I've been seeing that happen for a long time, appraisals here are more about what it takes to get financed than what the actual value is. Buddy bought a 2 bedroom house on 5 acres with a loft, at the same time I was refinancing, same appraiser did both of ours. My place with 17 acres, a heated shop, pole barn and 2x the square footage on an ICF basement appraised 20k higher than his, but his appraised for the exact amount he needed to borrow..........It does seem crazy right now. I work in real estate and am seeing some weird stuff going on. I recently had a property for sale and the Realtor who worked with the buyer was representing her son. The house sold for 50k over asking price. The appraisal came back $10k short of the purchase price. Instead of renegotiating the price with the sellers, the Realtor (again, who is representing her son) convinced the appraiser to raise the appraisal value so they wouldn't lose the house! Just seems wrong to me...
What?30 year mortgages. The single worst financial thing that has probably happened to the middle and lower classes In the last 30 years.
The same thing is happening here in CA (San Jose) which cascades down in other places. Lots of liquidity chasing what little inventory is available is pushing up already very high prices. A house on our street recently listed for $1.55M (Zillow suggests it is worth $1.7M). What is insane is this house is 1,250 sf, was built in 1960, is on a 6,550 sf lot, and has not been significantly updated. Crazy times.Ha! You should see Flagstaff, AZ! Insane!!
If you don’t have cash here, you don’t have a chance. California buyers are out bidding everyone with cash. $50K+ over asking, all cash. No way to compete with that.
Something has to give.
Unless I am misunderstanding, I either don't get or couldn't disagree more with everything you said.. 30 year mortgages are key to home ownership which is a key part of man people's financial future/retirement. There is no relationship between the financing rate and the value of a given home. In these inflationary times, low 30 year rates makes for essentially free money while home values are increasing at an unprecedented rate which equals more equity.30 year mortgages. The single worst financial thing that has probably happened to the middle and lower classes In the last 30 years. Not knocking you if you have one but this has made what wasn’t affordable, affordable. Meanwhile, the surplus of buyers this creates has put upward pressure on home prices.
The cost of capital for these mortgages basically costs you almost double what the home is worth = Less equity in the home.
Realtor here in ND, I've sold 4 homes in the past 3 months via facetime, every one of my buyers were fleeing their state to come back home to where they grew up.I’m that guy that was an idiot and sold my house in 2019 when the market was at an all time high where I live in Southern Utah and had decided that it was a good time to sell. We had a 4900sq/ft custom built home and our 2 oldest had just moved out so it left us with 1 kid at home. I talked my wife into selling because it seemed like we were due for a correction in my mind since it had been over 10 years since the last dip and we never planned on retiring in this home. Also with only 1 son at hike we didn’t need a hike the size of what we were living in. We had planned on buying property after we rented for a year or so and building our next home that would take us into retirement and live in until we die. So we ended up selling for $570k which at that time seemed like a ton since we had bought it 9 years earlier for $350k. Used some of the equity to pay off all our debt so we were debt free and kept a nice chunk of money in the bank. Now we have literally priced ourselves out of the market where we live and this is we’re we want to retire. Our house would have easily sold for a million right now. That’s over $400k that we have lost by selling. I’m so sick about how this has all worked out and not even sure what to think or do anymore. I make a great 6 figure salary but can’t imagine what people do to afford these $700k + mortgages. Are people in serious debt or is the rest of the country just making more money than I can even imagine. Talking to the realtors around here they are saying that many of the people buying the homes where we live in St. George are buying them as second homes and many paying cash. That’s just crazy. Also they say these are well qualified loans and have income to pay the mortgages unlike the 2008 housing crisis where they gave anyone a loan even without income verification.
What’s the end game here. Are these high prices here to stay (new normal) or is something catastrophic gonna happen or will there just be a small dip in real estate? I don’t know what or who to believe anymore. All I know is I’m always second guessing myself for selling but on the other hand happy I’m 100% debt free. My biggest concern is I had planned on retiring in 5 years. (Age 55). Now not owning a home I know that’s most likely a pipe dream and not gonna happen. I can’t go into retirement with a $3k a month mortgage. What are your thoughts. Should I buy now or wait it out at this point? My next home will be my forever home more than likely.
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It’s horrible in Bozeman area. People just buying then having them as AirBnB and charging freaking insane prices to stay and there seems to be no shortage of people that can pay those prices and the absurd home prices while statewide we are in a rental shortage with lots of folks leaving because they can’t afford to stay. Hell even our mediocre hotels in town were going for 900 a room. You could go stay at the ritz , st Regis or 4 seasons for less than that. I’m just a dumbass chef that’s debt free with a solid salary but what in hell do these people do to afford this kind of lifestyle?
Exactly....Unless I am misunderstanding, I either don't get or couldn't disagree more with everything you said.. 30 year mortgages are key to home ownership which is a key part of man people's financial future/retirement. There is no relationship between the financing rate and the value of a given home. In these inflationary times, low 30 year rates makes for essentially free money while home values are increasing at an unprecedented rate which equals more equity.
That doesn't make much sense at all. The purchase funds have to get into the banking system at some point to complete a purchase. The source of those funds generally needs to be validated by a bank via a proof of funds letter. And even if the transaction was done outside of the traditional title company process, the seller would have a very difficult time getting the money into the banking system, Not to mention, they could be found complicit in money laundering by accepting those funds. Not sure how many folks would be willing to take on that sort of liability - certainly not "all".I was told by someone ‘in the know’ that all the cash home purchases was from all the marijuana money that is legal in many states
They can’t put the money in the bank since it’s considered drug money at the federal level.
Dunno - but it does make sense
A lot of people are in that boat. I bought my place in the winter of 2019 and got a decent deal on it. Fast forward to summer of 2021 and I can make a fast 25%.I bought my house(3 bed, 2 bath on 1acre) in 18’ for 290k and open door wants to give me over 450 for it. It’s tempting, but I have a nice house on a nice little lot and most importantly we can comfortably afford it. I’m not sure if I would be ahead to sell because then I need to find something in this ludicrous situation.
That doesn't make much sense at all. The purchase funds have to get into the banking system at some point to complete a purchase. The source of those funds generally needs to be validated by a bank via a proof of funds letter. And even if the transaction was done outside of the traditional title company process, the seller would have a very difficult time getting the money into the banking system, Not to mention, they could be found complicit in money laundering by accepting those funds. Not sure how many folks would be willing to take on that sort of liability - certainly not "all".
There are lots of other well-demonstrated explanations for much of the cash purchases that have been common in more recent years.
- I think you have individuals with high paying jobs/property in high cost of living cities (San Fran, DC, NYC, Silicon Valley etc..) that can work from home so they have decided to use geographical arbitrage into middle and lower cost of living cities. Quality of life decision.
- Realizing gains on stocks, real estate, RSU's vesting, etc. to scale up in housing. SP500 has hit 51 all time highs in 2021. Why not take advantage of low interest rates if you have the money to do so. Pretty much a bull market the last decade. More money to play with and offer well over asking price.
- People over extending themselves. Putting all their eggs in one basket. Lowering retirement saving contributions if they were even saving in the first place. 56% of Americans have less than $5,000 in savings.
- Supply and demand due to low interest rates.