OT: Housing market
Not sure how many MGoMembers are currently buying or selling but...holy cow. Apparently inventory is down over 50% from last year and it's insanely competitive. What's your experience like right now? Anyone thinking of just selling and renting for a little while and figuring things out later?
On a related note, I'm wondering how the heck builders are dealing with these lumber costs if they have fixed price contracts. Eesh. Lumber futures are going bananas. Seems like a catch 22 - we need more new builds and new inventory but the lumber prices are so high it seems like it'd be hard to get some of the homes to appraise.
It's absolute insanity. I just got done helping a friend wire his basement and there were times he had to order a 3-gang electrical box from Amazon because the local Home Depot/Lowes/Ace/whatever was completely sold out. I'm thankful I got my one significant renovation out of the way a couple years ago.
IMO - Only "overpay" and buy a house if you plan on staying there 5+ years. Do not get cute with the housing or stock market for the next couple of years, trying to time sales and purchases.
In Detroit and Chicago areas - Would be very wary of rising housing prices as compared to the future economies of those cities and states. Bad combo if one is going up and the other is going down or sideways. But if you are choosing to live in such a place long-term - you gotta "keep on livin"...
Just sold my house for a price I never thought I'd get in Oakland County here, and bought in Novi at what is also a little high, but not crazy.
Houses here are insane right now. We put ours up on Saturday, had 39 showings between Sat-Sun, had 7 offers on the table Monday morning all for over asking.
This is encouraging, my Royal Oak home is getting listed a week from tomorrow. I’d love that outcome!
Not encouraging if you're a buyer though.
I bought & sold in January. I got the advice, which I thought was ridiculous at the time, to price mine 10% higher than CMAs so I could bid 10% higher on the house I bought. My only regret was not pricing mine above even that since every offer I had was ~10% over my (inflated) price, even though appraisals came back lower the buyers still wanted the house and made up for the difference in cash.
I am not your typical 42 year old because 1) I went back to school for a career change at 28 and didn't start my second career until 34, 2) I just got married last fall at age 41, 3) my wife is also going back to school for a career change at age 31, and 4) we have no kids nor any desire to have kids. I am a teacher and my wife is currently in school for nursing. We are not nor never will be wealthy unless we get inheritance as both our parents are better financially than we are, but we aren't by any means expecting that. But, looking around where I live you can't can't buy a typical 3-bedroom 1800 square foot first time home that is less than 30 years old, in an established neighborhood, with a paved driveway and an attached garage for under $300k. Yet, lots of people in this area, people I teach with, have just those homes. I have no idea how they afford it because their are not many jobs here in Maine to support a $300-$500k home, yet lots of people have them. I don't if they live in debt or what. So, I've been renting forever.
I'm considering buy a condo, which I'm not enthused about, but it's the only way I can afford a newish home in an established neighborhood with a paved driveway and an attached garage. They are converting the apartments we live in into condos and selling them for $200k. At that price the mortgage, condo fees, utilities, and taxes would be less than our $1,500/month rent. The condo is only 2 bedroom with 1,150 square feet, but it meeds our needs. I'd rather buy a slightly larger 3-bedroom home, but we just can't afford an extra $100k mortgage. I don't know how people afford homes here based on the salaries in the area. There also is nothing in inventory here so I'm worried if we don't buy they might sell them all quickly and we'd be looking for a new place to live.
Anyways, long story short, I struggle with the decision of whether to buy or rent myself. I've never bought a home before. I wanted to wait until I had tenure at my teaching job, which I do now, but also until my wife was done with school and working in her desired career. That hasn't happened yet, but we may not have the luxury of waiting any longer.
Honest question (not trying to be a dick): have you looked into how much you can get approved for in terms of a mortgage? It may be more than you think. If property taxes are reasonable you can get a lot of house for a reasonable payment (under 2k a month including taxes etc).
Honest question (not trying to be a dick): have you looked into how much you can get approved for in terms of a mortgage?
No worries. Oh yeah, they are perfectly happy giving me a $350k mortgage that I cannot afford. I mean I guess I could theoretically afford it, but I'd be living paycheck to paycheck and saving nothing. I'd guess a good chunk of people live above their means and are more concerned about the size of their home than the size of their investment portfolio. There is a balance between enjoying life and saving for retirement and financial independence, but I wouldn't feel comfortable spending more than $250k on my salary.
Same kind of scenario where they've approved me for way more than I think I could afford. I will not choose to be house poor but I imagine a lot do
April 23rd, 2021 at 12:18 AM ^
You’re getting priced out because of all the Massholes who have second homes and investment properties in Maine. It’s not local hardworking people living within their means.
Two of my kids sold in the last two months. Both received 20K over asking, and both 50% or more over their purchase price ~3 years ago. One moved in with another relative to ride out the bubble, the other is hoping to find a slightly larger home. One will be thrilled, the other will probably struggle with winning against full-cash offers. Both had them in the 200K+ price range as sellers. Absolutely crazy times. If I didn't have a special needs sibling living with me, we would sell and rent for a stretch until this bubble explodes.
In Houston a lot properties are being purchased by REIT's that are paying well over the asking price and then renting the homes out. It makes it extremely difficult for young home buyers to get into the market. Home values are way up but it seems like fools gold to me.
Interesting. I live in Houston, am looking and believe this but don't understand the business model unless they are counting on selling in a few years. Nearly every place I'm looking at ($450-600k homes) has a total monthly payment slightly greater than what it would rent, and it gets worse as the homestead exemption is lost if you rent. So I don't understand how an REIT is making $ if they can't recover costs. Maybe there is a long term selling arbitrage opportunity they are betting on.
Closing on a place next week.
It was insane. We had 4 offers rejected on other places - each one was a bidding war, and even going 10% over asking isn't enough to get your offer accepted. If you have contingencies...forget about it.
The folks who built our new home are doing a new construction project next door starting in the next few months. You're right: due to construction costs, that place will have to be 5-10% more expensive than our place just to keep the same margin.
The only advice I can offer is: don't overextend yourself. There will always be someone richer than you, or more willing to overlook flaws, or just with lower standards of what makes a home livable.
My current landlord, who is a real estate investor, is expecting a downturn within the next year. From my perspective, it's pretty simple: when the Fed stops pumping money into the economy, the party is over. So I'm ok if my home value decreases temporarily - I put a large % down, and I can ride it out as long as I'm employed at my current salary or above.
"... when the Fed stops pumping money into the economy ..."
I'd really love to know when that's going to happen. (No snark intended ...)
April 23rd, 2021 at 12:22 AM ^
Fed Chairman said by the end of 2022.
Seattle is bananas. Houses have many cash bids on Day 1 of listing significantly over listing. Selling prices btwn $500-$600 per sq ft.
Buyers around Seattle are also offering incentive money beyond earnest money; the seller keeps it if the buyer backs out for *any* reason, no contingencies.
Yaup...there are hoses around me going for $1+M and they have NO business selling at that amount...welcome to inflation. But unless you plan to live in a tiny house in the woods, you will be paying just as much for your next house. I know some folks who have gone through backdoors and put offers on houses that are off market...you are playing with fire if you want to dip your toe in the real estate game in 2021.
Also know some folks who have sold for way over asking, then jump into a major fixer upper with more land and just plan to remodel it all...problem is even to remodel the wait time is 1 year plus at minimum. So be ok with living in less than ideal situation for a while.
Out of the frying pan, into the fire
Agree that the houses have no business at those prices. These are cookie cutter homes with postage stamp backyards wedged together. Last one sold for $1.75M. Appreciated nearly $1M in less than 2 years. We have been in the neighborhood for 12 years so I’m not complaining but there’s no where else to move to in the area and I’m kind of stuck here for work so difficult to leverage the equity. Seems like all buyers are Amazon and Microsoft folks cashing in on huge stock gains and want to get out of the city. Can’t imagine being a young person trying to get a first home on a reasonable income like I did 20 years ago.
Fortunately, we don't need to sell our house or look for a new one any time soon. But we have been looking for an up north cottage in Michigan on the water for some time, and the market is just as crazy. Almost nothing for sale in any kind of lower to mid price range. And when places do come up for sale, they are sold immediately with multiple offers - hardly even any time to drive up there and look at them! It doesn't even matter if the place needs a bunch of work. People are still clamoring for getaways. If you don't have to be on the water though, there are a lot more options.
Do you know how land only prices are doing Up North? On a lake or near a lake.
They’re stupid. It’s all stupid. I had been looking and even got in early on a couple but the prices are... stupid. I am no longer in the market, not because I can’t afford it but because I’m not paying stupid money for a second home. We’re talking 50% increase in 2 years for a small lake house!
The problem with “renting for a little bit” is you would be missing out on any market gains during that period of time. I have been in my current house for 6 years, price of the house has gone up over 100k so it’s almost like I have been getting paid $1400 a month to live there, there more than I pay on my mortgage.
Would love to move but the house I could buy for $350 two years ago now are going for $450-$500 and I can’t afford that.
I'll be "renting for a little bit". While I think I may miss out a some gain, I think I'll be renting during an eventual housing downturn, where I'll get back in during a buyers market.
You are already winning dude!
I keep telling my friends that see their zillow estimate super high, and wanting to sell, to not do anything. To volatile right now, and like poster mentioned above about lumber prices, its going to get even weirder.
Feeling kinda screwed at the moment. I'm a first time buyer and I've just recently started searching in southeast Michigan (Livonia) area. Its incredibly competitive out there. I found a listing I liked and literally overnight it was off the market. Even if I actually manage to find a place that I can check out and evaluate, I will have to place an offer higher than the asking price on a house thats value is 50 percent higher than it was 3 years ago. And even then I'd have to compete with 10 other offers.
Im renting right now and I wanted to buy a house to start to build equity but now that is starting to look impossible. Im now leaning towards waiting 3 years for my girlfriend to finish grad school and hope that the bubble bursts by then. 3 years more of renting...
I've heard of some people surfing obituaries and contacting next of kin with offers to buy houses. You could try that route if you had no moral code.
Honestly though, if you were desperate, you could find houses that you like, look up the sale date to make sure it wasn't recent, and try to contact the owner with an offer to buy their house without a realtor. It is easy to find ownership information on local government GIS mapping platforms. Buying without realtors also saves the seller 6% - you would have to pay a transaction agent (often a realtor or attorney) to guide you through the process though.
The other option as a first time homebuyer is looking at HUD homes. They have a program that allows first time homebuyers the option to bid on houses before other buyers. It isn't available on all houses but something to looking into.
Dude, there is nothing wrong with renting. Especially when the market is crazy like this, and if your wife is still in grad school and I assume there's a good chance you're younger and could be moving in 3-5 years? Don't get caught up in pressure from people about buying a house and "building equity" and saying shit like "I don't want to rent and pay someone else's mortgage". Building equity does jack if your house doesn't go up in value, not to mention if you all of a sudden have to fix a bunch of things around the house. And when you buy, expect 3-5% to go to fees and closing costs you never get back. The rule of thumb is you need to be in a house minimum 5 years for it to make financial sense to purchase instead of renting. My wife and I were looking for a house last summer and did the math, and the 5 years came to be pretty accurate, but that can easily change if you have 1 major home repair, or your house doesn't go up (or goes down) in value. Point is, there is nothing wrong with renting for a few years. Save for a down payment, and purchase when you are ready to settle for a long time. We ended up not buying and I'm very happy now because the market will have to swing back in a few years to a buyers market.
Yeah we are pretty young (I'm 24). She's actually my girlfriend not wife (yet anyways, I plan on changing that soon enough)
My situation is such that once she's done with grad school I don't know where we are going to end up. I think you're right where it's not necessary to rush into things when we don't know where we are going to end up.
Bought a house four years ago. Glad we got in when we did. Refinanced last year and no plans to leave. Got a huge garage and I am spoiled by not having to clean my car off in the winter.
I live in a Seattle suburb. A house on our street just sold for almost triple what we paid for ours ten years ago. It's on a smaller lot and it's 800 square feet smaller. They had an offer for $335k more, but it didn't appraise for that so financing fell through. Fifty showings and twenty offers in just two days of open house.
We own (technically "owe") two houses here within a mile of one another (one is a rental) and couldn't afford to buy either one right now.
Good for us, and I feel badly for people my kids' age- there just no way they can buy a place around here.
Fellow Seattle area person here. Housing is insane right now, and there is no such thing as a starter home anymore unless you work in tech. I'm about 2-4 years away from a house, and I've resigned myself to the fact that I'll only be able to choose two of the three between Nice house, financial flexibility, and near the Seattle area.
Looking to sell my home. Had a few realtors walk through and they all said that they would put it on the market for over 80-100k what I paid for it 7 years ago and they all commented that they would have it sold in a day. One went so far to say that he would have five competing offers in the first hour.
I was told I need to find the home I want to buy first and have my offer accepted before I put my home officially on the market. Crazy! And would sure as hell make for an extremely stressful week if it did come to that. .Anything under 350k is selling so fast in my area that they don't actually go on the market. They go straight to pending sale.
One of the problems you would run into with putting an offer on a house first is that you are likely to lose to an all cash offer (if you were not able to offer cash) and they would not accept your offer if you have any contingencies (like selling your current house). It is a crazy seller's market to the point where most people can't be sellers and buyers.
Bingo. We bought & sold in January, and had we not been pre-approved for the purchase of another home without the contingency of the sale of ours, we would have lost out to other offers. And that's with a sizeable down payment & attractive closing options. A lot of people out here (SLC-Utah area) are even waiving pre-closing options like inspections just to try to get their offer to stand out.
Just wait until student loans are forgiven. Much of that influx of cash is going right into the housing market.
I don't think we are in a bubble because construction is too low. Demand is high but supply isn't able to react in the same way, basic economics says that prices will rise. Unless we can increase supply substantially (which probably will not happen because lumber and lot prices are insane), prices will remain high.
In my experience, one of the hallmarks of a bubble is rising insistence that we're not in a bubble.
Describe it as you wish, but I do not believe that prices can continue to go up 20% a year, or even that current prices are sustainable. It's going to flatten and likely reverse. Just like it did in 2000 and 2009.
Every bubble must burst at some point and it is often triggered by a market feature becoming untenable. What is the feature? Prices rising to fast? That likely isn't enough. Collapse in demand? What would cause that? Massive unemployment? We already have/had that. Too much supply? High material costs and labor shortages are constraining supply. Look at housing start rates.The silver tsunami might gets us. If older folks start dying off or decide to sell their houses, we might see to much supply.
The 2009 crisis was triggered by over supply caused by infinite demand. The most likely scenario this time around is a plateau in prices as supply slowly approaches demand.
One of the biggest reasons that I, a liberal politically, am against student loan forgiveness. Way too much of the government picking winners and losers in my mind - those of us who didn't go the college route will already make less lifetime than college graduates.
I'm in my late 20's and my loans are pretty much paid off. I was pretty aggressive with paying them off early on, including getting scholarships, saying no to more expensive schools, working weekdays and weekends during school, taking a gap year to save more money, and then when I graduated, I took a better job a couple thousand miles away to pay them off faster. Now that they are paid off, I'm starting to be at the point where I can dip my toes into the bonkers housing market thats out there. I worked my ass off to get to that point, and I'm going to lose my mind if I then have to immediatly compete with all those that got their loans forgiven for the small amount of houses.
We should do something about loans, but we can't screw over others to do it.
April 22nd, 2021 at 10:08 PM ^
They should forgive like 20k. Most of that is poor people who dropped out or graduates don't make much anyway.
And for people who are against forgiveness, are you against making college affordable? Because if it becomes affordable then you should also be pissed about that. People who don't have to suffer like you did.
We’re getting ready to sell in Macomb Township. Moving out to California for work, where we’ll be renters. Bought this house in 2011, so I feel like I timed this well.
My wife and I bought our current house 6 years ago. When we refi'd last year, the valuation was about 20% up from our original purchase price. In the last few months, we've had a couple neighbors sell for prices that are probably comparable to what we would list if we were in the market to sell. Those price points would put us at an increase of about 45% from our original purchase price. Makes me want to sell just to realize the appreciation in value, but the reality is that this home is perfect for us, and we have no reason to go through the hassle to move.
Lumber is out of control right now. I just need to redo some boards on my deck and I feel like I have to sell one of my kidneys for it.
Had a builder tell me that not only is lumber hard to get, but that what is available is younger growth trees harvested earlier than optimal, and that the resulting wood is much more prone to warping, cracking, etc. Which in turn means fewer quality boards, which means even less supply.
For decks, they're pushing Trex really hard. But you have to figure the price on that will go up too if the lumber shortage increases demand for alternatives.
We live on an all sports lake north of Ann Arbor and were thinking of a move back to the west side of Michigan where we came from. We can get a very nice price for our home but the lakefront homes around Kalamazoo (where we were heading) have exploded and we haven’t been able to even schedule a viewing before they are gobbled up. Some are outrageously priced so we’re staying put for now.
Just saw a new build in our sub sell, new owners moved in, and and now 2 months later are moving out of state. They listed at their purchase price and accepted an offer $30k over asking. Had 17 offers in 3 days - 12 over asking price. Nuts.
I don't think many builders out there are or ever have been working on fixed price contracts.
Just moved into a new build we started in early July and got VERY fortunate with our timing. Our builder was dialed in, pushed us at the beginning of the process because he saw major increases coming, and he had trusses on before we closed on our construction loan. Sounds risky, but in this market he was happy to take over a spec house if something fell apart on us. (He had a spec house underway next door that was about 4 months ahead of ours). He was very clear throughout that we agreed to a rough budget but our contract made US responsible for material increases or change orders, but that labor wouldn't change unless there were design changes. Because of his foresight and willingness to start without us having a loan, we came in almost exactly on budget and right on time.
We have builders canceling contracts here and opening negotiations upward, I'd make sure you send your builder a nice Christmas gift this year because that was a huge bro move of him.