3 ms·
A nearly identical story is playing itself out in Seattle (1). I saw a house drop in price by $150k recently - a year ago you would have had to offer $150k over
by matheweis 8y ago
A nearly identical story is playing itself out in Seattle (1). I saw a house drop in price by $150k recently - a year ago you would have had to offer $150k over asking price just to play in the market at all.
It’s slowing in other major markets Dallas (2), Denver (3), and others, although not as severely.
From my perspective as a recent home seller and a prospective home buyer, the turnaround is largely due to the increasing interest rates.
As a seller you suddenly don’t want to risk holding out for the best possible offer because you know the average person might not be able to afford as much soon, and even if that’s questionably accurate, the uncertainty makes you more willing to consider offers.
As a buyer, even a 50 basis points change (half a percent) has a significant effect on what you can afford especially if you’re going to be highly leveraged. You’d be surprised the number of people doing crazy things like 10/10/80 Jumbo loans to get in the market, even in tech.
From both the buyer and seller side there was an insane amount of demand just as rates started going up as people were pushing the limits to get in at the best rates. I suspect this pushed prices up sharply in early 2018, making the following slowdown as rates went up appear more severe than it otherwise would have.
In the Seattle area, taxes are also a minor factor; there’s recently been several significant hikes in property taxes that eat further into affordability - I’m not sure if that’s the case in other markets, but it wouldn’t surprise me.
1. https://seattlebubble.com/blog/2019/01/07/nwmls-home-price-gains-vanish-as-sales-continue-to-slip/ https://seattlebubble.com/blog/2019/01/07/nwmls-home-price-g...
2. https://www.wsj.com/articles/the-u-s-housing-boom-is-coming-to-an-end-starting-in-dallas-1543248073 https://www.wsj.com/articles/the-u-s-housing-boom-is-coming-...
3. https://www.denverpost.com/2018/12/26/home-price-increases-slow-case-shiller/ https://www.denverpost.com/2018/12/26/home-price-increases-s...
- cobookman 8y agoI considered 80-10-10 over traditional 20% down as a way to lower my risk and leverage cheap interest rates. Put the other 10% down in a diversified stock portfolio over 10 years would likely fetch > 4.5% apr.
- sjg007 8y agoA lower down is good when the market is appreciating fast and you can either refinance or get PMI removed.
- deleted 8y ago[deleted]
- conanbatt 8y agoThis gives you extra exposure from a credit perspective. Its collecting pennies in from of the steam-roller.
- muzz 8y agoThese offers would be competing against 80-20 offers though. For the past several years in the Bay Area, it's been hard to buy even with an 80-20 because there are other buyers that put more cash down (and sometimes 100% cash).
- cobookman 8y agoYou can make an offer of 80-20 then do financing with 80-10-10. Once they accept the offer all they care about is getting their money. Note you still Need to show in your offer letter that you have the cash to do 20% down. Note an 80-10-10 is both an 80-20 mortgage along with a 10% loan.
- muzz 8y ago
- jandrese 8y agoI wonder if some of the downward pressure is the economic slowdown in China. Without foreign tax evaders propping up the market it is unsustainable. You might even see a crash if the situation gets really bad and people are forced to liquidate to cover their losses. We already saw this happen once with the Japanese back in the 80s and 90s.
- scruple 8y agoI believe this is the cause, if you want my speculative hot take. But, to be clear, I feel like I am insanely biased about this viewpoint in particular because I live in Irvine, CA.