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Why are the houses so expensive?

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  • Why are the houses so expensive?

    I was expecting the house prices to drop when COVID started, but looks like they are 10-15% higher as compared to last year, where I live.

    Do you all think it is temporary or is this going to last for a while due to low interest rates, people wanting more space and the ability to work from home .

    Any thoughts ?

  • #2
    In order for housing prices to drop, there would need to be an increase in inventory. Housing starts dropped off in late 2018 and in 2019 before picking up again. This is on top of already low inventory overall.

    When the pandemic hit, the number of buyers as well as the number of sellers went down, so prices essentially stayed flat. Then there was a flurry of buying and selling when things opened up. Some looking for more space, some looking to maximize potential gains in a hot market, etc.

    Foreclosures really haven't gone up. Housing starts have slowed from the uptick because of rising cost of construction.

    All this said- real estate is local and regional. Your community may be affected more than others.

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    • #3
      I had a condo on Lake Michigan (ok, maybe 50 feet or so from the water) that sat on the market for a year because I had it priced at a super premium for the area and its selling price history. Staying stubborn on the price paid off and I sold it for asking price last month. I'm shocked about the market around here; it seems absurdly overpriced because of the pandemic. With the proceeds I downsized and bought a non-lakeside condo for cash very near my office. I now bike to work. I've learned a few things from these blogs and podcasts it seems.

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      • #4
        I thought prices would freeze. Government debt solved that.
        Those that can seem to be opting for less congestion.

        https://www.google.com/amp/s/mobile..../idUSKCN26D1Z9

        Home builders (even with higher costs) seem to think that is an opportunity.

        https://www.calculatedriskblog.com/2...ated+Risk)&m=1

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        • #5
          Supply & Demand

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          • #6
            It is definitely a supply demand equation, but local factors may contribute to this, we are seeing a mass exodus from NYC with many new buyers with in driving distances of NYC.

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            • #7
              Its supply and demand. In our Area in 2019, there were 500 new listing a day. Last 3 months have averaged 230 new listing a day (decreasing supply). Combine that with lower interest rates allowing people to decrease their monthly payment (increasing demand for higher priced housing). Don't expect a dip IMO. For every person who is forced to sell because their down on their luck due to COVID, there are 2-3 people waiting to buy up the property.

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              • #8
                Apparently sales are up in our area. The cost to build I believe has become prohibitive.

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                • #9
                  Originally posted by Jack_Sparrow View Post
                  Its supply and demand. For every person who is forced to sell because their down on their luck due to COVID, there are 2-3 people waiting to buy up the property.
                  houses on market on more than a year are now being sold at listing price . Doesn’t look like COVID had any impact on anyone . I guess you are correct . It is not going back to normal soon, but I think this “ hot market “ will end in 1-2 years.

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                  • #10
                    1. Low interest rates
                    2. Cost of building through the roof right now
                    3. migration out of CA, NYC (applicable to certain markets)

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                    • #11
                      Originally posted by Sundance View Post
                      3. migration out of CA, NYC (applicable to certain markets)
                      I guess these migrants aren't selling their homes. Housing prices in Southern California increased 12% YoY in August.

                      https://www.latimes.com/homeless-hou...cent-in-august


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                      • #12
                        This recession hasn’t affected the folks on this board, nor the people you are buying from/selling to. This is a poor people recession (I’m sure others can more eloquently phrase that).

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                        • #13
                          Originally posted by East coast View Post
                          This recession hasn’t affected the folks on this board, nor the people you are buying from/selling to. This is a poor people recession (I’m sure others can more eloquently phrase that).
                          It isn't necessarily a poor person recession. It's negatively impacted pretty much any service industry that is typically done in person. That just so happens to include a lot of people on the lower side of the income scale.

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                          • #14
                            anyone think the real estate market will tank when the eviction and foreclosure moratoriums expire at the end of the year?

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                            • #15
                              Originally posted by CordMcNally View Post

                              It isn't necessarily a poor person recession. It's negatively impacted pretty much any service industry that is typically done in person. That just so happens to include a lot of people on the lower side of the income scale.
                              The first and last comments are quite the paradox, aren't they?

                              Ultimately, the point is that yours and my neighbors aren't the ones losing jobs and/or houses left and right, thus why would we expect the houses we are looking at to drop in price?

                              Now, I'm assuming this discussion is about buying single family homes as a main residence (OP said "where I live"). If we were talking about picking up rentals in lower priced neighborhoods - I could see that as potentially being a place where there is some dislocation of pricing.

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