are houses going for more than the precrash prices? (Newton: sale, 2014)

[MikePRU]

Originally Posted by luvmyhoss

In my area north shore prices are recovering but nowhere near precrash prices.
Beware, listings are selling quickly, but the economy has not recovered. So
this phenomenon is not real.

Interesting point you bring up. It's kind of a "what came first the chicken or the egg?" question. Many economists are saying that a housing recovery is the key to an overall economic recovery. If people don't buy homes because they're thinking as you do then will the economy recover? I don't claim to be an expert in these matters. I just think your statement raises an interesting question.

[SpringMom3]

Originally Posted by MikePRU

Anyway...getting this back on track.

Some towns around here didn't have a "crash" and now prices are sky rocketing in these towns. So, values are definitely above 2005-2006 levels in these locations.

So, Mike, what do you think about the housing prices? Let the market cool down for a bit, or it will only get worse? I see the exact same people going from "first showing at OH" to "first showing at OH" and all of us trying to outbid eachother.

We put in 2 offers this weekend. One of them was declined (although we offered over asking) bc they got 8 offers and one was cash. I'm guessing it went for well over asking.

But then at the same time, I wonder if it'll only get worse?

Why are people pricing their houses so much below what they will end up getting?

[MikePRU]

Originally Posted by SpringMom3

So, Mike, what do you think about the housing prices? Let the market cool down for a bit, or it will only get worse? I see the exact same people going from "first showing at OH" to "first showing at OH" and all of us trying to outbid eachother.

We put in 2 offers this weekend. One of them was declined (although we offered over asking) bc they got 8 offers and one was cash. I'm guessing it went for well over asking.

But then at the same time, I wonder if it'll only get worse?

Most houses I put offers in on (or list) tend to average 5-6 offers. It's really amazing.

It's hard to say where the market will go from here. If the economy continues to get better than likely home prices will continue to rise. There's no way that this current craziness of OH Sat, OH Sun, review 10 offers on Monday can last forever. However, that doesn't mean home prices will not continue to rise after that but likely at a more calm rate.

Originally Posted by SpringMom3

Why are people pricing their houses so much below what they will end up getting?

I think the biggest issue is that the rise in prices was SO sudden. One day was business as usual and then the next was craziness. Additionally, values have continued to rise at a rate no one seemed to expect. Real estate agents and appraisers use comparable sales to determine values (and agents of course price based on perceived value). Comps are sales though and it can take 3 months or more to close a sale so they really just tell you what happened in the market 3 months ago. 3 months ago the market was calm so now our best tool for pricing and judging values is virtually useless. To make matters worse, there seem to be a lot of people out there putting in offers without regard to what a house is actually worth. They have plenty of cash to put down as a downpayment so they still have no trouble getting financing. Inventory levels are so low that some people will pay anything for a house.

[nshorema]

Mike the issue of offers without knowing worth is huge! Comps are comps. Nothing more to be said. I just got my appraisal back and I am SO glad I worked with a realtor who knows the market. It appraised for a little more than my offer (which was over asking). I am finally under contract after losing several properties to what I felt were unrealistic bids. I think sellers are fairly savy though, an all cash offer is still the best obviously. But greater than 20% down is still better than someone with 'only' 20% even at a lower offer price.

On another note, have you ever seen sellers just take the highest offer, and get all of the way to the appraisal only to end up taking much less because the house didn't make the grade? I'm sure that is happening out there. My worst was a house that went under agreement for $40,000 over asking, with absolutely no comps to support that price. I'd be interested to know if the buyers are going to pony up some serious cash or will the deal fall through.

My advice for those still in the market is to have everything together (financing, down payment, etc.), be smart and don't get caught up in the game. If you don't have 20% down, it's probably a good time to just wait out the market if you're in a competitive area. I know people do FHA and whatnot, but you'll be less attractive to sellers if you do.

[raveabouttoast]

Originally Posted by nshorema

But greater than 20% down is still better than someone with 'only' 20% even at a lower offer price.

Why?

A 17% downpayment takes the same time for the bank to process as a 22% downpayment. So you can't close any quicker. The only thing I can think of someone with a 22% downpayment might appear to be more financially secure, and thus able to actually get a mortgage.... but that's what a pre-approval letter is for.

I wouldn't give up several thousand dollars just because someone's making an offer with a slightly larger downpayment.

[maxximase]

Curious whether all of this multiple offer nonsense is also happening a little further south/west. We are looking to move back to MA from CA in a couple months and are looking in the Norfolk/Franklin/Wrentham/Mendon area. I see some reasonable houses at reasonable prices that have been on the market much longer than the first open house. Is anyone familiar with markets trends in these areas?

[hken]

IMO this particular problem (low inventory) is not going away any time soon. You have a whole generation of buyers who cannot sell their home because they are underwater. If you assume people in a normal market on average move every ~7 years, then everyone who bought 05-06 cannot sell and are stuck. Those default landlords might be able to buy a 2nd home but they are certainly not listing their old ones. If you want to "wait" it out, it's worth a gamble but I genuinely believe there is a structural problem in the market with inventories. The only way out is higher prices to induce sellers to sell. But we are not talking 1 year of price increases....I would say 2-3 years.

[mmyk72]

Lots of good postings. I also 'guess' that given the lack of choices, people simply NEED to out-compete with a handful of other people who NEED that same house. In the end, they may look at their monthly payment more so than the final price of the house. It's easier to accept that the monthly payment goes up 100 or 200 bucks 'only' as a result of a bid higher than asking price.

[luvmyhoss]

Originally Posted by nshorema

Mike the issue of offers without knowing worth is huge! Comps are comps. Nothing more to be said. I just got my appraisal back and I am SO glad I worked with a realtor who knows the market. It appraised for a little more than my offer (which was over asking). I am finally under contract after losing several properties to what I felt were unrealistic bids. I think sellers are fairly savy though, an all cash offer is still the best obviously. But greater than 20% down is still better than someone with 'only' 20% even at a lower offer price.

On another note, have you ever seen sellers just take the highest offer, and get all of the way to the appraisal only to end up taking much less because the house didn't make the grade? I'm sure that is happening out there. My worst was a house that went under agreement for $40,000 over asking, with absolutely no comps to support that price. I'd be interested to know if the buyers are going to pony up some serious cash or will the deal fall through.

My advice for those still in the market is to have everything together (financing, down payment, etc.), be smart and don't get caught up in the game. If you don't have 20% down, it's probably a good time to just wait out the market if you're in a competitive area. I know people do FHA and whatnot, but you'll be less attractive to sellers if you do.

You can do your own comps with a little knowledge. Makes your offer more believable.
You CAN get all the way to the appraisal and it doesn't support the price bid, then there
is no deal unless the buyer comes up with more cash.

Go with a complete package from insurance on up; I have had sellers take my offer because
I was well informed.

[nshorema]

Originally Posted by raveabouttoast

Why?

A 17% downpayment takes the same time for the bank to process as a 22% downpayment. So you can't close any quicker. The only thing I can think of someone with a 22% downpayment might appear to be more financially secure, and thus able to actually get a mortgage.... but that's what a pre-approval letter is for.

I wouldn't give up several thousand dollars just because someone's making an offer with a slightly larger downpayment.

Not just more able to get a mortgage, but if/when the appraisal comes in low they have more cash to deal with it. And PMI approval is another process, another roadblock, so less than 20% down and you have that to deal with. Of course this assumes people don't waive their financing contingency, which I guess if you're that solid and have enough money why have one?