The Pandemic Ignited a Housing Boom--but It's Different From the Last One

[brooklynite]

This discussion thread was locked as off-topic by Omaha Steve (a host of the Latest Breaking News forum).

Source: Wall Street Journal

The residential real-estate market is on its biggest tear since 2006, just before the housing bubble burst and set off a global recession. Yet in nearly every meaningful way, today’s market is the inverse of the previous boom.

Anthony Lamacchia, a broker and owner of a real-estate company near Boston, entered the industry in 2004. Home buyers were trading up to bigger, more expensive houses after barely a year, he said. Many buyers paid small down payments, or none at all. When housing prices stopped rising, the market collapsed. By 2009, Mr. Lamacchia was working with clients desperate to dump the homes he had just helped them buy.

Now, he said, housing demand in the Boston suburbs is stronger than he has ever seen. Lamacchia Realty reached $1 billion in sales last year for the first time. Buyers have higher credit ratings these days. They are flusher and are putting down more cash up front.

“On $1 million purchases, people are putting down $500,000,” he said. “You didn’t see that before.”

Read more: https://www.wsj.com/articles/the-pandemic-ignited-a-housing-boombut-its-different-from-the-last-one-11615824558?mod=e2tw

[KPN]

1. I dunno. It may be fine for now. People are taking on more debt because

of low interest rates. When rates rise, the price point on many of these homes will reflect demand at the time. It seems unlikely that there will not be a period when most of the homes sold in the past year are not worth significantly less than they are now at these rates. Demand will undoubtedly dampen as rates rise. Buying at today’s highly inflated rates seems risky to me.

As for 500k down, it’s not hard to do when the house you bought just 2-3 years ago for 250k sells at 500k today. Will all those people who buy $1 million homes be able to sustain payments on 500k debt vs the prior $200-250k prior? That’s also questionable. But I will admit, I’m no expert.

[SWBTATTReg]

2. Interesting article and thank you for posting. I had heard of this happening and I was

indeed curious as to why etc. and this answered a lot of my ?s.

I do think that a lot of buyers were on the sidelines when prices were up and up price-wise, and couldn't afford the housing then. A lot of them didn't spend their savings and a lot started saving (I seem to recall that the rental markets boomed too during this same time period).

And now that markets steadied, they moved in and started buying. With more cash too, they didn't want to undergo the financial mess that the banks and other crazy lenders make then, so w/ fewer borrowers hurting their credit, markets got better, more people kept buying (w/ lots of cash) homes, and etc. No mortgages or such. I did the same thing. I got tired of my lender and decided to pay myself those mortgage interest payments. Where else in today's world can you make a better return?

In addition, I think people are scared of investing in the super high stock markets, where valuations were somewhat inflated w/ companies buying back their shares, thus inflating stock prices (and the indexes too).

So in effect, this boom is a 'for the people thing, by the people thing'. No billionaires, no rumps, no business incentives, all individuals and their families doing this buying, building up their neighborhoods, etc.', causing the good valuations people are seeing in their own neighborhoods (hey, fixing up one's place does pay off, etc.).

So maybe a sort of transfer of wealth in the 'right direction' so to speak...

[Warpy]

3. I've been getting "we pay cash for houses" come ons twice a week

for almost a year now. I've been a little tempted, this place needs a lot of work that I haven't been able to get done thanks to this damned virus and I'd love to stick some profiteer with the bills.

But then, where would I go? Prices have been driven ridiculously high even in a slow market like mine.

[Omaha Steve]

4. After a review by forum hosts....LOCKING

This is analysis, NOT LBN.