Housing Market (& Mea Culpa)

[thinkxingu]

I keep going back to "Americans have a short memory." Many have already forgotten The Great Recession and how much that crippled huge swaths of people, so, barring any crazy Covid mutations, I'm thinking if vaccines continue to exponentially increase, we'll be back to normal by summer or next fall.

Sure, there may be some holdovers—some might be good, like personal masks for people who are sick and increased hygiene—but I'm thinking the shift won't be nearly as seismic as some have predicted.

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[FlyingScot]

Originally Posted by thinkxingu

I keep going back to "Americans have a short memory." Many have already forgotten The Great Recession and how much that crippled huge swaths of people, so, barring any crazy Covid mutations, I'm thinking if vaccines continue to exponentially increase, we'll be back to normal by summer or next fall.

Sure, there may be some holdovers—some might be good, like personal masks for people who are sick and increased hygiene—but I'm thinking the shift won't be nearly as seismic as some have predicted.

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A couple of thoughts:

As I'm sure Wily would point out, we don't need seismic shifts in people to have large shifts in real estate values--it's the last few percent that make a real estate project profitable or that send prices skyrocketing.

Also, keep in mind that you're in a profession that benefits greatly from in person attendance. A seismic (haha) number of people are happier working from home than in their offices. The strongest members of this group will insist on more time working from home, less in the office, and this will ripple through for all. Pretty sure that Facebook and Google, two companies with very powerful workforces, have already acknowledged this

[JEEPONLY]

Originally Posted by thinkxingu

I keep going back to "Americans have a short memory." Many have already forgotten The Great Recession and how much that crippled huge swaths of people, so, barring any crazy Covid mutations, I'm thinking if vaccines continue to exponentially increase, we'll be back to normal by summer or next fall.

Sure, there may be some holdovers—some might be good, like personal masks for people who are sick and increased hygiene—but I'm thinking the shift won't be nearly as seismic as some have predicted.

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Yes! Pick the lifestyle you prefer and work toward it.
Just as "fair and equal are not the same"- so is true of "living the life v. feeling comfortable and secure".

I moved out of the fast lane to experience my life- not to just live it!

[MeredithMan]

This is not really lake-related, but it is another data point on how crazy the RE market is right now. We have family friends who recently retired and they decided to sell their house, buy an RV, and tour the country. Their home is a late 1950's split-level in Framingham, MA. Listed the house for $589K. In the first weekend, they had 25, (yes, TWENTY FIVE), offers and accepted a cash offer $90K over asking price. They close in 3 weeks.

I've also heard from realtor acquaintances on the lake that many offers now contain "escalation clauses", whereby the buyer writes into the offer that they will go $___ over their offer, and it's usually 50-100K over.

[FlyingScot]

Originally Posted by MeredithMan

This is not really lake-related, but it is another data point on how crazy the RE market is right now. We have family friends who recently retired and they decided to sell their house, buy an RV, and tour the country. Their home is a late 1950's split-level in Framingham, MA. Listed the house for $589K. In the first weekend, they had 25, (yes, TWENTY FIVE), offers and accepted a cash offer $90K over asking price. They close in 3 weeks.

I've also heard from realtor acquaintances on the lake that many offers now contain "escalation clauses", whereby the buyer writes into the offer that they will go $___ over their offer, and it's usually 50-100K over.

It's related enough, MM. There was a great article in the paper a few days ago that describes how the pandemic has led to some people not wanting to sell/move, and that has caused a ripple effect in the market leading to plummeting inventory, and hence skyrocketing prices, as we see on the lake.

https://www.nytimes.com/2021/02/26/u...uses-gone.html

[Biggd]

Originally Posted by FlyingScot

It's related enough, MM. There was a great article in the paper a few days ago that describes how the pandemic has led to some people not wanting to sell/move, and that has caused a ripple effect in the market leading to plummeting inventory, and hence skyrocketing prices, as we see on the lake.

https://www.nytimes.com/2021/02/26/u...uses-gone.html

I believe many baby boomers are reluctant to sell because they are afraid to be a buyer in this market and afraid they will have no place to go.
I want to sell my house in Ma and move to my lake house but my wife is not ready for that. I personally think this spring is going to be the top of the market or very close to it.
Once we get everyone vaccinated and back to work, the economy is going to heat up and inflation will make interest rates go up.
I don't think it will turn into a buyers market but I do think the price increases will slow down to a more normal market, JMO.

[jazzman]

I'm curious if island properties will pop 25% like mainland has in the past 6 months when they finally can hit the market again in a few weeks. Maybe not since it can't be your permanent home with a remote office.

My dream of selling my southern NH house getting something with at least a view of Winni and living on Barndoor Island in the summer is fading fast.

[mswlogo]

Originally Posted by MeredithMan

This is not really lake-related, but it is another data point on how crazy the RE market is right now. We have family friends who recently retired and they decided to sell their house, buy an RV, and tour the country. Their home is a late 1950's split-level in Framingham, MA. Listed the house for $589K. In the first weekend, they had 25, (yes, TWENTY FIVE), offers and accepted a cash offer $90K over asking price. They close in 3 weeks.

I've also heard from realtor acquaintances on the lake that many offers now contain "escalation clauses", whereby the buyer writes into the offer that they will go $___ over their offer, and it's usually 50-100K over.

Wow. We are thinking of retiring to our house in NH. Problem is, it isn't built yet. A friend suggested we sell now and rent with the hot market. The thought of that makes me crazy. I thought our home in MA was worth $400K-ish (bank appraised it for $425K about 3 years ago I think). A 1970's Split with a new attached two car garage, in ground pool. 0.5 Acre. It has owned Solar too. About 15 miles west of Framingham. Good schools. Park and school walking distance. Maybe it's worth a lot more than I thought.

[8gv]

Originally Posted by mswlogo

Wow. We are thinking of retiring to our house in NH. Problem is, it isn't built yet. A friend suggested we sell now and rent with the hot market. The thought of that makes me crazy. I thought our home in MA was worth $400K-ish (bank appraised it for $425K about 3 years ago I think). A 1970's Split with a new attached two car garage, in ground pool. 0.5 Acre. It has owned Solar too. About 15 miles west of Framingham. Good schools. Park and school walking distance. Maybe it's worth a lot more than I thought.

Those who have the next place bought or being built should consider selling now and renting.

Once interest rates climb the prices will begin to fall.

Job losses will accelerate the price decline.

You will likely get the highest price if you sell now.

[Sue Doe-Nym]

Originally Posted by MeredithMan

This is not really lake-related, but it is another data point on how crazy the RE market is right now. We have family friends who recently retired and they decided to sell their house, buy an RV, and tour the country. Their home is a late 1950's split-level in Framingham, MA. Listed the house for $589K. In the first weekend, they had 25, (yes, TWENTY FIVE), offers and accepted a cash offer $90K over asking price. They close in 3 weeks.

I've also heard from realtor acquaintances on the lake that many offers now contain "escalation clauses", whereby the buyer writes into the offer that they will go $___ over their offer, and it's usually 50-100K over.

We retired from the real estate business several years ago, so the concept of an escalation clause in the contract would keep me awake at night. Most realtors are honest, but I can imagine a shady listing agent maneuvering so that the buyer wound up paying the higher amount. I asked a real estate attorney friend about it, and he is familiar with its usage. He says he would never recommend having a buyer put that clause into a contract.

[Descant]

I know a young attorney who is currently in the buying mode and has made offers with an escalation clause, with a cap. He is also a licensed RE agent. His bid still wasn't enough due to his cap, but he is quite comfortable with the process and offer. If you ant to make such an offer, an hour with a lawyer who deals in RE is probably worth an hours fee. S/He should be reviewing all paperwork anyway, not just a RE agent. No matter how the deal works, realtors are on commission. The only un-connected party is your lawyer.

[Blue Thunder]

Escalation clauses in this market are more common that not. I just sold my brothers house on the North Shore of Massachusetts. House was shown over the course of just 3 days with a deadline set for offers. We had numerous offers, ALL for over the asking price. Most of them had escalation clauses in $2k, $5k, and $10k increments! House sold for $90k over asking price. Crazy times indeed.

My wife and I are strongly considering selling our home and renting. I recently retired and she is about 1-2 years out from retirement as well. It is very tempting....

BT

[thinkxingu]

Originally Posted by Blue Thunder

Escalation clauses in this market are more common that not. I just sold my brothers house on the North Shore of Massachusetts. House was shown over the course of just 3 days with a deadline set for offers. We had numerous offers, ALL for over the asking price. Most of them had escalation clauses in $2k, $5k, and $10k increments! House sold for $90k over asking price. Crazy times indeed.

My wife and I are strongly considering selling our home and renting. I recently retired and she is about 1-2 years out from retirement as well. It is very tempting....

BT

Interesting idea on selling/renting—let's take a moment to consider the equation. In my head, it would come down to "escalated/inflated" sale proceeds - rental fees vs. sale proceeds in a couple years?

So, if you could make an extra $100k now but rented for 3 years at $1500/mth. (fair average rent?) you'd have an extra $46K. Of course, there'd be real estate tax, maintenance, etc. savings which would also add up.

The presumption, of course, would be that whatever house you'd settle on would have gone down in price in that three years, but it's an interesting proposition for one so close to retirement.

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[TiltonBB]

The price escalation seems to be happening in many places, with the exception of the big cities.

In one new Florida neighborhood, of about 800 homes, lots started selling about 18 months ago for $160,000. The same lots today start at $500,000.

One person who bought early (18 months ago) had about $1.1 million total into his property and decided to sell. He listed at $1.5 million and sold at $1.4. That is a nice profit!

It does get tempting to sell your home at the top of the market, take a profit, and wait for the decline to buy back in.

But what if you really like your house? What if the decline doesn't happen this time? What value would you put on missing a summer at the lake?

[8gv]

An additional expense involved in the "sell, rent, buy later" plan is storage of all one's stuff.

Also, if the "buy later" property needs to be financed there is exposure to the inevitable interest rate increases.

[thinkxingu]

Originally Posted by 8gv

An additional expense involved in the "sell, rent, buy later" plan is storage of all one's stuff.

Also, if the "buy later" property needs to be financed there is exposure to the inevitable interest rate increases.

AND cost of refurnishing, potentially, both.

MSW, above, also pointed out the "value of missed time" portion of the equation (which, incidentally, I've appreciated throughout all of his posts). Buying at Arcadia was absolutely a questionable financial decision at the time, but I knew it was my family's chance to live that life before my children got too old. They are now 9 & 11, and I'm forever grateful we took the leap.

Any other variables to selling high with the hopes of getting in low in the future?

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[Biggd]

Originally Posted by TiltonBB

The price escalation seems to be happening in many places, with the exception of the big cities.

In one new Florida neighborhood, of about 800 homes, lots started selling about 18 months ago for $160,000. The same lots today start at $500,000.

One person who bought early (18 months ago) had about $1.1 million total into his property and decided to sell. He listed at $1.5 million and sold at $1.4. That is a nice profit!

It does get tempting to sell your home at the top of the market, take a profit, and wait for the decline to buy back in.

But what if you really like your house? What if the decline doesn't happen this time? What value would you put on missing a summer at the lake?

I know people who have done the sell, rent, and wait for prices to come down in the past. That's great for young people with no kids but it can take quite a long time for the bargains to become available. If you're older and retired it's tough to put your life on hold and wait for the down turn.
In my case I still have a home in Ma and a home in NH so I have a place to go. But my wife is not ready, she will be ready when prices drop and it's a buyers market.

[Descant]

Originally Posted by Blue Thunder

Escalation clauses in this market are more common that not. I just sold my brothers house on the North Shore of Massachusetts. House was shown over the course of just 3 days with a deadline set for offers. We had numerous offers, ALL for over the asking price. Most of them had escalation clauses in $2k, $5k, and $10k increments! House sold for $90k over asking price. Crazy times indeed.

My wife and I are strongly considering selling our home and renting. I recently retired and she is about 1-2 years out from retirement as well. It is very tempting....

BT

Before you sell, be sure you can get a rental. That market is very tight. I know of one instance where a tenant moved out unexpectedly in November, usually a time when nobody wants to move. In the first 36 hours the realtor had 25 calls and several deposits/applications. This was a single family home. Big complexes and retirement communities may have extended wait lists.

[FlyingScot]

Predictions are difficult, especially about the the future.

My sister got squeezed when she decided for rent for a year or two after selling her house. Prices kept climbing, she could no longer afford what she expected.

[loonguy]

Another option, which might work for some, is rather than sell and rent for a couple of years, refinance your current home while rates are low and take some cash out to serve as a down payment on purchasing the home you want now with a low interest rate mortgage. Your current residence could become a rental property that might generate some excess cash flow and you could enjoy your next home now. Alternatively, you could rent out the new home until you are ready to make the move. Of course, there are risks as a landlord and the couple of times I moved and converted my prior residence to a rental property I had the misfortune of having deadbeat tenants who did not respect the property or their rent obligations. I still do not regret the transitions, however, because they enabled me to improve my then current and future home situations at a time when I really did not have a better alternative.

[TheTimeTraveler]

Originally Posted by loonguy

Another option, which might work for some, is rather than sell and rent for a couple of years, refinance your current home while rates are low and take some cash out to serve as a down payment on purchasing the home you want now with a low interest rate mortgage. Your current residence could become a rental property that might generate some excess cash flow and you could enjoy your next home now. Of course, there are risks as a landlord and the couple of times I moved and converted my prior residence to a rental property I had the misfortune of having deadbeat tenants who did not respect the property or their rent obligations. I still do not regret the transitions, however, because they enabled me to improve my then current and future home situations at a time when I really did not have a better alternative.

I know of several folks who owned income properties and would exclusively rent to Section 8 Tenants. The rent was guaranteed by the Government. They both became extremely wealthy as a result.

I think I would need an iron stomach to deal with property tenants but it does work for many.

[mswlogo]

My case is unique that it’s not sell, rent, buy later.

It’s sell, rent, wait for already bought property to be rebuilt.

Some mentioned taxes on selling. If it’s your primary home they wave a huge amount of capital gains. I forget the amount and it may have changed. But I think it’s $500K and it resets every few years if you live in your primary.

Tax laws could change and the rule could change.

If I couldn’t rent I could buy a used RV and park it at the new place and sell it when house is done.

Moving stuff around is a pain though. And we have almost 2 homes worth of stuff stuff in our primary. Because we didn’t want to move it into a house we plan to tear down. Storage is cheap though, assuming you can find it. That is maxed out too.

I also might be able to rent or buy close to the place wanna be at in the first place. I would not rent in MA I’d rent in NH.

I plan to pull some money out of IRA to build. Then replace it when we sell. But it will no longer be tax free compounded. So selling now is another tax win.

I would not want to wait till prices drop. Could be tomorrow or 5 years from now.

[8gv]

What if... this isn't really a bubble in the traditional sense?

What if this is inflated dollars seeking tangible assets?

As the gubmnt printing presses work 24/7 devaluing the currency, could the "value" of real property continue to rise for years to come?

It seems that holding cash is counterproductive during a period of high inflation.

So where does one put the cash?

Equities? Precious metals? Real Estate?

Does this mean the run will be longer but the fall will be steeper?

[dickiej]

What good is a $700,000 house going to do when gas is $4.50/gallon, milk is $5.00/gallon and a loaf of bread is $8.00?

[Descant]

Originally Posted by 8gv

What if... this isn't really a bubble in the traditional sense?
What if this is inflated dollars seeking tangible assets?
As the gubmnt printing presses work 24/7 devaluing the currency, could the "value" of real property continue to rise for years to come?
It seems that holding cash is counterproductive during a period of high inflation.
So where does one put the cash?
Equities? Precious metals? Real Estate?
Does this mean the run will be longer but the fall will be steeper?

1. Hard assets. Fiberglass is good. Maybe one for the lake and one for a southern winter home. Low annual taxes and unlikely capital gains tax when you sell
2. Give the money to your kids. They'll know what to do with it. No inheritance tax.
3. Make a donation in a memorial fund to the local Trustees of Trust Funds. Tax deductible donation, the trust can give some guidance as to spending, you can add to it, and you may get a brass plaque with your name on it. Don't give it to the school. They'll build something and the brass plaque will have the names of the school board on it.(LOL).

[mswlogo]

Originally Posted by 8gv

What if... this isn't really a bubble in the traditional sense?

What if this is inflated dollars seeking tangible assets?

As the gubmnt printing presses work 24/7 devaluing the currency, could the "value" of real property continue to rise for years to come?

It seems that holding cash is counterproductive during a period of high inflation.

So where does one put the cash?

Equities? Precious metals? Real Estate?

Does this mean the run will be longer but the fall will be steeper?

What ever you do, you don't want your money in cash for a while.

Probably should borrow money, while it's still cheap and buy a house