NFR How's the housing market where you live?

[David Dalan]

I'll just say that buying my first house 10yrs ago is a decision I'm so glad I made. Had I not done that, I likely would have been permanently priced out of the market.

Us too. We had some odd housing needs (11 people) but we were able to do it 10 years ago. Since then the market value of our house has doubled. 25% or so in the last 18-25 months. I could not by the house we are in, if we were shopping today.

 

[sleestak]

My two cents...we are seeing a "blow off top" and the final group of FOMO buyers thinking they have to get in now or never at ultra low interest rates and eek out the monthly payment that is "less" than local rents (never accounting for maintenance, cost of time lost on maintenance/upgrades/yard work etc. of course).

My personal opinion is that I'd rather be in at a higher interest rate loan with lower principal, and since I have the funds I can pay off the loan balance whenever I feel like it so I'm steering way clear of the market right now and not buying into the "lock in a low rate now or never!" baloney.

All equity markets are addicted to the cheap/free money era of the past two decades. We were able to get away with it because inflation was in check (or well hidden), but that cat is out of the bag in a big way. Like a junkie coming off his high this is going to be a brutal experience as global reserve banks turn off the easy money taps. For some light reading to see where things are headed go check out the Japanese asset price bubble of the late 1980s

 

[RCF]

I was talking to a guy recently that sold a house then bought another house that was more expensive. He was under the assumption that the old rules applied, not realizing being single he could only get $250k tax free.
He was in shock when he got a letter from the IRS stating what he owed in capital gains.
As he was walking away, he mumbled “keep every fucking receipt”…….
SF

Very sad indeed. Just on the $250k exemption vs $500k married exemption difference is a huge $37.5k tax bill... Not a fun surprise at all...

 

[Flatwings]

This was a good read. He’s been calling for a crash for a while now and I know many ignore this but seems like a real possibility.

Let The Wild Rumpus Begin*

Today in the U.S. we are in the fourth superbubble of the last hundred years, and for the first time in the U.S. we have simultaneous bubbles across all major asset classes.

www.gmo.com

 

[majpreal]

On the offer we made last week, we were one of 15. I don't like those odds.

My realtor is a friend. But his office is in Big Sky and he's not a player in this market. So far, I feel like I'm the one pretty much bringing him into the deal. But in this market, I need an agent that is dialed, is out networking, getting leads, and can potentially bring me into a deal. So I had to have the call with him yesterday that I want to cast my net a bit wider.

I then asked a couple of friends who know the industry and got a list of agents who are hustling. I spoke to two of them yesterday and the feedback was consistent.

1. Unless I want to overpay 20-25%, offers with a contingency of selling another property aren't even being considered. There are too many strong offers w/o that contingency. So I'm probably wasting my time.
2. 50% of the offers right now are coming from out of staters. They are not even walking the property and some are "panic" buying.
3. Inventory is only getting worse and this could be a tough year. If we can wait until Aug, Sept, Oct, that is probably when things might loosen up a bit
4. On good properties, all contingencies are being waved, even inspection. Some people are putting down $5k non-refundable. Insane.

Now they might have told me I'm wasting my time in an attempt to see if I'd use them to go ahead and list my house now. Any commission paid salesperson has their own interests and while I didn't feel pressured, that is in the back of my mind.

I've got a couple more agents to speak with. I think the opportunity to turn one deal into two, might get a few folks willing to work for me. Fortunately, we have a great house in a hot neighborhood so we can afford to be patient. If this is not be the right time for us, no biggie.

If you have any feedback/coaching, I'm open. I've only bought two properties and it was nowhere near this crazy back then.

Swimmy, this is out of left field, but you could look into the requirements in your area to get a real estate license. In Washington it's not too difficult but does require a bit of time investment. If you obtained a real estate license, you could then list/sell your own house. Let's say your place is worth $900k and the common commission structure in your area is 6% total, with 3% going to the seller's broker and 3% going to the buyer's broker. If you are the selling broker for your own house, that's $27k you save in commission paid out. Now let's say you want to by a place for $1.2mil and they seller is paying the buyer's broker (you) 2.5%, which would be $30k. You could make your offer, but reduce it by that amount and include an offer to reduce the buyer's agent commission to zero. The seller gets a little less on the sales price but doesn't have to pay that side of the commission so it nets out at zero and since you don't get a commission check, it's not a taxable event for you and between the sale of your first house and purchase of the new house, you've tallied $57k in savings. I'm oversimplifying a bit but hopefully you get the point.... Of course, it requires time (and desire) to do this and you'd need to find an agency that allows you to do a transaction at a flat fee versus taking a cut of your commission and I'm not even sure what the licensing laws/standards are in Montana since I'm basing this off how it would work in Washington.

 

[swimmy]

I've been out today and now just skimming through to get caught up. Man there is a lot of good info here.

I'm going to go back through and re-read this one later. There are too many posts to quote 'em all but just want to say thanks for chipping in and providing good advice/information.

 

[RCF]

I've been out today and now just skimming through to get caught up. Man there is a lot of good info here.

I'm going to go back through and re-read this one later. There are too many posts to quote 'em all but just want to say thanks for chipping in and providing good advice/information.

There is a true treasure trove of good information here. Who wudda thunk? I have learned a lot and I am familiar with real estate...

 

[Greggor]

For sure. We are actually started to prep our home in Seattle for sale. My wife was downstairs going through boxes and shouts at me..."can I toss this box of receipts from 2008-2010?" My response to her was..."only if you want to dumpster dive our own trash can to dig every single one of them back out". If a nut or a screw from Home Depot was used to improve my house, you can be damn sure it's getting added to our cost basis.

You hit the nail on the head when you said "used to IMPROVE my house". Many people needlessly keep receipts from REPAIR or REPLACE projects. You can cut down on tedious record keeping by knowing the difference (in IRS terms of course).

 

[Seaalki]

It is great to believe that your home has appreciated 100% in the last few years, and this all goes on forever, in reality you've lost when considering your increase in property taxes, and all other inflationary costs related to that purchase, the purchasing power of the dollar over time, inflation, and rising interest, is a ticking time bomb, some will be lucky, many will not, I guess through the magic of monetary engineering, we are all millionaires...rise-and-fall-dollar

 

[O' Clarkii Lewisi]

Parents had a rental off icicle since the 80s and sold in ‘09, same story, didn’t require listing. Only thing affordable is old Longview fibre land and even that has been threatened with development. We have close to 1000 acres at the bottom of Blewett, only reason, besides hunting, was to put a stop to potential development.

Nice part of the world!

 

[jaredoconnor]

This can be risky. The realtor who holds the listing has a fiduciary responsibility to the seller first and foremost. They also hold all the cards since they can see all the offers coming in so how do you know they're not manipulating you to get the sweetest possible deal for the seller while cashing in on both sides of the commission? But sure....there are plenty of low integrity realtors in this business who will do whatever' is necessary to double dip even if means the seller doesn't get the best offer.

Of course. The key is that you need to educate yourself enough to mitigate that risk. This is part of the reason why I mentioned that you need to know enough about construction to not shoot yourself in the foot. On a related note, when buying a house in this market, I am convinced that some people should take a month of unpaid leave, learn how to buy a house on their own and then do so. The reduction in cost and risk could easily exceed a months salary, unless the house was low value and/or their income is high. However, that kind of out of the box thinking is uncomfortable for most, so we all just pay a premium instead.

I was completely transparent with the realtors I dealt with; I told them I want them to dual agent and I want them to tell me what I need to do to get the house. Of course, you use your own judgement and don't give them exactly what they ask for. However, you will be surprised how willing they are to help you. In my experience, they almost always divulged information that gave me an advantage.

The flip side to all this is a mistaken belief that using your own agent provides any kind of risk mitigation. If you are an intelligent person, I strongly believe that using an agent only adds risk. My three favorite pieces of BS in real estate are...

1. The seller pays the commission.
2. You need an agent, so you have someone protecting your interest.
3. You can trust your agent, because they need to get referrals from you.

Regarding #1, this is just a sales tactic; the buyer pays for everything. It blows my mind how many people get sucked into this line of thinking. I understand how that argument is backward-rationalized, but it is nonsense.

Regarding #2, there is almost never anything to bind the economic self interest of the agent and the buyer. The self interest of an agent is generally to make the fastest, highest value and lowest effort transaction. More often than not, this stands in direct opposition to the self interest of the buyer. It's a classic principal-agent problem. Virtuous realtors do exist, of course, but it would be unwise for anyone to assume theirs is one of them.

Regarding #3, realtors don't need to do a good job; they only need to make you think they did and that can definitely be more profitable for them. The reason for this is because there is generally huge information asymmetry at play; if you knew enough to know that you were getting a good deal, you wouldn't actually need the agent in the first place.

TLDR: If you put in enough effort, you can beat the game.

 

[SurfnFish]

There are two outdated business models costing consumers way too much money, auto and real estate sales, and real estate commissions are absolute thievery.
6% of the sellers blood, sweat and tears, at a time when consumers know every single listing on the market, what comparables have sold for, the listing sales history, property tax's, and have poured over the pictures before even visiting the property.
Our neighbor recently sold their home for 950K. Made a call to the broker who came over and listed it, he called someone on his waiting list, house was sold in 48 hours for 1M cash. $60,000 commission for a few hours work. Once the contract is signed, the heavy lifting is done by the escrow company.
Sooner rather than later, a new model needs to blow the old one up...

 

[jaredoconnor]

There are two outdated business models costing consumers way too much money, auto and real estate sales, and real estate commissions are absolute thievery.
6% of the sellers blood, sweat and tears, at a time when consumers know every single listing on the market, what comparables have sold for, the listing sales history, property tax's, and have poured over the pictures before even visiting the property.
Our neighbor recently sold their home for 950K. Made a call to the broker who came over and listed it, he called someone on his waiting list, house was sold in 48 hours for 1M cash. $60,000 commission for a few hours work. Once the contract is signed, the heavy lifting is done by the escrow company.
Sooner rather than later, a new model needs to blow the old one up...

I believe the original mission of Redfin ("property REDeFINed") was exactly that. However, like everyone else in the industry, I'm guessing they realized it is way more profitable to not revolutionize the industry too much. I give them credit for having their agents on a salary and not commission. However, they are still massively profiting from information asymmetry, IMO.

 

[Chris Bellows]

The bubble is everywhere. Took over a year to buy a place on Hatteras Island. We looked at multiple towns and cities on the Eastern Seaboard and Great Lakes region and the real estate market is out of wack in every location.

 

[Nick Clayton]

The bubble is everywhere. Took over a year to buy a place on Hatteras Island. We looked at multiple towns and cities on the Eastern Seaboard and Great Lakes region and the real estate market is out of wack in every location.

Hatteras... awesome! Such a cool place. I highly enjoyed the little bit of time I spent over there.

 

[_WW_]

A brief synopsis of my time in the housing industry as a residential construction guy from 50 years of experience. Why does construction experience matter? Because when the market is good for sellers it's good for me because I can basically write my own check when I work. When the market is good for buyers it is tough for me because what work is available pays like shit. I can offset it some because folks who don't want to sell in a down market will often remodel and update the place they're in. But down is down, and there have been a few times when things got scary for me. Being slow to learn, I finally figured out that I needed to set up my situation to where I could survive the down times. The market goes up and down - without fail. Every time rules are put in place to stop it, work arounds are found and off we go!

I built as small as I could and still have some elbow room - 1900 sq ft. At the time I still had one child living at home but that was gonna change in six to eight years. I did all the work myself that I could. Being in the business I called in some favors. Traded some weekend work for some of the work I needed done, etc.

When interest rates dropped enough I refied. When times were good I paid down the principle. Paid off a 15 year in 9 years which shaved off something like 40k in interest.

In the market today I would examine very closely why I thought I needed to move/buy/sell. Is it a need or a want? Answer honestly. If your spouse loses her job, will you still be able to make that mortgage payment? What if you lose yours? Down times in real estate also spread to the rest of the economy. I built in '02. The market went tits up in '08. I was ready for it and for probably the first time in my life I rode through it comfortably because I was ready. I knew it was coming then and I can tell you that it is coming again. I watched and suffered through an inflated real estate crash in Texas in the late eighties. This time I suspect it will go nationwide. Writing loans on inflated real estate is just another bad loan practice that is not sustainable.

Protect yourself from history repeating itself.

 

[headduck]

I can not believe how many are buying all cash with no inspections. Seems scary to me...

For those of us that are buying and require a mortgage to make it happen, how does the mortgage company determine the loan-to-value to base it's loan on? If a house is listed for $600k and sells for $200k over listing is the mortgage company only going to have a loan for up to $600k and requires a larger down payment by the buyer or will they loan up to $800k? Note: not including down payment for ease of discussion.

Yup... thats how I understand it...we were looking at a property that was overpriced and wouldnt appraise, our offer was more in line with value (this was a few a years ago)... we were recommended by he genius agent to bring more cash as the bank stops where the risk starts.

Additionally think of all the waste in real estate transactions. The number of folks who visit a house without intention to buy, to look at finishes, for something to do on a sunday. The number of folks who dont really have their shit together, either economically or strategically. "Buyers" waste a shit ton of time and somebody has to pay. It's a terribly inefficient and expensive process.

 

[Old406Kid]

A brief synopsis of my time in the housing industry as a residential construction guy from 50 years of experience. Why does construction experience matter? Because when the market is good for sellers it's good for me because I can basically write my own check when I work. When the market is good for buyers it is tough for me because what work is available pays like shit. I can offset it some because folks who don't want to sell in a down market will often remodel and update the place they're in. But down is down, and there have been a few times when things got scary for me. Being slow to learn, I finally figured out that I needed to set up my situation to where I could survive the down times. The market goes up and down - without fail. Every time rules are put in place to stop it, work arounds are found and off we go!

I built as small as I could and still have some elbow room - 1900 sq ft. At the time I still had one child living at home but that was gonna change in six to eight years. I did all the work myself that I could. Being in the business I called in some favors. Traded some weekend work for some of the work I needed done, etc.

When interest rates dropped enough I refied. When times were good I paid down the principle. Paid off a 15 year in 9 years which shaved off something like 40k in interest.

In the market today I would examine very closely why I thought I needed to move/buy/sell. Is it a need or a want? Answer honestly. If your spouse loses her job, will you still be able to make that mortgage payment? What if you lose yours? Down times in real estate also spread to the rest of the economy. I built in '02. The market went tits up in '08. I was ready for it and for probably the first time in my life I rode through it comfortably because I was ready. I knew it was coming then and I can tell you that it is coming again. I watched and suffered through an inflated real estate crash in Texas in the late eighties. This time I suspect it will go nationwide. Writing loans on inflated real estate is just another bad loan practice that is not sustainable.

Protect yourself from history repeating itself.

Having been a lifelong home builder, reading this was much like looking in the mirror.
My toughest times were in the very early 80's when interest rates were in the high teens.

 

[cody-]

There are two outdated business models costing consumers way too much money, auto and real estate sales, and real estate commissions are absolute thievery.

The mundaneness of real estate agent's and car sales manager's work means more time serve on local zoning boards, guaranteeing people will forever be dependent on driving since the only housing being built is single family houses 45 minutes from the city center with no bus or light rail in sight.

 

[SurfnFish]

part of home buying/retention as one ages is functionality. Who wants stairs when knees start to ache...how much space do you actually need or want to maintain. Flatter property vs steeper. What can be a dream house when younger can be a significant maintenance chore when older, and location, location, location.
My broker on the Oregon coast told me when we bought our lakefront property by the beach..'I'll sell a home to a just retired couple in their 60's, and a decade or two later I'll sell that same house on their behalf when the 90" of rain a year and the hour plus drives to decent doctors and big box shopping get's to be too much.'
That broker, who is now in his mid 60's? Is selling out and moving to his new beach house in sunny Portugal, 20 mins from a big city...lol