Multiple bids are becoming a rarity, even in the nation’s most competitive real estate markets.
Comments: 26
Yet it's impossible to buy a modest property without overpaying now.
@nom de guerre What, in a market sense, is 'overpaying'? The market IS what the commodity actually sells for, although it has been argued that the market value is actually what the 2nd-highest bid was - the price above which no one else, except the 'winner', was willing to pay...
@Roger - you could also think of it as the cost of the land plus construction, the cost of construction can be easily estimated, so the remaining cost is land. America has an abundance of land, but many folks like to live in cities near jobs and amenities, so this cost can range from very little to the majority of the house cost.
@Mikey G, the U.S. covers 4.5 million square miles.
Even if you assume 90% of it is not someplace you can live (lakes, rivers, mountains, swamp, deserts and farmland), there is enough space to build over one thousand NYCs.
Most of the pricing problems described are a product of cramming 8 million people into a 400 sq mile area. In what way does that make sense?
In places like India and China with populations of 1.4 billion, we would have problems but a mere 320 million? The problems are self-imposed.
Major real estate brokers, shall we say, fanned the flames of the bidding wars in the Bay Area, to create a near panic in home-buyers. I remember one house we visited a house two ago and were told to make our minds up by 5 pm with at least a 10% over-bid. We said no and the house was actually bought for a 10% over-bid sight unseen. Lunacy.
@Paul from Oakland It's the market, not the realtors, as your example shows - the house sold for exactly what the realtor advised you.
In my neighborhood houses are so insanely overpriced making bidding wars a thing of the past.
I’m 63. In my life I’ve never seen a piece of real estate decrease in value. It may languish for a time at a certain price, like during a recession, but never actually seen it go down in value.
Therefore, since empirical evidence is all that we have, you may buy a house at ANY price and not expect to loose money.
Plus it has utilitarian value. You get to live in it.
That’s better than your Ex. Better than your car. Better than stocks and better than your 401k.
Throw in a desirable location, maybe a view, and whoa....
p.s. don’t forget about water and altitude (climate change).
@PC Many homes in suburban DC and in Midwestern cities are worth no more than they were in 2005. Since inflation has occurred since then, real losses are evident.
Beside that who wants a home that has 15 year old kitchens, bathrooms, landscaping? And in that period of time roofs, furnaces, plumbing, windows and flooring needs replacing. Serious money must be spent to keep the home marketable. Doesn't seem like such a good investment to me.
@PC, did you take into account "carry costs" (interest expense, property taxes, insurance costs, upkeep)?
@PC I am your age and our first and second homes were both sold for less than we paid for them, one in Massachusetts in the late 80s and the other in suburban northern Virginia in the mid-90s. Timing is everything and if you have to move, it sometimes means taking a loss. Just because it hasn't happened to you, doesn't mean that property values don't go down as well as up.
Luckily, I’m buying a NYC property during this so-called bidding war downturn, as I will not participate in one. The bidding war is an artificial construct that benefits agents and adds yet another layer of difficulty to an already insane process. It is the irrationality of the market applied to housing that, IMO, doesn’t benefit buyers, sellers or cities - only real estate sharks.
@Theo Trust me, as someone in the business for 20 years, bidding wars are not an artificial construct. We too are often surprised during a hot market what people will pay. And what they pay is always exactly what it's worth.
DanO, On my 11th purchase and I’ve seen the underbelly of “the business”. I would never trust a realtor - even if she were my own mother. I think it’s best to approach buying and selling property with no illusions to avoid disappointment.
People getting all giddy when their home price goes up is silly. Unless your home is paid off already or you're moving somewhere in the country that's cheaper, the money buys you nothing. Either you end up renting in an expensive city or buying another property just as expensive or even more so. What did you gain? Nothing really.
The American fascination of turning their homes into piggy banks or an "investnent" mystifies people in other countries. They view it as a place to live and what it really is: a living expense.
@Larry, life costs. Nothing is free. You pay either (1) rent or (2) payment towards mortgage which indeed needs to include all costs like structure, land, upkeep, insurance, taxes, interest. Meaning you pay, big time. Probably higher costs with a house! But at some point you either (1) continue to pay, oftentimes more due to rent increases or costs to move (deposit), or (2) you recoup most of what you just paid out. I say most because taxes and insurance are inevitable.
Which is better?
Wouldn’t you like to recoup something? That’s the sale of your house, apartment, condo, whatever.
Now you proceed with life. Whether you buy another house or rent or whatever, you’ve got those funds. Now you may be taxed on this monetary gain but if you buy something more expensive, it’s always deferred.
In option #1 above, no funds are returned. You are actually still paying carrying costs; taxes, insurance, interest, but it’s for your landlord. And to make things worse, you don’t get any annual deductions when you file your taxes.
@PC All true except the deferred taxes.
@Larry L "Unless your home is paid off already or you're moving somewhere in the country that's cheaper, the money buys you nothing."
You act like this would not describe a lot of people. It does. As one of them, I most definitely get giddy with housing prices going up. And if I choose to move to a more expensive city, the gains I will get from selling my current home will make upgrading my life more manageable.
Having just sold my NJ home in July, I noticed the change from last year's frenzy as well. Not having the house 'ready' last summer, and also me not being ready to retire, the homes in my area were being snapped up in a day.
I had the inside painted neutral colors, ripped out old wiring, and had 4 offers within 2 weeks, with a closing date 60 days later.
The real eye opener is what I got in return, for a 10K difference;
I left a very busy, now being over built destination suburb with great schools, restaurants and parks with a 1375 sq ft older home on a small 50 ft x 150 foot lot.
I moved to a gorgeous lake town in NH, on 10 acres, with over 3000 sq ft of living space, and the beauty of the area is breathtaking.
I'll miss my friends but they're already showing up to visit.
Bidding wars are great for sellers, but when I bought that suburban home 33 years ago, the wars were going on and the interest rates for my mortgage were far steeper. I bought for the town then, and I bought for the town now. I'm just older...
My late father was a small town dentist in Wisconsin. In 1954, he paid $14,000 cash for our largish house that was big enough to fit his small dentistry practice in addition to our living space. Using the inflation adjuster calculator, I see that that amount today would be roughly the equivalent of $135,000.00. My parents, as children of the depression, always lived quite modestly but we had a very adequate standard of living based on local comparisons.
I bought our present house for $90K in a north shore suburban neighborhood in Milwaukee in the mid-80's. I've paid off the note on our house over 10 years ago. Our property tax bill here is $7600-/yr. (2000 total sq ft, duplex-we occupy both units) Fairly onerous, buy doable for us in retirement. Our boys could walk to very good public schools thru all the grades. That house today would probably fetch in the neighborhood of $300K-$325K if we were to sell. It's a nice enough house but rather modest and we are almost trapped here because if we were to sell, we'd be entering a very rich market for our next living space. Climbing stairs in our late 60's is no fun but moving to different circumstances seems almost impossible at this point.
In NYC it is a freewill, yet the times has not reported how slow it actually is. there is a 7 year supply of luxury unties and there is a massive building boom going on. Many developers thought the Chinese would not realize how much they were being ripped off in 2014 and 2015. Five years alter the average price is down 20%. the rental market is strong the sales market is sleeping. Homelessness is all over the place in LA, San Fran and NYC and the quality of life is becoming below average after buying an apartment in NYC for it is overcrowded and extremely nosing with all the building going on. One day you to can buy a large two bedroom for 3 to 4 million to stare across the street at another copycat building. Boring as heck. Those internet brats are not helping with the homeless problem. They simply stare at their cell phones and hope not to to be noticed as they run to their elevators so they can hide in their condo's.
Did you write this post without the internet? Why are “they” the brats?
A collapse in home prices would help Bernie Sanders. A sizable portion of Americans are renters and they are helped by plummeting real estate prices. The rich, who own most of the real estate, are hurt. So sad.
Real Estate markets are VERY local. San Jose has softened as has San Francisco. Oakland and Berkeley still crazy with multiple offers. As someone who most often represents buyers, I would like to see the market slow down and not have to offer 120% over list to get the house. I don't see a "collapse" in California home prices but maybe some stagnation. I get more concerned about the stock market tanking as most buyers have their down payment in a brokerage account.
I see a long slow slide in Bay Area homes for the next 10 years. I see a quicker patchwork of flippers and investors that were caught cash flow tight to go bankrupt and quickly throw multiples of homes on the market as their little daisy chain of homes unwinds
I will not be sorry to see their pain because they helped engineer the ridiculous prices and tied up homes that productive citizens could be living in in order to speculate
The Bay Area is finally getting serious about building and the fact is that the newest homes are going to be the ones that hold their value
As soon as we get Fiber Optic and 5G in our very nice rural areas we will see the decline of cities and suburbs.
I am far happier far from the madding crowd since I left inner city Chicago.
There are affordable homes all over the USA.
Go forth and live!
Yet it's impossible to buy a modest property without overpaying now.
@nom de guerre What, in a market sense, is 'overpaying'? The market IS what the commodity actually sells for, although it has been argued that the market value is actually what the 2nd-highest bid was - the price above which no one else, except the 'winner', was willing to pay...
@Roger - you could also think of it as the cost of the land plus construction, the cost of construction can be easily estimated, so the remaining cost is land. America has an abundance of land, but many folks like to live in cities near jobs and amenities, so this cost can range from very little to the majority of the house cost.
@Mikey G, the U.S. covers 4.5 million square miles. Even if you assume 90% of it is not someplace you can live (lakes, rivers, mountains, swamp, deserts and farmland), there is enough space to build over one thousand NYCs. Most of the pricing problems described are a product of cramming 8 million people into a 400 sq mile area. In what way does that make sense? In places like India and China with populations of 1.4 billion, we would have problems but a mere 320 million? The problems are self-imposed.
Major real estate brokers, shall we say, fanned the flames of the bidding wars in the Bay Area, to create a near panic in home-buyers. I remember one house we visited a house two ago and were told to make our minds up by 5 pm with at least a 10% over-bid. We said no and the house was actually bought for a 10% over-bid sight unseen. Lunacy.
@Paul from Oakland It's the market, not the realtors, as your example shows - the house sold for exactly what the realtor advised you.
In my neighborhood houses are so insanely overpriced making bidding wars a thing of the past.
I’m 63. In my life I’ve never seen a piece of real estate decrease in value. It may languish for a time at a certain price, like during a recession, but never actually seen it go down in value. Therefore, since empirical evidence is all that we have, you may buy a house at ANY price and not expect to loose money. Plus it has utilitarian value. You get to live in it. That’s better than your Ex. Better than your car. Better than stocks and better than your 401k. Throw in a desirable location, maybe a view, and whoa.... p.s. don’t forget about water and altitude (climate change).
@PC Many homes in suburban DC and in Midwestern cities are worth no more than they were in 2005. Since inflation has occurred since then, real losses are evident. Beside that who wants a home that has 15 year old kitchens, bathrooms, landscaping? And in that period of time roofs, furnaces, plumbing, windows and flooring needs replacing. Serious money must be spent to keep the home marketable. Doesn't seem like such a good investment to me.
@PC, did you take into account "carry costs" (interest expense, property taxes, insurance costs, upkeep)?
@PC I am your age and our first and second homes were both sold for less than we paid for them, one in Massachusetts in the late 80s and the other in suburban northern Virginia in the mid-90s. Timing is everything and if you have to move, it sometimes means taking a loss. Just because it hasn't happened to you, doesn't mean that property values don't go down as well as up.
Luckily, I’m buying a NYC property during this so-called bidding war downturn, as I will not participate in one. The bidding war is an artificial construct that benefits agents and adds yet another layer of difficulty to an already insane process. It is the irrationality of the market applied to housing that, IMO, doesn’t benefit buyers, sellers or cities - only real estate sharks.
@Theo Trust me, as someone in the business for 20 years, bidding wars are not an artificial construct. We too are often surprised during a hot market what people will pay. And what they pay is always exactly what it's worth.
DanO, On my 11th purchase and I’ve seen the underbelly of “the business”. I would never trust a realtor - even if she were my own mother. I think it’s best to approach buying and selling property with no illusions to avoid disappointment.
People getting all giddy when their home price goes up is silly. Unless your home is paid off already or you're moving somewhere in the country that's cheaper, the money buys you nothing. Either you end up renting in an expensive city or buying another property just as expensive or even more so. What did you gain? Nothing really. The American fascination of turning their homes into piggy banks or an "investnent" mystifies people in other countries. They view it as a place to live and what it really is: a living expense.
@Larry, life costs. Nothing is free. You pay either (1) rent or (2) payment towards mortgage which indeed needs to include all costs like structure, land, upkeep, insurance, taxes, interest. Meaning you pay, big time. Probably higher costs with a house! But at some point you either (1) continue to pay, oftentimes more due to rent increases or costs to move (deposit), or (2) you recoup most of what you just paid out. I say most because taxes and insurance are inevitable. Which is better? Wouldn’t you like to recoup something? That’s the sale of your house, apartment, condo, whatever. Now you proceed with life. Whether you buy another house or rent or whatever, you’ve got those funds. Now you may be taxed on this monetary gain but if you buy something more expensive, it’s always deferred. In option #1 above, no funds are returned. You are actually still paying carrying costs; taxes, insurance, interest, but it’s for your landlord. And to make things worse, you don’t get any annual deductions when you file your taxes.
@PC All true except the deferred taxes.
@Larry L "Unless your home is paid off already or you're moving somewhere in the country that's cheaper, the money buys you nothing." You act like this would not describe a lot of people. It does. As one of them, I most definitely get giddy with housing prices going up. And if I choose to move to a more expensive city, the gains I will get from selling my current home will make upgrading my life more manageable.
Having just sold my NJ home in July, I noticed the change from last year's frenzy as well. Not having the house 'ready' last summer, and also me not being ready to retire, the homes in my area were being snapped up in a day. I had the inside painted neutral colors, ripped out old wiring, and had 4 offers within 2 weeks, with a closing date 60 days later. The real eye opener is what I got in return, for a 10K difference; I left a very busy, now being over built destination suburb with great schools, restaurants and parks with a 1375 sq ft older home on a small 50 ft x 150 foot lot. I moved to a gorgeous lake town in NH, on 10 acres, with over 3000 sq ft of living space, and the beauty of the area is breathtaking. I'll miss my friends but they're already showing up to visit. Bidding wars are great for sellers, but when I bought that suburban home 33 years ago, the wars were going on and the interest rates for my mortgage were far steeper. I bought for the town then, and I bought for the town now. I'm just older...
My late father was a small town dentist in Wisconsin. In 1954, he paid $14,000 cash for our largish house that was big enough to fit his small dentistry practice in addition to our living space. Using the inflation adjuster calculator, I see that that amount today would be roughly the equivalent of $135,000.00. My parents, as children of the depression, always lived quite modestly but we had a very adequate standard of living based on local comparisons. I bought our present house for $90K in a north shore suburban neighborhood in Milwaukee in the mid-80's. I've paid off the note on our house over 10 years ago. Our property tax bill here is $7600-/yr. (2000 total sq ft, duplex-we occupy both units) Fairly onerous, buy doable for us in retirement. Our boys could walk to very good public schools thru all the grades. That house today would probably fetch in the neighborhood of $300K-$325K if we were to sell. It's a nice enough house but rather modest and we are almost trapped here because if we were to sell, we'd be entering a very rich market for our next living space. Climbing stairs in our late 60's is no fun but moving to different circumstances seems almost impossible at this point.
In NYC it is a freewill, yet the times has not reported how slow it actually is. there is a 7 year supply of luxury unties and there is a massive building boom going on. Many developers thought the Chinese would not realize how much they were being ripped off in 2014 and 2015. Five years alter the average price is down 20%. the rental market is strong the sales market is sleeping. Homelessness is all over the place in LA, San Fran and NYC and the quality of life is becoming below average after buying an apartment in NYC for it is overcrowded and extremely nosing with all the building going on. One day you to can buy a large two bedroom for 3 to 4 million to stare across the street at another copycat building. Boring as heck. Those internet brats are not helping with the homeless problem. They simply stare at their cell phones and hope not to to be noticed as they run to their elevators so they can hide in their condo's.
Did you write this post without the internet? Why are “they” the brats?
A collapse in home prices would help Bernie Sanders. A sizable portion of Americans are renters and they are helped by plummeting real estate prices. The rich, who own most of the real estate, are hurt. So sad.
Real Estate markets are VERY local. San Jose has softened as has San Francisco. Oakland and Berkeley still crazy with multiple offers. As someone who most often represents buyers, I would like to see the market slow down and not have to offer 120% over list to get the house. I don't see a "collapse" in California home prices but maybe some stagnation. I get more concerned about the stock market tanking as most buyers have their down payment in a brokerage account.
I see a long slow slide in Bay Area homes for the next 10 years. I see a quicker patchwork of flippers and investors that were caught cash flow tight to go bankrupt and quickly throw multiples of homes on the market as their little daisy chain of homes unwinds I will not be sorry to see their pain because they helped engineer the ridiculous prices and tied up homes that productive citizens could be living in in order to speculate The Bay Area is finally getting serious about building and the fact is that the newest homes are going to be the ones that hold their value
As soon as we get Fiber Optic and 5G in our very nice rural areas we will see the decline of cities and suburbs. I am far happier far from the madding crowd since I left inner city Chicago. There are affordable homes all over the USA. Go forth and live!