Is the housing market overheated?

[mguthrie]

I think he was commenting more on how quickly the houses were under contract than actually meaning they were closing when the cabinets were hung and moving in before the flooring was laid. There is indeed a new development close to my house and that builder claims almost every lot is under contract already and they have just started grading an entrance. He may well mean he has the lots "under" contract but thats what he told me. Perfect area for rentals.

He very well may have them under contract. The builder I just finished framing one for has a slab boxed up. Started it as a spec and has it under contract. Has 2 more lots under contract but it takes several weeks to get a permit now.

 

[GTMODawg]

He very well may have them under contract. The builder I just finished framing one for has a slab boxed up. Started it as a spec and has it under contract. Has 2 more lots under contract but it takes several weeks to get a permit now.

Permitting process is out of control. People have no idea what costs are added to a construction project due to ANY delay. A process that should, in most instances, take a few minutes online takes, at best a week or so....and the consumer pays the price without any risk reduction at all. In the case of an established builder in an established subdivision the permitting process should consist of the builder paying the permitting costs ONLY. If they then proceed to build something other than an identical building to several already reviewed and approved the builder should then be forced to have the design reviewed with the understanding that were it unacceptable they had no recourse but to make it so or start over again. Builders are going to do what they are going to do and the AHJ has no liability anyway....the consumer is at the mercy of the builder and their reputation if they aren't in a position to use due dilligence themselves. The AHJ ain't responsible for certain. The permitting process should take a few minutes. It never has and never will. Its all for show.

 

[mguthrie]

Permitting process is out of control. People have no idea what costs are added to a construction project due to ANY delay. A process that should, in most instances, take a few minutes online takes, at best a week or so....and the consumer pays the price without any risk reduction at all. In the case of an established builder in an established subdivision the permitting process should consist of the builder paying the permitting costs ONLY. If they then proceed to build something other than an identical building to several already reviewed and approved the builder should then be forced to have the design reviewed with the understanding that were it unacceptable they had no recourse but to make it so or start over again. Builders are going to do what they are going to do and the AHJ has no liability anyway....the consumer is at the mercy of the builder and their reputation if they aren't in a position to use due dilligence themselves. The AHJ ain't responsible for certain. The permitting process should take a few minutes. It never has and never will. Its all for show.

A week? Not hardly. When I built my house in 2006 I had to have soil tests and site plans first then walked in,paid for the permit and started. It takes 4-6 weeks now.

 

[GTMODawg]

A week? Not hardly. When I built my house in 2006 I had to have soil tests and site plans first then walked in,paid for the permit and started. It takes 4-6 weeks now.

I get it...at best it should take a week but it takes far longer than that. The process shouldn't take more time than it takes to collect the money. The AHJ has zero liability at any point in the process....the fact that you and everyone else has to submit site plans and soil tests and more in some cases is my point. The AHJ has no liability. They are going to do an inspection. If they show up and the soil ain't been tested and is not suitable and the site is not in compliance they are going to fail your inspection. One should presume if a person has the ability to gather the finances to build a building and is the only one with any liability in the process that that person has done their due diligence and if they haven't the AHJ has the authority to stop the process at any time and has ample opportunities during a multitude of inspections.

I will bet you a coca cola you can't spend 2 days looking through the records of any AHJ office in the state and not find COs issued on approved site plans where the actual site plan doesn't mirror the approved site plan. Stories of developments failing due to inadequate soil are many in this and every other state in the country. The permitting process lends nary a bit of real assurance that the builder is going to what they say and no protection to the buyer. The AHJ has zero liability - it is a waste of time and resources to do what anyone with any sense is going to do given they are the only one liable if they foul it up. The AHJ should offer their approval to those who want it for reassurance but it means bupkus at the end of the day. They have zero liability and the developer has no leverage to speak of and any leverage they do have costs a heap of money to apply...lawyers ain't cheap.

 

[westcobbdog]

Market still hot but it varies from white hot to just ok hot depending on area. I am seeing some inventory building as everyone listed in the market thinks their home is the class of the market. Some aren’t and are just sitting. A healthy real estate market has 4-6 months of inventory and I think we are still in the 1 month of inventory category.
Also, about 30% of metro area wide transactions were by investors last year.
I can say with around a high degree of certainly that sellers will nearly always do better than selling to an investor by listing the home with a good agent who then lists it as “Coming soon” then make it “active” a week coupled with a weekend open house. If you are somewhat close on intersection of price and condition it should rain offers.
Just listed one high 6’s in contract 100k over list, and list was a rather pie in the sky number. And we appraised.
Also dont believe the junk Zillow puts out there. They lost 378m last year. Get an agent to do some (free) research for you.

 

[Ajlink2]

I’m a millennial. I’ve been saving for a house for years. I had planned to buy this past year but prices keep going up. So, I’ve given up on buying a house. I’m confused as to how so many people can have so much money. I guess I’m either pore as dirt or there’s a lot of fake money out there. Kind of feels like my life’s been on hold because everything is so unaffordable.

41% of homes bought in 2021 in the city of Atlanta were bought by investors (hedge funds). they buy in all cash and quick closings. no one can compete.

 

[GTMODawg]

41% of homes bought in 2021 in the city of Atlanta were bought by investors (hedge funds). they buy in all cash and quick closings. no one can compete.

We sold our house in New Mexico to Shell Oil for $200K above the appraised value. We had an offer from a couple for the same amount and the appraisal came back woefully low....they did not value a 3000 square foot shop with a 200 amp 3 phase service, HVAC, full bath with washer and drier connections and 18 foot high ceilings at any value the morons. That couple understandably could not come up with $200K and would have been foolish to do so if they did. This was in an agricultural zoning area which meant that shop could be used for just about anything imaginable but it had no value according their lendors appraisal....but it did have some value to Shell Oil. They paid cash and were going to use the place for repairing vehicles and house several people in it but one of their project managers and his family have lived in it since they bought it. If you are buying with a conventional mortgage, as most people are, you are definitely behind the 8 ball if cash buyers are present in the market.

 

[westcobbdog]

41% of homes bought in 2021 in the city of Atlanta were bought by investors (hedge funds). they buy in all cash and quick closings. no one can compete.

When the free market can go to work most investors can’t compete. I see deals daily where the seller lists with an agent and gets so much activity and offers investors don’t have time or the will to jump in the fray. Investors did 30% of the deals in our metro market last year i am told. But putting it on the market beats an investor prolly 80-90% of the time. An example would be a lady I know quietly sold her home that needed some TLC for 300k to open door. If she lists it she hits 330-350k sales price, even paying 6% commission she comes out way ahead not selling to the investor. May have mentioned just sold my 685k listing at 794k to a couple wanting to get out of mid town. They were tired of losing 3 prior houses by 70-80k. My friend went with his client to an open house in Smyrna with 100 people in attendance. Most bottom feeder investors won’t pay over retail for a house. Investors seem to be paying about 80% of what they think the value is.

 

[GTMODawg]

When the free market can go to work most investors can’t compete. I see deals daily where the seller lists with an agent and gets so much activity and offers investors don’t have time or the will to jump in the fray. Investors did 30% of the deals in our metro market last year i am told. But putting it on the market beats an investor prolly 80-90% of the time. An example would be a lady I know quietly sold her home that needed some TLC for 300k to open door. If she lists it she hits 330-350k sales price, even paying 6% commission she comes out way ahead not selling to the investor. May have mentioned just sold my 685k listing at 794k to a couple wanting to get out of mid town. They were tired of losing 3 prior houses by 70-80k. My friend went with his client to an open house in Smyrna with 100 people in attendance. Most bottom feeder investors won’t pay over retail for a house. Investors seem to be paying about 80% of what they think the value is.

I am certain investors would like to pay 80% but I ain't sure they are doings so very often in the current market. If a house is listed with an agent most prospective buyers are 4-6 weeks from closing when a cash deal can be closed in just a few weeks. If the money is comparable....and it can be higher with a cash buyer because they are not concerned with an appraisal as much as most traditional buyers are...the cash buyer has a decided advantage. They are often also more willing to forego inspections and all the other stuff required by traditional lending institutes. Most investors have no idea what they are doing but some are very savvy and when they want a property they usually get it.

 

[sinclair1]

I am certain investors would like to pay 80% but I ain't sure they are doings so very often in the current market. If a house is listed with an agent most prospective buyers are 4-6 weeks from closing when a cash deal can be closed in just a few weeks. If the money is comparable....and it can be higher with a cash buyer because they are not concerned with an appraisal as much as most traditional buyers are...the cash buyer has a decided advantage. They are often also more willing to forego inspections and all the other stuff required by traditional lending institutes. Most investors have no idea what they are doing but some are very savvy and when they want a property they usually get it.

We just sold two thru real estate agents. Both had several cash offers from non investors. Both bid up and closed in 30 days. We fixed nothing, paid zero closing and netted more than the investor sold homes in the neighborhood.
We will be switching up and becoming investors again as soon as the market dictates.
We just inherited a fixer and will probably dump it to an investor. Too many miles away to mess with it for us.

 

[westcobbdog]

I am certain investors would like to pay 80% but I ain't sure they are doings so very often in the current market. If a house is listed with an agent most prospective buyers are 4-6 weeks from closing when a cash deal can be closed in just a few weeks. If the money is comparable....and it can be higher with a cash buyer because they are not concerned with an appraisal as much as most traditional buyers are...the cash buyer has a decided advantage. They are often also more willing to forego inspections and all the other stuff required by traditional lending institutes. Most investors have no idea what they are doing but some are very savvy and when they want a property they usually get it.

the comments I made are from observations as an active Realtor, repping both buyers and sellers. What do you do?

 

[mguthrie]

the comments I made are from observations as an active Realtor, repping both buyers and sellers. What do you do?

He’s a keyboard kowboy?

 

[GTMODawg]

the comments I made are from observations as an active Realtor, repping both buyers and sellers. What do you do?

I am a real estate broker with 6500 agents world wide. Why, does it matter? Of course it doesn't. I am certainly not in the real estate industry and I currently, thank goodness, own exactly one pile of bricks and would get rid of it today if my wife and daughter would agree and move to the country. I was not disagreeing with anything you posted, I was simply stating my experience. I can't imagine investors not wanting to pay 80% or less for a home than its worth...that is good business, if you can get it. If this was possible on a large scale the number of people doing it would be far greater than it is. While I am certain they are doing it when they can I highly doubt it is happening on a large scale because it is a sellers market and folks, even dumb ones like me who ain't brilliant real estate professionals and only own a few houses at a time, have a pretty good idea of what they need from the sale of their property when they decide to sell it. They also have a pretty good idea of what it is worth. I have bought and sold a lot of homes in a lot of markets in a lot of regions of the US for someone who has never been in the real estate business so I have some experience as a consumer. I have bought and sold houses and commercial properties with cash, with financing, with an agent and without. I do not doubt that you have vastly more experience than I do and I applaud you for it but in my experience if you have a cash buyer, who is not by definition necessarily an investor, and someone interested in buying who is doing so with traditional financing, the cash buyer has an advantage. I can't even imagine why a broker or agent would care...if they have listed the property and have sold it to a cash buyer do they not get their cut???? If not I can certainly see why agents and brokers are wont to advise against cash deals and dealing with investors LOL. What comments of yours that I responded to are you taking issues with? I am certain your experience is valid...and based on far more experience than mine. I ain't really seeing where we have disagreed on anything.....

 

[GTMODawg]

We just sold two thru real estate agents. Both had several cash offers from non investors. Both bid up and closed in 30 days. We fixed nothing, paid zero closing and netted more than the investor sold homes in the neighborhood.
We will be switching up and becoming investors again as soon as the market dictates.
We just inherited a fixer and will probably dump it to an investor. Too many miles away to mess with it for us.

So to understand....you listed 2 homes with agents and cash buyers, who were not investors, bid them up and closed in 30 days, correct?

If so I would be careful...a real estate professional is liable to take issue with that for some reason.....

 

[GTMODawg]

the comments I made are from observations as an active Realtor, repping both buyers and sellers. What do you do?

So I re-read the post, thinking I had missed something, and as it turns out I did not. You said that investors "did 30% of the deals in our metro market last year i am told" meaning they were in the minority of overall deals done in that market. There is no telling what % of prospective buyers were investors so it could be that they are responsible for a vast majority of the deals they are interested in. You also said that they "seem to be paying about 80% of what they think the value is". No doubt. I am certain they would prefer 80% over 90 and 50% over 80. I don't know how often they are actually closing deals at 80% of the value though....and it would seem, using your own numbers, it may not be often given they were only responsible for about 30% of the deals in the market you mentioned. Cash buyer does not mean investor. I am not even aware of investors never paying a real estate commission. I am certain they prefer not to but I am just as certain that they do so from time to time. It would seem that you stated sellers were better off listing with an agent because investors wanted to low ball offers and I agreed completely stating I wasn't sure they are being overly successful in doing so in the current market and your numbers seem to suggest that is categorically correct. I ain't so sure if you are indeed "an active Realtor, repping both buyers and sellers" that the blistering pace of the current market hasn't some how rattled your thinking because your asking me what I do seems to suggest that you have a problem with someone agreeing with your statement and doing so using the figures and examples you offered....

 

[GTMODawg]

He’s a keyboard kowboy?

Yes cause keyboard kowboys are known for agreeing with someone using that person's facts and figures LOL.....

Some folks just ain't right......

 

[sinclair1]

So to understand....you listed 2 homes with agents and cash buyers, who were not investors, bid them up and closed in 30 days, correct?

If so I would be careful...a real estate professional is liable to take issue with that for some reason.....

The real estate agents get their pound of flesh for selling them. It was a good deal, the bid ups paid them and bought us a new car. People are crazy!
We never used agents in the past, but with the influx of west coast people as buyers, it was well worth it. They were bidding from out there and the agents were necessary to get the big money people.

 

[GTMODawg]

The real estate agents get their pound of flesh for selling them. It was a good deal, the bid ups paid them and bought us a new car. People are crazy!
We never used agents in the past, but with the influx of west coast people as buyers, it was well worth it. They were bidding from out there and the agents were necessary to get the big money people.

I have done it with and without agents and always appreciated the work the agents put in....they earn their money in my opinion. Most of these were sales and purchases where a company was reimbursing us for realty expenses so that might have given us a slanted view but a brokerage definitely can expose a property to more potential buyers than most individuals can do. When you decide to sale it is, in my opinion, just the cost of doing business.

I have found, again in my own experience, that folks that are selling their property themselves tend to think it is worth more than it is. Not always but I think a lot of people put a sign in the yard and if it sells good and if not good.

 

[sinclair1]

@mguthrie @westcobbdog what you guys seeing out there? My wife is still busy and has a pretty good backlog.
We have put in place our prep for recession plan just in case.

 

[westcobbdog]

Sinclair its still a great time to sell and a bit tricky to buy, with agents I know literally writing up to 15 offers before landing a buyer a house. I mean veteran agents, too, not a newbie. So demand is still strong for now, even with rising rates. I would guess as rates rise higher buyer demand will soften. However, I don't see home values receding far at all due to a really low supply of inventory, like less than a 1 month supply of homes here in metro Atlanta. A healthy market has about 6 months of listing inventory. Selling to an investor is fine however not allowing the free market to work for you is most times a real big mistake. What I mean is its pretty hard to predict a final sales price right now, so allowing the listing agents marketing and the free market itself to dictate the sale is a far better way to go. Let the 30-40k agents in the area work to sell the home vs just 1 investor buyer somehow agreeing with the sellers sales price. My last few listings have all sold for over what looked to me like a high retail list price. Also many of these investor cash buyers have a 3% junk fee added to the deal so listing with an experienced agent for 6% only costs a seller 3% more and they will net much more than selling to say open door without the curveballs.