Real Estate Boom?
Seems many areas besides the Hudson Valley/Catskills in NY are experiencing a huge BOOM in sales/prices as city folk rush to get out of NYC (and Boston etc too I bet).
Does Chris and Adam still feel the overall path of real estate is down? I assume if so then its when the stock market starts to tank that real estate will follow. Any idea when?
I am asking the same question myself as I am in the market for property. This has come as a surprise. I expected the real estate market to tank during this time.
It’s happening here in Tennessee too.
Just sold a rural property for cash to a couple getting out of the city.
Wish I had more country property to sell!
Nashville just raised property taxes 32% to offset reduced business tax revenues.
With policies like that, city real estate is going to collapse!
Maybe I should sell the 20 acres of woods I own in a different state. I haven’t been down there in years anyway.
Most of the interest in rural is for properties that have some sort of residence. I was very surprised at the number of showings the property got, especially to people seeking to use VA or FHA mortgages. As a seller those aren’t your best buyers, because the appraisal requirements are more stringent, but there were a lot of those types of lookers. Anyway, I used MLSBrokerDirect.com and saved the listing commission! Just paid $100 bucks to list it. So it was even a bargain to sell!
It’s a very interesting time for real estate. Real estate is normally, for the vast majority of the market, purchased by credit and not with money. Thus, the cost and availability of credit to make the purchase is normally the over-riding factor in pricing. When lending is loose, valuations go up. Similarly, when interest rates come down, valuations go up. Conversely, when banks won’t lend, or will only lend at higher interest rates, valuations can crash dramatically as only a few people have enough money to buy all cash, and in difficult credit markets even people who have enough cash to make all cash purchases tend to be wary.
So, the 2008 housing bubble pop was never allowed to price down properly. For a while lenders weren’t lending, as owners were walking away from properties bought with easy money in the just-past bubble. So it was critical to stick save the remainder of the mortgage holders — and especially the PigMen in the banks and Fed who were criminally complicit in blowing the bubble and failing in due diligence — to drop interest rates to near ZIRP. The Fed did that — as I said, more to help their criminal buddies at places like Wells Fargo, but also to keep the whole contagion from taking down everything like the Smith Virus at the end of The Matrix trilogy. But even that wasn’t enough as for a long time, banks found it less dangerous to just lend the QE funds back to the Fed for a sure but small return. Because of that, real estate didn’t really start picking up pricing power again until after 2012 in most markets.
Ok, so on to the present. Real estate was already dramatically overpriced coming into 2020. A lot of the valuation was being held up by still historically low, and arguably actually negative *real* interest rates. (real interest rates correct for inflation, so if real inflation of money and credit is, say, 5% but you can borrow for 4%, your real rate is negative and you are being paid to buy houses…with credit). In terms of discounted cash flows, however, and especially if you had a variable rate loan, coming into 2020 things were way overpriced and quite at risk.
But where else can you put your money when the government is raping and pillaging savers and pensioners? You have to continue to play the game under those circumstances and housing prices were still going higher.
The Covid lockdown SHOULD have hit real estate pricing dramatically. And it still will, I expect, in urban areas and in most commercial property valuations. But there are a lot of additional factors now in play. A few of them are (1) “Escape from New York” (and most other cities) (2) Artificial, and temporary, fiscal money dumping and buttressing of certain people, players, and institutions. (3) Temporary forbearance on evictions; super remuneration of unemployed (which ends very soon, unless extended); the Federal reserve PPP funds PLUS SBA picking up the tab for all SBA loan payments for the six months beginning April 1 (the jokes on someone, no joke) and all manner of other incentives. (4) On the other hand you still have to have a job to qualify for a mortgage, and there are still a lot of them in government drone positions; bankstering; and other more legitimately productive pursuits. (5) there is still somewhat of a drag on markets as people are adverse to going into strangers houses, or allowing strangers into theirs, in order to facilitate showing and selling.
So real estate is really crazy. And I can attest that nice, smaller towns and rural areas, as well as lower tax states in general are experiencing a boom. Farmland, too, seems to have caught a bid.
Some of this is people being jerked around by non-free-market forces. Some is people beginning to wake up to the realization that either Jesus or the Devil may be coming for the United States for real and possibly really soon.
“May you live in interesting times!” is supposedly a Chinese curse. To go along with all the other Chinese curses we’ve been getting recently.
WHEN real interest rates cease being ZIRP or negative, aka when dollar debasement comes home to roost, AKA “full faith” in the government gets sufficiently tarnished, the lending rates and availability should go into reverse in a big way. That SHOULD cause housing purchased with credit, and also housing purchased with cash, to drop in value quite dramatically. There are lots of other things that can feed into that, or forestall that a little longer, I guess…but I wouldn’t count on any of it.
Figure out NOW where you want to die, or attempt to live, and try to make final adjustments. That’s what I’m trying to do, but it is confusing as there are so many variables, and the government is just such a wild card even on its death bed, and you have to figure out what kind of safety is most important for you and what you are willing to give up now to maybe buy more of that safety going forward. And, in the end, you only live once…so what are you going to do? Markets are repricing and repricing almost by the hour as perspectives shift and shift again, along with the odds and timings.
One more thing that will be a big factor, I’m pretty sure, eventually that I wanted to make explicit: The US government – federal but also state and local – is showing you what its priorities are. Its priorities are protecting ITSELF and its apparatchiks, and other leeches with various other titles. The Federal government can always print (though keep Weimar and other historical references in mind, as all printing has its limits). But what of states and local governments and THEIR self-entitled pigs and apparatchiks? They can’t print; and they can’t live within a budget; and they can’t not pay their pensions; and they DO get most all of their loot from fixed property, one way or another.
What are you going to do when the state and local government decide to raise your property taxes 100%…a year…a month…a day? Who is going to own “your” property then? And who is going to want to own it — and what will it be worth?
You can be very sure that when push comes to shove, the state and local governments will take EVERYTHING you have rather than go down with the ship. Public “servants” are notoriously in it for the money, and not to be “servants” at all. Or maybe only, or mostly, to serve themselves.
We live in a rural part of North Central Florida. Two days ago for we were looking at a small, nicely improved, fenced parcel of 2 1/2 acres with a double-wide as an investment. They were asking a premium for this property as the mobile home was 10 years old. It’s sale is already pending. On the market two days. It does appear people are seeking rural alternatives.
Amelia county va, like north fla, is experiencing quite a boon in smallish 2-10 acre farmette. True farm land, 100+, still sells for 7-9X the annual gross of the commodity produced.
I have been a real estate watcher my entire life and have held broker’s licenses in both Texas and Florida. A late in life divorce set me adrift and I have been trying to decide where to land for the last couple of years. I don’t think I have seen a market like this since the Florida boom back in the early 00s.
The markets I am considering and watching are Washington (where I am a legal resident), Texas (family there), Florida and I fell in love with Maine after living there last winter. I am retired so looking for a small town. I am also a Permaculturist so want some land.
There is a shocking amount of cash flowing out there. One particular neighborhood in Texas I was interested in has had no less than a dozen houses come on the market in the last month or so and go pending in a day. Many for asking price and all cash. A realtor’s dream! A buyer’s nightmare!
Washington state is off the charts for valuation but interestingly I have seen just a hint of a slowdown in smaller town properties in the last week. For the past several months anything under $200k is gone as soon as it hits the market. Even raw land that I have been watching here has been snapped up.
Texas is still offering reasonable properties…if you want to live there. The biggest hurdle I’ve found (aside from the obvious ones) is access to reliable internet for rural properties.
The Maine market is heating up but I am still finding nice properties under $200k. Raw land seems to be moving quite well in the areas I am watching. I really want to stay in one particular area there so my options remain limited.
As of now, there’s a 1.5 point spread between my money market account and the mortgage rate I qualified for. I am opting to mortgage and put cash in PMs
I am going to echo what Blkstph said: choose the place you want to die, whatever your age. And choose carefully. You are likely going to be there for the duration. That’s why the decision of where to settle has been so hard for me. This is it.
I’m likely headed back to Maine. And hey, I’m looking for a partner!