How can this market continue seeing such highs?
60 Replies
Josh Edwards
Real Estate Agent from East Moriches, NY
posted 11 days ago
Hey guys,
I’m relatively new to BiggerPockets and I am having a hard time understanding our current market conditions.
I am from Long Island, New York, last summer due to COVID there was lots of cash buyers entering the market and they were often overbidding on properties by tens of thousands.
How is it possible that is has become normal for agents to start recommending people to bid over asking price on houses? I get the basic facts of supply and demand and low interest rates.
But how is this sustainable in the long term? In my opinion rates have become way too low and this has caused almost this bubble of inflated housing prices. I think that we will see interest rates go up by the end of this year if not then next year.
Would this lead to lower values of homes? Or would we keep seeing this insane demand for housing? I’m pretty young so I don’t have much understanding of what happened in 2008, but something about this seems pretty similar.
Please correct me if I’m wrong, I want to hear everyone’s opinions on this matter so I can better understand what’s going on.
Thanks!
Josh
Russell Brazil
(Moderator) -
Real Estate Agent from Washington, D.C.
replied 11 days ago
People have been asking the same questions for the last 80 years.
Josh Edwards
Real Estate Agent from East Moriches, NY
replied 11 days ago
Hey Russell,
Thanks for the response!
Yeah I see what you mean, it’s definitely interesting to see how much home prices have appreciated over the years!
Josh
Russell Brazil
(Moderator) -
Real Estate Agent from Washington, D.C.
replied 11 days ago
Originally posted by @Josh Edwards :@Russell Brazil
Hey Russell,
Thanks for the response!
Yeah I see what you mean, it’s definitely interesting to see how much home prices have appreciated over the years!
Josh
People call it appreciation when they think of it in terms of that economic force being good....like investors, homeowners, land owners. Other people call it inflation when they view the same economic force through a negative lens, like renters. It is all one in the same though.
Josh Edwards
Real Estate Agent from East Moriches, NY
replied 11 days ago
Yeah that makes sense but I’m curious to see how much homes have appreciated over the years while factoring in for inflation.
Bill Brandt
Investor from Las Vegas, NV
replied 11 days ago
Compare it health costs or college costs and you’ll think housing prices are stuck in the 60’s. Calculate today’s prices with 8-10-12% mortgages and see what expensive housing looks like. Now imagine you’re still making $3.35 or $5/hour? I remember when “Professionals” made $15-$20/hour.
EVERYTHING gets expensive If the government gets involved, or financing appears.
Paul Scozzari
Real Estate Agent from Allentown, NJ
replied 11 days ago
You should read up on what lead to the 2008 crash, maybe watch the movie "The Big Short". I don't have time to go into it here but basically, they gave mortgages to people who should have never gotten them. We're not heading that way now, but historically rates and prices have correlated. When rates rise housing pricing will come back in check. Also more people will put money in the bank because it will actually pay them something vs. now (they are paying NOTHING now, maybe .5% on a 1 yr CD?). That's why you see a lot of people parking cash in real estate these past few years.