Another Housing Market Crash Looming?

[Elkmagnet]

Just to add info..
Speaking of our local market.
My wife is an escrow officer and is doing 10-20 closings a week. She feels 20% of hers are cash buyers and another 50% are buyers with cash who are getting a loan simply because at 3% interest they can invest their cash and see long term returns.
Around here the people who NEED a loan aren't buying right now.

 

[Nick87]

I understand prices are up because of demand but the last two houses we looked at closed over 20% more than asking. How are these appraising out? The last one we had the option and walked away they wanted us to sign off on whatever amount was over appraisal was on us to pick up in cash. Call me crazy but that's where I draw the line.

 

[Elkmagnet]

I understand prices are up because of demand but the last two houses we looked at closed over 20% more than asking. How are these appraising out? The last one we had the option and walked away they wanted us to sign off on whatever amount was over appraisal was on us to pick up in cash. Call me crazy but that's where I draw the line.

Some contracts are getting crazy. Like buyer picks up any appraisal gap up to 100k!. Or seller lives in home rent free for a year!

 

[Nick87]

Some contracts are getting crazy. Like buyer picks up any appraisal gap up to 100k!. Or seller lives in home rent free for a year!

Nuts

 

[Doublecluck]

I understand prices are up because of demand but the last two houses we looked at closed over 20% more than asking. How are these appraising out? The last one we had the option and walked away they wanted us to sign off on whatever amount was over appraisal was on us to pick up in cash. Call me crazy but that's where I draw the line.

The house we just closed on I offered to beat any other bid by 1k up to 20k over asking but would only pay 5k over appraised value. My offer and another were nearly the same but seller choose us because we agreed to pay the 5k over appraisal up front if it didn’t appraise. We got it for 11k over asking and luckily it appraised. Lost a dream house in august because it appraised 30k under 5 days before closing. We assumed the seller would negotiable but they had received a full price cash offer after going under contract with us. Told us to pound sand basically. It’s crazy out there, you gotta get creative to make deals and don’t count on anything till the keys are in your hand. Ive been told some of the appraisals aren’t coming in now around here.

 

[BigHornRam]

The appraisal process is ouija board science at best IMO.

 

[Nick87]

The house we just closed on I offered to beat any other bid by 1k up to 20k over asking but would only pay 5k over appraised value. My offer and another were nearly the same but seller choose us because we agreed to pay the 5k over appraisal up front if it didn’t appraise. We got it for 11k over asking and luckily it appraised. Lost a dream house in august because it appraised 30k under 5 days before closing. We assumed the seller would negotiable but had received a full price cash offer after going under contract with us. Told us to pound sand basically. It’s crazy out there, you gotta get creative to make deals and don’t count on anything till the keys are in your hand. Ive been told some of the appraisals aren’t coming in now around here.

Yah done a few that way myself. We had a house picked out last year spent one year in the process with a lady going through all the zoning to split it off from the existing farm once we got through all the hurdles she told us she had cancer and was too sick to move forward. Turns out there was no cancer she sold it to a relative after she had assured me I had first option. People suck. Pisses me off I tied up a whole year passing other properties. I hope she gets run over by the karma truck.

 

[ida homer]

So if you sold yours, what and where are you replacing it with? Real question, no smart ass, intent. Occasionally I think about offloading mine as the prices in Portland are nucking futs. (house 3 doors down sold for $1.3M last week- $400/sqft!), but I have no idea where I'd go to replace what I have...

I sold my house for absolute top dollar. To “win,” you need some luck. I bought my neighbors house. He was on a slight time crunch and needed to re-locate closer to his parents. We downgraded slightly and got a reasonable price, not a steal but slightly below market. He didn’t have to clean, list, market or show it. So a rare win win for both parties. Honestly just got lucky.

 

[ida homer]

Some contracts are getting crazy. Like buyer picks up any appraisal gap up to 100k!. Or seller lives in home rent free for a year!

If you don’t waive the inspection or the appraisal right now, you don’t have a prayer of getting an offer accepted!

 

[SAJ-99]

If you don’t waive the inspection or the appraisal right now, you don’t have a prayer of getting an offer accepted!

Correct me if I'm wrong, but you can't waive the appraisal unless you pay cash. The appraisal is for the bank/mtg co. Hard to burst a bubble when buyers are paying in cash.

 

[Nick87]

Correct me if I'm wrong, but you can't waive the appraisal unless you pay cash. The appraisal is for the bank/mtg co. Hard to burst a bubble when buyers are paying in cash.

Correct, probably talking more so about being disregarding the appraisal and paying the difference in cash. Not that appraisals mean much of anything.

 

[Sytes]

Correct, probably talking more so about being disregarding the appraisal and paying the difference in cash. Not that appraisals mean much of anything.

Buyers outbidding eachother beyond 100k over appraisal in Whitefish area... it's mad.

 

[Letthemgrow]

Buyers outbidding eachother beyond 100k over appraisal in Whitefish area... it's mad.

That would be nice.
I helped a friend move some furniture in to her new vacation home this weekend.
Bought it for $251k over asking price . . . and I didn't think it would appraise for that.
I guess if it's not my money why should I care.
I do wish that housing crash would hurry up so I could buy another rental property.

 

[pointingdogsrule]

Purchased a fixer upper in Rochester, MN. Market there is good. Not crazy like you guys out west.
Talked to my electrician. He has put in 13 bids since last November. All at least 20,000 over asking price. He didn't come close to any of them.
I hope the market holds til I get this house remodeled. On a side note, Rochester is a community in need of housing for 40,000 Mayo clinic and thousands of IBM employees.

 

[ida homer]

Correct me if I'm wrong, but you can't waive the appraisal unless you pay cash. The appraisal is for the bank/mtg co. Hard to burst a bubble when buyers are paying in cash.

Waive the appraisal contingency is the correct term. So the offer is not contingent upon the appraisal meeting the contract price. AKA, paying the/any difference. Hopefully more clear.

 

[nontyp]

TLDR: F- if I know

There are a handful of places I hope my wife and I end up someday, places where I want to raise a family. I have watched prices in these places steadily increase for years.

I'd love to own a 3 bed 2 bath, 2 car garage, ~ 2000 sqft, with a yard. Time line is 5 to 7 years from now.

I'm guessing that property with reasonable finishes, nothing super high end, is going to be about $1MM by the time we are looking to buy.

Not sure if you’re dead set on a specific area, but take a look at the suburbs on the KS side of Kansas City. Good medical area, and some great school districts. Houses aren’t cheap by any means, but its a great area and you could prly buy that dream house for much cheaper depending on how this housing craze shakes out. Lots of acreage type properties within 30 minutes of the major hospitals. My wife is medical as well and we love this area.

 

[Deleted member 28227]

Not sure if you’re dead set on a specific area, but take a look at the suburbs on the KS side of Kansas City. Good medical area, and some great school districts. Houses aren’t cheap by any means, but its a great area and you could prly buy that dream house for much cheaper depending on how this housing craze shakes out. Lots of acreage type properties within 30 minutes of the major hospitals. My wife is medical as well and we love this area.

Not really my vibe, but I'm doing a lot of research into areas that weren't even on my radar, 5 years ago... we shall see.

 

[NoWiser]

My wife and I listed our house last week and accepted an offer last night. All I have to say is that this market is absolutely insane and is in no way sustainable. We had 9 offers and basically crossed off any that weren't cash, because I have no confidence the house could appraise for close to what the offers were coming in at. The highest appraisal gap offered was $51k and I still didn't feel comfortable with it. We accepted a cash offer with no contingencies or inspections and quick closing. The house almost doubled in value in the last 5 years and I've owned it for 13 years. It couldn't have worked out more perfectly for us, but I feel sorry for any young family looking to buy a home right now. It's just not happening in this area without a bunch of cash. I work in the construction industry and am going to move our family into the tiny house my great-grandparents built in the 50s. I'll do a simple remodel and addition on it. I don't know what the future is going to look like, but it helps to know that, whatever it brings, a mortgage will no longer be in the picture for us.

 

[homers]

I've read that in many markets, it's REITs doing the buying to rent. They (the mutual fund reits) have cash influx that needs to be spent. Cash offers at above market values. Not sure if that is good for the community long term or not. Also pricing younger people and familes out of market.

 

[LopeHunter]

Here is my story from Phoenix area.

Wife wanted to move within the same city to be walking distance to grandkids now that she is retired. We are 9 miles away at that point. Our home is nice and updated through several projects the past decade since bought the home as a vacation home. We bought the home as a vacation house that would be our main home in retirement then we had family move into the area to be near us.

We look at a few homes in October and November. Only one or two homes were coming on the market each week which met the walking distance hurdle. We both liked one house two blocks from the grandkids but the buyer decides not to list after signing up with a realtor. Houses were getting offers in the first week so had to go look right away.

We then went back to walk-through a house for the second time which had been on the market six weeks and the listing price had dropped twice. There were about a dozen issues with this house that a handy person could address in about two days if had the right tools and skills. The interior needed some light patching and painting. I think those to-dos turned off a lot of potential buyers. The flow was a bit odd after a remodel that created a bonus bathroom that opened facing the kitchen island but not terrible so could live with it. We made an offer at full list. Appraisal was $70K light so we paid cash to span the difference.

Now, are living four blocks from the grandkids, nicest home have ever owned and a much better school district so homes go more per square foot than our current home. We got moved in the first week after closed on the purchase. We then took the the next two weeks to touch up all small issues with our prior home, staged the rooms professionally and had professional pictures taken of the house and yard. The yard was very nice. Was the largest yard in over a mile in any direction, no HOA and walking distance to Old Town Scottsdale. Salt water pool with automated cover and heater.

Four weeks after closing we allowed the realtor to market the home for seven days without activating the listing. Five weeks after we closed, we officially listed the prior house and held the Open House. We listed at 115% of Zillow and I laughed at the listing agent for thinking we could get that so was prepared to lower the price after a week or two. We got 14 offers in first 6 hours on the market. An all cash offer was 9% over listing price. Yes, we sold at 125% of Zillow. Zillow had been a decent indication of home values the prior five years as houses sold near us.

The contract sales amount was within $5K of what we had just paid for the nicer home in a nicer school district. The real estate market was officially tubo-charged. We had the realtor expense as part of the transaction so not quite a wash to change homes. I figured the hit would be $180K more. We got lucky in buying before selling and buying a house that had been on the market a few weeks.

As for the next year or two, I just can't see a way the prices can keep going up $1000's a week in Phoenix. I do think inflation fears combined with low bond rates lured investors to focus on buying residential real estate. Investors with all-cash offers are not constrained by appraisal roadblocks so prices are locking out buyers which need to have a mortgage yet lack the cash to cover appraisal deficiencies.