Mad rush to buy homes? (real estate market, foreclose, condo)

[k374]

well...in some neighborhoods bidding wars are back, perhaps the whole housing bubble will re-inflate? who knows...

In Lucky Housing Markets, Bidding Wars Are Back - Businessweek

[EscapeCalifornia]

Originally Posted by k374

well...in some neighborhoods bidding wars are back, perhaps the whole housing bubble will re-inflate? who knows...

In Lucky Housing Markets, Bidding Wars Are Back - Businessweek

I don't see anything other than super low interest rates creating demand. Investors are looking for somewhere to stick their money and families are hoping to buy before rates go up and drive the payment up. But the economy is still in the crapper, businesses aren't expanding because they're unsure about the future, unemployment is high, and banks aren't lending. Maybe the still dead cat is just taking another bounce.

[GoldenZephyr]

Originally Posted by EscapeCalifornia

I don't see anything other than super low interest rates creating demand. Investors are looking for somewhere to stick their money and families are hoping to buy before rates go up and drive the payment up. But the economy is still in the crapper, businesses aren't expanding because they're unsure about the future, unemployment is high, and banks aren't lending. Maybe the still dead cat is just taking another bounce.

EscapeCA, exactly right, and what do you think will happen to prices once interest rates climb, prices going up further, I think not.

As I have said, people buy a monthly payment, not a house price and an increase in interest rates by even 1% is like home prices going up by 15-20%. So you really think that prices will increase on top of an interest rate climb. Hardly, no poor families that are once again buying the lie "buy now or be priced out forver" will find themselves crying when prices drop once rates rise.

[EscapeCalifornia]

Originally Posted by GoldenZephyr

EscapeCA, exactly right, and what do you think will happen to prices once interest rates climb, prices going up further, I think not.

As I have said, people buy a monthly payment, not a house price and an increase in interest rates by even 1% is like home prices going up by 15-20%. So you really think that prices will increase on top of an interest rate climb. Hardly, no poor families that are once again buying the lie "buy now or be priced out forver" will find themselves crying when prices drop once rates rise.

The banks are the key to the whole thing. If they verify income and enforce maximum debt to income ratios, then as interest rates rise, home prices will have to fall unless incomes rise dramatically. People may want to buy but they're not going to without a loan. The whole bubble was the result of banks throwing piles of other people's money at anybody who could scratch out an "X" on a mortgage contract. Unless that happens again, I don't see real prices going up for a while. I remember reading about Japan's "Lost Decade" and thinking that was a long time for an economy to stagnate. Well, we're half way there.

[som3on3_10]

Originally Posted by GoldenZephyr

EscapeCA, exactly right, and what do you think will happen to prices once interest rates climb, prices going up further, I think not.

As I have said, people buy a monthly payment, not a house price and an increase in interest rates by even 1% is like home prices going up by 15-20%. So you really think that prices will increase on top of an interest rate climb. Hardly, no poor families that are once again buying the lie "buy now or be priced out forver" will find themselves crying when prices drop once rates rise.

I hope you are right. This is absolutely outrageous. My wife and I have great credit scores (high 700's), have a 20% down payment, and have a maximum budget of $450k and we can't find a decent house. My requirements aren't even that high: 3 bedrooms, 2 baths, 2 car garage, and at least 1,300 square feet. Every house that looks somewhat halfway decent has MULTIPLE offers above asking. It's crazy. Do you guys think it's possible for agents to manipulate the market by saying that there are multiple offers when in fact there aren't? Is there anyway to prove that there are multiple offers on the property or do you just have to take the listing agent's word for it?

[Nathan356]

Having just gone through this (closed on a house about a week ago after over a year of looking), I'd recommend to be "patient but vigilant". There's absolutely no reason to rush just because at the moment inventory is very low. The banks aren't able to bring houses to market as fast as demand has picked up, but if demand remains high you'll see more inventory hit and things will level out.

Regarding whether agents can lie about multiple offers, sure, and some of them do at the risk of losing their license, but are they all collaborating to manipulate the market by collectively agreeing to lie about multiple offers? No. Inventory is clearly very low at the moment, but this is a recent phenomenon and I don't expect this to last. The approach I would take is be 100% ready, look at lots of houses, but be patient. What doesn't get mentioned much in these types of discussions is you are actually living in this house. It has to be right for you!

[Lallo]

I understand the argument of what will prices do once interest rates rise. The US Govt has already said they won't be raising rates for at least 2 years (I think). I'm guessing that by that time, they are hoping the economy will be much better which will allow for people to absorb those higher rates. The little guy always gets screwed I guess. I really don't see rates rising any time soon and if they do, it won't be by much. It also looks like banks are holding on to a lot of homes and investors are out in droves buying a lot of short sales/REO's. This of course, is just my opinion.

[som3on3_10]

I'm telling you it's these damn investors that are bidding up the prices of these homes. Here is an example:

15922 Diamond St Westminster CA - Home For Sale and Real Estate Listing - MLS #P819432 - Realtor.com®

This home is a new listing just listed today. But look at the history, it was purchased on 3/6/12 for $29k less than it's current listing price. I'm guessing the investor put in $10k in upgrades or so and now wants to make a quick $20k in a month. The funny thing is, based on how it's been going there will be a bidding war and some sucker will pay above asking for this house. I guess you can't blame these investors for doing what they do if people keep paying them to do it.

[GoldenZephyr]

Originally Posted by Lallo

I understand the argument of what will prices do once interest rates rise. The US Govt has already said they won't be raising rates for at least 2 years (I think). I'm guessing that by that time, they are hoping the economy will be much better which will allow for people to absorb those higher rates. The little guy always gets screwed I guess. I really don't see rates rising any time soon and if they do, it won't be by much. It also looks like banks are holding on to a lot of homes and investors are out in droves buying a lot of short sales/REO's. This of course, is just my opinion.

Of course Lallo, you are making the case for home pricess to fall in future. You see, if the "hope" is that the economy will be strong enough in the future to support higher prices once rates climb, then prices are sure to fall. There is nothing economically that would support higher prices now or in the future.

Demographic realities of baby boomers selling off equities, property, etc to fund retirements and health care coupled with no real new jobs outside of shuffling paper, is going to keep the economy slow for a generation. There are fewer people forming households and the birth rate is declining. Nothing to support sustained home price increases by and large.

When investors are getting into bidding wars, people are "writing letters groveling to the seller" you know you have a frenzy and mania and it is best to wait the market out, or move on to a new market.

Don't become a debt slave, people thought the same things in 02-06 and look how that turned out.

This time will be a bit of a slower burn, but prices aren't sustainable, even at today's prices and will be stagnant to declining for a generation, especially in gauged of real terms.

[HarleyGuyOC]

Originally Posted by k374

I am noticing that there is very little available inventory these days and many o the listings that I used to check are now in Pending state. Prices for entry level townhomes still between $200-250/sqft, with quite steep ($350+) HOAs and Mello Roos as well but people seem to be rushing to buy now... someone even told me there were bidding wars.

Any of this true? Has the market finally turned around? I am really surprised as salaries are down and the job market looks unstable with fresh layoffs announced by several companies (Yahoo, Best buy etc.)

Here's what's happening:

-Banks are purposely keeping inventory hidden in order to artificially boost the prices of those few properties that they slowly allow to trickle onto the open market. By carefully limiting supply they manipulate demand.

-Banks are allowing defaulting borrowers to stay on their properties payment-free for years at a time in order to avoid booking the financial losses. In many cases the banks are even paying the delinquent property taxes on homes so as to keep city tax collectors from exercising their first-lien rights at forced tax auction sales.

-Most current home 'buyers' are doing so using FHA-sponsored loans that only require a 3.5% downpayment. That means that it only takes someone about $14K to get into a $500K property. Basically, the U.S. government is surreptitiously subsidizing housing, even while the default rates for these very same FHA loans are skyrocketing! Fannie Mae & Freddie Mac both went broke already from implementing this very same foolish policy.

-Flippers are purchasing foreclosed properties at discount rates, giving them a light to moderate facelift and then turning them onto the market once again with a $100-200K mark-up.

-HOA Dues: Once traditionally in the $100-$200 range, many are currently charging $300-$400 a month, in some cases up to $600! This is because as more & more unit owners default and cease making HOA payments, the remainder must absorb the added expense.

-Real buyers with the actual 20% downpayment required to buy a house are choosing to sit on the sidelines, unwilling to throw in their real accumulated savings against FHA-sponsored competitors whom they view as deadbeats.

Conclusion: Buying a house or condo right now is exactly like trying to catch a falling knife!