Do we have another real estate bubble in certain locations?

[HawkeyesAndCubs1023]

Let me first make a couple of disclaimers:

1. Real estate is extremely local. The crash of 2007-2009 ravaged Las Vegas, Phoenix, and parts of California, while the rest of the country did not see huge price depreciations.
2. There is a somewhat unprecedented confluence of events: pandemic, low interest rates, low inventory, people buying more house due to work from home, etc.

But what I am currently seeing makes very little sense. We live in Arizona and have been in our house for a shade over four years. If we listed the house tomorrow, we would likely have multiple offers at 40-50% of our purchase price with appraisal waived. Zillow projects home prices in our zip code to increase around 13% over the next 12 months. Our market is different from most in that we are a warm weather destination, and we have a number of people fleeing California, which is diminishing supply and driving up price.

Many say that there is no "bubble" for the following reasons:

1. The irresponsible pre-2007 lending practices are no more.
2. 80% of the homes being sold are primary residences. Prior to the crash, only about 40% of homes sold in this market were primary residences.

That said, I still see many people getting way out over their skis, and could foresee a "mini-crash" or correction of 15-20% within the next few years.

I know there are similar situations in sought-after warm weather, non-California locations such as Austin, TX, parts of Florida, Atlanta, etc.

Curious to know if some of the people on this board who are smarter than I and who study this closer, seem to think these prices can continue to go up and up?

 

[Chishawk1425]

Let me first make a couple of disclaimers:

1. Real estate is extremely local. The crash of 2007-2009 ravaged Las Vegas, Phoenix, and parts of California, while the rest of the country did not see huge price depreciations.
2. There is a somewhat unprecedented confluence of events: pandemic, low interest rates, low inventory, people buying more house due to work from home, etc.

But what I am currently seeing makes very little sense. We live in Arizona and have been in our house for a shade over four years. If we listed the house tomorrow, we would likely have multiple offers at 40-50% of our purchase price with appraisal waived. Zillow projects home prices in our zip code to increase around 13% over the next 12 months. Our market is different from most in that we are a warm weather destination, and we have a number of people fleeing California, which is diminishing supply and driving up price.

Many say that there is no "bubble" for the following reasons:

1. The irresponsible pre-2007 lending practices are no more.
2. 80% of the homes being sold are primary residences. Prior to the crash, only about 40% of homes sold in this market were primary residences.

That said, I still see many people getting way out over their skis, and could foresee a "mini-crash" or correction of 15-20% within the next few years.

I know there are similar situations in sought-after warm weather, non-California locations such as Austin, TX, parts of Florida, Atlanta, etc.

Curious to know if some of the people on this board who are smarter than I and who study this closer, seem to think these prices can continue to go up and up?

It is inevitable.

 

[mthawkeyes]

The house I sold in Washington almost four years ago is now worth 50% more than I sold it for. That's insane.

And I now wish I had just rented it out instead of selling.

 

[goldmom]

If you think prices crashed just in Cali, Phoenix, and Vegas, you're mistaken. They crashed hard all over Florida. And the rest of the country as well.
I think housing will continue to appreciate and be in tight supply for at least another year. Millenials are finally starting to become homeowners, because rents are more expensive in many markets than owning, and they're finding out that instead of paying someone else they are building equity in their own place. Plus they're moving into tax brackets that mean they need that interest and property tax deductible for themselves.
If the government reinstates the easy no doc loans and "liars loans" that were around in the late 90's and early 2000's that put people into homes they really couldn't afford, we could be right back in the bad old days of foreclosures. Fannie Mae and Freddy MAC back in trouble.
I know people who bought condos that were in foreclosure for ridiculous low prices in 2009-2010 ($40K for a 2/2 with a garage) and they've sold them recently for 3-4 times what they paid. They cleaned them up, painted them, put in new appliances, and made money. First time Millenials love getting them.

 

[Obviously Oblivious]

We didn’t see much of a dip in Iowa City in the Great Recession and the pandemic has had little effect as well.

 

[ConvenientParking]

look at housing prices in Salt Lake City, Utah. or at least the listing prices from before the pandemic. i don't know if that's real or not. there are a lot of people feeling priced out of Cali relocating to Salt Lake, Oregon, Washington, Boise, Vegas, Denver, Phoenix right now and all those markets are feeling pressure to some extent. I found it hard to believe for Salt Lake looking at appraisals I've seen in the past few years.

 

[Formerly Rockymtnole]

I feel for young couples starting out in some metro areas.

 

[mnole03]

I’m surprised Colorado doesn’t offer a “Go back to California” license plate.

 

[goldmom]

I’m surprised Colorado doesn’t have a “Go back to California” license plate.

I think Oregon, Arizona, Nevada, and now Texas are in the line already.

 

[ConvenientParking]

I feel for young couples starting out in some metro areas.

I am very curious to see what impact the pandemic has long term on how people work. If a lot don't go back to the office... who needs the closest/safest burb? I think cities will still have ppl who wanna be in the city, but what do the suburbs become?

 

[RonaldMexico]

I think Oregon, Arizona, Nevada, and now Texas are in the line already.

There are quite few of this type of thing in Boise. The most common is the “Before you vote, remember why you moved here.” and “The problem isn’t California politicians moving here, The problem is the people that voted for them did.”

 

[goldmom]

There are quite few of this type of thing in Boise. The most common is the “Before you vote, remember why you moved here.” and “The problem isn’t California politicians moving here, The problem is the people that voted for them did.”

Some move and don't realize they're refugees, not missionaries.

 

[Formerly Rockymtnole]

I am very curious to see what impact the pandemic has long term on how people work. If a lot don't go back to the office... who needs the closest/safest burb? I think cities will still have ppl who wanna be in the city, but what do the suburbs become?

Do you mean will they move away from metro areas altogether and out to smaller towns and rural areas?

 

[ConvenientParking]

Do you mean will they move away from metro areas altogether and out to smaller towns and rural areas?

I don't know who will move out, but what happens to the demand to move in? If that demand takes a hit, people who bought in the past couple years may now be underwater. Who knows

 

[Formerly Rockymtnole]

I don't know who will move out, but what happens to the demand to move in? If that demand takes a hit, people who bought in the past couple years may now be underwater. Who knows

If anything I think the work from home trend increases demand in the suburbs. More for your money, generally better schools overall, close to amenities, but without the extended commute.

 

[ConvenientParking]

If anything I think the work from home trend increases demand in the suburbs. More for your money, generally better schools overall, close to amenities, but without the extended commute.

If it makes the cities cheaper I'm for it

 

[mnole03]

I am very curious to see what impact the pandemic has long term on how people work. If a lot don't go back to the office... who needs the closest/safest burb? I think cities will still have ppl who wanna be in the city, but what do the suburbs become?

It certainly hastened the move for a lot of young families I know. The people in Chicago got what they paid for their city places. The people in New York did not.

 

[billanole]

I’m surprised Colorado doesn’t offer a “Go back to California” license plate.

This reminds me of an old bumper sticker that was often on work trucks around a Florida that read “I don’t give a damn how you did it up North!”

 

[mnole03]

This reminds me of an old bumper sticker that was often on work trucks around a Florida that read “I don’t give a damn how you did it up North!”

I think the biggest issue for most is that they’re driving up real estate prices to insane levels.

 

[dekhawk]

We didn’t see much of a dip in Iowa City in the Great Recession and the pandemic has had little effect as well.

The home I sold in Iowa city in 2013 is up 50% today per appraisal on realtor.com.

 

[noleclone2]

“I’ll take ‘Topics you don’t want to see on a message board the week you close on a house’ for $500, Alex”

 

[noleclone2]

Jokes aside it is the low interest helping drive prices up. I am getting a loan for almost a third the rate I got my first house at in 2003. The result is the mortgage payment for the 2021 house is over $1000 less than it would have been in 2003 for this loan. It’s actually pretty shocking the difference of house and location for what I was getting for a $1400 dollar mortgage payment in 2003 and what I am getting in 2021 with a $2250 payment.

 

[SalAunese]

I remember getting a prime rate on my first house back in ‘99 at around 7%. Times have changed.

 

[srams21]

Jokes aside it is the low interest helping drive prices up. I am getting a loan for almost a third the rate I got my first house at in 2003. The result is the mortgage payment for the 2021 house is over $1000 less than it would have been in 2003 for this loan. It’s actually pretty shocking the difference of house and location for what I was getting for a $1400 dollar mortgage payment in 2003 and what I am getting in 2021 with a $2250 payment.

Yep this is a big part of what is driving up home prices. In some areas, prices are rising over 10% per year. That is crazy.

Like you said, it's crazy how much a $1400 mortgage payment can get you. You can get around a $375k mortgage for that range. Just a few years ago, that payment would have been about 2k a month.

 

[billanole]

I think the biggest issue for most is that they’re driving up real estate prices to insane levels.

Migration patterns worldwide, not just in the states, is a very underrated crises waiting to cause basically open conflict.

We were ordering sammies at a country store in SW Virginia last month, ( the Konnarack Store is a classic place) and I asked the proprietor how his sideline real estate business was doing. Understand, this is a very rural, mountainous area whose folks travel far and wide for the few decent jobs available. The loss of timber, furniture, and textile jobs still casts a pall over the local economy. Trump signs were like native flora.... everywhere.
He said real estate was booming. He could not find close to enough listings and most places had bidding wars between prospective buyers. Then he kinda grinned and said that he was selling homes to people that the locals did not want for neighbors, and pretty soon the newcomers would realize they did not want the neighbors they have moved next to either.

A case study, perhaps in grass is not always greener consequences. In the rush to leave some perceived issues, these folks pounced on “very affordable“ properties without peaking under the hood.

The US birth rate dropped dramatically in 2020, and has been below the 2.1 kids per household needed to maintain a steady population for years. The numbers are clear. Without smart immigration policies, (let’s please figure this shit out!) we are destined to shrink in numbers, especially young working age folks. Or, we are destined to be overwhelmed by vast numbers of folks who can’t be blamed for wanting a better life.
Political upheaval, narco terrorism, climate issues, wars, and other events have intensified movements of vast numbers of folks in recent years. These issues will not go quietly into the night, but also cannot be ignored as they will impact everyone on Earth sooner, rather than later.

 

[3 and Out on D]

When I moved in 1990, with an excellent credit rating the best I could get of 10.25% on a 20 year mortgage.

In 2003 the rate was 5.125% for a 15 year mortgage and I thought that was great.

 

[Joes Place]

Let me first make a couple of disclaimers:

1. Real estate is extremely local. The crash of 2007-2009 ravaged Las Vegas, Phoenix, and parts of California, while the rest of the country did not see huge price depreciations.
2. There is a somewhat unprecedented confluence of events: pandemic, low interest rates, low inventory, people buying more house due to work from home, etc.

But what I am currently seeing makes very little sense. We live in Arizona and have been in our house for a shade over four years. If we listed the house tomorrow, we would likely have multiple offers at 40-50% of our purchase price with appraisal waived. Zillow projects home prices in our zip code to increase around 13% over the next 12 months. Our market is different from most in that we are a warm weather destination, and we have a number of people fleeing California, which is diminishing supply and driving up price.

Many say that there is no "bubble" for the following reasons:

1. The irresponsible pre-2007 lending practices are no more.
2. 80% of the homes being sold are primary residences. Prior to the crash, only about 40% of homes sold in this market were primary residences.

That said, I still see many people getting way out over their skis, and could foresee a "mini-crash" or correction of 15-20% within the next few years.

I know there are similar situations in sought-after warm weather, non-California locations such as Austin, TX, parts of Florida, Atlanta, etc.

Curious to know if some of the people on this board who are smarter than I and who study this closer, seem to think these prices can continue to go up and up?

Without a doubt, IMO

 

[goldmom]

Migration patterns worldwide, not just in the states, is a very underrated crises waiting to cause basically open conflict.

We were ordering sammies at a country store in SW Virginia last month, ( the Konnarack Store is a classic place) and I asked the proprietor how his sideline real estate business was doing. Understand, this is a very rural, mountainous area whose folks travel far and wide for the few decent jobs available. The loss of timber, furniture, and textile jobs still casts a pall over the local economy. Trump signs were like native flora.... everywhere.
He said real estate was booming. He could not find close to enough listings and most places had bidding wars between prospective buyers. Then he kinda grinned and said that he was selling homes to people that the locals did not want for neighbors, and pretty soon the newcomers would realize they did not want the neighbors they have moved next to either.

A case study, perhaps in grass is not always greener consequences. In the rush to leave some perceived issues, these folks pounced on “very affordable“ properties without peaking under the hood.

The US birth rate dropped dramatically in 2020, and has been below the 2.1 kids per household needed to maintain a steady population for years. The numbers are clear. Without smart immigration policies, (let’s please figure this shit out!) we are destined to shrink in numbers, especially young working age folks. Or, we are destined to be overwhelmed by vast numbers of folks who can’t be blamed for wanting a better life.
Political upheaval, narco terrorism, climate issues, wars, and other events have intensified movements of vast numbers of folks in recent years. These issues will not go quietly into the night, but also cannot be ignored as they will impact everyone on Earth sooner, rather than later.

Outstanding post!

 

[goldmom]

Jokes aside it is the low interest helping drive prices up. I am getting a loan for almost a third the rate I got my first house at in 2003. The result is the mortgage payment for the 2021 house is over $1000 less than it would have been in 2003 for this loan. It’s actually pretty shocking the difference of house and location for what I was getting for a $1400 dollar mortgage payment in 2003 and what I am getting in 2021 with a $2250 payment.

I’ve just started the refi on my house. I’ll be saving almost $300 a month. If you’re retired like me that is a TON of extra $$$ every month.

 

[LuteHawk]

Families will still move to the suburbs because of the
high quality of the public schools. It is still a matter of
supply and demand. Unless you are building a new
home, you probably depend on a good supply of homes
in the suburbs.