Hacker News Reader

Comment by ryanSrich | Hacker News Reader

I’m not buying this, at least not for desirable areas. In the last 48 hours I’ve seen 6 houses close. Every single one in under 30 days (signifying significant, if not entirely cash offers), and each roughly 110-185% of asking price. Yes. One house I tracked on Redfin listed at $722k and sold for $1.31m.

Most houses in the average zones are going for well over asking price. It’s not even a matter of competitive offers. It’s almost as if the asking price doesn’t even matter. The market is essentially converging on what can only be described as silent auctions. You come in with the highest amount you can pay or whatever you’ve been prequalified for and hope it’s high enough. But when 20-50 people are bidding on a single house it’s unlikely you’ll ever be near the top.

It’s really hard to explain to people that aren’t following the market just how bad it is.

View on HN

This is anecdotal, and the market deserves to be addressed holistically. In major metros, city councils refusing to permit new construction limits supply artificially and pushes up prices. It may well have fallen outside major metros where cost of construction is a bigger portion of the price of a house. However, consider that zoning rules conspire to make houses outside metros bigger even if cheaper per square foot.

[edit] btw, percent over ask doesn't mean too much by itself - after all the market in the region may default to setting asks below expected price. That's just how it's done in some places. [1]

[1] https://www.homelight.com/blog/price-my-home/

I do't think its useful to "address the market holistically". The housing market is heavily variegated, and any honest assessment must take this into account. It's not one market, it's many different markets, and possibly sorting them even into just a binary classification makes more sense that treating it as if it's all the same.

If you look at markets with lots of new construction, you'll find that prices are increasing more rapidly (not surprising, since new construction is driven by rising housing prices). Right now there are challenges in procuring labor to build new housing as well as procuring material, but permitting isn't really a bottleneck (at least in my rapidly growing region in Seattle, you only need to go on a walk to see all the new townhomes being built).

Mortgage rates went from ~2.5% to 6% in a matter of a few months. People generally feel that given the low supply of housing that prices wont go down, but instead will stagnate with higher rates. If that's your belief you'd be in a mad rush to buy a home as your primary residence before rates go even higher.

Personally, if rates continue this path housing prices will go down. A 500k mortgage at 2.5% has the same monthly payments a 330k mortgage at 6% or 225k at 10%.

I struggle to reconcile this with the number of cash buyers, though. Higher rates aren't going to affect their ability to pay.

Most cash buyers are flippers doing it with bank loans. They’re in a very vulnerable position right now. The smart ones will get out and stay out. Most are greedy.

>They’re in a very vulnerable position right now.

Why? aren't the rates locked in for the duration of the mortgage (25/30 years)? The only way I can think of this going wrong is doing your budgeting when the rate is 2.5% and then not taking the rising rates into account, but presumably the bank will cut them off first.

Flippers either buy with cash, or they do all interest loans, and really factor in how long they take to flip the house. Interest rates or going long on a build can really dig into profits. You can't get a 25/30 year loan on a flip as it's not your primary residence, and you're limited on the number of those you can have per year.

Flipping implies selling the homes at a profit, which is unlikely in a rising interest rate environment.

So I figured this out, there are now companies that will give you all cash from a loan for a fee.

Wait wat?

With a purchase mortgage the bank is involved in the transaction in multiple ways, for the bank's protection. Appraisal, inspection, etc. You're saying there is some magic wand to be waved that makes the bank not care about its exposure anymore?

Locking in a great rate seems misguided if the low rates were inflating prices. You can always refinance a high rate but you can’t renegotiate what you paid 5 years ago.

It’s even worse for the all-cash buyers since they’re not sensitive to the interest rate anyway… but they probably have other motivations for parking their cash in real estate.

Is that in Canada? In the USA, Freddie Mac says 30-year fixed rates are typically 4.42% It took a year to get there from 2.75%, and it never hit 2.5%.

I locked in 2.49% rate on a 30yr fixed two months ago in the US basically betting that rates were about to skyrocket and I wouldn’t be able to buy again for a long time at a rate this good. To get a rate that low you have to pay it down in points. Otherwise it would have been closer to 3%.

I don’t expect Bay Area nimbys to get any better, but there is a risk people just leave the bay (most of my friends have left). You can get way nicer housing in austin, Denver, Miami, dc, LA, San Diego, etc. for cheaper. Socal has even better weather and with remote work is super nice.

Florida is also way nicer for taxes. I forgot Seattle too.

And here I am, relieved to have locked in 3.75% a couple of weeks ago instead of 4.75%

A good rate is anything that let's you sleep a night.

I know it's mostly platitude but I don't have the time or the depth of knowledge to time mortgage rates or the market so I mostly ask myself if I can afford it.

Still a good rate imo - loans are a decent hedge against inflation. Plus you have a place to live without worrying about rent shifts (main risk is if you’re forced to sell for some reason at a bad time).

I’m happy we decided to do it.

Just poking around online it seems 5% isn't uncommon, some higher, some lower and it has happen relatively quickly. I'm not surprised if people who have a locked in rate are just eating the cost of outbidding to win.

Bankrate says this though:

On Sunday, March 27, 2022, the national average 30-year fixed mortgage APR is 4.570%.

Just for a perspective from a different world...

I live in a development (but not a recently constructed one) where many of the homes are almost identical, and a few years ago were assessed at around $170K and sometimes sold for less.

Prices seem to have risen to almost $220K, and paused there, but I notice that new sales are going faster, like days instead of weeks.

I know this because my real estate agent continues to send me notifications of new listings and sales, probably because I unconvincingly denied being a flipper (I'm not!) at the time I bought mine.

When the press says "cools" they often mean only "decelerates". Prices may indeed still go up. However, interest rate changes are working against house prices at the present time.

One in five houses currently listed in San Francisco has had its asking price reduced at least once. Sale prices are still high and time to close is still low, though.

There are a lot investors out there right now. I get cold calls daily. As interest rates climb and supply shortages improve, I expect things to cool off. Probably not until after summer as sales always increase up until schools starts back,

A close friend just bought a house in a largeish west coast city and it was as you described and worse than my experience buying a house about 1.5 years ago

There's a big difference between the market of "ready to move into" houses and new construction. Lumber prices mostly impact the latter.

higher socio-economic areas tend to go up in value first and go down in value last.

the amount they shift tends to be a great deal more in the up direction (percentage) and less in the down direction as well.

A rising tide does NOT raise all equally.

Higher socio-economic areas tend to have more stable price fluctuations, because they are sure bets and a lot of their value has been priced in (barring the whole region rising as is happening right now). Lower socio-economic areas are more risky: you could more likely get a deal or a horrible situation, leading to a lot more volatility. Gentrification takes time to work, and isn't always successful.

because the housing market is not uniform. high value areas are resilient to corrections

Resilient to corrections? Nothing is. They are just the last to correct.

Ever heard of lead time? Lumber price falling doesn't mean housing costs will cool down immediately. The new houses being sold told and being built now are being built with lumber prices from ~6 months ago. It takes time for things to show. So if the housing market will cool, it will take a few months at the very least. Until then, the madness will keep going on for a while.

Speaking of auctions...why aren't homes just sold via normal auctions? I would imagine you would end up with a better price than everyone giving their "best and final" offer - which may not be their best and final if they are given a chance to increase their bid slightly to get the house.

Because price isn’t remotely the only factor.

Time to close and guarantee of funds and waiving inspection and so on all create custom contracts for each sale.

Some peole would take $500k closing in 30 days over $535k close ng so n 90 days with some contingencies and others would not.

That's quite common in Australia. Is it not in the US?

Yes unless something has changed with the root issue, zoning laws, prices will probably continue to rise.

Prices have risen with falling interest rates. They will fall with rising interest rates.

Zoning is a smaller part of it (though more significant in some areas than others).

I see how low interest rates increase demand. But in my opinion the lack of supply is a much bigger issue. Most people have most of their net worth in their homes, and spend their political will ensuring nothing new is built. That and related phenomenon I put under a broad “zoning laws” statement. We need to incentivize building more, taller. That’s it.

You can change zoning laws tomorrow (California just did) but that won’t create any housing. It needs to be constructed at an affordable price.

All that really means is the house was listed below its market value to drive more bidding

I sold a house last week. Within 3 hours I had 2 offers. Within 36 hrs we sold for 20% over asking; I had 8 offers in that time.

There wasn’t even a negotiation phase, I eventually just took one because I was tired of showing the house.

Could this be people shifting investments from other asset classes toward real estate, to be more inflation-proof?

> . One house I tracked on Redfin listed at $722k and sold for $1.31m.

do you have a link by any chance?

Sure. I have a few.

$220k over ask- https://www.redfin.com/CO/Centennial/7405-S-Quince-Ct-80112/...

$230k over ask - https://www.redfin.com/CO/Centennial/7963-S-Clayton-Cir-8012...

$297k over ask - https://www.redfin.com/CO/Boulder/5640-Table-Top-Ct-80301/ho...

$269k over ask - https://www.redfin.com/WA/Seattle/3829-Ashworth-Ave-N-98103/...

$311k over ask - https://www.redfin.com/WA/Bellevue/12810-SE-29th-St-98005/ho...

$425k over ask - https://www.redfin.com/WA/Bellevue/90-145th-Pl-SE-98007/home...

Looks like they changed the record history, but this was the one I was talking about - https://www.redfin.com/WA/Bellevue/2004-144th-Ave-SE-98007/h...

I’ve been looking this the Denver/Boulder area. 15% over asking is pretty much normal at this point, and I’ve seen more than a few places go for 17-20% over. I was approved through a regular lender, but had to find another lender that offered an all-cash option since that’s what’s winning everything around here.

15%+ over asking, all cash, limited to zero-inspection, and increasingly 30-60 post closing occupancy agreements. Rough market.

The strange part to me is the appraisals, I used to worry about an appraisal gap, but I have yet to hear of a place that doesn’t appraise for the final selling price. When places are going 15-20% over asking, and appraising at that, you don’t have to worry about the gap, but I do raise an eyebrow at the process.

Reply on news.ycombinator.com