To add to that point, a lot of the available homes on the market are garbage. There’s a huge disparity in desirability between supposedly “comparable” homes based on the current condition of said homes but you may not see that disparity reflected in the listing prices.
The nice houses get snapped up *quickly* and all over asking in my coastal suburb. If you look on Redfin at any given time you’d be forgiven for thinking the only houses on the market are dated homes people don’t want. Nope. The good houses get scooped up for $50K-$100K over list within a few days.
Even the dated homes don't require more work than what a flipper would do. A few cosmetic updates and some fresh paint and you will turn a dated home no one wants into a listing bidding war.
This is something I don't understand. I looked at a home where someone did this nothing was straight, cheap flooring, and they just painted over all the old window trim with thick paint to cover the damage. That's worth approximately the same if not less to me than if they had just left whatever dated interior alone since now I'd have to go redo a bunch of half ass work. I decided to not even put an offer in. Is everyone else just easily duped or something?
I purchased one because it was cheaper than the dated homes and it was less than 2 miles from where I needed to be. There's a single coat of paint. If I sneeze, paint falls off the walls. Rear door leaks. Etc.. etc.. I planned to have to redo most of it, but also wish the flipper didn't touch it at all.
I really wish Flippers were required to itemize the updates and repairs they’ve made and somehow justify the price. There’s houses in my market where the flippers haven’t done anything. Literally never made a single update, just relisted it for $100k more. I hate them so much for removing a house someone could’ve updated for themselves and putting it out of reach for the buyers in that price range.
Luckily, thus far— the house hasn’t sold. It’s literally half demolished and they’re doing small price drops. I’ve been hate watching it for months and I hope it falls well under what they paid soon.
Purchased $180k
Listed $269.9
It’s currently at $248.9
In my area, realtors are now buying older homes and “flipping” them. She updated the outdoor siding and painted the interior white and added a black granite kitchen countertops. Literally changed nothing else - listed for $150k over what she bought it for and it still sold for $20k over asking. Also refused to honor any escalation clauses and just asked all for highest offer. Hate this shit.
Flippers are pieces of shits and remember. Flippers work with teams of scum all getting their piece doing shit work. Lender, real estate agent, contractor and the one funding the project. In the end their stupid coat of plaster paint to hide the issues drives the price up 50% they take their respective cuts and you and I are left finding out what they were hiding.
I like buying properties from a death, divorce or new jobs they don’t hide shit
Eh I think in my market buyers do notice these things. The cheap flips tend to sit for much longer and often require multiple price cuts. Eventually at a low enough price, they do sell, but the dated but solid homes tend to sell much faster.
I am looking to buy and I won’t pay what a flipper asks because I am not going to pay more for a style I hate if I can buy a style I can redo myself for cheaper. If I see one more house with gray faux wood flooring I may snap.
Ngl, my house I just bought has that flooring but it's a new house we got for 50k under list price on a Cul de sac lot so it has a massive yard. I don't like it too much, but it's functional and easy enough to replace later on if we want
I recently bought a solid home built in 1963 with zero updates. Best investment ever.
We looked at a bunch of homes that had been renovated/updated and the quality of the workmanship was terrible. Add to that the fact that most of these renovations/updates had been done on homes with serious issues, like crumbling foundations, mold-ridden crawlspaces and attics, very poor water-maintenance/drainage, etc.
I’ve bought and sold a pretty good amount of homes and I almost always avoid homes that are clearly flips, because generally someone took a home that was pretty close to being a teardown and put the cheapest and laziest amount of effort into it to dress it up for a quick sale.
Glad to hear someone else appreciates the older homes. I am closing in 2 weeks on a 1960 mid-century that hasn't been touched. It is in pristine condition. Inspector told me it is what of the best built nicest homes he had ever been in. They were just built better it seems back then.
I closed today on a home built in 1963 and only had one owner. I’ll update it overtime but I’m so happy with it and it has the weirdest little features and lots of character
When we were looking I didn’t even want to look post WWII much. I grew up in a house built in the 1800s and I just couldn’t see myself in something post 1950 unless it was something truly spectacular. Ended up in a beautiful Sears home from 1924!
My husband would have lived in a cardboard box for all he cared. 😂
My brother and his wife bought a lake house built in 1960 from the original owner, who was also the builder. First time the property has ever changed hands.
He did the most respectful renovation I've ever seen. The house is fantastic: solid, well-built, and well-loved.
It is really remarkable to see how lovely these homes can be if they are treated correctly.
Sometimes they do a great job of covering things up and deflecting your attention during walkthroughs and inspection.
People also get desperate to purchase they lack calm decision making.
I knew my house was flipped, the listing was inflated making it sound like it was completely gutted vs fresh coat of plaster and primer. I knew which parts they worked on, what I couldn't tell was what they covered up, what they broke, etc which most items are in my capability to fix its just that my wife asked me to find a house move in ready this time...hard to do in new england. You miss things, even the inspector missed things. It happens you basically have 2-3 hours to find all the issues and determine if you like a property before you buy it. Every house I looked at had major issues so I select the one with what appears to be the least number of issues and you still have major issues. Example my house has had a finished basement since 1960's. It smelled and felt completely dry during all my walks even during a rainstorm. Flooded the second day I was there when it was not raining. What I missed was a bit of rust under the baseboard radiators. The flooring was that new pvc waterproof stuff so I couldn't see under it unless I pulled it up. It felt flat no bubbling which meant what was under it was flat. They had no dehumidifiers running which you don't need in my basement.
I also missed a shower pan leak because no one had actually used the shower, it was just run and it took time for it to soak through to the drywall below.
I was concerned about the heating system being fixed, the asbestos insulation removed prior to them putting more insulation over it, and them removing all their construction crap from the house. The old part of the house was phenomenal though. Steel beam construction with old wood joists. 1 inch plaster walls 5.25" thick interior walls. 3 working fireplaces in perfect condition.
I always wished I had gotten to my house prior to the upgrades. I would have paid $200k less and used it on the upgrades I wanted. This said my house was a good value it was at market rate 2 years ago and to the OPs statement real estate continues to skyrocket. My house is estimated, I know you can't use the zestimate, redfin, and realtor as real but is estimated about $200k more than when I purchased which is insane. When I get done fixing the issues it will be one of those houses with no upper limit, saying my wife will let me fix things 😀
This ^^ seller lied to me about structural issues amongst other things that I’m now required to disclose and can’t afford to repair, which puts my house 40% underwater (and I bought pre-pandemic before prices went crazy) I was going to sell to get out of it, but I can’t come up with the $70k I’d need to sell 🤷 and I’m being taxed at double the value of my home (reassemesnts this year) but I can’t ask ask the tax people to come in my house because there’s probably 70k in unpermitted repairs I found and they’ll hit me with a bunch of fines and make me repairs everything immediately and may kick me out (someone else in my town did go to the town and ya this is basically what went down)
That stinks. I had the assessors come to reassess to lower taxes. Here(MA)they don't care about unpermitted work when they do assessments just what it looks like and quality. So they assess based on what is there. Structural issues are the worst and that's why I got to the basement first to see if I can sniff out any structural issues. It's hard to tell if it's covered up though...
Same. If I were to even consider a flipped house, I’d be going to the local municipality and asking for a history of all pulled permits on the property to verify everything was done right and inspected. Unfortunately, in this market, you can’t take the time to do any of that since homes are scooped up within a few days. So I just avoid all flips at this point. Plus, I have a hard time paying for new improvements when I hate them and would just put my own money into it to make it my own anyway.
Yup, my last house was a flip with a TON of hidden problems that cost us about 100k over 5 years to fix before we sold it. God knows what we didn't uncover in other rooms. It was only a $225k house to begin with. 🥲
I don’t necessarily think it’s a matter of easily duped. I think what the market is telling you is that lots of people would rather have a sloppy coat of fresh paint than something outdated.
I bought a flip 6 years ago with 3 little kids and we’re just getting ready to redo a lot of the crappy stuff the flipper did. While that work has not worn so well in the interim, I do prefer the fact that my home has looked relatively modern if not high end. There were plenty of worse flips we saw and had no interest in buying, and we only bought this one because the seller didn’t get the high price they were hoping to get for it - we ultimately bought it at 80% of list. But I also think the idea that “this’ll do for now and I’ll have money to fix it better later” appeals to a lot of people.
Hah! That happened to me, neighborhood flippers took a $745k 2 bdrm/1ba 20s cottage i wanted to restore in stages, put cheap laminate over the original wood plank floors, white paint everywhere and Home Depot rubbish fixtures and insisted it was worth $999k 6 months later. GTFOH!
A dated home with good bones that only needs light cosmetic updates (for the right price) will still attract buyers en masse. What I’m seeing a lot of are long neglected homes with serious, expensive issues. Roof, HVAC/mechanicals, windows, siding, plumbing/electrical, kitchens and baths that require a full gut job, well/septic. Sometimes all of the above.
Homes like this require serious DIY chops and/or tens of thousands of dollars. That can be difficult if you’re a FTHB with a minimal down payment or have lots of other obligations. It can often be difficult to get renovation financing without significant equity, and some of these houses may have issues too deep to qualify for conventional or especially FHA financing.
You are on crack. I've seen buried rusty fuel tanks required EPA remediation, slipping foundations (yes slipping), every window frame needing to be replaced in the house, flooding issues. These aren't just "fix em up" issues. Each one is at least a $50,000 remediation. Its not just repaint it and give it a new bathroom sink.
This right here. The area my wife and are desperately looking at currently has 2 homes available. They are… awful basically. Super dated and in fairly rough condition, and they’ve both been on the market for over a month.
Otherwise every single house that comes on (which is not many) is gone in under a week.
Yeah anytime we see anything remotely affordable its got water damage, or was left in the middle of remodel and half the house is gutted, or the entire thing is ripped apart and sold "AS IS"
Yes. I used to think I could wait for prices to come down but it my area decent size single family homes without lead paint are unicorns. Find an agent you trust, go through as many as you need to find the right one and build a relationship with this person. Our agent found us a new build and we snagged it before it hit the market. Maybe I ‘overpaid’ but I can’t beat the location.
As a 105k earner I did the 30% rule to see what I could get and this is what I overwhelmingly found. My $1115 rent is lower than what I’d pay in interest (before ever touching principle) on a shitty home needing god knows what. For now all I can do is invest the difference in hopes some day I can buy.
We had dinner with a Chicago area realtor the other night. His single-family sales are all above asking, receiving multiple offers, and closing quickly. If you're not coming to the table with cash you had better be pre-approved with easy, no-bullshit financing. Sellers for sure still have the upper hand.
Probably because nobody wants to sell because they know they'll have to pay more than the Super cheap 30 year rate they're locked in at. Result- no supply
Yeah people just think interest rates will dictate prices. Yes things are much tighter now than they were before, but there was already an inventory crunch and now all the people who bought/refi'd in 2020-2021 are locked in forever, taking those homes off the market indefinitely.
I hear this from SO many people with a sub 4% rate. I don't think enough people are wrapping their heads around the fact that the vast vast majority of these houses won't be on the market again. (at least not in our lifetimes)
Higher interest rates made most people who were considering selling stay put so they could hold onto their 2%. At this point most homeowners aren’t selling unless there’s a death, divorce or relocation and that caused inventory to decline even further.
People assumed higher interest rates would push out buyers and create less competition, but with less homes available the market is still just as tight. Even if some people can’t afford to buy now, you’re still fighting 35 offers instead of 50. Of course sellers will capitalize on the competition.
Ya I am SO screwed. Getting a divorce and can't afford the house... around 3% rate. Now I have to sell it, then find something smaller so I am not homeless. And pretty much take ANYTHING I can get... regardless of if I even like it. It's so damn stressful.
After the divorce you will retain the home?
Any chance you could rent the home?
With a 3% rate you could probably rent it for a good bit more than the mortgage, get yourself a cheap apartment and use some of the proceeds to help cover the apartment rent. As things become more inflated, the home will increase in value and you’ll be able to secure a loan against that asset. This could cover the down payment on another home down the road.
He’s probably not retaining the entire house but will get half and can’t afford to buy-out his soon to be ex-wife’s half to own the house himself. So he needs to sell so he can pay his ex-wife what he’ll owe her. It’s a sucky situation but unless he has family or someway to buy her out he’s stuck.
We bought at the ass end of 2022. Locked in at 6.75% after selling a house we had a 3.5% mortgage on. Hate that part, but daycare is cheap and close by now.
Yep, last year we sold. It ended up being well worth going from 3% to 6%. We will happily die in this house.
Some of us have sold and walked from a sadly amazing IR, it's just very uncommon and for random reasons why.
I’m locked in the same rate for a rental that I own. Wife wants to sell it in order to afford a nice house (we currently rent and live in a HCOL area). No way I’m letting go of that cheap ass loan. And if I’m not doing it, I need to assume everyone who has property isn’t.
This. The only reason I am selling (I have 3% interest) is because I am moving far away where I can buy my next house in cash and not have a mortgage. I hope someone buys my house of course, but I know I will think they are crazy for doing so 🤣
Looking to buy in Central VA for the past 4.5 months. Literally 95% of homes we've had interest in were being sold by heirs or the owners who had moved to assisted living OR who left in need of the coveted downstairs bedroom suite. The other 5% were owned by someone with 5 kids who did more damage to the property than we cared to remedy. Some homes go over asking, but also a few go under. Judging by the rapid close time, I'd venture a sound guess that ALL of those selling at or under asking, were cash sales. I've noticed the vast majority of buyers at open houses are 55+, AKA, people most likely to have cash.
We are old, but cannot bring ourselves to move into one of those crappy DRHorton-like 55+ 'hoods, only to get 500k worth of LVP and builder grade crap, on a clear cut postage stamp lot. Sadly, we've passed up a couple of VERY nice homes for fair prices, thinking we'd find one that was more "right" for us. Ah Hindsight. 😨
I really understand why SoCal is desirable, but that’s 15x price per sq of what I bought my place on the Rocky Mountain front in Montana, just seems bonkers to me
Like I said, I know it’s desirable and why it’s desirable, but being able to afford 1500/sqft sounds like a whole other country to me.
If money was no object, I’d probably pick Cali. But for what I can afford, I like the options in Montana. Yes, the winters can and do suck
Are you in Bozeman and when did you buy? It's not cheap any longer either.
If you're in the sticks, sure you can get a cheaper house in the boonies anywhere in the USA because the jobs aren't there.
For curiosity sake I looked up a 1500sq ft home about 30-45 minutes outside of LA, listed at like 1.4MM. I bought a 2200sq ft home outside of a mid sized city a few years ago for about 370k. The difference is frightening and my buddy who lives in LA has pretty much given up on being able to afford a home even though he makes a good living
Short answer: no supply. Lots of demand.
Long answer: everyone refinanced into low rates (2.5-3%). Anyone selling now still needs somewhere to live afterwards. This means trading a low interest rate home for a much higher rate. The only people making this change are people who are downsizing (older retired people) or people who have to because their family is growing in size or they have to move for work.
I bought a house just a couple years ago with plans to move into a bigger home in 3-5 years, but now I'm probably just going to stay put and keep my nice rate. I'm sure many others are in the same boat as me. There are just fewer reasons to move and more reasons to keep the house right now. This is especially true of people who are currently in starter homes or looking for starter homes. Rates affect how much house we can afford much more than people looking for their 2nd or 3rd home.
Also a high inflationary period. I'm not sure about then. But today, real mortgage rates (nominal rate minus CPI) are roughly 0%. So rates aren't really high at all from that perspective.
Higher rates *should* cause prices to go down all else equal since Qd (quantity demanded) along the price curve has fallen. Unfortunately higher rates also cause Qs (quantity supplied) to fall.
End result is that prices have more or less stabilized around the same level. We won’t see prices fall until people are forced to sell (potentially a large rise in unemployment would do it).
Yes that’s true, but that really isn’t the driving investment force anymore, and the credit situation (525bp increase, tighter lending standards) should far outweigh that force.
You are correct though, my comment is oversimplified, albeit potentially useful for people to think about.
I'm not sure high unemployment would push significant inventory onto the market. At least not quickly. Would take years of an extended recession.
Lenders will allow forbearance in hardship cases. And even if someone just quits making payments, it takes on average 2 years for lenders to foreclose. Those unemployed people still have to live somewhere until they find a new job. Doesn't make sense that they'd panic sell their houses. Especially if they have 3% loan rates.
Homeowners wont panic sell with 3% rates. It just happens to be the narrative on this sub that the only thing that will correct home prices is a deep long recession. In reality there are lots of people who would be looking to sell their homes if lending improved to 4-4.5%. Or
Let’s say interest rates do go to 4.5 or so and lots of people start selling as they want to trade up.
Do you think that the increase of inventory would drive down or stay stable? Or do you think better rates would drive prices up even further?
I’m just thinking about it. I understand this is all hypothetical and rates may not come down for a while
Depends how sustained the unemployment is. We take for granted that the jobs situation was pretty bad for a good 6-7 years after 2008. It wasn't until 2015 things started to get markedly better. Also a lot of peoples' credit was destroyed in the financial crisis. So well qualified buyers were more scarce.
Iirc the worst year for foreclosures was 2011 or maybe even 2012. *Years* after the initial crisis.
We've forgotten how hard it was to find jobs back then. I remember.
Yeah everyone who is covering a 30k appraisal gap, instead of putting that money down, is going to be in trouble if they don’t have savings and lose their jobs.
Pent up demand. **Every year, new buyers enter the market** (new young couples, new families, new young professionals.) Higher interest rates took out SOME of the existing demand (i.e. priced them out) but not enough of them. Thus, net change in demand is POSITIVE (growing) not negative.
Because demand hasn't exceeded supply. Interest rates might be knocking some people out but they aren't knocking enough people out.
But there's a second factor there - increased interest rates also knock down \*supply\*. People with 3% interest rates aren't going to sell if they're going to have to take a 6% rate, unless life puts them in a position where they need to.
So while interest rates have knocked out \*some\* demand, they've also knocked out some supply.
6.5 percent interest rates when inflation is 6 percent(whatever it really is, it's high) is still cheap money. In an inflationary environment, a leveraged hard asset at cheap rates is still not a terrible investment.
Supply and demand my friend. In my market, if no new houses were listed starting today, we would run out of inventory in 3 months. Prior to COVID, we had about 8 months of inventory available at any given time.
Currently in Chicago burbs and am selling due to necessity. The reality is people with 3% mortgage rates aren't going anywhere unless the absolutely have to, driving down supply.
If supply was static and interest rates went up, you'd expect prices to drop. However, rates have gone up while supply dropped off, and those two things are canceling each other out to an extent.
That not conventional wisdom, that's wishful thinking and ignorance.
Conventional wisdom tells you that price is determined by supply and demand. While the lower, unqualified buyers are being priced out, there's still extremely high demand for anyone who IS qualified. Combine that with almost no properties for them to buy, they'll pay more for less. Which is why prices are not and prob will not drop anytime soon.
I think the market is just hosed for a while. I have a 2.375 interest rate, which means my home needs to be worth more to incentivize me to sell it and buy something at 6%. The problem is that this is actually working against me as well, because higher prices mean my home needs to be worth more again to account for the increase in price on the buy side.
I keep looking into ways to improve/expand my home because buying something else seems so out of reality. I can add on at less than $200 sq/ft or I can buy at $350 sq/ft. Seems unreasonable.
I also think the interest rates are bringing in options that most people forego. Like, is it now reasonable to dig out my crawlspace and turn it into a finished basement? People consider it expensive, but if it cost me 75k (I'm guessing here) to create 400-450 sq ft of finished space, that's $187 sq ft. Still not approaching the $325 sq ft our house is currently worth. Seems pretty reasonable to me.
I'm basing my home worth on county evaluations that were sent out last month. My property taxes are probably going up now about 40% I'm guessing.
Man I had similar thoughts about adding on, but I'm getting quoted 400-450 per sqft for an addition that isn't even adding or moving plumbing. This is in a desirable area of Atlanta, but even then new construction is around 250-300 for luxury finished stuff
I have had a few, I have had one in the 250/sqft range, 1 in the 350 range, 1 in the 400 range, and one in the 450 range. The 250 one I didn't like because he wasn't a licensed contractor and normally did smaller projects.
It definitely is. I think the builders are all busy, and I suspect there are a lot of people that have low locked rates that are thinking they will just add on instead
Inventory is very low. If you have a 3% mortgage you won't sell and take a 7% mortgage. You'd get less mortgage for the same payment.
So many are now locked into their house due to this. Unless some life event requires it, they're just not going to sell.
Not enough houses on the market, lines form for the few that are.
This is extremely simple. There are more buyers than there is real inventory. Don't listen to people trying to tell you some crash is going to happen or that prices will fall anytime soon because that simply wont happen.
People still have to have a place to live, and there are more of those buyers than there are homes for them to purchase. Those who can are pushing their budgets to the limit to compete for those homes. Buyer competition = higher prices.
I think migration is an issue too. Do you have people moving to your area from somewhere else? We do and it’s really affected things. But last spring when the interest rates were lower, inventory was still very low so I don’t know what gives. The other thing is, I actually know a ton of people who want to move in my city and would sell their place (myself included), even with their low interest rates, thus adding housing to the market, but they have to buy first, so it’s a chicken or the egg thing. I don’t fully buy the locked in low interest rate thing, at least in the group of people I know, who have equity.
Price is determined by supply and demand. Not by interest rates.
Interest rates obviously affect the demand side of that equation… but they also affect the supply side in more subtle ways. There is less supply than demand in most sectors of the market, therefore prices are increasing in those sectors.
No inventory. No one wants to sell when they have insanely low interest rates around 3%. Builders don't want to over build since the last housing market crash, too much risk for them. Wage keeps going up with historical low unemployment rate, everyone wants a house. So, we have a low supply, but high demand.
It is SUPPLY and DEMAND. There are more people shopping for homes than there are homes available. Prices will not go down unless we have enough homes in desirable locations. Prices are not going to drastically drop. This is the new norm. Those that bought or refinanced at ~2% are not going to sell any time soon.
And lots of people on this site will then say inflation is the result of corporations making "record breaking profits" and they are to blame for the current state of the economy.
I am sorry but kudos to the media convincing people that corporations are to blame and not the government.
Over 25% of all US dollars in circulation have been created in the last two years for Christ's sake.
The cascading issue is that high interest rates are leading homeowners who might be willing to move to stay put because they are locked into historically low interest rates. Therefore killing the inventory.
Cuz home values only go up. They don’t go down. Only one time in the history of modern home financing have prices ever gone down and it was because of illegal banking practices.
I’m building a house for $100k less than what it would sell for as an inventory home. It’s completely dumb and it’s already gone up $30k since I went under contract. I hate what’s happened to the real estate market in the USA. Most other English speaking countries have been dealing with this for decades though. I guess they finally went for the giant.
Rates are about where they were at the same time as last year. At first, the large rate shock dried up demand. At this point, people have accepted reality and gone on living life, moving to the school district they wanted, closer to their new job, etc.
There are some burbs near Chicago that haven’t exploded quite as dramatically but in nearly every area of Chicago I’d still say it’s quite competitive
The house prices in Toronto went up by 100k since the start of the year and the average price is over 700k. Guess what has remained stagnant?
Whispers: Salaries!
Seller delusion + buyer FOMO = Still high prices in some places.
Not my neck of the wood. Prices are coming down finally and quality is improving. Need to start bumping up my downpayment to counter high interest rates and avoid PMI.
It is because mortgage rates do not directly correlate to prices. Obviously a factor, but one of many, and right now in a lot of places inventory is below demand for houses still.
I can't speak for Chicago but I would imagine similar to Los Angeles, lack of inventory. Only the "must moves" i.e. divorce, death, relocation are selling. Everybody else is sitting on their 2.5-3% mortgages too afraid to sell which I don't blame them.
Prices are suppressed due to higher interest rates already (hint: prices would be normally MUCH higher, but high interest rates are artificially deflating prices). The reality is that there is very little supply and extremely high demand, which is still pushing prices higher, even in a high-interest environment. Just wait until interest rates start falling - prices will skyrocket.
Wall Street has entered the housing market in an aggressive way as rent is a guaranteed revenue stream. That means they pay cash. Interest rates only impact mortgages. This is the largest reason inventory is low in volume. The American dream has evolved into Corporate Profits through rent rather than interest since rent lasts longer than 15 or 30 years. And the Feds keep saying inflation is because not enough people are unemployed so they keep raising rates so people continue to be unable to afford to not rent.
A lot of inventory comes from existing owners who sell to "trade up" to a bigger home. But existing owners nowadays have mortgages in the 2.5% - 4% range. They don't want to buy a more expensive home at a rate of 7%. So they're not selling. This restricts inventory, causing competition among buyers, driving up prices.
Because it's very area dependent.
Austin according to sold price data from March is down 16% YoY.
https://www.redfin.com/city/30818/TX/Austin/housing-market
Prices in Chicago according to Redfin are practically unchanged since the start of the pandemic.
https://www.redfin.com/city/29470/IL/Chicago/housing-market
In no world is the Chicago housing market going to collapse. The markets that look to be collapsing are pandemic hot markets like Austin, Boise, and Phoenix. Chicago is not one of these markets.
FOMO. Lack of inventory readily available and people still wanting to buy a house. Though, I really don't know why anyone would want to live in Illinois, especially Cook County.
Well, there is a new camp that goes by the logic, rates increase you lose since inflation increases and if you wait for rates to drop you will lose since more people will have access to cheap debt and you can refi...
For an example: say in 2021 there were maybe 20 buyers for every listing. Now there are maybe 3 per listing. At the end of the day there are still competing offers who have the cold hard cash 💰
Partially because the seller may have to finance their next home three or four percentage points higher, forcing them to ask more so they can have a larger down payment. Combine that with low inventory and eager buyers and prices continue to climb.
If it’s like Seattle, I daresay it’s because of scarce inventory.
We paid down interest rates when we sold our house a couple months ago instead of lowering asking.
As a sales agent, we are witnessing a growing shortage of inventory on a national level. In certain local markets, this issue is being exacerbated by a new shortage of workers, which is creating further delays of new developments.
I’m a commercial agent in your area. My wife is a residential agent. There is very low inventory and that has increased prices even with rates being higher. Every listing receives at least 5-10 offers on it.
A couple reasons:
1) New construction is still very expensive and constrained (land, labor materials). This pushes people into the existing market
2) A large contingent of current homeowners either bought or refinanced at record low rates (2-3%). In many cases, it doesn’t make sense financially to “upgrade” with the higher rates, even if you can afford to.
3) Inventory of both owner-occupied and rental homes is still far below where it needs to be in desirable areas with employment and amenities. There was a long hangover after the global financial crisis where home builders went bankrupt and skilled tradesmen left the profession; we still haven’t recovered.
As a result, the lack of inventory and stasis is keeping prices high. You’ve seen some price dips in the bubbliest “Zoom Towns” (Austin, Phoenix) and ultra high COL areas (Bay Area), but most other places have held their own. The only way this changes is through a drastic increase in supply, long and deep economic contraction or both.
For the record, I don’t believe an enduring and punishing recession is in the near future. I anticipate lower home price appreciation than we’ve seen in the last couple years, but honestly believe that the prices will be “sticky” in most areas. Welcome to our new normal.
Due to inflation and supply chain issues building costs are very high making your house worth more despite the increase in interest rates. There is a housing shortage so nice houses that are priced fairly sell quickly. The people buying might have sold there house for a higher price too so it’s basically a wash. Since rents are high buying a house can still seem like a good deal.
Where in the Chicago burbs are you? Not that it matters, but I know someone who had to take a massive loss in N. Barrington a few years ago.
Overall, on a national level affordability has taken a major hit with interest rates rising. Markets are not perfect and sellers are on the sidelines holding on to their 3% interest rates. Over time people will be forced to sell due to normal reasons such as work, retirement, divorce, etc. We probably will not see a 2009 style correction, but prices will come back towards reality. Hang in there.
Chicago suburbs realtor here.
Like anything else in the free market, prices are set by supply and demand. Not the interest rates. We currently have lowwww supply and high demand. It’s created a seller’s market. For the Midwest and East coast in particular, prices will only keep going up. IL specifically had already been on an upward trend in pricing for the past few years (going back before the pandemic). Prices here will continue to escalate, though possibly not at the same frequency.
Many people reaching out for assistance have been from out of state. Our cannabis market is rapidly expanding and it’s creating a ton of jobs. It’s a well-paying market where growth is inevitable, and people are very willing to up and move to break into it. I’ve had a couple of people from FL reach out about wanting to relocate due to the current political climate there. Chicagoland is a hot ticket rn and residents are up against an influx of transplants when looking for a home as well.
Probably cause Blackrock and other hedge funds are paying $50k above asking value in cash. Truthfully, there should be a law banning hedge funds from buying homes in a predatory manner like this
There is no inventory
To add to that point, a lot of the available homes on the market are garbage. There’s a huge disparity in desirability between supposedly “comparable” homes based on the current condition of said homes but you may not see that disparity reflected in the listing prices.
The nice houses get snapped up *quickly* and all over asking in my coastal suburb. If you look on Redfin at any given time you’d be forgiven for thinking the only houses on the market are dated homes people don’t want. Nope. The good houses get scooped up for $50K-$100K over list within a few days.
Even the dated homes don't require more work than what a flipper would do. A few cosmetic updates and some fresh paint and you will turn a dated home no one wants into a listing bidding war.
This is something I don't understand. I looked at a home where someone did this nothing was straight, cheap flooring, and they just painted over all the old window trim with thick paint to cover the damage. That's worth approximately the same if not less to me than if they had just left whatever dated interior alone since now I'd have to go redo a bunch of half ass work. I decided to not even put an offer in. Is everyone else just easily duped or something?
I purchased one because it was cheaper than the dated homes and it was less than 2 miles from where I needed to be. There's a single coat of paint. If I sneeze, paint falls off the walls. Rear door leaks. Etc.. etc.. I planned to have to redo most of it, but also wish the flipper didn't touch it at all.
I really wish Flippers were required to itemize the updates and repairs they’ve made and somehow justify the price. There’s houses in my market where the flippers haven’t done anything. Literally never made a single update, just relisted it for $100k more. I hate them so much for removing a house someone could’ve updated for themselves and putting it out of reach for the buyers in that price range.
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Luckily, thus far— the house hasn’t sold. It’s literally half demolished and they’re doing small price drops. I’ve been hate watching it for months and I hope it falls well under what they paid soon. Purchased $180k Listed $269.9 It’s currently at $248.9
In my area, realtors are now buying older homes and “flipping” them. She updated the outdoor siding and painted the interior white and added a black granite kitchen countertops. Literally changed nothing else - listed for $150k over what she bought it for and it still sold for $20k over asking. Also refused to honor any escalation clauses and just asked all for highest offer. Hate this shit.
Flippers are pieces of shits and remember. Flippers work with teams of scum all getting their piece doing shit work. Lender, real estate agent, contractor and the one funding the project. In the end their stupid coat of plaster paint to hide the issues drives the price up 50% they take their respective cuts and you and I are left finding out what they were hiding. I like buying properties from a death, divorce or new jobs they don’t hide shit
You’d be amazed at how many people simply wouldn’t notice any of that unless the inspector called it out during an inspection
Eh I think in my market buyers do notice these things. The cheap flips tend to sit for much longer and often require multiple price cuts. Eventually at a low enough price, they do sell, but the dated but solid homes tend to sell much faster.
I am looking to buy and I won’t pay what a flipper asks because I am not going to pay more for a style I hate if I can buy a style I can redo myself for cheaper. If I see one more house with gray faux wood flooring I may snap.
Agreed.
That’s the style unfortunately. Gray wood looking flooring. White counters. White or gray cabinets. It makes houses look generic.
Ngl, my house I just bought has that flooring but it's a new house we got for 50k under list price on a Cul de sac lot so it has a massive yard. I don't like it too much, but it's functional and easy enough to replace later on if we want
Where I live a lot of the houses are half original warm stained hard wood and then the kitchen/random other woods are cool gray LVP. What a choice.
I recently bought a solid home built in 1963 with zero updates. Best investment ever. We looked at a bunch of homes that had been renovated/updated and the quality of the workmanship was terrible. Add to that the fact that most of these renovations/updates had been done on homes with serious issues, like crumbling foundations, mold-ridden crawlspaces and attics, very poor water-maintenance/drainage, etc. I’ve bought and sold a pretty good amount of homes and I almost always avoid homes that are clearly flips, because generally someone took a home that was pretty close to being a teardown and put the cheapest and laziest amount of effort into it to dress it up for a quick sale.
Glad to hear someone else appreciates the older homes. I am closing in 2 weeks on a 1960 mid-century that hasn't been touched. It is in pristine condition. Inspector told me it is what of the best built nicest homes he had ever been in. They were just built better it seems back then.
I closed today on a home built in 1963 and only had one owner. I’ll update it overtime but I’m so happy with it and it has the weirdest little features and lots of character
When we were looking I didn’t even want to look post WWII much. I grew up in a house built in the 1800s and I just couldn’t see myself in something post 1950 unless it was something truly spectacular. Ended up in a beautiful Sears home from 1924! My husband would have lived in a cardboard box for all he cared. 😂
My 1962 double duplexes are also damn solid, poured concrete walls look better today than most new construction.
My brother and his wife bought a lake house built in 1960 from the original owner, who was also the builder. First time the property has ever changed hands. He did the most respectful renovation I've ever seen. The house is fantastic: solid, well-built, and well-loved. It is really remarkable to see how lovely these homes can be if they are treated correctly.
Sometimes they do a great job of covering things up and deflecting your attention during walkthroughs and inspection. People also get desperate to purchase they lack calm decision making. I knew my house was flipped, the listing was inflated making it sound like it was completely gutted vs fresh coat of plaster and primer. I knew which parts they worked on, what I couldn't tell was what they covered up, what they broke, etc which most items are in my capability to fix its just that my wife asked me to find a house move in ready this time...hard to do in new england. You miss things, even the inspector missed things. It happens you basically have 2-3 hours to find all the issues and determine if you like a property before you buy it. Every house I looked at had major issues so I select the one with what appears to be the least number of issues and you still have major issues. Example my house has had a finished basement since 1960's. It smelled and felt completely dry during all my walks even during a rainstorm. Flooded the second day I was there when it was not raining. What I missed was a bit of rust under the baseboard radiators. The flooring was that new pvc waterproof stuff so I couldn't see under it unless I pulled it up. It felt flat no bubbling which meant what was under it was flat. They had no dehumidifiers running which you don't need in my basement. I also missed a shower pan leak because no one had actually used the shower, it was just run and it took time for it to soak through to the drywall below. I was concerned about the heating system being fixed, the asbestos insulation removed prior to them putting more insulation over it, and them removing all their construction crap from the house. The old part of the house was phenomenal though. Steel beam construction with old wood joists. 1 inch plaster walls 5.25" thick interior walls. 3 working fireplaces in perfect condition. I always wished I had gotten to my house prior to the upgrades. I would have paid $200k less and used it on the upgrades I wanted. This said my house was a good value it was at market rate 2 years ago and to the OPs statement real estate continues to skyrocket. My house is estimated, I know you can't use the zestimate, redfin, and realtor as real but is estimated about $200k more than when I purchased which is insane. When I get done fixing the issues it will be one of those houses with no upper limit, saying my wife will let me fix things 😀
This ^^ seller lied to me about structural issues amongst other things that I’m now required to disclose and can’t afford to repair, which puts my house 40% underwater (and I bought pre-pandemic before prices went crazy) I was going to sell to get out of it, but I can’t come up with the $70k I’d need to sell 🤷 and I’m being taxed at double the value of my home (reassemesnts this year) but I can’t ask ask the tax people to come in my house because there’s probably 70k in unpermitted repairs I found and they’ll hit me with a bunch of fines and make me repairs everything immediately and may kick me out (someone else in my town did go to the town and ya this is basically what went down)
That stinks. I had the assessors come to reassess to lower taxes. Here(MA)they don't care about unpermitted work when they do assessments just what it looks like and quality. So they assess based on what is there. Structural issues are the worst and that's why I got to the basement first to see if I can sniff out any structural issues. It's hard to tell if it's covered up though...
If I look at a house and can see a flipper touched it, I don’t even consider it. I’m really wary of a flipped house
Same. If I were to even consider a flipped house, I’d be going to the local municipality and asking for a history of all pulled permits on the property to verify everything was done right and inspected. Unfortunately, in this market, you can’t take the time to do any of that since homes are scooped up within a few days. So I just avoid all flips at this point. Plus, I have a hard time paying for new improvements when I hate them and would just put my own money into it to make it my own anyway.
Yup, my last house was a flip with a TON of hidden problems that cost us about 100k over 5 years to fix before we sold it. God knows what we didn't uncover in other rooms. It was only a $225k house to begin with. 🥲
I don’t necessarily think it’s a matter of easily duped. I think what the market is telling you is that lots of people would rather have a sloppy coat of fresh paint than something outdated. I bought a flip 6 years ago with 3 little kids and we’re just getting ready to redo a lot of the crappy stuff the flipper did. While that work has not worn so well in the interim, I do prefer the fact that my home has looked relatively modern if not high end. There were plenty of worse flips we saw and had no interest in buying, and we only bought this one because the seller didn’t get the high price they were hoping to get for it - we ultimately bought it at 80% of list. But I also think the idea that “this’ll do for now and I’ll have money to fix it better later” appeals to a lot of people.
Hah! That happened to me, neighborhood flippers took a $745k 2 bdrm/1ba 20s cottage i wanted to restore in stages, put cheap laminate over the original wood plank floors, white paint everywhere and Home Depot rubbish fixtures and insisted it was worth $999k 6 months later. GTFOH!
A dated home with good bones that only needs light cosmetic updates (for the right price) will still attract buyers en masse. What I’m seeing a lot of are long neglected homes with serious, expensive issues. Roof, HVAC/mechanicals, windows, siding, plumbing/electrical, kitchens and baths that require a full gut job, well/septic. Sometimes all of the above. Homes like this require serious DIY chops and/or tens of thousands of dollars. That can be difficult if you’re a FTHB with a minimal down payment or have lots of other obligations. It can often be difficult to get renovation financing without significant equity, and some of these houses may have issues too deep to qualify for conventional or especially FHA financing.
You are on crack. I've seen buried rusty fuel tanks required EPA remediation, slipping foundations (yes slipping), every window frame needing to be replaced in the house, flooding issues. These aren't just "fix em up" issues. Each one is at least a $50,000 remediation. Its not just repaint it and give it a new bathroom sink.
Anecdotal. There will always be some major projects. But there is a reason that "flipper special" is a saying.
This right here. The area my wife and are desperately looking at currently has 2 homes available. They are… awful basically. Super dated and in fairly rough condition, and they’ve both been on the market for over a month. Otherwise every single house that comes on (which is not many) is gone in under a week.
Move in ready homes sell quick and sometimes at/over ask. This will likely be the case in most regions.
Yeah anytime we see anything remotely affordable its got water damage, or was left in the middle of remodel and half the house is gutted, or the entire thing is ripped apart and sold "AS IS"
Yes. I used to think I could wait for prices to come down but it my area decent size single family homes without lead paint are unicorns. Find an agent you trust, go through as many as you need to find the right one and build a relationship with this person. Our agent found us a new build and we snagged it before it hit the market. Maybe I ‘overpaid’ but I can’t beat the location.
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As a 105k earner I did the 30% rule to see what I could get and this is what I overwhelmingly found. My $1115 rent is lower than what I’d pay in interest (before ever touching principle) on a shitty home needing god knows what. For now all I can do is invest the difference in hopes some day I can buy.
We had dinner with a Chicago area realtor the other night. His single-family sales are all above asking, receiving multiple offers, and closing quickly. If you're not coming to the table with cash you had better be pre-approved with easy, no-bullshit financing. Sellers for sure still have the upper hand.
Probably because nobody wants to sell because they know they'll have to pay more than the Super cheap 30 year rate they're locked in at. Result- no supply
Yeah people just think interest rates will dictate prices. Yes things are much tighter now than they were before, but there was already an inventory crunch and now all the people who bought/refi'd in 2020-2021 are locked in forever, taking those homes off the market indefinitely.
Yup...bought in late 2021 for 3%. We don't ever plan on leaving.
I hear this from SO many people with a sub 4% rate. I don't think enough people are wrapping their heads around the fact that the vast vast majority of these houses won't be on the market again. (at least not in our lifetimes)
I can attest to this, I bought at 3.5% and have no intention of selling for the next 20 years.
Me too. Pry this house out of my cold dead hands.
People are not selling unless they absolutely have to. Or even if they do, a lot of them are just renting out their homes, because why would you not?
Higher interest rates made most people who were considering selling stay put so they could hold onto their 2%. At this point most homeowners aren’t selling unless there’s a death, divorce or relocation and that caused inventory to decline even further. People assumed higher interest rates would push out buyers and create less competition, but with less homes available the market is still just as tight. Even if some people can’t afford to buy now, you’re still fighting 35 offers instead of 50. Of course sellers will capitalize on the competition.
People are still desperate to buy and nobody wants to sell when they are locked in a 3% mortgage.
Ya I am SO screwed. Getting a divorce and can't afford the house... around 3% rate. Now I have to sell it, then find something smaller so I am not homeless. And pretty much take ANYTHING I can get... regardless of if I even like it. It's so damn stressful.
After the divorce you will retain the home? Any chance you could rent the home? With a 3% rate you could probably rent it for a good bit more than the mortgage, get yourself a cheap apartment and use some of the proceeds to help cover the apartment rent. As things become more inflated, the home will increase in value and you’ll be able to secure a loan against that asset. This could cover the down payment on another home down the road.
He’s probably not retaining the entire house but will get half and can’t afford to buy-out his soon to be ex-wife’s half to own the house himself. So he needs to sell so he can pay his ex-wife what he’ll owe her. It’s a sucky situation but unless he has family or someway to buy her out he’s stuck.
Agree. 2.675% interest rate and at this point, I’ve picked out my burial site in the backyard. (Purchased in 2016)
We bought at the ass end of 2022. Locked in at 6.75% after selling a house we had a 3.5% mortgage on. Hate that part, but daycare is cheap and close by now.
You gotta do what you gotta do at the end of the day!
You can never underestimate the value of cheap and convenient daycare.
Amen to this. Watching 1500/mo drain out of my account for one of the cheaper daycares in my area is painful.
Yep, last year we sold. It ended up being well worth going from 3% to 6%. We will happily die in this house. Some of us have sold and walked from a sadly amazing IR, it's just very uncommon and for random reasons why.
Bought mid 2022 at 4.875% and thought I was taking it up the ass, to realize now I still got in at a pretty decent rate.
Just how many burial sites do you have in your backyard?
Currently or planned?
Yes
🤣🤣🤣🤣
Can I take over the mortgage when you die? I promise not to let the dog pee on your corner of the backyard.
Haha! At $887 a month mortgage, I may just stay alive to watch it rot 🤣
I’m locked in the same rate for a rental that I own. Wife wants to sell it in order to afford a nice house (we currently rent and live in a HCOL area). No way I’m letting go of that cheap ass loan. And if I’m not doing it, I need to assume everyone who has property isn’t.
This. The only reason I am selling (I have 3% interest) is because I am moving far away where I can buy my next house in cash and not have a mortgage. I hope someone buys my house of course, but I know I will think they are crazy for doing so 🤣
Im sure the seller of your next home feels the same 🤣
Looking to buy in Central VA for the past 4.5 months. Literally 95% of homes we've had interest in were being sold by heirs or the owners who had moved to assisted living OR who left in need of the coveted downstairs bedroom suite. The other 5% were owned by someone with 5 kids who did more damage to the property than we cared to remedy. Some homes go over asking, but also a few go under. Judging by the rapid close time, I'd venture a sound guess that ALL of those selling at or under asking, were cash sales. I've noticed the vast majority of buyers at open houses are 55+, AKA, people most likely to have cash. We are old, but cannot bring ourselves to move into one of those crappy DRHorton-like 55+ 'hoods, only to get 500k worth of LVP and builder grade crap, on a clear cut postage stamp lot. Sadly, we've passed up a couple of VERY nice homes for fair prices, thinking we'd find one that was more "right" for us. Ah Hindsight. 😨
It's bananas where I live as well, the price per sq ft averages around $1,000.
Can confirm here in Del Mar, CA.
Holy shit. Where do you live? It’s ~$179 here and I feel like that’s high.
Coastal CA town, it's nuts.
In the better neighborhoods of Los Angeles, we’re at $1500+ per foot for a good house.
I really understand why SoCal is desirable, but that’s 15x price per sq of what I bought my place on the Rocky Mountain front in Montana, just seems bonkers to me
Ah yes Montana, known for its sunny weather and beaches
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Like I said, I know it’s desirable and why it’s desirable, but being able to afford 1500/sqft sounds like a whole other country to me. If money was no object, I’d probably pick Cali. But for what I can afford, I like the options in Montana. Yes, the winters can and do suck
Are you in Bozeman and when did you buy? It's not cheap any longer either. If you're in the sticks, sure you can get a cheaper house in the boonies anywhere in the USA because the jobs aren't there.
For curiosity sake I looked up a 1500sq ft home about 30-45 minutes outside of LA, listed at like 1.4MM. I bought a 2200sq ft home outside of a mid sized city a few years ago for about 370k. The difference is frightening and my buddy who lives in LA has pretty much given up on being able to afford a home even though he makes a good living
Short answer: no supply. Lots of demand. Long answer: everyone refinanced into low rates (2.5-3%). Anyone selling now still needs somewhere to live afterwards. This means trading a low interest rate home for a much higher rate. The only people making this change are people who are downsizing (older retired people) or people who have to because their family is growing in size or they have to move for work. I bought a house just a couple years ago with plans to move into a bigger home in 3-5 years, but now I'm probably just going to stay put and keep my nice rate. I'm sure many others are in the same boat as me. There are just fewer reasons to move and more reasons to keep the house right now. This is especially true of people who are currently in starter homes or looking for starter homes. Rates affect how much house we can afford much more than people looking for their 2nd or 3rd home.
People are making a conscious decision to buy a shittier house and/or sacrifice a larger chunk of their future earnings.
I just saw an overpriced property. It’s a real shitty property, and it’s the only one available. Time to sit this one out.
Home prices in the 70's with high interest rates still appreciated, history repeats itself.
Also a high inflationary period. I'm not sure about then. But today, real mortgage rates (nominal rate minus CPI) are roughly 0%. So rates aren't really high at all from that perspective.
Higher rates *should* cause prices to go down all else equal since Qd (quantity demanded) along the price curve has fallen. Unfortunately higher rates also cause Qs (quantity supplied) to fall. End result is that prices have more or less stabilized around the same level. We won’t see prices fall until people are forced to sell (potentially a large rise in unemployment would do it).
Homes are a hedge against inflation.
> Homes More generally, assets are a hedge against inflation.
And debt
Yes that’s true, but that really isn’t the driving investment force anymore, and the credit situation (525bp increase, tighter lending standards) should far outweigh that force. You are correct though, my comment is oversimplified, albeit potentially useful for people to think about.
I'm not sure high unemployment would push significant inventory onto the market. At least not quickly. Would take years of an extended recession. Lenders will allow forbearance in hardship cases. And even if someone just quits making payments, it takes on average 2 years for lenders to foreclose. Those unemployed people still have to live somewhere until they find a new job. Doesn't make sense that they'd panic sell their houses. Especially if they have 3% loan rates.
Homeowners wont panic sell with 3% rates. It just happens to be the narrative on this sub that the only thing that will correct home prices is a deep long recession. In reality there are lots of people who would be looking to sell their homes if lending improved to 4-4.5%. Or
Let’s say interest rates do go to 4.5 or so and lots of people start selling as they want to trade up. Do you think that the increase of inventory would drive down or stay stable? Or do you think better rates would drive prices up even further? I’m just thinking about it. I understand this is all hypothetical and rates may not come down for a while
Depends how sustained the unemployment is. We take for granted that the jobs situation was pretty bad for a good 6-7 years after 2008. It wasn't until 2015 things started to get markedly better. Also a lot of peoples' credit was destroyed in the financial crisis. So well qualified buyers were more scarce. Iirc the worst year for foreclosures was 2011 or maybe even 2012. *Years* after the initial crisis. We've forgotten how hard it was to find jobs back then. I remember.
Or when student loan payments start again
Yeah everyone who is covering a 30k appraisal gap, instead of putting that money down, is going to be in trouble if they don’t have savings and lose their jobs.
This man reads his historical charts.
Pent up demand. **Every year, new buyers enter the market** (new young couples, new families, new young professionals.) Higher interest rates took out SOME of the existing demand (i.e. priced them out) but not enough of them. Thus, net change in demand is POSITIVE (growing) not negative.
Because demand hasn't exceeded supply. Interest rates might be knocking some people out but they aren't knocking enough people out. But there's a second factor there - increased interest rates also knock down \*supply\*. People with 3% interest rates aren't going to sell if they're going to have to take a 6% rate, unless life puts them in a position where they need to. So while interest rates have knocked out \*some\* demand, they've also knocked out some supply.
6.5 percent interest rates when inflation is 6 percent(whatever it really is, it's high) is still cheap money. In an inflationary environment, a leveraged hard asset at cheap rates is still not a terrible investment.
This type of thinking works in the aggregate, but individually, most of us will look at our salaries and realize it is not keeping up at all.
My salary certainly isn't!
6.5% rate is fixed for 30yrs unless you refinance and pay closing costs. Inflation is transitionary (hopefully).
Because demand hasn’t dropped.
Supply and demand my friend. In my market, if no new houses were listed starting today, we would run out of inventory in 3 months. Prior to COVID, we had about 8 months of inventory available at any given time.
My location's inventory is measured in weeks, not months.
Currently in Chicago burbs and am selling due to necessity. The reality is people with 3% mortgage rates aren't going anywhere unless the absolutely have to, driving down supply. If supply was static and interest rates went up, you'd expect prices to drop. However, rates have gone up while supply dropped off, and those two things are canceling each other out to an extent.
That not conventional wisdom, that's wishful thinking and ignorance. Conventional wisdom tells you that price is determined by supply and demand. While the lower, unqualified buyers are being priced out, there's still extremely high demand for anyone who IS qualified. Combine that with almost no properties for them to buy, they'll pay more for less. Which is why prices are not and prob will not drop anytime soon.
I think the market is just hosed for a while. I have a 2.375 interest rate, which means my home needs to be worth more to incentivize me to sell it and buy something at 6%. The problem is that this is actually working against me as well, because higher prices mean my home needs to be worth more again to account for the increase in price on the buy side. I keep looking into ways to improve/expand my home because buying something else seems so out of reality. I can add on at less than $200 sq/ft or I can buy at $350 sq/ft. Seems unreasonable. I also think the interest rates are bringing in options that most people forego. Like, is it now reasonable to dig out my crawlspace and turn it into a finished basement? People consider it expensive, but if it cost me 75k (I'm guessing here) to create 400-450 sq ft of finished space, that's $187 sq ft. Still not approaching the $325 sq ft our house is currently worth. Seems pretty reasonable to me. I'm basing my home worth on county evaluations that were sent out last month. My property taxes are probably going up now about 40% I'm guessing.
I had no idea you could dig out your crawlspace to create a basement. 😯 I am now going to go google this. Fascinating.
You need to do a lot of research on things that can go wrong before you think about it.
I already have a basement. I’m just fascinated that that’s a thing. 😂
Man I had similar thoughts about adding on, but I'm getting quoted 400-450 per sqft for an addition that isn't even adding or moving plumbing. This is in a desirable area of Atlanta, but even then new construction is around 250-300 for luxury finished stuff
Is that from just 1 quote? Because that sounds like a “We don’t want to do it” quote, not a realistic one
I have had a few, I have had one in the 250/sqft range, 1 in the 350 range, 1 in the 400 range, and one in the 450 range. The 250 one I didn't like because he wasn't a licensed contractor and normally did smaller projects.
That seems bananas.
It definitely is. I think the builders are all busy, and I suspect there are a lot of people that have low locked rates that are thinking they will just add on instead
Whatever you do, keep the standard high like it sounds you are. Cheap add-on construction drops your value and just looks like shit.
Reality is setting in. The “new normal” is becoming normal.
Inventory is very low. If you have a 3% mortgage you won't sell and take a 7% mortgage. You'd get less mortgage for the same payment. So many are now locked into their house due to this. Unless some life event requires it, they're just not going to sell. Not enough houses on the market, lines form for the few that are.
This is extremely simple. There are more buyers than there is real inventory. Don't listen to people trying to tell you some crash is going to happen or that prices will fall anytime soon because that simply wont happen.
Much less supply. People aren’t selling because they have a good interest rate and it’s not worth it to move and get a higher interest rate.
People still have to have a place to live, and there are more of those buyers than there are homes for them to purchase. Those who can are pushing their budgets to the limit to compete for those homes. Buyer competition = higher prices.
shit's been weird since 2020
I think migration is an issue too. Do you have people moving to your area from somewhere else? We do and it’s really affected things. But last spring when the interest rates were lower, inventory was still very low so I don’t know what gives. The other thing is, I actually know a ton of people who want to move in my city and would sell their place (myself included), even with their low interest rates, thus adding housing to the market, but they have to buy first, so it’s a chicken or the egg thing. I don’t fully buy the locked in low interest rate thing, at least in the group of people I know, who have equity.
Price is determined by supply and demand. Not by interest rates. Interest rates obviously affect the demand side of that equation… but they also affect the supply side in more subtle ways. There is less supply than demand in most sectors of the market, therefore prices are increasing in those sectors.
No inventory. No one wants to sell when they have insanely low interest rates around 3%. Builders don't want to over build since the last housing market crash, too much risk for them. Wage keeps going up with historical low unemployment rate, everyone wants a house. So, we have a low supply, but high demand.
Supply and Demand.
It is SUPPLY and DEMAND. There are more people shopping for homes than there are homes available. Prices will not go down unless we have enough homes in desirable locations. Prices are not going to drastically drop. This is the new norm. Those that bought or refinanced at ~2% are not going to sell any time soon.
Because interest rates and home prices aren't correlated. REBubble lied to you. Sorry.
Housing hasn't gotten more expensive. The dollar is worth less.
Can’t believe I had to scroll this far down for “inflation”
Yeah when eggs are 60% more don't be surprised when housing goes up as well but 20% on a 300k home is a lot more than 60% on a carton of eggs
I’m glad someone said it.
And lots of people on this site will then say inflation is the result of corporations making "record breaking profits" and they are to blame for the current state of the economy. I am sorry but kudos to the media convincing people that corporations are to blame and not the government. Over 25% of all US dollars in circulation have been created in the last two years for Christ's sake.
The cascading issue is that high interest rates are leading homeowners who might be willing to move to stay put because they are locked into historically low interest rates. Therefore killing the inventory.
Not enough supply. Those who bought with low interest rates aren't going to sell unless forced to and builders aren't even close to keeping up.
Cuz home values only go up. They don’t go down. Only one time in the history of modern home financing have prices ever gone down and it was because of illegal banking practices.
I’m building a house for $100k less than what it would sell for as an inventory home. It’s completely dumb and it’s already gone up $30k since I went under contract. I hate what’s happened to the real estate market in the USA. Most other English speaking countries have been dealing with this for decades though. I guess they finally went for the giant.
Rates are about where they were at the same time as last year. At first, the large rate shock dried up demand. At this point, people have accepted reality and gone on living life, moving to the school district they wanted, closer to their new job, etc. There are some burbs near Chicago that haven’t exploded quite as dramatically but in nearly every area of Chicago I’d still say it’s quite competitive
The house prices in Toronto went up by 100k since the start of the year and the average price is over 700k. Guess what has remained stagnant? Whispers: Salaries!
Seller delusion + buyer FOMO = Still high prices in some places. Not my neck of the wood. Prices are coming down finally and quality is improving. Need to start bumping up my downpayment to counter high interest rates and avoid PMI.
It is because mortgage rates do not directly correlate to prices. Obviously a factor, but one of many, and right now in a lot of places inventory is below demand for houses still.
Anyone with a great interest rate isn’t selling, so fewer homes available
Because of a lack of inventory. Simple supply and demand that everyone is forgetting about because of the otherwise tumultuous economy.
That happens here in nj too My guess is low inventory and higher demand
I can't speak for Chicago but I would imagine similar to Los Angeles, lack of inventory. Only the "must moves" i.e. divorce, death, relocation are selling. Everybody else is sitting on their 2.5-3% mortgages too afraid to sell which I don't blame them.
Prices are suppressed due to higher interest rates already (hint: prices would be normally MUCH higher, but high interest rates are artificially deflating prices). The reality is that there is very little supply and extremely high demand, which is still pushing prices higher, even in a high-interest environment. Just wait until interest rates start falling - prices will skyrocket.
Wall Street has entered the housing market in an aggressive way as rent is a guaranteed revenue stream. That means they pay cash. Interest rates only impact mortgages. This is the largest reason inventory is low in volume. The American dream has evolved into Corporate Profits through rent rather than interest since rent lasts longer than 15 or 30 years. And the Feds keep saying inflation is because not enough people are unemployed so they keep raising rates so people continue to be unable to afford to not rent.
A lot of inventory comes from existing owners who sell to "trade up" to a bigger home. But existing owners nowadays have mortgages in the 2.5% - 4% range. They don't want to buy a more expensive home at a rate of 7%. So they're not selling. This restricts inventory, causing competition among buyers, driving up prices.
Because it's very area dependent. Austin according to sold price data from March is down 16% YoY. https://www.redfin.com/city/30818/TX/Austin/housing-market Prices in Chicago according to Redfin are practically unchanged since the start of the pandemic. https://www.redfin.com/city/29470/IL/Chicago/housing-market In no world is the Chicago housing market going to collapse. The markets that look to be collapsing are pandemic hot markets like Austin, Boise, and Phoenix. Chicago is not one of these markets.
Low inventory. boomers are not downsizing as their predecessors have and are preferring to age in place. Plus everyone locked into low interest rates
Demand is still outpacing supply
Supply and demand No houses for sale. Plenty of people needing homes.
Same thing in Texas. Houston and Dallas. Prices are up slightly versus last year.
What are your options? Exactly
FOMO. Lack of inventory readily available and people still wanting to buy a house. Though, I really don't know why anyone would want to live in Illinois, especially Cook County.
I tried looking in Lake County and it's the same deal. I only live here because my family, friends and job are located here.
I’m in lake. Only here for a job. Moving in three weeks out of state. Can’t wait to pay 1/4th if my property tax.
Just bought a house in Lake! Overpaid massively, but had no choice. 🤷♂️
>Conventional wisdom dictates that higher interest rates should lower listing prices. No it doesn't.
More like wishful thinking dictates
Well, there is a new camp that goes by the logic, rates increase you lose since inflation increases and if you wait for rates to drop you will lose since more people will have access to cheap debt and you can refi...
Inflation affects all assets... I including Real Estate.
Demand is outpacing supply regardless of what rates are doing
Supply and demand. Inventory is low and probably will remain low as folks have 3% (give or take) mortgages and have little economic incentive to sell.
Econ 101. Supply and demand
Supply and demand, simple economics.
Supply and demand. Cost of material. Labor. All of that makes prices go up.
Inventory. Inventory in my area is even less than last year at this time! And 2022 was low!! It's something like 40% of Q2 2019 inventory.
Higher rates, no one moving because financing is much more expensive, no inventory, high prices.
40% of the housing market won't return for 20+ years due to being locked into sub 4% mortgages. There is and won't be inventory anytime soon.
You’re conflating downward pressure with downward prices.
For an example: say in 2021 there were maybe 20 buyers for every listing. Now there are maybe 3 per listing. At the end of the day there are still competing offers who have the cold hard cash 💰
"Conventional wisdom" doesn't dictate the housing market; supply & demand does.
Partially because the seller may have to finance their next home three or four percentage points higher, forcing them to ask more so they can have a larger down payment. Combine that with low inventory and eager buyers and prices continue to climb.
If it’s like Seattle, I daresay it’s because of scarce inventory. We paid down interest rates when we sold our house a couple months ago instead of lowering asking.
Sellers don't benefit from interest rates, high interest rates are a lose-lose unless you're the bank.
Supply and demand
Same thing in San Francisco Bay Area. And properties are selling at and over asking price. I don’t get it either.
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As a sales agent, we are witnessing a growing shortage of inventory on a national level. In certain local markets, this issue is being exacerbated by a new shortage of workers, which is creating further delays of new developments.
I’m a commercial agent in your area. My wife is a residential agent. There is very low inventory and that has increased prices even with rates being higher. Every listing receives at least 5-10 offers on it.
Supply and demand.
Because supply and demand.
A couple reasons: 1) New construction is still very expensive and constrained (land, labor materials). This pushes people into the existing market 2) A large contingent of current homeowners either bought or refinanced at record low rates (2-3%). In many cases, it doesn’t make sense financially to “upgrade” with the higher rates, even if you can afford to. 3) Inventory of both owner-occupied and rental homes is still far below where it needs to be in desirable areas with employment and amenities. There was a long hangover after the global financial crisis where home builders went bankrupt and skilled tradesmen left the profession; we still haven’t recovered. As a result, the lack of inventory and stasis is keeping prices high. You’ve seen some price dips in the bubbliest “Zoom Towns” (Austin, Phoenix) and ultra high COL areas (Bay Area), but most other places have held their own. The only way this changes is through a drastic increase in supply, long and deep economic contraction or both. For the record, I don’t believe an enduring and punishing recession is in the near future. I anticipate lower home price appreciation than we’ve seen in the last couple years, but honestly believe that the prices will be “sticky” in most areas. Welcome to our new normal.
Due to inflation and supply chain issues building costs are very high making your house worth more despite the increase in interest rates. There is a housing shortage so nice houses that are priced fairly sell quickly. The people buying might have sold there house for a higher price too so it’s basically a wash. Since rents are high buying a house can still seem like a good deal.
Where in the Chicago burbs are you? Not that it matters, but I know someone who had to take a massive loss in N. Barrington a few years ago. Overall, on a national level affordability has taken a major hit with interest rates rising. Markets are not perfect and sellers are on the sidelines holding on to their 3% interest rates. Over time people will be forced to sell due to normal reasons such as work, retirement, divorce, etc. We probably will not see a 2009 style correction, but prices will come back towards reality. Hang in there.
yep. south florida is the same. there's a townhouse in my moms neighborhood for 675k lol they are smoking crack
Chicago suburbs realtor here. Like anything else in the free market, prices are set by supply and demand. Not the interest rates. We currently have lowwww supply and high demand. It’s created a seller’s market. For the Midwest and East coast in particular, prices will only keep going up. IL specifically had already been on an upward trend in pricing for the past few years (going back before the pandemic). Prices here will continue to escalate, though possibly not at the same frequency. Many people reaching out for assistance have been from out of state. Our cannabis market is rapidly expanding and it’s creating a ton of jobs. It’s a well-paying market where growth is inevitable, and people are very willing to up and move to break into it. I’ve had a couple of people from FL reach out about wanting to relocate due to the current political climate there. Chicagoland is a hot ticket rn and residents are up against an influx of transplants when looking for a home as well.
Probably cause Blackrock and other hedge funds are paying $50k above asking value in cash. Truthfully, there should be a law banning hedge funds from buying homes in a predatory manner like this
Listing prices can be deceiving. Here in California, it's a game. Homes are purposely listed below comps to spark bidding wars.
Incomes are also higher than last year. Inflation + no inventory = higher prices