Current State of Real Estate

Does anyone else have a house deal in the works throughout all this craziness? My wife and I are getting within a few weeks of closing on a new house and I am worried about the economics of it. We are both still employed for the near future but that is not my primary concern. How bad are home values going to tank with all the economic fall out?

We have been looking for a place for 18 months now, having moved back to the area. This will be our second home purchase and the goal was not to have to do it again for a while so knowingly being picky.  The rural area we live in does not have much in the way of houses coming on the market. We still need a house and have the emergency cash set aside for employment concerns but I don’t want to lose 10’s of thousands of dollars in value over the next year. Anyone else going through similar or have insight from the industry?

Our closing date is April 7. I was just getting my business going after forming it this winter and am now shut down as I'm non essential in the eyes of the state. Thankfully, Dana makes enough to cover the mortgage payment and I'm still making enough to cover everything else, but there's not much emergency fund if things go really pear shaped. Not a great feeling for first time buyers with 2 kids. 

Just scheduled the appraisal and finished up the mortgage paperwork this morning. Closing is apparently still on track to try to do online with facetime or something. 

On the one hand, I'm glad we got our interest rate locked when we did. 3.625% is better than what I've seen since the feds dropped their rate to 0. On the other, I'm a little bummed we're buying now because I expect prices to bottom by the end of the year, and I won't have enough equity in this house to leverage it for another. 

I have mixed feelings on the future of the market. I've set myself to profit from another housing collapse as a contractor to manage the foreclosed homes. The problem is there's a lot of people that could be out on the street, even with the mortgage forgiveness thing Fannie Mae and Freddie Mac have floated. Good for my business and family, but bad for the community as a whole. 

I expect things to fall below 2008 levels before bottoming out, but I've always been a pessimist about such things. 

I think that unlike the last panic there is a huge pent up demand to get back to normal. The minute we are all released from virus jail things will explode. Except we will all just owe way more money.

I closed on a house 2/21. Excellent interest rate. Using it as second house. 

Been toying with selling one investment property for a few months. After CA went on lockdown Thursday, I listed it Friday. Put it 30K under market to test it. I made sure to tell realtor, no inspection and no appraisal. Even though no issues with that house, in this locality , if you put those two words, it attracts a certain demographic of buyer, which is what I want. 

Sat/Sun showings - no realtor, just with door lock.  Got 11 offers yesterday. As I expected, 8 offers are mix of Chinese/Korean buyers, 100% cash. 1 caucasian buyer, 30% down - but will want appraisal and inspection (going to reject), and one Indian buyer with 25% downpayment (also will reject). 

I countered two of the Korean buyers this morning, both with "give me your best offer" and 10 day close. Should be sold today and get it done. 

Around here, schools all being 10/10, HUGE demand. People with the cash don't really seem to care, and wants to buy. 

My plan is when a significant correction happens, buy 2 more properties this year. 

In reply to RevRico :

You never can figure the exact bottom of the market or the best time to buy. So don't worry, get a deal you can live with.  
Even  if the loaner can  get money at 0% he can't sell you a mortgage near that because he has risks and other costs to consider. 

One final point,  

America is currently 23 trillion in debt.  The politicians are talking about some really expensive  bail out proposals in the trillions.  
That level of debt will lead to inflation and when inflation hits I sure wouldn't want to be in a position with either an adjustable mortgage or needing to get a new mortgage. 

bearmtnmartin said:

I think that unlike the last panic there is a huge pent up demand to get back to normal. The minute we are all released from virus jail things will explode. Except we will all just owe way more money.

This is my thought as well.

I was just getting ready to refinance my house too. The second whammy is the stock market, I have a stock bonus coming in June. Likely no point in cashing it out now.

Was happy with the way interests rates worked out. Was a few days early from completely nailing it at the low point but happy with where we locked in, same as what you got RevRico.  Like frenchyd said, you can't time the market otherwise everyone would be a rich stock broker.

The money is pretty cheap right now and even with all this happening I don't see the local market changing radically over the next year. If anything everyone who made it through with their mortgage will be recovering cash instead of putting a house on the market.

Damn, all my friends will have the best excuses to not help me move though.

I was planning on selling my house in the next month or two.  I don't see that happening now.

I'm in the process of putting my mom's house on the market here in NC. The realtor thinks the market will hold at least for a few more months. Knowing my luck the market will make a near vertical plunge the day we put the sign out front.

To Ghia and Rev,

You may be buying at the wrong price but you are buying at the right interest rate.  My advise would be to press forward with the deal at full steam ahead.  

You have to live somewhere.  In ugly times it is not really good to be a renter.  And, in ugly times, interest rates and your credit score could get worse.  

An example of myself, I bought a condo in 2003 at the height of the market.  I tried to sell it in 2009 and it took 2 years or 2011 to actually sell it.  When it did sell, it sold for 25% less than  what I paid for it.  Luckily, I owned 30% of it so I did not have to write a check to get rid of it but the check I got at the end was pretty small.  

The silver lining is that even when I factored in my home improvement costs, I lost about $500 per month that I owned the house over the 8 years or nearly $50k.  That sounds horrible but it would have cost me more than $1k per month to rent that same place.  So, it was still cheap living, comparatively.  

Pent up demand?  Only if you're employed!  There's going to be a huge sector that won't have jobs as their companies have gone out of business.  Airlines will be laying off an enormous amount of people as are the Oil/Gas companies.  Same thing with service industry, lodging, food services, bars, etc...

In reply to John Welsh :

What worries me long term is selling the house I'm in now. Things are changing too fast to have any idea what the market will be like a year from now when we'll be ready to offload it. Hopefully all this corona stuff is over with and the casino opening 2 miles away will bump values up. The house is in bad shape, but it's in a desirable school district with a good sized lot, perfect opportunity for someone to tear down and build new, or for a masochist to refresh.

I'm relatively happy with our purchase, just stressing over the shelter in place orders in some counties combined with state wide closure of non essential businesses could have an effect on our closing date. 

I mathed it out, if we send mortgage company $1000/month we'll have the house paid off in 27 years. 3 bed, 2 bath, 4 garage spots, 2200+ square feet on .63 acres. Right now, I can't even find a 2 bedroom apartment or house for rent for under $1200/month locally without being over 60 or on section 8, even those have year long wait lists.

The interest rate was a pleasant surprise. When we got preapproved in January we were looking at 4.2%. We locked at 3.625 the end of February, and as of this afternoon, wells is back over 4% according to the mortgage originator I talked to. That does make me very happy indeed that we wound up ahead in that regard. I still think we could have paid less than we did, but I don't think that $10k would make much different in the long run, I was just talked out of a more aggressive offer by our buyers agent.

RevRico said: I was just talked out of a more aggressive offer by our buyers agent.

Yeah, because it's in the agents interest, both agents, to keep the price as high as possible. The % commission they make is based off the selling price, higher selling price = more commission.

Realtors have really set up a pretty great scam for themselves. 

One doesn't need to use a realtor to buy a house. Last 4 properties in the 7 previous years we purchased, never used a realtor. 
 

the one I am selling, I gave my realtor a fixed amount, and "buyers" agent will get 2.5%. 
 

the days of paying 6% is long gone here. Now with redfin and Zillow selling houses direct - realtors business will be drying up pretty quick here. Two friends bought houses here literally online (redfin). No realtors at all

In reply to z31maniac :

Would have only been a difference of $300 for her. Although I still think the 4500 she's making from this is to much since she still can't get me meter numbers to transfer the power over.  It was listed at $165 in November, dropped to 149 in January, I said let's offer 130 and meet them in the middle, that was "to aggressive" so 145+ 6% sellers assistance it became, which the sellers jumped on immediately. They thought they'd have trouble selling because the house is handicap accessible. 

Still better than the first agent we were dealing with who stood to make $1200 from the transaction and couldn't even tell me if the property we were going to buy through him had gas service. 

It is a good little system they have. I've considered a real estate license through the years, I just don't like people enough to want to deal with them every day.

mr2s2000elise said:

One doesn't need to use a realtor to buy a house. Last 4 properties in the 7 previous years we purchased, never used a realtor. 
 

the one I am selling, I gave my realtor a fixed amount, and "buyers" agent will get 2.5%. 
 

the days of paying 6% is long gone here. Now with redfin and Zillow selling houses direct - realtors business will be drying up pretty quick here. Two friends bought houses here literally online (redfin). No realtors at all

I know you don't NEED to use a realtor. My point was, over the years through lobbying and such, they have built themselves a cozy little racket that isn't needed in the modern age. 

It sucks many of them will start to lose their jobs, hopefully they will be able to replace them with something else. 

In reply to z31maniac :

Around here realitors with the right connections can still command a 7% fee.  They used to do it with pocket listings of the real premium homes. Until the state outlawed that practice. 
Today they do it by prequalifying Potential buyers. Keeping the unqualified from traipsing through the multi-million dollar estates.  
Even more modest homes like my neighbors  are working with Realtors rather than have a flood of unqualified people chase away legitimate  buyers due to heavy crowds. 

In reply to frenchyd :

Here the game on the expensive houses and good neighborhood are, realtors won't sell you a house, IF you have your own realtor. They will ONLY sell you a house, if you use them. Thus over 80% in these neighborhoods, the selling realtor and the buying realtor are the same person.     The new neighbor I have is a Disney Executive. Sold his house in Newport Beach. He tried using the same realtor to buy the house next to me. GOt no response on his offers (which is highly illegal in this state, as sellers rejection needs to be sent).  Then he called the selling realtor direct, and the realtor in no unncertain terms said, if he used her on both, she can close the deal. He agreed. So he was essentially forced to be unethical and cut his own realtor out, as that is the competitive market in the 10/10 school districts. You have to play the games, as you are competing witih 100% cash. Each house is getting 10-12 offers (last 3-4 years) all cash, all no realtor deals. So if you don't play the game, you won't get a house. Truly the wild wild west. 

Realtors, used car salesman, dentists, chiropracters....around here..they all seem to be the made from the same cloth....

z31maniac said:

RevRico said: I was just talked out of a more aggressive offer by our buyers agent.

Yeah, because it's in the agents interest, both agents, to keep the price as high as possible. The % commission they make is based off the selling price, higher selling price = more commission.

While this is technically true, it's been shown that it is actually in the realtor's best interest to make the sale promptly rather than at the absolute highest price.  With time factored in the ROI goes down the longer they have it listed, even if they ultimately make more money at the higher price.

I agree, though, most real estate fees seem ridiculous.  As an architect, I would be lucky to make 3%-4% of the house's cost for designing it, including my professional liability for the design. A real estate agent will make 5%-6% just for showing it to people.

We've got a HELOC in underwriting right now to do some exterior remodeling. It's a horse of a different color, but I'm glad that I'm doing it now because of the rates.

Semi-related, we've got a lot of equity, we've been here a while. My plan is not to borrow more on the HELOC than what current market value for the place is. Basically, if I need to get out of the house I wont be underwater. Of course, given the market for the next few months, that might not be true for a short while, but I think it will come back. We weren't planning on going anywhere anyway, and even through 07/08 our value didn't fall much. We're in a good neighborhood in an Air Force town and the house is around 100k. Property like this is always in decent demand and the base influence keeps prices up.

In reply to mr2s2000elise :

What do you mean dentists near you are ???  I don't understand.

I also don't understand who has the money to do an all cash offer on a house in California that's gotta be 7 figures or more.  Where are these people getting their money and what to do they do for a living to be able to lay their hands on that much liquid cash?  Are they refinancing the home after the purchase?

Doc, 

They are funneling cash out of their home country in most cases. 

"In California, however, Asian buyers do dominate: Last year they accounted for 71 percent of California homes sold to foreign buyers. That dwarfs the next closest group of international buyers, Latin Americans at 14 percent.

No state in the country has attracted nearly as much attention from Chinese buyers as California, site of nearly 40 percent of all Chinese home purchases in the U.S.

Why are the Chinese so enamored with California real estate? First, it’s important to understand what we mean by “foreign.” Those statistics include recently arrived immigrants, of which California has quite a few. There’s legitimate debate over whether those immigrants should be counted as “foreign.”

Many of the recently arrived Chinese snapping up California properties are holders of EB-5 visas—a U.S. program granting green cards to foreigners who invest $500,000 in U.S. business.

“The wife and kids are in the U.S., some of the husbands are here some of the time and some are not, they have a portion of their money here and they have a portion of their money in China,” says Lin He, a real estate investor and developer who courts Chinese property speculators in places like Newport Beach and Irvine.

The number of Chinese diaspora already settled in areas such as Orange County and the San Gabriel Valley attract a great deal of foreign investment because cultural and language similarities make the purchase process easier.

Much of that money goes towards primary residences—Chinese visa holders living with their family in a U.S. home. But after getting a foothold in California, many recently arrived Chinese view residential real estate as an attractive investment strategy—one that was not readily available to them in China, either because of government policy or exorbitant cost.

“The real estate in Beijing and some other places is really expensive,” says He. “They spend a year here, they buy a house, they say, “You won’t believe it, it’s so cheap here.”

The National Realtors’ survey found only 40 percent of Chinese foreign buyers intend to use their U.S. home as a primary residence for their recently immigrated family. The remainder eyed it as an investment vehicle, vacation home, or for use by a student."

**CA is the new Vancouver **

And BTW - Asians have been buying California real estate since at least the 1980's, and Chinese in particular have been doing it since 1997 when it was announced the Hong Kong lease was not going to be renewed, and mainland Chinese are following along what Hong Kong was already doing for the reasons expressed in the post above.

This is not a Covid specific phenomena.

Ok, but unless they already owned real estate in Beijing, where are they getting the money? Are there that many people in China who have 7 figures cash laying around?