The turn in the US housing market has been sharp and swift. Just ask Karlyn and Jack Stenhjem, would-be downsizers who dropped the asking price for their home near Seattle by almost $100,000 since May.
The brick Everett, Washington, house, with private access to lakes and trails, is now available for $899,000, a price that makes Karlyn Stenhjem “cringe.”
My neighbor was crowing about how the condo he just bought in Florida has appreciated more in 2 months than his place here in metro Detroit has appreciated in 2 years.
I thought to myself “never noticed how Florida RE is more bubbly than Detroit?”
The turn in the US housing market has been sharp and swift. Just ask Karlyn and Jack Stenhjem, would-be downsizers who dropped the asking price for their home near Seattle by almost $100,000 since May.
The brick Everett, Washington, house, with private access to lakes and trails, is now available for $899,000, a price that makes Karlyn Stenhjem “cringe.”
Yeah, but let’s not get ahead of ourselves here. From the article:
“Two months ago our house was valued at $1.1 million on Zillow,” she said. “When you look at the map of listings now, the little red dots are on top of the other little red dots.”
I can see why that kind of crazy estimate of home value might get them to take a flyer on a quick buck. But if you look at the Zillow estimate history for their home, while it might have been $1.1 million two months ago (May), it was only $800K a few months before that (February):
If she’s “cringing,” it’s because she bought into the Zillow estimate as reality, even when her home appreciated 40% in the space of three months.
Not questioning the rather uncontroversial proposition that a near-doubling of residential mortgage rates and a looming recession might knock house prices down a bit - but whether a homeowner having to settle for a ‘cringe’ $100K more than her house was estimated to be worth at the beginning of the year is especially good evidence of that.
Homes in our neighborhood are starting to go through small cuts to asking price. Last weekend a home on our block had an open house so I went in. The agent said the market has cooled off a lot, very fast. Not expecting a bidding war on this house, and will be happy to get asking price. Just 6 months ago that same floor plan, one street over, went for $150k over ask. Another house, two streets over, sold a few months back and has had a “for lease” sign in the yard since (was sold to a firm). Times change, sometimes quickly.
I have used Zillow in the past to see what home priced are doing in my area. In my rural Indiana county there are 82 homes listed on Zillow 40 of them have had price reductions. How much of the is caused by declining demand or because of owners pricing the sale of their property for perfection, I can’t say. It’s likely there is some of each or both.
The agent said the market has cooled off a lot, very fast.
Salesman saying “great bargains right now, hurry, hurry, HURRY AND BUY TODAY”. Ever notice those “reports” on the local “news” about the real estate market? They are always asking “is now a great time to buy?”, and they always ask that of a RE salesman.
Another house, two streets over, sold a few months back and has had a “for lease” sign in the yard since (was sold to a firm).
In spite of the buy-laws of the condo I live in saying the units are to be owner occupied, about a third of the units are now rentals. My neighbor, the one on the board, who was telling me of the big CAPEX expenses coming in the next few years, said several of the other residents are “struggling”, and may have difficulty paying a four figure special assessment, or a big increase in the monthly fee. The thought has crossed my mind that, if several people are priced out and sell, their units will probably be bought by more landlords, as small condos and houses have not been built around here since the mid 90s, so it’s a landlord paradise.
I have used Zillow in the past to see what home priced are doing in my area. In my rural Indiana county there are 82 homes listed on Zillow 40 of them have had price reductions. How much of the is caused by declining demand or because of owners pricing the sale of their property for perfection, I can’t say. It’s likely there is some of each or both.
Anecdatum - I’ve been watching the Zillow prices in our area ever since December when a home two doors down was listed, and then sold, for a price that (at the time) seemed absurd to me. The purchasers just listed it again for 60% more than they paid for it seven months ago. I spoke to the broker at the open house, and he said they were motivated by the same type of, “Zillow says my home just put a fortune in my pocket in a few months so let’s SELL!” impetus that was described in the original article.
Anyway, the homes in my area have been priced for beyond perfection with their initial listings for several months now. New listings aren’t priced where recent sales have been, or even where current Zillow values have been - they’re pricing for where they think values will be three months from now, when they finally close. Which is crazy and unsustainable, of course - but when they cut prices from those figures, they’re “reducing” them to prices that are still big increases from where homes were valued at the beginning of the year.
In spite of the by-laws of the condo I live in saying the units are to be owner occupied, about a third of the units are now rentals. My neighbor, the one on the board, who was telling me of the big CAPEX expenses coming in the next few years, said several of the other residents are “struggling”, and may have difficulty paying a four figure special assessment, or a big increase in the monthly fee. The thought has crossed my mind that, if several people are priced out and sell, their units will probably be bought by more landlords, as small condos and houses have not been built around here since the mid 90s, so it’s a landlord paradise.
By-laws are very tricky things (probably because they are created by lawyers). Sometimes if you look closely at them, and I have periodically looked closely, you will notice that they often have “weasel words” negating the very thing the clause is trying to enforce. For example, I’ve seen the by-laws of a HOA (similar to condo) that state “Units shall be occupied by the owner or by members of their family”, and then later on in the document it says “Units may not be rented for a period of two years from date of purchase”, so which is it? In this particular case, the unit had to be owner-occupied (or owners-family-occupied) for the first two years and then could be converted to a rental. And plenty of people availed themselves of the opportunity. And I know another large facility where people use the “family member” clause rather liberally, basically they rent to whomever they want and call them “family” (8th cousins 6 times removed) because “family members” isn’t clearly defined anywhere.
In general, if the current owners can’t afford to live there anymore, they shouldn’t live there anymore. Keeping owners that can’t afford proper upkeep leads to bad things over time (in the extreme, it can lead to the whole condo collapsing and killing everyone). As I’ve discussed elsewhere, when condo fees or assessments rise, their value will go down. The company buying the condo to rent in the future KNOWS exactly what they need their cashflow to be, and they will adjust their bid to conform with that reality.
In general, if the current owners can’t afford to live there anymore, they shouldn’t live there anymore.
That is what I suggested to the board member. What is so odd about that conversation is his concern for residents “struggling” is the only empathic thing I have ever heard him say. We have been neighbors over 20 years. Our conversation about crime and punishment a few years ago brought his solution, words to the effect “execute every criminal. those that get out of prison will only commit another crime, and be back in prison. execute all criminals and improve the breed”. He must be going soft in his old age :^)
I figure any chance of enforcing the owner/occupant clause went out the window when the first rental was tolerated.
Keeping owners that can’t afford proper upkeep leads to bad things over time
Yup. We discussed that condo collapse in Florida, because no-one wanted to pay for more maintenance. iirc, Florida has a law now that requires condo associations have money put aside for maintenance projects.
When he first told me about the upcoming CAPEX needs, I did a little checking around, in this now pricey suburb. A two bedroom apartment costs $1500/month. The one condo development currently building offers fully detached units, 2 car garage, no basement, for $500,000. Ridiculous little townhouses built last year bring $400,000. Units like mine go for $170,000, if you can snag one, because they have not built condos here that are that “affordable” since the mid 90s.
There are rewards for staying put in the same place in Michigan too. Michigan has a law that limits how much the taxable value can be increased for people who stay put in the same home. Comparable condos may bring $150K+, but my assessed valuation is only $61K. Paid my summer property tax today: $600. Winter taxes are more. I paid $877 last December.
How I solved my condo fee problem. I wanted to make sure my condo account would be kept up to date while away from home. I sold my car and rented out my parking space. The rental fee is my monthly condo fee. Happy, happy, happy – owner, renter, condo!
Anecdatum - I’ve been watching the Zillow prices in our area ever since December when a home two doors down was listed, and then sold, for a price that (at the time) seemed absurd to me. The purchasers just listed it again for 60% more than they paid for it seven months ago. I spoke to the broker at the open house, and he said they were motivated by the same type of, “Zillow says my home just put a fortune in my pocket in a few months so let’s SELL!” impetus that was described in the original article.
Following up on my anecdatum:
I checked Zillow the other day, and noticed that the house down the street was no longer listed. I texted the broker, and asked if it went under contract. He said no - they pulled the listing because they weren’t going to get a price near Zillow estimate level. They did get offers, but they would have landed at about 80% of the Zillow price.
Note: they were still getting offers at about 25% higher than they paid for it 7 months ago, so this is hardly evidence that the market is falling (except compared perhaps to a really short-term peak of craziness). At least the market in my immediate neighborhood - YMMV.