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I live in an area where houses are selling within hours for above asking. I understand all the perceived reasons but cannot stomach overpaying like what others are doing. Low interest is great but spending 150k more than what something is actually worth isn’t. I live in a condo and don’t desperately need to move or anything so I’m going to sit this one out and see what happens in the next 2 years or so. Anyone think it’s a bad idea?
I live in an area where houses are selling within hours for above asking. I understand all the perceived reasons but cannot stomach overpaying like what others are doing. Low interest is great but spending 150k more than what something is actually worth isn’t. I live in a condo and don’t desperately need to move or anything so I’m going to sit this one out and see what happens in the next 2 years or so. Anyone think it’s a bad idea?
you've been wondering about this, and predicting a downturn, since April. As Mike says - it appears your personal mindset is to sit tight. That's great of course, just understand and remember that 2 years from now you're going to be either right or wrong and just live with it.
When you say you "understand the perceived reasons", let's examine actual reasons which anyone can apply to their own market:
1. What is the basic annual appreciation since the end of the Big Recession in your market?
In your case, you talk about overly inflated prices, but Zillow (if it has 20/20 hindsight) says VaBeach is up 17% over 8 years. That's not even 2%/year. That is not inflating prices.
2. What % of properties are owner-occupied in your market?
This isn't very easy to find out, but someone should be able to give you a good idea. What we know is on a country-wide basis, we think we max out at 2/3 owner-occupancy. If a lot of VaBeach is either beach rentals or you've got a lot of transient military that tend to rent not own, then that matters. But it's all a local market.
3. How does the median house price compare to the median income?
If the median house price/payment is < 30% median income, then your market is affordable. The median earner can afford the median home. It also means home ownership is available BELOW the median price to those who earn BELOW the median income.
The reason I asked question 2 is because it really matters to question 3. If an area has high owner-occupancy, then it's likely going to have lower median prices. When home ownership is low, then it's a "privilege", you don't have the same demand for houses. The wealthier/higher income are the ones that can afford, and prices can rise.
median Income of $76K/household and average income of $98K/household
$76K affords a $317K mortgage. The median price (per Zillow) is $286K. So, prices could rise 10%+ and still be considered "affordable" right now.
The average income affords a $408K mortgage. So, looking at one much higher neighborhood/community - "Princess Anne" - with prices of ~$350K (22% more expensive than median) - the higher-income "average" household can easily afford that too.
Location: Stuck on the East Coast, hoping to head West
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Develop and follow your own plan. I sold this year because that was part of my overall plan. It just so happened I sold in a seller's market and it was amazing.
Should I buy again, it will be per my personal financial plan. Would I want to buy in this market? Not particularly, but if that were part of my overall long-term plan, I'd probably be out there looking.
I live in an area where houses are selling within hours for above asking. I understand all the perceived reasons but cannot stomach overpaying like what others are doing. Low interest is great but spending 150k more than what something is actually worth isn’t. I live in a condo and don’t desperately need to move or anything so I’m going to sit this one out and see what happens in the next 2 years or so. Anyone think it’s a bad idea?
Market value is the value someone will pay for something. Period. So whatever people are willing to pay is what something is "worth."
It's not a very convenient time to go house-shopping what with the coronavirus and high demand. So assuming that OP has a place to live he doesn't need to buy now.
Now as to whether that will be the right long-term decision: none of us can say. But I will observe that people shopping for houses have been saying that they are overvalued pretty much forever. Except for recessions when everyone says the sky is falling.
Houses are not selling for over market value. If people are willing to pay that much, then that is market value.
Your guess is just as good as anyone else's guess. If your guess is that prices will go down sharply, then wait and see if you are right. Someone else will guess that it is the time to buy, or else they must buy now. Time will tell if they are a better guesser than you are.
I'm not buying right now, but I am not selling either. "Wait and see" is what my best guess is.
I live in an area where houses are selling within hours for above asking. I understand all the perceived reasons but cannot stomach overpaying like what others are doing. Low interest is great but spending 150k more than what something is actually worth isn’t. I live in a condo and don’t desperately need to move or anything so I’m going to sit this one out and see what happens in the next 2 years or so. Anyone think it’s a bad idea?
If they're going under contract, and appraising, they're worth it. Our market is exactly the same and I can still find homes that have been sitting for 180 days. Might not be the one you want (the hot homes go first and for the most money) but try re-evaluating how you look for homes. Try looking for an ugly house that nobody wants and improving it. If you can get a good value, put some sweat equity into a home, you might just be in a much better position than those over-paying for someone else's flip profit.
Just a thought.
I'm showing a home this afternoon, on a creek, with god awful turquoise (neon turquoise) interior doors, hot pink/purple paint and wall paper. There's also a freaky swing in the bedroom. Wood paneling etc. It's been on market for 6 months in a neighborhood with a 4 days on market avg. We are going to offer slightly under asking which is 100k less than comps. 25k in upgrades for 75k worth of equity with work that the buyers would do anyways.
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