our area.

[movingforward]

Jun 8, 2023 12:35:50 GMT -5 dannylion said:

The eventual selling price will be a better indicator of current price levels than the asking price.  If other comparable homes in the area are on the market for less or are selling for less, then that home may be on the market for a long time.  If they get the price they are asking, then it will be an indicator of a huge regional price jump, but until then, it's just speculation.  

We often have bidding wars in my city and houses are going $20K over the asking price. The average home was staying on the market for less than 5 days. I am hearing that is really starting to cool down though.

[wvugurl26]

I was hoping 7% interest rates would bring prices back down to reality but apparently people here have cash money.

[anciana]

Jun 8, 2023 12:55:22 GMT -5 wvugurl26 said:

I was hoping 7% interest rates would bring prices back down to reality but apparently people here have cash money.

Some years back when people started getting pushed out by cash offers, I heard stories how a new industry branch developed. People would take out a loan, or cash out their 401(k) to get the cash to buy a house with a much preferred cash offer. Then, they would close really quickly, turn around to get a regular mortgage and just pay the money back into the 401(k). There was some trick in returning the money so quickly that there was just a smallish fee that they ended up paying instead of all the usual associated taxes and fees. That’s how so many people were able to put a cash offer in without the actual cash, or so I heard.

[chiver78]

Jun 8, 2023 12:55:22 GMT -5 wvugurl26 said:

I was hoping 7% interest rates would bring prices back down to reality but apparently people here have cash money.

those would be the boomers downsizing, like my parents. they will be paying cash for what they ultimately buy, if they can ever figure out WTF they want and get out of that damn hotel. 

as far as the current generation never being able to afford to buy, I remember when I bought my first condo, yikes - 21y ago. I paid $146k for an ~850sf 2BR apartment condo, 45min west of Boston with zero traffic. my mom said congrats! when we bought <the house I grew up in> in 1986, it was $162k. 3BR/1.5BA in walking distance to the commuter rail into town. they sold that during COVID for almost $600k. prices are absurd. 

[weltschmerz]

Jun 8, 2023 7:42:41 GMT -5 happyhoix said:

Why have housing prices made such a big jump in just a few years?

I live in a low cost of living area. The house next door sold for about $200k three years ago. A nice young couple bought it, sis some minor upgrades (added a barn door in the master bath, new siding, new bath vanities, a lot of paint) and put it in the market for 500 this week. Even saying they spent 100k on remodeling, that’s a huge jump in 3 years.

It’s not the only house in the neighborhood to do that. A 2 bedroom on an awkward sloped lot is on the market for 430. Another one with an unmowable front yard but 3 bedroom is asking 460 - sold about 10 years ago for around 200.

Is it a housing shortage? Irrational bump in the market that will crash at some point?

It's not just the price of houses. Rents have shot up. I'm paying $940 for a two bedroom apartment. I moved here 3 years ago.  They're now  asking $1,800 for the same apartment in my building. There IS a housing shortage here, especially affordable housing.

[chiver78]

Jun 8, 2023 13:39:27 GMT -5 weltschmerz said:

Jun 8, 2023 7:42:41 GMT -5 happyhoix said:

Why have housing prices made such a big jump in just a few years?

I live in a low cost of living area. The house next door sold for about $200k three years ago. A nice young couple bought it, sis some minor upgrades (added a barn door in the master bath, new siding, new bath vanities, a lot of paint) and put it in the market for 500 this week. Even saying they spent 100k on remodeling, that’s a huge jump in 3 years.

It’s not the only house in the neighborhood to do that. A 2 bedroom on an awkward sloped lot is on the market for 430. Another one with an unmowable front yard but 3 bedroom is asking 460 - sold about 10 years ago for around 200.

Is it a housing shortage? Irrational bump in the market that will crash at some point?

It's not just the price of houses. Rents have shot up. I'm paying $940 for a two bedroom apartment. I moved here 3 years ago.  They're now  asking $1,800 for the same apartment in my building. There IS a housing shortage here, especially affordable housing.

you said in another thread, those units were renovated. that's not comparing apples to apples. is the rent appropriate post-renovation? no. but you can't compare it to your own unrenovated and rent-controlled unit. 

[weltschmerz]

Jun 8, 2023 13:56:31 GMT -5 chiver78 said:

Jun 8, 2023 13:39:27 GMT -5 weltschmerz said:

It's not just the price of houses. Rents have shot up. I'm paying $940 for a two bedroom apartment. I moved here 3 years ago.  They're now  asking $1,800 for the same apartment in my building. There IS a housing shortage here, especially affordable housing.

you said in another thread, those units were renovated. that's not comparing apples to apples. is the rent appropriate post-renovation? no. but you can't compare it to your own unrenovated and rent-controlled unit. 

My place was renovated when I moved in. They did the beatuiful hardwood floors, new cabinets, all new appliances, etc.

[Tiny]

We may be entering into the phase where lenders start getting creative to get buyers into a mortgage/house.

I'm hearing about more adjustable rate mortgages being written. I'm not sure what the down payment requirements are for those.

I'm not sure how "risky" these mortgages will be in the long term. Or how much people are stretching to take on the adjustable mortgage.


FWIW:  7% mortgage rates aren't that outrageous -  historically mortgages were in the 5 to 6% range.   The 5 or 6 years of 3% or less mortgages is the out of the ordinary.     

[NomoreDramaQ1015]

A lot of houses here are still fairly cheap compared to other areas of the country.  As such people from out of state are buying up all the houses and turning them into investment properties.  Which is driving up rent costs.

When you have a bunch of people from California (for example) buying all the houses there is nothing left for those that actually live here to buy.   You're competing against someone who has a large wad of cash to buy a house "as is" sight unseen.   So now you feel pressured to offer even MORE money in order to have a roof over your head.   In turn the investors offer even MORE money and can promise you'll have the cash and house closed by Wednesday.

It felt dirty but that is how we offloaded my grandma's house in a hurry.  

There is also a lot of drive here for large yards which leaves a lot of undeveloped property.  What once would have been an entire block of houses in 1942 is now maybe 4 houses with giant yards.

There are also a shit load of fly by night people coming in and buying huge lots of land to build luxury condos on.  Sorry but ain't hardly anyone living in this area going to be affording $250k+ condos.  Those sit empty which provide massive tax breaks for the owners of the property.   Land that again could have held an entire neighborhood in 1942 now holds a 75% empty condo building so Bezos can afford another penis rocket.

I'm not sure if Bezos invested here.  I know Bill Gates holds a shit load of agricultural property that results in a massive tax write off.

[tskeeter]

Jun 8, 2023 8:43:01 GMT -5 laterbloomer said:

In my area it's because working remotely is suddenly a real thing for a lot of people. So those that lived in the big cities to be close to work can suddenly sell for big bucks, buy further out much cheaper and they are using the excess to buy investment properties in my small city. It's really messing with our housing prices and rents because they can't wrap their heads around our traditional costs and are paying and charging substantially more than the locals used to.

Working from home can have a significant impact on family budgets and make large mortgage payments more affordable.  My commute was about 60 miles a day. At the current IRS mileage reimbursement rate, my estimated commuting cost would be very close to $10,000 a year.  Avoiding $10K of commuting expenses would mean we could afford to increase our mortgage payments by 50%.

[Tennesseer]

Stupid Question

Thread title fixed.

[TheOtherMe]

In my little town, every summer before this one, several of the townhouses which is what I have, turn over.  Not a single one went up for sale this summer.

DN3 and his wife are looking for a house and are having a hard time finding one that they can afford with the higher interest rate.  

I know I was paid 12% for interest.  He thinks I am crazy, but that was the rate.

DN1 and his wife just spent over $1 million CD on their new condo in downtown Toronto.

[Peace77]

I’ve heard that lenders in HCOL have been offering 40 year mortgages 

[Pink Cashmere]

Jun 8, 2023 12:44:39 GMT -5 anciana said:

The way things are going with salaries not keeping up with the cost of living, housing is just going to be harder to get. If things keep up this way, our kids might never be able to afford to buy a house or rent a decent place.

This is something I think about. I feel like home ownership is important, and people that want it should be able to have it, but now I worry that my children and Mister’s children might not be able to do that. So even though my first house has become a PITA, I feel more strongly now, than ever, about keeping it for my children to inherit. If Mister and I do ever move from this house, I would like for us to try to keep this one too, for his children.

I don’t see how the current housing market is sustainable for this area. The city is a poor city. My salary is more than the median household income for the whole county, but today, I’d be in trouble trying to find a house I could afford, somewhere I felt halfway safe living. We bought this house in the summer of 2019, and on paper, I could’ve bought it by myself at the time, even though it would’ve been way beyond my comfort zone. Less than 2 years later, and still today, I absolutely could not buy this same house by myself, even if I wanted to. The “value” according to Zillow, increased over $100k in less than 2 years. Even if Zillow is off the mark by some 10’s of thousands of dollars, I still couldn’t afford it.

Until the last few years, housing was fairly inexpensive here. And now it’s crazy. A large part of the problem Imo, is “investors”. I ASSume this area became attractive to investors because even if they paid more than the asking price for a house here, it was still less than what the same house would cost in many other parts of the country. Regular people can’t compete with “investors” that are willing to pay a premium and with cash, so buying a home has become very difficult for people that don’t have substantial income, when it’s not been like that here historically. There was a news story recently about how a whole section of the city has become mostly rental properties because of investors. And when they buy these houses, they charge a ridiculous amount of rent, so everything has just really gotten out of hand.

My first house is in the price range that investors are really interested in. I constantly get texts asking about the property, several texts a week. And a couple of them have had the nerve to get testy because I don’t respond to their texts, like I owe them something, which makes me want to cuss them out, but I don’t. The phone calls about the same are one of the reasons I do NOT answer calls from unknown numbers, I’m tired of cutting people off and saying no I do not want to sell my house.