I bought a house this past March right before accepting an out-of-the-blue job offer across the country, so I need to sell the house. This Redfin news worries me (although I'm happy for the buyers!)
For anyone who has been through the process of selling a house right at the start of a market turn — what advice would you give? It seems like I need to get rid of the house ASAP, but are there any other important steps that I might miss?
Are you sure you need to sell it? Could you rent it out?
There is pretty much no way you won't lose money unless the house went up in value a huge amount since you bought it -- enough to cover all of the costs you incurred when buying it and when selling it.
On the other hand, you might be able to cover a large portion of the mortgage payments by renting it out, depending on the rental market in the area.
Look at "flat fee listing" services. You can save at least 3% (seller's agent commission) and up to 6% by avoiding realtors. These services will charge a flat fee to list your house on the major online portals, but you're on the hook for showing it. You'll still need a lawyer. Not really an ASAP solution, but you can save tens of thousands of dollars this way.
Also, don't sweat a price drop as long as the market you're moving to doesn't lag the market you're in. You might lose money when selling, but if the other market is stalling too you'll pay less and it could be a wash.
Timing a market slowdown such that you sell before a drop and buy after a drop is nearly impossible with a primary residence.
Isn't this a side affect of rising interest rates? Two years ago (when I bought my current house) I got about 3.25% interest. Which means a 200K mortgage is $870/mth. With 5%, the mortgage would have to drop to 162K to have the same monthly payments -- almost a 40K drop in house price (about 16%, assuming the mortgage makes up 80% of the home price).
I don't really believe anyone cares. It's Fall, people drop prices to sell before the holiday season. It could just be a normal thing that happens every year just like fewer houses sell in December because of Christmas.
People don't move after Labor Day if they have school-age kids because it's so hectic once school starts.
There is just normal stuff that goes on that is not any kind of indicator of impending doom.
I am sitting on a $100K down payment awaiting a market correction, but I won't wait forever. It's hard to just have that money in brokered CDs, but that's where it is for now.
2008 was the big correction, it could be 20 years before we get another one.
I would say looking at those graphs that the interest rates going down from ~1982 look pretty correlated to the real house prices going up till ~2008. Especially for the post 1999 or so period. Then we had the bubble, then we had a crisis from a slight raise of rates. House prices move really slowly. You also probably want to look at real rates rather than nominal rates, for some of the period rates were high because inflation was also high.
If interest rates keep heading up it's a good bet we're setting up for a repeat of that last crisis. Let's hope the banks are better prepared and have loaned money to less questionable people.
It would also be instructive to see the shorter term rates, not everyone finances for 30 years.
So I would say in theory and in practice interest rates have major impact on house prices. We would not have the bubble without the low interest rates as people wouldn't not be able to finance the purchase of those houses at those prices.
The house-price-to-income ratio has been historically high these last 1-2 decades, which will result in interest rates playing a bigger role in prices than they have in the past. Especially in the hotter coastal markets where affordability is a major issue. Part of this is structural as well, as most banks have strict debt-to-income ratios for their mortgages, so if interest rates go up, either incomes need to rise or prices need to come down to maintain the same level of demand.
So the same company that lied through their teeth during the 2008 crisis and buildup to it, to give the banks ability to package junk loans as AAA CDOs? The one that had to be bailed out by the taxpayer eventually? Sure, let's listen to them, they sound like a trustworthy source.
The semantics of the philosophy of the argument are irrelevant. The basic point is that predictive economists are nothing more than highly educated charlatans.
The original comment ("In theory, yes. In practice, no.") is from ad hominem. It does not provide any actual thoughts or arguments, it simply says that there is an economist that thinks this way, implying that it should be enough of a reason to trust it. There was no argument except for ad hominem! Of course the response to that can only be a defusal of such argument.
There is a fallacy about logical fallacies: using them to discredit non-logic based arguments. When one wants to assess the credibility of anecdotal facts, it is entirely fair to ask whether a person is a reliable source for this information. This is why character witnesses are acceptable in court. We are not trying to prove a theorem or explain the results of an experiment. We are trying to use our intuition, for lack of better tools and information, to assess what we hear. So saying that this person can be considered unreliable as a source of information in this kind of analysis due to past behavior is valid. Objective data and detailed explanation should be provided to back up his argument logically in order for it to be acceptable, rather than taking Duncan's word for his analysis of the data he has presumably seen.
In this case, the author's data-based assertion of non-correlation is much weaker than Douglas Duncan's. I think based on Duncan's background, it is fair to dismiss his quote entirely without further context and base conclusions only on the data presented. In addition, since the author presents an unreliable source, one may suspect the data is skewed to support that source, conciously or unconsciously.
If interest rises, sellers still want the same high prices for their house. Buyers won’t be able to afford them though so the houses will remain on the market for a lot longer.
I've noticed several houses over the last month or so that haven't sold anywhere near as fast as expected. Around here (Greater Seattle area), houses have been selling in a matter of days: On the market by Wednesday, open house at the weekend, offer accepted on the Monday.
If there had been just one house not selling that fast I'd have assumed overpriced, or something noticeably wrong with them, but even the new builds are struggling to sell at a price that would have been market competitive back in July / August.
My brother put his (Seattle) house on the market about a month too late. What he was expecting to move in days took two months, and at a significant reduction in price. Something definitely changed around mid/late-summer.
Check out https://seattlebubble.com. Numbers started changing in May, was “obvious” in sept. Average time on market is up to about two weeks. Was single digit days back in Q2. I still see in demand property going same day. Inventory is up, sales flat to down, prices mostly flat. Way beyond seasonal demand changes. Will be curious to see what happens in Q1/Q2.
I've been bookmarking a lot of homes on Zillow lately within the app and I get almost weekly emails about prices drops. This is in the San Diego, CA area.
What is with the repetitive part of the graph that almost looks like a heartbeat? It looks like some kind of yearly cycle where around the holidays the prices don't move so much (probably because everyone's on holiday). It is a bit higher than the last few peaks, but not by that much. I think people also have been raising their expectations of what they will get recently.
I have been watching Zillow price drops well for Tucson, where I've been looking to buy, and waiting for things to hopefully cool off.
Helpful hint: Thanksgiving day is the best day of the year to buy a home (offer accepted) in the US, provided you like what's on offer. It's the slow season but there's less inventory.
We'll likely never see a housing crisis quite like 2008, at least not a for a while, but many cities really have overshot reality. I'm in Nashville and it's absolutely insane what people are asking for houses in bad neighborhoods or houses in good neighborhoods. It might not be a lot if you're moving here from California, but if you're from the region even Atlanta or Charlotte, you're getting a bad deal. Condos last I checked were cheaper in Charlotte and Atlanta in good neighborhoods than Nashville. Even in surrounding cities it has greatly outpaced rationality. Homes in East Nashville are up almost 300% in 8 years. That's not normal.
Do Airbnb and Vacation homes push prices higher in Nashville? Planning a trip to Nashville and there are a lot of Airbnbs available. I’ve known a few people with rental or vacation condos in Nashville.
I’m in Atlanta and it’s nice to see prices cooling off. Especially since I want to buy soon. A lot of lisitings look like the sellers are way too high especially in hot areas.
They absolutely do like tourist-heavy cities like Barcelona or London but a temporary drop in a white-hot housing market isn't a good sign to buy. Houses are still ludicrously expensive.
It is interesting but be aware that expressing these figures as a fraction of listings necessarily biases the result to weak markets, where the properties are on the market longer and the inventories are greater. In "strong" markets (according to the point of view of a realtor; dysfunctional markets to everyone else) such as San Francisco inventory is currently near record lows with only about half as many listings as we had in 2010.
What a strange metric. It's not 'prices are falling' even though doomsayers really want it to say that. IMO what it mostly says is 'Sellers have been posting really high numbers and slowly walking them back.' Which is effectively a time-based auction, so it's not a completely irrational price discovery model.
Sellers will always be greedy, the problem arise when buyers and lenders take risks.
In Denmark housing is way higher than it was before the crisis, but wages aren’t really up.
The market has now reached the point where the middle class can’t afford to buy a home near our biggest cities.
Of course it’s going to end poorly. Especially with the aging population. If we didn’t own an appartment in the central part of time that was bought at 30% lower than the current prices I’d honestly be shitting bricks.
American here. Basically giving up on ever owning in a city that I want to live in.
Also terrified that if I ever did buy, the bottom would fall out on me. Most of the homes in my area are a few million even if they’re objectively garbage.
> I'm going to guess that "in a city that I want to live in" is a fairly short list. In most of the country, a few million gets you a palace.
In most by geographic area, sure, but most of the country by geographic area is sparsely populated because, to a rough approximation, no one wants to live there (at least, after accounting for work opportunity.) In urban centers that aren't going through collapse, it doesn't go nearly that far, though outside of Manhattan and San Francisco (even in the same metros) it'll still get you a pretty nice place.
Atlanta, Dallas, Houston, Denver, even Chicago - are any of them that overheated? No one wants to live in those places? That seems a bit unrealistic.
Seattle, San Francisco/San Jose, NYC, maybe Los Angeles and San Diego are that overheated. But that's not even the majority of the population of large metro areas.
I mean, I get it if someone doesn't want to live in Boise or Omaha. But what's so bad about Denver?
And it appears that a lot of people agree with you - that's why those markets are overheated.
But, well, if you want something different than what you've been getting, you're going to have to do something other that what you've been doing. I'd suggest that it might be worth re-thinking whether you really want to live in those places, at the price it's costing you. And if you do, then you do - it means that you're giving up what you want less (to own your own home) in order to get what you want more (to live in one of your chosen cities).
Article seems so click-baity. Last year, more than 1 in 4 home sellers dropped their price, according to the included chart, but the market was hotter than ever.
In California this has become noticeable to even the casual watcher of real estate. Per my earlier comment about people who are speculating and trying to 'flip' houses, I'm seeing pretty rapid price rollbacks on houses that were previously sold < 18 months ago. My speculation is that these people are trying to unwind their position because the market is softening and they don't want all their capital tied up waiting for the rebound.
The combination of higher interest rates and tax code changes which limit mortgage interest deductions[1]. While $750K seems like a pretty high cap for limits to kick in, in the Santa Clara county, the median house price is over $1.3M so that is over $500K of mortgage interest you can't deduct.
That changes the calculus of buying an expensive house and I would not be surprised if that is reducing the number of buyers.
I have a friend who works as a realtor and she says that the market is definitely starting to cool off. There are less "mid-range" buyers and more low-end buyers because the prices have risen too much and interest rates are reducing the amount people can borrow. End result is previously a buyer was a mid-range buyers but now they are low-end buyer because the bank is not willing to lend as much anymore.
Also there is data from CAR which shows both sales price and sales rate is declining. Inventory should start to build up going forward as home sit on the market longer.
> We define a price drop as a listing price reduction of more than 1 percent and less than 50 percent.
I would like to see the number of houses that increased their listing prices by more than 1% for a clearer picture. Without that information, I don't see how this graph leads to the conclusion of a general price drop.
Does that ever happen? As a casual observer, I don't think I've ever seen it. When would a seller raise the asking price of a house already on the market?
I don't know how often it happens. That was my question after all. Judging by the downvotes I received, I guess people here either know (or assume) that asking prices don't rise. Unfortunately their downvotes aren't as educational as the statistics I was asking for.
I wonder about the data legitimacy on these sites.
I looked my place up on Zillow a few weeks ago, and it said $1.5 million. There's been only 1 sale here in the past 2 years, artificially low at $950K. A neighbor's just sold for $1.32M.
Meanwhile, Redfin has mine at $1.04M.
Zillow has my original purchase price at about 45% of what it actually was (and publicly recorded at).
My family who invests in single family homes said that Redfin is far more accurate than Zillow. In other words, he usually ends up paying close to the Redfin estimate.
Would also like to see this data against initial price charts -- my gut is that the market is over pricing on the initial price point and pulling back as the pricing was too optimistic. May just be a sign that people in the market assume their sales could be much more profitable than reality allows.
TLDR: Sellers are trying to squeak out higher prices than in the past and the market is not accommodating the maneuver, or it is a tactic where an initial over inflated price + reduction is a ploy to dangle the properties at the true-wanted initial price.
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[ 4.4 ms ] story [ 118 ms ] threadFor anyone who has been through the process of selling a house right at the start of a market turn — what advice would you give? It seems like I need to get rid of the house ASAP, but are there any other important steps that I might miss?
There is pretty much no way you won't lose money unless the house went up in value a huge amount since you bought it -- enough to cover all of the costs you incurred when buying it and when selling it.
On the other hand, you might be able to cover a large portion of the mortgage payments by renting it out, depending on the rental market in the area.
Are you crazy? An absentee landlord can't keep close tabs on the property. It can be trashed, or the tenant can stop paying rent.
I didn't rent my old house out for that exact reason.
Also, don't sweat a price drop as long as the market you're moving to doesn't lag the market you're in. You might lose money when selling, but if the other market is stalling too you'll pay less and it could be a wash.
Timing a market slowdown such that you sell before a drop and buy after a drop is nearly impossible with a primary residence.
Unfortunately, I moved from semi-rural countryside to the Bay Area. I won't be buying a house here any time soon haha
People don't move after Labor Day if they have school-age kids because it's so hectic once school starts.
There is just normal stuff that goes on that is not any kind of indicator of impending doom.
I am sitting on a $100K down payment awaiting a market correction, but I won't wait forever. It's hard to just have that money in brokered CDs, but that's where it is for now.
2008 was the big correction, it could be 20 years before we get another one.
https://www.calculatedriskblog.com/2013/06/house-prices-and-...
"There’s no strong correlation between interest rates and home prices,” said Douglas Duncan, chief economist at Fannie Mae.
If interest rates keep heading up it's a good bet we're setting up for a repeat of that last crisis. Let's hope the banks are better prepared and have loaned money to less questionable people.
It would also be instructive to see the shorter term rates, not everyone finances for 30 years.
So I would say in theory and in practice interest rates have major impact on house prices. We would not have the bubble without the low interest rates as people wouldn't not be able to finance the purchase of those houses at those prices.
So the same company that lied through their teeth during the 2008 crisis and buildup to it, to give the banks ability to package junk loans as AAA CDOs? The one that had to be bailed out by the taxpayer eventually? Sure, let's listen to them, they sound like a trustworthy source.
Please don't argue ad hominem, if you have an issue with the statement then make your objection directly.
There is nothing exceptional about THIS economist that would make him right. The OP had the right idea.
In this case, the author's data-based assertion of non-correlation is much weaker than Douglas Duncan's. I think based on Duncan's background, it is fair to dismiss his quote entirely without further context and base conclusions only on the data presented. In addition, since the author presents an unreliable source, one may suspect the data is skewed to support that source, conciously or unconsciously.
If there had been just one house not selling that fast I'd have assumed overpriced, or something noticeably wrong with them, but even the new builds are struggling to sell at a price that would have been market competitive back in July / August.
Still insane.
I have been watching Zillow price drops well for Tucson, where I've been looking to buy, and waiting for things to hopefully cool off.
I’m in Atlanta and it’s nice to see prices cooling off. Especially since I want to buy soon. A lot of lisitings look like the sellers are way too high especially in hot areas.
In Denmark housing is way higher than it was before the crisis, but wages aren’t really up.
The market has now reached the point where the middle class can’t afford to buy a home near our biggest cities.
Of course it’s going to end poorly. Especially with the aging population. If we didn’t own an appartment in the central part of time that was bought at 30% lower than the current prices I’d honestly be shitting bricks.
Also terrified that if I ever did buy, the bottom would fall out on me. Most of the homes in my area are a few million even if they’re objectively garbage.
I'm going to guess that "in a city that I want to live in" is a fairly short list. In most of the country, a few million gets you a palace.
You might consider re-evaluating where you want to live. Most of the rest of the country isn't horrible.
In most by geographic area, sure, but most of the country by geographic area is sparsely populated because, to a rough approximation, no one wants to live there (at least, after accounting for work opportunity.) In urban centers that aren't going through collapse, it doesn't go nearly that far, though outside of Manhattan and San Francisco (even in the same metros) it'll still get you a pretty nice place.
Seattle, San Francisco/San Jose, NYC, maybe Los Angeles and San Diego are that overheated. But that's not even the majority of the population of large metro areas.
I mean, I get it if someone doesn't want to live in Boise or Omaha. But what's so bad about Denver?
But, well, if you want something different than what you've been getting, you're going to have to do something other that what you've been doing. I'd suggest that it might be worth re-thinking whether you really want to live in those places, at the price it's costing you. And if you do, then you do - it means that you're giving up what you want less (to own your own home) in order to get what you want more (to live in one of your chosen cities).
So, if you haven't moved your house by now, it's probably not gonna move until next spring.
I would be more interested in how many simply delisted and will wait until next spring.
The combination of higher interest rates and tax code changes which limit mortgage interest deductions[1]. While $750K seems like a pretty high cap for limits to kick in, in the Santa Clara county, the median house price is over $1.3M so that is over $500K of mortgage interest you can't deduct.
That changes the calculus of buying an expensive house and I would not be surprised if that is reducing the number of buyers.
[1] https://www.marketwatch.com/story/what-the-new-tax-law-will-...
Also there is data from CAR which shows both sales price and sales rate is declining. Inventory should start to build up going forward as home sit on the market longer.
https://www.car.org/en/marketdata/data/countysalesactivity
> We define a price drop as a listing price reduction of more than 1 percent and less than 50 percent.
I would like to see the number of houses that increased their listing prices by more than 1% for a clearer picture. Without that information, I don't see how this graph leads to the conclusion of a general price drop.
I looked my place up on Zillow a few weeks ago, and it said $1.5 million. There's been only 1 sale here in the past 2 years, artificially low at $950K. A neighbor's just sold for $1.32M.
Meanwhile, Redfin has mine at $1.04M.
Zillow has my original purchase price at about 45% of what it actually was (and publicly recorded at).
WTF?
TLDR: Sellers are trying to squeak out higher prices than in the past and the market is not accommodating the maneuver, or it is a tactic where an initial over inflated price + reduction is a ploy to dangle the properties at the true-wanted initial price.
https://www.piggington.com/september_2018_housing_data_slowd...