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Location: Stuck on the East Coast, hoping to head West
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In my area, a seller's market, median is $350,000, there are 2 types of housing that sell fast: houses under $300,000 and houses at or above the median price that are specifically updated.
For example, in my neighborhood, houses sell at $365,000. As long as your house has stainless steel, subway tile, granite counters, gray paint, updated bathrooms, you get that price. In hours or days. Some of these houses have negative days on market, not sure what that means.
If the house is not considered updated, even if it's discounted, it will sit. It will sell, but it will take a while. Example dom are 31, a house not updated (even if price is lower); will sit for double that time. At least that's how it's been over the past 9 months or so.
Nope. Banks will not finance a house with an inflated value. They always demand an assessment and if the value from that assessment is way below the loan amount, they won't do the loan. This puts a natural damper on how fast prices can rise in a market. Unless of course people pay cash.
Thanks for better explaining my point about bank financing.
Nope. Banks will not finance a house with an inflated value. They always demand an assessment and if the value from that assessment is way below the loan amount, they won't do the loan. This puts a natural damper on how fast prices can rise in a market. Unless of course people pay cash.
Also the buyer PROFILE seeking homes in the area in which you are selling. You likely have a certain income range that buys homes in your neighborhood. High or low, could be either, but there's definitely numbers in your area that would not or could not entertain living in some other parts of town. This is another limitation.
Everything is selling at its highest prices ever. Its called inflation.
Not everything is selling at the highest price ever. Not gold, not oil. Even houses in Phoenix metro (see the Case-Shiller index) are not selling at their highest price ever.
With that said, yes I do get your point. If houses are going under contract in a day or two you would think prices would escalate until days on the market is a bit more normal. I don't really know for sure what limits this, but I'd guess it has something to do with the appraisal and underwriting process. It's kind of strange, as the bank wants to see justification of sales price by seeing recent comparable sales. For prices to go up at all there has to be some reasonable allowance for inflation in the price of housing... so how much is allowed and how much is "too much"?
Nope. Banks will not finance a house with an inflated value. They always demand an assessment and if the value from that assessment is way below the loan amount, they won't do the loan. This puts a natural damper on how fast prices can rise in a market. Unless of course people pay cash.
You beat me to it. You can qualify for $800K all day long but if the house listed at $750K comes back appraised at $700K the bank is only loaning you $700K. This absolutely factors in as to why houses are priced where they are.
Actually, that's a very reasonable question. I've had a little (VERY little) experience in living in an area with rapidly rising house prices. Based on my limited experience with this, here's my take on it.
With rapidly rising house prices, the problem that is encountered is "appraisals". It's a never ending problem in such areas because appraisals are always based on "past" sales of comparable properties. So if a homeowner decides that he is going to raise his price 10% to 15% higher than similar properties sold for a month ago, then even if he finds a buyer willing to buy his house, the appraisal won't be enough for the buyer to get his loan.
Consequently, any price increases, even in a hot market, have to be fairly gradual. This means not exceeding the recent past sales by more than 2% or 3% or the appraisal will drag it back down. Stated a different way, prices DO rise in a hot market, but due to the fact that most buyers are getting loans and the loans depend upon appraisals, therefore the price increases must be kept gradual. Of course, even gradual increases can really add up over time, but if someone tries to jump their price too fast, they'll likely have problems with the appraisal. That's my take on it.
I think you are on to something here.
The guy who remodeled our kitchen works for a contractor who flips houses that always sell for more than other homes in the area.
Sometimes the banks will go for it based on the upgraded appearance. Other times they balk.
When that happens, the buyers have to pitch in. Say the contractor wants $420K and the bank says $400K is all we'll loan. Then the buyer either has to walk, or come up with another $20K.
Then this becomes one of the comps for the neighborhood and prices go up.
In my area, a seller's market, median is $350,000, there are 2 types of housing that sell fast: houses under $300,000 and houses at or above the median price that are specifically updated.
For example, in my neighborhood, houses sell at $365,000. As long as your house has stainless steel, subway tile, granite counters, gray paint, updated bathrooms, you get that price. In hours or days. Some of these houses have negative days on market, not sure what that means.
If the house is not considered updated, even if it's discounted, it will sit. It will sell, but it will take a while. Example dom are 31, a house not updated (even if price is lower); will sit for double that time. At least that's how it's been over the past 9 months or so.
Updated homes go in a hurry around here as well.
Homes that need work often go under contract several times before they finally sell.
Lots of people looking during open houses doesn't mean lots of people buying at the asking price.
There are so many people just kicking tires in my area you'd think sellers would start CHARGING prospective buyers to visit a home.
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