Real estate market: There has to be a "ceiling" doesn't there?

[Martinjmpr]

That is the normal or traditional pattern. But much of the federal debt is tied to the interest rate, ie what the .gov pays in debt service. Not all of it is at a locked rate. The fed wont willy nilly raise interest rates as it also raises the debt service that comes right off the top of tax receipts. That downward pressure on rates will keep them lower than would otherwise be logical. We wont see Jimmy Carter interest rates because it will collapse the economy from the debt service. Currently the solution is to BRRRR run the money printers. Some other stupid solution will come after this. Raising the rates, the logical response, will be avoided at all costs. So this housing bubble, based on cheap money, will extend longer than it would otherwise.

Yes, I've heard much the same elsewhere. The thing is, while low interest rates are great for real estate (and wall street) they suck for people who's retirement is invested in "safe" bonds and blue chip stocks. It's gotten to the point where real estate and the stock market are the only things making money anymore and they both seem to be ripe for a "correction" (i.e. crash) some time soon.

As far as real estate itself goes, there is a huge range of prices. Sometimes just for fun I get onto Realtor.com and look at home prices in other parts of the country. I set up a "base" house requirement, like 3 br, 2 ba, detached home with 2 car garage, and then see what that goes for in various markets.

There are still parts of the US where you can get a pretty decent home with a couple of acres for ~$150k or less. That seems nuts here in CO where you can barely get a 1 BR 1 BA condo for that much.

[brutal]

Been getting crazy money cash offers by mail for a while now.

Crazy money. However, we're very much grounded here with the grandson.

[MrPrena]

let's assume we willl have 40% correction, that is still approx 2018 housing price.

I am still looking for newly built 5500sq ft 4 car garage $290,000 house in Denver metro!

[PugnacAutMortem]

Real estate agent here...and I hear a lot about "the bubble" from people. Here's the thing, in the Denver Metro area at least, there is no bubble.

What we are seeing here is an extreme of supply and demand. The last stats we have are for June of this year, and there's a total of ~2,800 active listings in the entire Denver Metro Area. Now over 6,000 homes were put under contract in June though. That means we have just about 2 weeks worth of inventory in Denver at any given point in time. You couple this extreme lack of inventory with historic low mortgage rates and you get the craziest sellers market we have ever seen. On top of all that, Colorado is still one of (if not the single biggest) destination for people migrating inside the US.

To put just how little inventory we have in perspective, a real estate market is considered a balanced market (neither a sellers or buyers market) when there is 6 months of available inventory, or in our case around 36,000 active listings. So we could literally 10x our inventory and STILL be in a sellers market. It's literally a perfect storm of contributing factors that are driving pricing up.

Pricing might go down a bit at some point, but we are still hearing long term predictions that our housing market will continue to grow. From 2010 to 2020, home values in the metro area doubled. We are hearing predictions that from now until 2030, home values could double AGAIN. Crazy times we live in.

[Gman]

let's assume we willl have 40% correction, that is still approx 2018 housing price.

I am still looking for newly built 5500sq ft 4 car garage $290,000 house in Denver metro!

...with acreage.

[Gman]

There are companies now allowing you to ?buy? with cash and then get a loan on the property. Im sure it?s a sweet gig for them as they are likely not out their money very long.


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We didn't go through a company, but we bought our home with cash for the asking price in Jan. Now we're doing a cash-out refi to do some home improvement projects. So now we'll have a small mortgage payment at a low rate in a much improved home that will easily command a better sales price than what we put into it.

Real estate can be a great investment. As my first wife's uncle would say, "Invest in real estate. They're not making more land."

[Martinjmpr]

Pricing might go down a bit at some point, but we are still hearing long term predictions that our housing market will continue to grow. From 2010 to 2020, home values in the metro area doubled. We are hearing predictions that from now until 2030, home values could double AGAIN. Crazy times we live in.

For purely selfish reasons I'd love for the prices to continue to rise, since I plan on retiring in about 3 years and the wife is already talking about moving to someplace less crowded, less expensive and (hopefully) warmer in the winter.

But there's also a part of me that says that crazy high prices are not good in the long run. You mentioned CO being a popular destination for people from other states - at what point do people say "I'd love to move to CO but I just can't afford to live there?" and then what?

Or are people just going up to their eyeballs in debt to get a house because they "know" the prices will continue to rise? To me that ends up looking like a classic pyramid scheme: The ones at the "bottom" of the pyramid (i.e. the ones who bought years ago at a lower price) will do OK but the ones who just moved here and financed a $650,000 mortgage on a house that in a less-heated market would have gone for $400k will be stuck with that crazy high mortgage when the housing prices collapse. They'll be in a hole that will take years to dig out of.

Then of course there are other factors like water. If people keep moving here, putting up houses with big green lawns, they're going to deplete water to the point where everyone has a $300/month water bill.

As I said, we are currently 'benefiting' from the high RE prices but it doesn't seem sustainable in the long run.

[Gman]

Yeah, if the market does dip a chunk, I'd hate to be upside down in a house.

[FoxtArt]

I am not sure if anyone is capable of predicting and timing a sag. But it will come, at some point. Maybe five months, maybe five years. Even if inventory is tremendously fast moving today, just as in any other market (guns for instance) once the real estate inventory starts inflating a bit, a lot of the demand will also drop, each factor affects the other until a potential spiral occurs because the lack of inventory is causing a lot of the buying pressure in the first place. Even if in normal conditions several months of inventory is a sellers market, in today's market, buyers would start to relax a bit and a lot of others would be holding off anticipating a future crash - the fear in fact, results in the truth.

Same thing with guns - most of the buying pressure on guns during panic season is induced simply by the lack of availability. Once the availability increases, that pressure drops, and the industry hemorrhages from a catastrophic drop in sales, bankruptcies ensure.

That said, I'm not anticipating anything too soon.

[MrPrena]

Yeah, if the market does dip a chunk, I'd hate to be upside down in a house.

ouch. v2 of housing crash will suck.

I know 2009-2011 was mainly due to sub prime and crazy adjj rate, but many were up side down, but this time might be due to excessive supply.
I speculate that some % baby boomers are moving to smaller places and selling overall. however the data doesn't show existing home are still not in surplus.

many of us consider house as property to hedge against the rising rent cost+ writeoff+ partial office space for small s and/or self employed space.

Sadly many people in CA consider it as a status.
So many people in silicon Valley and LA county upgrading 1100sq ft house to 1500. People in rural Alabama is probably laughing about that.