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

[Martinjmpr]

Just a random topic for discussion to a little....

Here on the Front Range we've seen the real estate market go from "good" to "red hot" to "holy crap!" levels. I think the median home price in the metro area is something like $600k.

Back in 2017 we sold our small Englewood home (3br, 1ba) for what I thought then was a crazy $350k (if you'd asked me in 2016 I'd have guessed maybe $250k but only because we put in a lot of upgrades in 2008 including an oversized 2 car garage, new siding, windows, a roof and a furnace.)

We bought our house in the Columbine area for $415 and I think now even the most "conservative" appraisal has it at $500k or more. A couple of houses near us (albeit a bit larger than ours) have recently sold in the $650k range.

Now at first blush I'd be saying "WOO HOO!" because our home values have gone up. But then it gives me pause - because at this point, people are putting offers in at $20k - $40k above asking price and STILL being beat out.

Which makes me wonder - at what point do the sky high prices act as a deterrent to sales because people are reluctant to sell without knowing whether they'll be able to buy?

Our kids are in this situation now. They have a small-ish 3br house that they'd like to sell to move to something bigger for their growing kids, taking advantage of the increase in value of their house - but their dilemma is, they can't afford to BUY in this market. So, as a result, (a) they aren't buying and (b) they aren't selling.

The current housing market reminds me of an old joke about New York: "Nobody drives here - there's too much traffic!"

So who the heck is BUYING all these houses? SOMEBODY is buying real estate at these (IMO) inflated prices, but who? Is it all "out of staters" moving here? And if they're so flush with cash from selling their homes, who is buying THOSE homes?

I studied history and law, not economics and business. But I don't see how this is sustainable. It seems to me that with the frenzy of building new construction, sooner or later, the "supply" of homes for sale is going to exceed the "demand" because there MUST be some kind of end point to the demand, mustn't there?

I even get that with historically low interest rates, people are pouring money into real estate because it's one of the only places you can invest money and get a decent return. But these homes being snapped up in hours can't ALL be investments, can they? I mean, it's a house, at some point somebody has to want to live there and if they don't it's not going to bring money to the investor, right?

I guess I just worry because it seems like we're on the part of the roller coaster where we're going up and up and up and it seems to me that sooner or later, there has to be a "down."

Anyway, I know we have a lot of smart people with different areas of expertise and experience so I thought this would be a good place to start this discussion....

[eddiememphis]

We are at the point where people are reluctant to sell. That is why the inventory is at historic lows.

Sure you can sell but you would likely end up in a smaller home for the same money.

If you have enough equity you can move laterally or up in some cases for the same house payment, depending, depending...

A lot of people in the real estate business are struggling because the amount of sales is so low- buying agents, inspectors like myself, appraisers, etc. We are not seeing the volume of the past. Selling agents are doing well, when they can find a seller.

[ray1970]

So who the heck is BUYING all these houses?

Assholes from California.

They move here because housing is cheap.

[Martinjmpr]

Assholes from California.

They move here because housing is cheap.

Sure, that's the facile answer and one I expected, but first question: if people are "fleeing" California, then who is buying THIER houses in CA?

They're not tacking an 'abandoned' sign on the door and driving away, they're SELLING their houses for huge prices in CA and then moving here.

Which means SOMEBODY in CA is buying that house for that crazy CA price, right?

Second question: Where are these "California people" working?

EDITED TO ADD: We hear so many people say California is falling apart, circling the drain, etc - and yet they still have crazy high real estate prices which means SOMEBODY is buying those houses when those people "flee" to CO, right?

Why would they pay crazy prices for CA houses if CA is, in fact, "falling apart?"

[Gman]

Housing is nuts in a lot of places. Our home here in WA has gone up at least $50K since January (and in hindsight we practically stole this place for what we paid in an estate sale).

My concern is that it's not going to be that housing value has gone up as much as the dollar value has gone down. It takes more dollars to buy anything these days.

[eddiememphis]

Why would they pay crazy prices for CA houses if CA is, in fact, "falling apart?"

Not everyone hates it there. If you like it or can't move because of whatever, buying a bigger or nicer home or moving school districts or name it is what a lot of people do.

It's not just California that people are leaving. I meet a lot of people from back east that are moving for climate, jobs or various reasons.

Not everyone has politics or taxes as their #1 reason to relocate.

[Martinjmpr]

My concern is that it's not going to be that housing value has gone up as much as the dollar value has gone down. It takes more dollars to buy anything these days.

I'm sure inflation is a factor, but if it was just inflation I'd expect prices to be going up by the same amount everywhere.

Seems to me there are two kinds of home buyers: Those that HAVE to buy and those that have a choice.

If someone is relocating from, say, Memphis to Denver, they don't have much choice. They can either buy an (IMO overpriced) house, or they can pay outrageous rent. At least with the house there is a chance that you might recoup some equity at sale time, whereas with rent you have a place to live but otherwise you are pissing money away paying somebody else's mortgage. So that person has pretty much no choice but to suck it up.

However, there are also the people who just want to "trade up" or move to a different part of town. Those people don't HAVE to buy and in this market, they'd be smart not to. You would think that would drive demand down somewhat, wouldn't you?

For that matter, if the person who's job relocates him from Memphis to Denver realizes his housing costs are going to be outrageous, he might choose to not take that job and not move here. Eventually that company is going to have difficulty finding employees unless they raise the salaries high enough that people can afford to move here.

[ray1970]

Sure, that's the facile answer and one I expected, but first question: if people are "fleeing" California, then who is buying THIER houses in CA?

They're not tacking an 'abandoned' sign on the door and driving away, they're SELLING their houses for huge prices in CA and then moving here.

Which means SOMEBODY in CA is buying that house for that crazy CA price, right?

Second question: Where are these "California people" working?

EDITED TO ADD: We hear so many people say California is falling apart, circling the drain, etc - and yet they still have crazy high real estate prices which means SOMEBODY is buying those houses when those people "flee" to CO, right?

Why would they pay crazy prices for CA houses if CA is, in fact, "falling apart?"

Yes, I was mostly being a smart ass.

You do bring up some valid points that I can?t explain or understand.

I am not a single guy (believe it or not) or I would likely sell my house here and relocate to some place with lower housing prices and cost of living. I could probably convince my wife to move in state but it just doesn?t make sense to sell and then have to buy a place nearby for more than double what we payed for our current place twenty plus years ago.

[Great-Kazoo]

Sure, that's the facile answer and one I expected, but first question: if people are "fleeing" California, then who is buying THIER houses in CA?

They're not tacking an 'abandoned' sign on the door and driving away, they're SELLING their houses for huge prices in CA and then moving here.

Which means SOMEBODY in CA is buying that house for that crazy CA price, right?

Second question: Where are these "California people" working?

EDITED TO ADD: We hear so many people say California is falling apart, circling the drain, etc - and yet they still have crazy high real estate prices which means SOMEBODY is buying those houses when those people "flee" to CO, right?

Why would they pay crazy prices for CA houses if CA is, in fact, "falling apart?"

They're not fleeing CA. "They" are being paid to infest red states, counties and cities. Hoping to turn the rest of the country, in to a plague infested shithole. Then move on towards the next target.




But on a serious note. The majority of CA residents we've met out here are gun owning, trump voting folks. Who retired or able to work from home, realizing the state was a lost cause. Are there some liberals, of course.




On a side note . In the 70's we'd party at some peoples homes, on the north shore of the island. Wondering how anyone could afford a quarter of a million dollar home.
Now that price range might get one a 2 bd, 1 bath starter home. In a hopefully, eventually, gentrified neighborhood.

[ray1970]

For that matter, if the person who's job relocates him from Memphis to Denver realizes his housing costs are going to be outrageous, he might choose to not take that job and not move here. Eventually that company is going to have difficulty finding employees unless they raise the salaries high enough that people can afford to move here.

I make less money than my counterparts who live and work in Wyoming.

Apparently there are more jobs than people in Wyoming so unless they are well compensated it is difficult to retain people.

And, yes, I have considered moving. Higher pay, lower cost or living, and no state income tax sounds like a win to me.