3 ms·

> It ends up messing with the local housing market, as the Californians come in with a ton of money for housing (as housing is so expensive where they're from)

> It ends up messing with the local housing market, as the Californians come in with a ton of money for housing (as housing is so expensive where they're from) and all the prices are super low in the new location. Since they have enough money to pay for it, prices go sky-high. Not good for locals (unless you want to sell your house). This argument doesn't make any sense, it isn't like Californians come and think "Wow let me pay 200k over asking price because this is such a good deal compared to the Bay!", they see the same prices you see. I don't see how Californians are distinguishable from any other demographic that migrates to somewhere like e.g. Austin, this just seems like an unwarranted reason to hate on people from Cali

lolinder 3y ago
Buyers who need a mortgage can't go above the appraisal value, which in times of high demand lags behind the actual value of the home. If the buyer and seller reach an agreed upon value and the appraisal comes in lower than they expect, the buyer may have to back out (which can screw up the seller's plans) or lower the offer. A cash offer doesn't have that risk, so all else being equal sellers will choose them over mortgage offers. This has the effect of raising prices faster than they might otherwise go, because the appraisal system normally serves as a bit of inertia in the system.
- elteto 3y ago
  You can go above appraisal, you just have to cover the difference in cash. It’s pretty standard in high demand markets.
  - lolinder 3y ago
    Yes, that's what we did, but that's out of reach for most first-time local buyers, who typically barely have enough for the down payment on the mortgage. An influx of out-of-state buyers who have lots of equity in their to use will therefore price out the locals.
l33tman 3y ago
It doesn't have to be 200k above in a single transaction to upset the "poorer" market. When you've just sold your house at a big capital gain, you're more willing to pay just a little bit over the average market value if you find something nice, even without being conscious of the fact (buying something is never a perfect decision, you have a span and can be pushed in either direction a bit). And that little bit over feeds the trend delta when lots of buyers think like that over time. I think that logic ties in with the theme of the article as well. Supply and demand regulates markets in a subtle way, it's not a binary input like "people want to live in SF or not". Maybe it's enough that 1/10 of the people who wants to move there changes their minds when they see the housing market.
- lotsofpulp 3y ago
  > Supply and demand regulates markets in a subtle way, Supply and demand is the market.

lolinder 3y ago

Buyers who need a mortgage can't go above the appraisal value, which in times of high demand lags behind the actual value of the home. If the buyer and seller reach an agreed upon value and the appraisal comes in lower than they expect, the buyer may have to back out (which can screw up the seller's plans) or lower the offer. A cash offer doesn't have that risk, so all else being equal sellers will choose them over mortgage offers. This has the effect of raising prices faster than they might otherwise go, because the appraisal system normally serves as a bit of inertia in the system.

elteto 3y ago
You can go above appraisal, you just have to cover the difference in cash. It’s pretty standard in high demand markets.
- lolinder 3y ago
  Yes, that's what we did, but that's out of reach for most first-time local buyers, who typically barely have enough for the down payment on the mortgage. An influx of out-of-state buyers who have lots of equity in their to use will therefore price out the locals.

l33tman 3y ago

It doesn't have to be 200k above in a single transaction to upset the "poorer" market. When you've just sold your house at a big capital gain, you're more willing to pay just a little bit over the average market value if you find something nice, even without being conscious of the fact (buying something is never a perfect decision, you have a span and can be pushed in either direction a bit). And that little bit over feeds the trend delta when lots of buyers think like that over time. I think that logic ties in with the theme of the article as well. Supply and demand regulates markets in a subtle way, it's not a binary input like "people want to live in SF or not". Maybe it's enough that 1/10 of the people who wants to move there changes their minds when they see the housing market.

lotsofpulp 3y ago
> Supply and demand regulates markets in a subtle way, Supply and demand is the market.