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  • What is going on with the housing market?

    Can someone please explain what is going on with the housing market?

    Almost everyone I know has purchased a home in the past year, or is in the process of doing so, and I know for a fact that some of these people are NOT in the best financial situation to do so. Homes in my area are receiving multiple offers within hours of being listed. Nearly every home on realtor.com and zillow is marked as pending. New construction communities that have sat for years have finally sold out. I recently inquired about a property and my broker said the listing agent told him to tell me "not to bother unless i am prepared to offer well over ask, bringing cash and ready to close in less than 2 weeks." They received an offer each hour the house was listed. Homes that sold in 2019 are being listed for 100-200K more and are selling above ask.

    Is a 1% drop in interest rates that big of a deal? What is going on?

  • #2
    Originally posted by braindoc View Post
    Can someone please explain what is going on with the housing market?

    Almost everyone I know has purchased a home in the past year, or is in the process of doing so, and I know for a fact that some of these people are NOT in the best financial situation to do so. Homes in my area are receiving multiple offers within hours of being listed. Nearly every home on realtor.com and zillow is marked as pending. New construction communities that have sat for years have finally sold out. I recently inquired about a property and my broker said the listing agent told him to tell me "not to bother unless i am prepared to offer well over ask, bringing cash and ready to close in less than 2 weeks." They received an offer each hour the house was listed. Homes that sold in 2019 are being listed for 100-200K more and are selling above ask.

    Is a 1% drop in interest rates that big of a deal? What is going on?
    Apparently housing supply/inventory is very low.

    The graph in this tweet really is something (assuming it's accurate).

    https://twitter.com/mikesimonsen/sta...19372179324931

    It's not clear if this is the cause or effect, though.

    So, my answer to your question is that I've got no idea what is going on.

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    • #3
      It is true housing inventory is very low in LCOL areas. Some is the very low interest rates but some is people fleeing VHCOL areas. Housing contractors are booming.

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      • #4
        Arguably lower interest rates are an accelerant to all risk assets including housing.

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        • #5
          Not the first time this has happened. In addition to the above factors I believe FOMO is a major player. Buying, like selling, is most often a matter of want rather than need which can be costly. I resist purchasing real estate under these circumstances.

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          • #6
            Hope this holds true for another month. Going to market this weekend with need to leaseback 2 months as new house build not completed until end May.

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            • #7
              My neighbor is a builder and he said the cost of new construction is way up resulting in older houses selling more easily. I’m sure there are multiple factors at play with lower interest rates being the biggest one.

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              • #8
                There is no inventory. Rates are low. Demand is high for all kinds of reasons, supply is low, this is an easy relationship. Add some fomo and of course people have been stuck in the same maybe not right sized for quarantine houses for a year now.

                Also, US housing is still very cheap (even in SF/NYC) compared to similar international homes, so not really surprising that gap closes some.

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                • #9
                  Originally posted by braindoc View Post
                  Can someone please explain what is going on with the housing market?

                  Almost everyone I know has purchased a home in the past year, or is in the process of doing so, and I know for a fact that some of these people are NOT in the best financial situation to do so. Homes in my area are receiving multiple offers within hours of being listed. Nearly every home on realtor.com and zillow is marked as pending. New construction communities that have sat for years have finally sold out. I recently inquired about a property and my broker said the listing agent told him to tell me "not to bother unless i am prepared to offer well over ask, bringing cash and ready to close in less than 2 weeks." They received an offer each hour the house was listed. Homes that sold in 2019 are being listed for 100-200K more and are selling above ask.

                  Is a 1% drop in interest rates that big of a deal? What is going on?
                  I think it is dependent upon the individual market. Dynamics where I live have changed some recently with increased sales related to the pandemic I think, but there is still a good bit of stuff here that has been on the market for a long time, even with prices that would be considered quite low in other markets.

                  Regarding the whole "be prepared to offer well over ask" thing, that is just bizarre to me. Seems like to some extent this is a feeding-frenzy FOMO thing being driven by real estate agents. Seems like perhaps they should change the terminology a bit. Instead of calling it "asking price", just call it "opening bid".

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                  • #10
                    I live in the NE , with in driving distance to NYC. I think in my area , the increase in home purchases is parallel to exodus of people leaving NYC. Housing inventory is very low, cost of lumbar has sky rocketed , interest rates are low and their is a segment of the population which is actually financial more stable after the pandemic in regards to savings.

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                    • #11
                      kind of crazy. someone knocked on our neighbors door this past week and asked if they could buy their house. Neighbors had no intention of moving and house not on market. so basically our neighbor said "well since we hadn't intended on moving, our price is X and no negotiation". done deal. The people put 100K earnest money and paying almost 200K above what home are selling with a for sale sign up.(in theory they don't allow signs in the neighborhood). Cash transaction.

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                      • #12
                        We are in the middle of two transactions and I think supply / demand is a bigger driver than rates. Rates seem to be icing on the cake - 2.25% for a 15 and 2.875% for a 30 are very attractive and the mortgage brokers are, of course, saying rates will never be this low again. What we are seeing: people leaving city for suburbs, people leaving city or suburbs for rural and vacation areas now that they can work from home and perhaps don't face future "requirements" to come into the office. Vacation property in MN and WI is selling quickly, and rural contractors are fully booked. I know one who is "sold through" for all of 2021, another drywaller who is booked until September, and they are realizing they can charge city prices in this environment.

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                        • #13
                          See:

                          https://cdn.nar.realtor/sites/defaul...2021-01-22.pdf

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                          • #14
                            Originally posted by bean1970 View Post
                            kind of crazy. someone knocked on our neighbors door this past week and asked if they could buy their house. Neighbors had no intention of moving and house not on market. so basically our neighbor said "well since we hadn't intended on moving, our price is X and no negotiation". done deal. The people put 100K earnest money and paying almost 200K above what home are selling with a for sale sign up.(in theory they don't allow signs in the neighborhood). Cash transaction.
                            The problem, of course, is that you have to live somewhere, and you are often forced to buy into this same hot real estate market that you are selling into. Of course, if you were already planning to downsize, are willing to rent for a while, can move to a low cost of living area, can move into your second home, etc., there might be some advantage to doing this.

                            I have one friend who did this successfully in the mid-00's in San Diego. He recognized the real estate market was hot and sold his townhouse and moved into a rental. He timed the move perfectly. Unfortunately, his marriage did not survive all of this, and I am not sure that he ever bought back into the San Diego market. In many ways, this is like timing the peak in the stock market. You have to be right twice to benefit.

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                            • #15
                              what’s going on with the ___________ market ?

                              insert any asset people with money want to own

                              hmmm

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