House price

[SwampSurvivor]

TN, specifically Nashville, has benefited from an influx of money out of the NE US. I'm a little surprised about Chattanooga however it does have the VW plant along with all the support industries which has been a success economically.

Fun fact. It is estimated that nationally the housing shortage is about 700,000 units/yr. This one reason why there won't be a crash like 2008. The other reason is that borrowers have fewer avenues to commit fraud. Yep, I'm going to say it. 2008 crash was mostly due to borrowers committing some level of fraud.

I don't know if I'd call it fraud, but a lot of people were really buying more than they could and should afford. And banks were more than eager to give it out. I remember people I worked with at Target (making less than $10 an hour then) getting a mortgage on a $200,000 house. Completely insane.

They're still pretty crazy. Of course I'd be ahead if I did it, but by myself when I bought the swamp shack, I was approved for $140,000 by myself. Single income. Right now, my fiance and I are looking for a new house and the one we have an offer in on now is only 1.5 what we make a year with our max being twice what we make a year. The mortgage on this one will be 1.3 paychecks a month for me , or exactly 1/4 of our take home pay each month. I know a lot of people who aren't doing that.

 

[Quattro Pete]

two bed room apt. for 1200 a month is normal,,,

That sounds pretty cheap actually. Around here in Michigan it's about $1700 for a 2br apt.

 

[BMWTurboDzl]

I don't know if I'd call it fraud, but a lot of people were really buying more than they could and should afford. And banks were more than eager to give it out. I remember people I worked with at Target (making less than $10 an hour then) getting a mortgage on a $200,000 house. Completely insane.

They're still pretty crazy. Of course I'd be ahead if I did it, but by myself when I bought the swamp shack, I was approved for $140,000 by myself. Single income. Right now, my fiance and I are looking for a new house and the one we have an offer in on now is only 1.5 what we make a year with our max being twice what we make a year. The mortgage on this one will be 1.3 paychecks a month for me , or exactly 1/4 of our take home pay each month. I know a lot of people who aren't doing that.

Without a doubt the industry was complicit but ultimately it was the individual borrower who signed the documentation attesting to the accuracy of the information they gave the lender. Greed and fear of losing business let it fester. In any case I had a front row seat of sorts and I've been in the business for over 20 years. There was a lot of fraud on the borrower level. Lies, lies and more lies. Lying about income of all sources, lying about assets, fake income and asset documentation, straw buyers, etc.

 

[billt460]

The actual value is whatever it sells for.

No it's not. People overpay for things all the time. That doesn't make what they buy worth it. If value was represented by sale price, we wouldn't have had the crash in 2008. The actual value of the home itself would have prevented it. That was not the case.

If it costs "X" number of dollars a sq. ft. to build, then that is what the home is worth, plus the lot value. If 30 months later building costs went up only 50%, but the home is selling for 250% more, (like the home I linked to), then the house is over inflated in value. And sooner or later it's price will plummet to reflect that.

Just because someone is stupid enough to pay the inflated price whomever is asking, does not mean that is what it's worth. In 2008 people were getting into bidding wars just like they are now. It drove prices way up and over actual value.

The home I sold back in 2019 was a perfect example. Two couples ended up bidding against each other, and the home ended up selling for over $7K more than asking price..... Which was inflated to begin with.

It's like Barrett Jackson. Many of those cars sell well over what they're worth, because people end up over bidding all the time. It's why Barrett Jackson will not allow a car to be resold at their auctions, for at least 2 years after being purchased at one. Many are simply not worth what people paid for them. The housing industry is no different.

 

[billt460]

I don't know if I'd call it fraud, but a lot of people were really buying more than they could and should afford.

That's exactly what it was, and nothing else. Remember, the last thing to appear on the last line of the last page in a mortgage is your signature. No one has a gun to your head when you sign it. It wasn't "illegal" what the lending industry was doing by over lending. It was just plain stupid.

The people never thought it would ever end. The downfall was these idiots in the banking industry started thinking the same way. They loaned out money based on equity that didn't exist, but they thought it would. Mortgages ballooned after 5 years, and the equity was not only not there, the house wasn't worth half of what they paid. The market crashed as a result. We're fast approaching that same breaking point today.

 

[BMWTurboDzl]

No it's not. People overpay for things all the time. That doesn't make what they buy worth it. If value was represented by sale price, we wouldn't have had the crash in 2008. The actual value of the home itself would have prevented it. That was not the case.

If it costs "X" number of dollars a sq. ft. to build, then that is what the home is worth, plus the lot value. If 30 months later building costs went up only 50%, but the home is selling for 250% more, (like the home I linked to), then the house is over inflated in value. And sooner or later it's price will plummet to reflect that.

Just because someone is stupid enough to pay the inflated price whomever is asking, does not mean that is what it's worth. In 2008 people were getting into bidding wars just like they are now. It drove prices way up and over actual value.

The home I sold back in 2019 was a perfect example. Two couples ended up bidding against each other, and the home ended up selling for over $7K more than asking price..... Which was inflated to begin with.

It's like Barrett Jackson. Many of those cars sell well over what they're worth, because people end up over bidding all the time. It's why Barrett Jackson will not allow a car to be resold at their auctions, for at least 2 years after being purchased at one. Many are simply not worth what people paid for them. The housing industry is no different.

It's worth it to them otherwise they wouldn't have bought. In other words value is subjective.

For example I recently saw a deal where an individual in WA State paid 10% over appraised value and just put more $$ down.

 

[alarmguy]

It's worth it to them otherwise they wouldn't have bought. In other words value is subjective.

For example I recently saw a deal where an individual in WA State paid 10% over appraised value and just put more $$ down.

Yes, this was very common even in the early 2000's but then the appraisers got in bed with the banks and they would start using any comps that a real estate agent gave to them including accepting comps in a different school district as long as the home was within a mile they would use it.
So it became rare buyers needed more cash down.
Actually they started asking the agents what the contract price was to make it work!
Im sure things are a little more tough since those days though.

If you think about it, actual value is the price buyers are willing to pay.

 

[billt460]

It's worth it to them otherwise they wouldn't have bought.

I sure hope so. Because it's going to be a long time before they ever see their money. A LOT of people went from $350K houses into apartments after the 2008 crash. Let's hope they apply a bit more common sense to their real estate purchases this time around. Although I'm not seeing it. I never would have paid what my house is currently priced at. It's just not worth it.

 

[BMWTurboDzl]

Yes, this was very common even in the early 2000's but then the appraisers got in bed with the banks and they would start using any comps that a real estate agent gave to them including accepting comps in a different school district as long as the home was within a mile they would use it.
So it became rare buyers needed more cash down.
Actually they started asking the agents what the contract price was to make it work!
Im sure things are a little more tough since those days though.

If you think about it, actual value is the price buyers are willing to pay.

It is tougher today. For example most if not all 1-4 family appraisals must delivered in digital format and some large investors have for the last decade or so used this data to create a database. This database goes down to the granular level (ex. room counts, GLA, condition, quality of construction, etc). It's a great system and parties involved are aware of it. It's great at spotting inconsistencies and trends like what we're seeing now.

 

[BMWTurboDzl]

I sure hope so. Because it's going to be a long time before they ever see their money. A LOT of people went from $350K houses into apartments after the 2008 crash. Let's hope they apply a bit more common sense to their real estate purchases this time around. Although I'm not seeing it. I never would have paid what my house is currently priced at. It's just not worth it.

Oh I understand. I always whine about how housing is overpriced based upon the qualify of construction that I'm familiar with but I'm also aware that my perspective is based on what I paid for my current home rather than what buyers sold their home for.

In any case do you think ultimately retirees really care how much they paid for their home in a retirement community?

 

[billt460]

In any case do you think ultimately retirees really care how much they paid for their home in a retirement community?

If they don't have kids, probably not.

 

[CharlesInCharge]

I don't understand what is happening. 10 years ago, we had a national housing surplus, everyone was upside down, banks were eating hundreds of thousands of dollars on foreclosure losses and repossessions. Just 10 years ago. I had a house I had to nearly give away just 2 years ago in the mid-west. I owned it for a decade, and if you can believe it I took a massive loss on it. I refuse to even look at what it's worth now, probably 3x what I sold it for 2 years ago.

This economy is madness. I don't understand it.

 

[billt460]

I don't understand what is happening. 10 years ago, we had a national housing surplus, everyone was upside down, banks were eating hundreds of thousands of dollars on foreclosure losses and repossessions. Just 10 years ago. I had a house I had to nearly give away just 2 years ago in the mid-west. I owned it for a decade, and if you can believe it I took a massive loss on it. I refuse to even look at what it's worth now, probably 3x what I sold it for 2 years ago.

This economy is madness. I don't understand it.

It is completely insane. I'm seeing reversals happening in many parts of the country. For example, when we lived here in Lake Havasu back in the early 90's, I sold my home I had built in the Chicago suburbs, (Lake Zurich), for $201K. I purchased a home similar to what I have here now, brand new from the builder for $90K.

Fast forward to today, and that same home in Chicago is only worth around $435K, while the exact same home here is currently worth $545K. The killer are the property taxes. Here around $1,300 a year for a $500K home. There that $435K home has taxes well over $13,000.00 a year. Insane.

The homes in many of the blue states are dropping in value, while they are skyrocketing in the red states. The property taxes in many blue state areas make them all but unaffordable. Especially after you tack on a nice fat mortgage payment. Young people find it too much of a financial struggle, when you have to fork out over a grand a month just for taxes.

I remember 30 years ago, you could sell your house in Chicago, and buy a nice "Golden Girls" style retirement house in Florida, for about half the price. Now it's almost the other way around. Taxes are astronomical in the blue states, and jobs are becoming scarce. Home values are taking a big hit as a direct result.

Companies are leaving the rust belt, and California in droves, because the cost of doing business is becoming too high. Along with massive, out of control, government regulations. And they're all flocking to places like Arizona, Texas, and Tennessee. The housing market appears to be adjusting accordingly.

 

[alarmguy]

I don't understand what is happening. 10 years ago, we had a national housing surplus, everyone was upside down, banks were eating hundreds of thousands of dollars on foreclosure losses and repossessions. Just 10 years ago. I had a house I had to nearly give away just 2 years ago in the mid-west. I owned it for a decade, and if you can believe it I took a massive loss on it. I refuse to even look at what it's worth now, probably 3x what I sold it for 2 years ago.

This economy is madness. I don't understand it.

Housing, like the economy is cyclical is all you really need to know.
Always ups and downs based on supply, demand, jobs and wages.
“Just 10 years ago” could be any point in time.
Just 10 years ago in 2000, just 10 years ago in 1990, just 10 years ago in 1980, 1970, 1960 …. and so on. It’s all the same just 10 years ago, highs and lows, peaks and valleys…

 

[Jack Watts]

Folks keep talking about how overpriced the housing market is currently, and how it's bound to crash or "return" to normal. I'm not so sure....

I also think those folks making those comments haven't really traveled much outside of the US. Granted, I spend a lot of time in Asia, where things are very skewed and housing is unbelievably unaffordable. That said, compared to pretty much the rest of the world, owning housing is much easier in the US than anywhere in the world. What I see is more of a correction to the norm vs. a boom that's ready to bust.

Property Prices Index by Country 2024

Property Investment Index by Country. Contains comparison of indicators for residential property investment. Apartment price to income ratio, price to rent ratio, gross rental yield, loan affrodability index, ...

www.numbeo.com

Interesting to sort by mortgage as a percentage of income. If you think things are out of whack here, take a look at the rest of the industrialized world.

 

[alarmguy]

Another thing left out of the equation todays homes are 100%+ larger (double the size) then they were back in the 50s and 60s and young couples have smaller families now too. Loaded with luxuries and energy efficient too and far larger then like countries overseas.

 

[Rand]

Fast forward to today, and that same home in Chicago is only worth around $435K, while the exact same home here is currently worth $545K. The killer are the property taxes. Here around $1,300 a year for a $500K home. There that $435K home has taxes well over $13,000.00 a year. Insane.

appraised value was 66k on house and taxes 2k but oddly enough it went up to 80k value appraised and taxes went up less than $100
so I guess the people with low value houses get screwed by the system.

house that is 4x-5x the value is 33%-40% more taxes than I pay.

Sort of like the high income only electric vehicle tax credit.

Stopping now before politics.

 

[nickaluch]

The media mentions a worker shortage but there is a huge worker shortage in construction which they seldom bring up.

Part of the problem is todays parents, the education system and the building industry itself.

What parent today wants their high school kids not go to college and become a carpenter/work in the building trades?

With all the subbed out work in the construction industry to small companies with self employed or small crews, it is hard to get in the trade
and become skilled.

K-12 schools and parents have a heavy push towards prepping students for a collage education or else you are a loser and will struggle in life.

High school vocational programs have wanned and are often filled by the student that generally don't do well in school.
Years ago a student that excelled in trig would be in the carpentry vocational program.

More legal immigrants needed to fill those jobs. Parents want better for there kids then they had. No parent wants there son swinging a hammer for 40 years to retirement. They want them educated making better money easier living and retired enjoying not crippled.

 

[measureman]

Chattanooga, TN is One of the Most Overpriced Housing Markets in America

Demand for housing has risen sharply in 2021, and that has affected prices. According to the carefully followed S&P CoreLogic Case-Shiller Indices, home prices nationwide rose 19.1% in October, compared to the same month last year. In several markets, the figure was over 25%. Surging demand, in...

247wallst.com

Note: It appears in Chattanooga that the builders cannot build new homes fast enough and the apartment business is booming...its crazy here, if there is a foot of land , the builders will put in a 4oo unit apartment complex....two bed room apt. for 1200 a month is normal,,,depends on where it is..the days of $500 a month apartment went out long ago..mercy.. Downtown living is the norm, the noise level is insane...o well, life goes on I guess....

Same thing in Colorado.
But if you advertised a 2 bedroom apartment for $1200 you would be swamped with renters.
2 bedroom here in a decent building is $2000 and up, anything less then that if you can find it lands you in some bad areas.
I work for one of many flooring companies here that do new home builders and my company alone did around 5000 new homes last year.
The 1000 or so homes that burned down in the big fire here are being quoted $350 a sq. ft. to rebuild and good luck getting materials and labor.

 

[Dave Hess]

Very difficult in Colorado with so many homeless families.

They have to relocate and start over.