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When I look at local real estate appreciation here in northeast TN, I have to shake my head.
Nothing has fundamentally changed from pre-COVID. If anything, the local economy is weaker, and it’s not like we are getting the huge amount of out of area interest than somewhere like FL gets. Our population is essentially stagnant. There isn’t much in the way of good jobs here. It’s not like people are beating the doors down to get here.
At some point, it makes no sense.
Quote:
Originally Posted by JRR
Same thing going on here in Cookeville. A house in our neighborhood went on the market due to the death of the owner. Listing lasted four days and it sold for over the asking price. Everywhere I look around here, new homes are going up. It is a bit crazy to me.
One driver is expectations for interest rates. Some people have rational expectations that interest rates will climb in the not-too-distant future, while their W2 income won't. They see they can afford a mortgage with a monthly payment of $X at current interest rates, but if rates rise, that would drive the monthly mortgage payment up to $X+delta, putting the home beyond their reach. Thus, if they were planning to buy at some point in the next year or two, they want to buy now before rates go up.
Note that this phenomenon is "pulling in demand" from a future time period rather than "expanding demand."
With areas in the West having 30% increase in demand and 50% drop in inventory then coupled with eviction bans. How could prices not see a substantial drop in the nearish future.
Globalists moving or purchasing property here.
The prices will not drop.
At one time I wanted to purchase investment property, I have changed my mind. In my area... nothing stays on the market for more than 3 days.
Even though, my state is at the bottom of people moving into it.
At one time I wanted to purchase investment property, I have changed my mind. In my area... nothing stays on the market for more than 3 days.
Even though, my state is at the bottom of people moving into it.
Explain that?
Money - there are too much money out there seeking a return.
Stocks are too high
Bonds have little to no return
Gold is stalled
Oil/commodities are flat.
Where is money going to go ? Well lots of it is going into real-estate. It is also very easy to borrow at low cost and that is also driving the market.
Seems crazy given the overall economy but it's happening in lots of places.
Many people, including myself, are expecting major inflation in the short future, which will drive up the value of assets - stocks and real estate being the most common two.
If you buy a house with low interest rates and have a stable job, just sit back and watch inflation mushroom the value of your house while shrinking the monetary value of your mortgage payments. Even if interest rates goes up, inflation can still drive up the value of houses (it's happened before in the 70s-80s era).
To put it bluntly, several trillion dollars have been dumped into the American economy with promises of trillions more - that points to one outcome: inflation.
People who rent and don't own property are at risk of losing out due to inflation. Their salaries likely won't rise fast enough to keep up with inflation. When my parents bought a house at a time of rapid inflation (1970s), my father's aunt, a wise business owner, pointed out that people couldn't save enough money to beat inflation, and encouraged them to get any house and to stretch themselves if needed. And that's what they did, they bought a very expensive house but within five years their mortgage become very affordable thanks to inflation.
One driver is expectations for interest rates. Some people have rational expectations that interest rates will climb in the not-too-distant future, while their W2 income won't. They see they can afford a mortgage with a monthly payment of $X at current interest rates, but if rates rise, that would drive the monthly mortgage payment up to $X+delta, putting the home beyond their reach. Thus, if they were planning to buy at some point in the next year or two, they want to buy now before rates go up.
Note that this phenomenon is "pulling in demand" from a future time period rather than "expanding demand."
The economy is going to have to get going first before there is any significant inflationary pressure. Will it come? Maybe, but that's no guarantee as of now.
The economy is going to have to get going first before there is any significant inflationary pressure. Will it come? Maybe, but that's no guarantee as of now.
Certainly true. Note my comment was about expectations of inflation.
I'm down the street in Tucson and just purchased a townhouse for a disabled adult child. Have had a front row seat to the buying process for the past year. We were looking for a simple two bedroom townhouse, preferably owned by an old lady that had tacky wallpaper and avocado green appliances that we could put some sweat equity in. Three years ago when we first pondered making a purchase, these townhouses were all over Tucson for $90-$110,000. Plus with attractive sales terms because the surviving children of the deceased old lady tended to live out of state and wanted the place sold, not looking to get rich.
This year, the market for townhouses was red hot. According to my real estate agent who has been in the game for 20+ years and comes from a family involved in real estate sales, this year every conventional rule about purchasing was changed. The past year, 75% of her clients that had a successful home purchase were out of state buyers. Townhouses were no longer bought by old ladies, but by first time younger home buyers. Got extremely lucky, stumbled across a situation where a divorcing couple needed to sell their townhouse ASAP, two other deals fell through and the listing hit the MLS two days before Christmas. My agent texted me at 5 AM to look at the place, took a tour at 10 AM and made an offer immediately. Looking at the sales history, our offer was $60,000 more than what the place sold for a few years ago.
One little tidbit of information that I haven't heard much about, especially for Arizona real estate. My agent said that this year is the first year where home prices have been divorced from the local average wage. House prices are not dependent on what long term Arizona residents have as income from work. This is creating a class of Arizona residents that are really ticked off that home ownership based on their current income will not happen.
Your last paragraph, I have seen this happen with people I grew up here with you never got into higher paying jobs, not expecting such a huge price increase here. Two years ago they probably could have afforded and should have bought then but didn't. They are out of luck for a while it would seem or they move to Ohio for cheaper housing options
Your last paragraph, I have seen this happen with people I grew up here with you never got into higher paying jobs, not expecting such a huge price increase here. Two years ago they probably could have afforded and should have bought then but didn't. They are out of luck for a while it would seem or they move to Ohio for cheaper housing options
What I don't understand are stagnant areas seeing the appreciation.
Where I live is essentially in a net population of decline of locals - more deaths than births, with a rapidly aging population. There's no significant job growth like what's driving population and home appreciation increases in metro Nashville. We're hours from middle class retail like Costco or Whole Foods. An NFL city is 3-4 hours away. There's not much different, other than a weaker economy, from 1/1/2020. Certainly nothing to justify the rapid property price increases.
With areas in the West having 30% increase in demand and 50% drop in inventory then coupled with eviction bans. How could prices not see a substantial drop in the nearish future.
I literally get calls every other day from realtors. I get letters in the mail for offers at least every three four days. Some from realtors with clients,some from realtors some from we buy your house. I had offers where realtors will do the sake for 1% commission. The demand is high and the supply is low.
House prices aren’t gonna get cheaper because building a house is a lot more expensive as costs have gone up.
The problem is that people think realtors are making a killing. Well....they are...but they gotta have sellers bad buyers to represent. If the demand is high but there is no inventory they aren’t making any money.
It's pretty simple. Prices will only drop when inventory increases. If you identify something leading to excess inventory next year let me know what it is.
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