5 ms·

Houses are way over valued right now due to the lumber shortage and then are selling for inflated values on top of that due to demand following the pandemic. My

Houses are way over valued right now due to the lumber shortage and then are selling for inflated values on top of that due to demand following the pandemic. My house, according to Zillow, has increased in value over 20% since the start of the year and I could likely raise the selling price by another 10% if I were to put it on the market.

JimTheMan 5y ago
While I am sure that is one of the factors in house prices, the main driving factor is very low interest rates and massive amounts of credit.
- dd36 5y ago
  I would add a continued reduction in supply. In AZ, SFR REITs have and continue to vacuum up 1,000s of homes every year. And they don’t ever sell them. This is a new phenomenon. It may more than offset new development. We may have a shrinking supply. The other downside is they aggressively put upward pressure on rents.
- OldTimeCoffee 5y ago
  Both of those were true pre-COVID and houses prices were not going up nearly as fast as they are now. People staying in their houses makes them actually pay attention to where they're living. Some end up wanting to renovate and some people just want to move. It's a high demand low supply time so prices increase and interest rates don't have much to do with that.
  - ghaff 5y ago
    Yeah, it's hard not to see it as a COVID-related effect, at least in part. Anecdotally, I know a lot of people renovating and moving, often from an urban apartment to somewhere suburban or rural/small town. One factor is probably that this sort of migration is always going on as people get older and the pandemic has probably pushed up a lot of timetables.
- helen___keller 5y ago
  > the main driving factor is very low interest rates and massive amounts of credit. This doesn't tell the whole story. Low interest rates don't make people offer 150k over asking while waiving all contingencies. I'm closing on a home soon and I saw this kind of stuff. I myself went 25k over with all contingencies waived on a condo in a 100 year old multifamily building. Relatively speaking, I was quite lucky to get this condo for this cheap. There's a legitimate demand here: people, like myself, who renewed a lease on a tiny apartment shortly after the pandemic started then spent a miserable year indoors. Informing each other of your meeting schedule so you aren't loud in the kitchen while your partner is presenting in a meeting. Wishing your relaxation space wasn't the same as your work space. I'm now roughly doubling the square footage of my living space, adding a garden and a patio. I'm thrilled. And yeah, I'm paying a million bucks for it.
  - bko 5y ago
    > Low interest rates don't make people offer 150k over asking while waiving all contingencies Paying above offer always struck me as strange. In my housing market its very common as well, to the point I believe under-pricing the home is intentional. There's no reason the home should be priced considerably below the market price. Sometimes you get it wrong but homes consistently selling above ask tells you the sellers are under-pricing intentionally. The upside for the seller is that bidders enter blind bids where the top bidder could bid significantly higher than the next highest bid. I think systematic under-pricing could happen when prices increase a lot in a short period and it takes the brokers a while to adjust their pricing as the trend becomes more clear. But it could also be cultural to a market where brokers feel comfortable under-pricing homes to encourage a bidding war, but that obviously doesn't work in all markets. As for waving contingencies, that's just another form of incentive in lieu of cash.
    - helen___keller 5y ago
      > There's no reason the home should be priced considerably below the market price. Partially because you comp against recent sales in the area to determine market rate, it takes a while to close so the comps you have available are usually a few months old, and the price moved a lot in a few months This happened to me multiple times. Recent sales as late as January suggested X could win this house, I put in an offer at X+15, I'm later contacted that there's an offer at X+50 and I can put another bid in if I want to one up them Of course in this example X is already over asking so you're right I think that this is done intentionally.
- meragrin_ 5y ago
  Don't forget the moratoriums on evictions and foreclosures.
- chadcmulligan 5y ago
  I heard a theory the other day that houses are more affordable than they were in the 70's - because even though the house prices are high, the repayments are lower because the interest rates are a lot lower. It was a business commentator trying to rationalise the housing market.
  - JimTheMan 5y ago
    The repayments seem to stay about the same but the overall payment is incredibly large. And because getting the % deposit is a big factor in whether you can afford a house, it pushes lower income people out of the market. And if you bought in 1980, the high rates kept the lid on prices. However while you may have started with the same payment but the rates have been steadily ticking down since then. Creating a massive generation gap between those who bought while rates were high and those who didn't have the opportunity. And I am sure this is only one of the factors in housing affordability but in my fairly uneducated opinion it seems like the largest.
    - ChrisLomont 5y ago
      >And because getting the % deposit is a big factor in whether you can afford a house, it pushes lower income people out of the market. Median downpayment is 6%, a common low end is 3%, some places and programs go lower. Median house price sold in 2020 was 347k, well over 25% of houses sell for under 250k [1]. So, for a starter home, saving 3% of say 200k is 6k. If someone can pay this mortgage without killing themselves (30%, say 4%, monthly payments ~1K) then they can save a 6K downpayment over a reasonable time. So downpayment should not be keeping many people out of homes that want one that can afford a mortgage. If their income is so low that they cannot even afford a mortgage, then yes, they are pushed out of the market, but there is no way they could enter anyways. [1] https://www.census.gov/construction/nrs/pdf/quarterly_sales.pdf https://www.census.gov/construction/nrs/pdf/quarterly_sales....
      - throwaway210222 5y ago
        > If someone can pay this mortgage […] then they can save a 6K downpayment Not if they are paying rent - there would be no surplus every month to save.
tristanj 5y ago
[deleted]
- austincheney 5y ago
  My house is not on the market, so at the moment it is priceless.
angarg12 5y ago
Real state in the UK is increasing in price the fastest since before the 2008 crisis [1]. Lumber is a very specific circumstance to the US, but similar trends are happening in other developed countries. One specific circumstance of the UK is a tax break introduced last year to incentivise home buying. Beyond that, as others pointed out, some shared causes are more people on the market for a new home due to the pandemic, and historically low interest rates. [1] https://www.theguardian.com/business/2021/may/26/value-of-uk-house-sales-forecast-to-leap-46-this-year-as-boom-continues https://www.theguardian.com/business/2021/may/26/value-of-uk...
newaccount2021 5y ago
HN is endlessly obsessed with disavowing monetary policy and the inflation we are seeing as a result. Your grocery bill and cost of gas are rising similarly to housing...just accept it, this inflation

JimTheMan 5y ago

While I am sure that is one of the factors in house prices, the main driving factor is very low interest rates and massive amounts of credit.

dd36 5y ago
I would add a continued reduction in supply. In AZ, SFR REITs have and continue to vacuum up 1,000s of homes every year. And they don’t ever sell them. This is a new phenomenon. It may more than offset new development. We may have a shrinking supply. The other downside is they aggressively put upward pressure on rents.
OldTimeCoffee 5y ago
Both of those were true pre-COVID and houses prices were not going up nearly as fast as they are now. People staying in their houses makes them actually pay attention to where they're living. Some end up wanting to renovate and some people just want to move. It's a high demand low supply time so prices increase and interest rates don't have much to do with that.
- ghaff 5y ago
  Yeah, it's hard not to see it as a COVID-related effect, at least in part. Anecdotally, I know a lot of people renovating and moving, often from an urban apartment to somewhere suburban or rural/small town. One factor is probably that this sort of migration is always going on as people get older and the pandemic has probably pushed up a lot of timetables.
helen___keller 5y ago
> the main driving factor is very low interest rates and massive amounts of credit. This doesn't tell the whole story. Low interest rates don't make people offer 150k over asking while waiving all contingencies. I'm closing on a home soon and I saw this kind of stuff. I myself went 25k over with all contingencies waived on a condo in a 100 year old multifamily building. Relatively speaking, I was quite lucky to get this condo for this cheap. There's a legitimate demand here: people, like myself, who renewed a lease on a tiny apartment shortly after the pandemic started then spent a miserable year indoors. Informing each other of your meeting schedule so you aren't loud in the kitchen while your partner is presenting in a meeting. Wishing your relaxation space wasn't the same as your work space. I'm now roughly doubling the square footage of my living space, adding a garden and a patio. I'm thrilled. And yeah, I'm paying a million bucks for it.
- bko 5y ago
  > Low interest rates don't make people offer 150k over asking while waiving all contingencies Paying above offer always struck me as strange. In my housing market its very common as well, to the point I believe under-pricing the home is intentional. There's no reason the home should be priced considerably below the market price. Sometimes you get it wrong but homes consistently selling above ask tells you the sellers are under-pricing intentionally. The upside for the seller is that bidders enter blind bids where the top bidder could bid significantly higher than the next highest bid. I think systematic under-pricing could happen when prices increase a lot in a short period and it takes the brokers a while to adjust their pricing as the trend becomes more clear. But it could also be cultural to a market where brokers feel comfortable under-pricing homes to encourage a bidding war, but that obviously doesn't work in all markets. As for waving contingencies, that's just another form of incentive in lieu of cash.
  - helen___keller 5y ago
    > There's no reason the home should be priced considerably below the market price. Partially because you comp against recent sales in the area to determine market rate, it takes a while to close so the comps you have available are usually a few months old, and the price moved a lot in a few months This happened to me multiple times. Recent sales as late as January suggested X could win this house, I put in an offer at X+15, I'm later contacted that there's an offer at X+50 and I can put another bid in if I want to one up them Of course in this example X is already over asking so you're right I think that this is done intentionally.
meragrin_ 5y ago
Don't forget the moratoriums on evictions and foreclosures.
chadcmulligan 5y ago
I heard a theory the other day that houses are more affordable than they were in the 70's - because even though the house prices are high, the repayments are lower because the interest rates are a lot lower. It was a business commentator trying to rationalise the housing market.
- JimTheMan 5y ago
  The repayments seem to stay about the same but the overall payment is incredibly large. And because getting the % deposit is a big factor in whether you can afford a house, it pushes lower income people out of the market. And if you bought in 1980, the high rates kept the lid on prices. However while you may have started with the same payment but the rates have been steadily ticking down since then. Creating a massive generation gap between those who bought while rates were high and those who didn't have the opportunity. And I am sure this is only one of the factors in housing affordability but in my fairly uneducated opinion it seems like the largest.
  - ChrisLomont 5y ago
    >And because getting the % deposit is a big factor in whether you can afford a house, it pushes lower income people out of the market. Median downpayment is 6%, a common low end is 3%, some places and programs go lower. Median house price sold in 2020 was 347k, well over 25% of houses sell for under 250k [1]. So, for a starter home, saving 3% of say 200k is 6k. If someone can pay this mortgage without killing themselves (30%, say 4%, monthly payments ~1K) then they can save a 6K downpayment over a reasonable time. So downpayment should not be keeping many people out of homes that want one that can afford a mortgage. If their income is so low that they cannot even afford a mortgage, then yes, they are pushed out of the market, but there is no way they could enter anyways. [1] https://www.census.gov/construction/nrs/pdf/quarterly_sales.pdf https://www.census.gov/construction/nrs/pdf/quarterly_sales....
    - throwaway210222 5y ago
      > If someone can pay this mortgage […] then they can save a 6K downpayment Not if they are paying rent - there would be no surplus every month to save.

tristanj 5y ago

[deleted]

austincheney 5y ago
My house is not on the market, so at the moment it is priceless.

angarg12 5y ago

Real state in the UK is increasing in price the fastest since before the 2008 crisis [1]. Lumber is a very specific circumstance to the US, but similar trends are happening in other developed countries. One specific circumstance of the UK is a tax break introduced last year to incentivise home buying. Beyond that, as others pointed out, some shared causes are more people on the market for a new home due to the pandemic, and historically low interest rates. [1] https://www.theguardian.com/business/2021/may/26/value-of-uk-house-sales-forecast-to-leap-46-this-year-as-boom-continues https://www.theguardian.com/business/2021/may/26/value-of-uk...

newaccount2021 5y ago

HN is endlessly obsessed with disavowing monetary policy and the inflation we are seeing as a result. Your grocery bill and cost of gas are rising similarly to housing...just accept it, this inflation