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Agreed! Rates have not gone up too much. People are still buying and the lack of inventory is driving up prices. A lot of new construction going on is our area (Chicagoland/NW Indiana). I also agree that people are buying smaller homes instead of the much larger craze that was going on in 2003-2007.
This is spot on! The "small" SFHs (under 2K sq. ft.) are highly desirable, and going up in price as much as 4-5% per month during this selling season. Large homes (either ones that are new construction or were built in the last 15 years) that are 2-3 times the price of the small SFHs are staying on the market for months, or years.
The lending standards concern me dearly as does the appraisal process. I believe weve been seeing lending standards loosen as prices and interest rates rise. Apprisals are basically pushing through crazy valuations in this market as they start with the contract price to start valuation. There really are no checks and balances in the system to hold back prices and risk. Everyone is paid and compensated by driving as many transaction lending as much money at the highest rate for the highest price.
The only limiting factor is consumer rationality and well we all know that doesn't exist in Americ.
What lending standards have you seen loosening?
What evidence do you have the appraisals are just being pushed through?
I am seeing lending standards staying about the same and remain pretty stringent.
I am seeing appraisals being fully scrutinized.
"No checks and balances", I would highly disagree with that.
Not all of CA is super expensive . But cities like Los Angeles and San Francisco are more global/world cities similar to New York .
They attract people with money from all over the world .
Most people actually can't afford homes at the current median prices in L.A
I read recently that 34 percent of millennials in California live at home .
There are many people living in homes worth $1 million .. but they paid a fraction of that price years ago.
As an example in West Los Angeles in the late 1990s homes could be bought around the low 300s.. now it's hard to find a modest home for less than $1.2 million .
No way wages have gone up that much since then .. and the late 1990s were actually a good time for the economy the tech scene was hot etc .
I was born and raised in Northern CA and bought a house in 2008 and sold it for a good profit in 2014, that same house has since ballooned up probably an addition doubling in price since then. This city has some incredibly low household income and very few job opportunities. The house in question is still pretty affordable by CA standards but it's still not affordable based on opportunities available in the area.
I was born and raised in Northern CA and bought a house in 2008 and sold it for a good profit in 2014, that same house has since ballooned up probably an addition doubling in price since then. This city has some incredibly low household income and very few job opportunities. The house in question is still pretty affordable by CA standards but it's still not affordable based on opportunities available in the area.
Many places are not affordable relative to local incomes. Sure, SF incomes are high, but real estate ownership is not affordable for most people. In rural areas, incomes are so low that housing costs can be a burden even at say, $100k for a house.
Viable telecommuting technology has been in place for the better part of a decade now (if not longer), and most corporate cultures that I've worked in, from Fortune 500 to small public company to large private company to small private company, are extremely averse to telecommuting even a day or week or so, much less full time telecommuting.
I won't speak for all companies but I know that, for where I work, the collaborative effort suffers from telecommuting. Put another way, telecommuting is a bit like getting stuff done over email. Great for spelling out exact details, or working out a minor one; but eventually it suffers for working out unknowns. Face to face has its place. I'm not convinced that even Webex works that well--it has its place, but it too suffers.
I won't speak for all companies but I know that, for where I work, the collaborative effort suffers from telecommuting. Put another way, telecommuting is a bit like getting stuff done over email. Great for spelling out exact details, or working out a minor one; but eventually it suffers for working out unknowns. Face to face has its place. I'm not convinced that even Webex works that well--it has its place, but it too suffers.
Agreed to a point. And as long as this trend continues, and companies keep consolidating jobs into fewer job centers, I don't see a major cool-off for now hot markets
The "RE Market" is not a huge amorphous beast that moves unilaterally in all areas across the country. Also, the 2008 bubble and housing decline was an anomaly that hadn't occurred in decades ... and was artificially induced by banks willing to qualify anyone who wanted to buy, not by traditional supply and demand. Those conditions are unlikely to occur simultaneously again (at least in the foreseeable future).
You are moving from one 'hot' market to another. It's unlikely a major change or turnaround will 'suddenly' occur without warning, in either. Likewise, interest rates remain historically low ... and could increase, which could raise the effective cost of housing and squeeze some low-end buyers out of the market.
If you are prepared to buy now, waiting for prices to decline in 'hot markets' will probably cost you money that you could be gaining in equity.
CO is mostly driven by out of state investments, or people coming in with cash from selling their coastal homes. People who move here from LA, NY, SF, etc are always talking about how "cheap" houses are here, but ignore the average salary for the other millions of residents. It was just reported that Denver has the lowest affordability in the country...which tells me that certain neighborhoods (close to downtown) will level off, and the neighborhoods that are currently over heated (and much further out) will see major corrections.
Denver has become a Coastal Transplant only market. That's all well and good as the city grows, but no one will be able to buy these homes once the economy slows down and migration hits it's first dip.
While home prices might level off or decrease slightly, the overall cost of home ownership is sure to remain constant or go up due to increasing interest rates.
Assuming you're keeping the same monthly payment, at the current 4.0% we locked in at on our $330k house (about $1500/month with taxes and homeowner's insurance), a 5.0% interest rate would mean a purchase price of $299k and a 5.5% interest rate would be $285k to keep that $1500/month payment.
In the end, if interest rates jump to 5% or 5.5% and my home value drops $30-40k, it's really not a huge issue, assuming I stay in the house because my monthly payments would remain constant whether I buy now or 5 years from now at a higher interest/lower price.
Personally, as I've said on the Denver sub forum, I don't see house prices going down, especially west of I-25, short of another financial collapse. The west side of the metro is always going to be more desirable, and those who can afford it will purchase there.
You have record high house prices, multiple assets under extreme pressure, volatility at record lows for a long duration, and rising interest rates after a period where interest rates were so low to create an artificial economy. You even have injections of liquidity by central banks.
What are wages doing? Exactly. What do you think is going to happen? I mean, let's honestly think about this. Do people really think that economies are completely disconnected?
Rising interest rates affect the cost of doing business across the board. This charade is going to end at some point and it's not going to be pretty, but consumers did this.
This is the fault of speculation and self gratification. Nobody ever thinks about the future. For example, low oil prices are priced in. Really? What a ****fest that will be when oil prices sky rocket, putting even more stress on our economy. It really irritates me that we go through this time and time again. People just never learn.
It's actually all starting to fall apart at the seams. Not sure how much longer this will last.
You have record high house prices, multiple assets under extreme pressure, volatility at record lows for a long duration, and rising interest rates after a period where interest rates were so low to create an artificial economy. You even have injections of liquidity by central banks.
What are wages doing? Exactly. What do you think is going to happen? I mean, let's honestly think about this. Do people really think that economies are completely disconnected?
Rising interest rates affect the cost of doing business across the board. This charade is going to end at some point and it's not going to be pretty, but consumers did this.
This is the fault of speculation and self gratification. Nobody ever thinks about the future. For example, low oil prices are priced in. Really? What a ****fest that will be when oil prices sky rocket, putting even more stress on our economy. It really irritates me that we go through this time and time again. People just never learn.
It's actually all starting to fall apart at the seams. Not sure how much longer this will last.
You like to keep spewing this without presenting any hard facts. Looking at a 15 year approach, the houses (at least in the Denver Metro) have increased on average of 3%. So while on a micro level it looks like huge increased due to the crash in 2008 and the huge uptick in the last 3-4 years, for the long term, it's remained pretty consistent with inflation.
On top of it, real estate is completely local. In areas like Denver or SFO or Seattle or Portland where there is limited land available (or limited desirable land) and a limited number of houses, prices are being driven completely be demand-side economics.
This, combined with it still being cheaper to have a mortgage than it is to rent makes it worth-while in the long run to buy, even at high prices. You need a place to live. If that's a $330,000 house with mortgage payment of $1650 or a rental house with a rent payment of $2000, that money is going somewhere.
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