Buyers Acknowledge They’re Overpaying
A weekend topic on bubbly media reports. The Tyler Morning Telegraph in Texas. “It’s a seller’s market, as homes in Tyler and Smith County are being snapped up quickly and builders work hard to meet growing demand. It’s not Dallas yet — where demand has artificially increased asking prices — but East Texas is well out of the Great Recession, according to a new report from the Smith County Appraisal District. ‘It’s getting crazy now,’ Realtor Amy Montanye, of the Montanye Team, said.”
“‘I have a family I’m working with now, who are from California,’ she said. ‘They see our home prices and to them, those are cheap. So they’re excited. But it’s also frustrating, because the houses are going off the market so fast — as soon as I send them an email with some listings, asking which homes they want to look at, the home is off the market. It’s got an offer before my buyer even has a chance to look.’”
“But that’s just where a seller wants to be. ‘We have a listing in Flint, for example, that would normally sell for $95, $96 per square foot,’ Ms. Montanye said. ‘But the seller used to be in real estate, and she knows what the market is doing. And she knows her home is mint. So she’s asking more. And she’ll get it.’”
CNBC on Colorado. “When Christopher Simmons began shopping for a home in Denver six months ago, he had no idea the risk and the frustration it would take to get one. The 27-year-old had good credit and cash to put down, but that was not enough in this red-hot market. Finally, Simmons went under contract on a small home in a transitional neighborhood, but only after beating out five other bidders. He wrote a letter to the owners, describing how he had grown up in the neighborhood, and then he added a risky tactic.”
“‘I waived the inspection and the appraisal contingencies on all of the offers I made and on this one as well,’ said Simmons.”
“‘Prices are going crazy. Multiple offers, love letters, videos, all kinds of things to appeal to a seller in order to make yours stand above all the others,’ said Denver real estate agent Jill Schafer.”
From Dow Jones Newswire. “Buyers who are eager to purchase a home are also waiving rights that are standard in sales contracts, experts say. In addition to promising to plow ahead even if an appraisal values the house below the purchase price, buyers are agreeing to forego the option of dropping out if an inspection shows the need for costly repairs or if they are unable to get a mortgage. ‘We’re seeing strategies and situations that have never been experienced here, and I’ve been in the real-estate business since 1987,’ says Tim Davis, managing broker at Weichert Realtors Professionals in Denver.”
“If, for example, a buyer agrees to pay $400,000 for a house, but the appraised value is $380,000, the buyer could have to pay the seller an additional $20,000 out of pocket. In such situations, buyers essentially acknowledge that they’re overpaying. They believe ‘the house will increase in value so much that even if something is wrong with it [they] will still be fine,’ says Doug Miller, a real-estate attorney and executive director of Consumer Advocates in American Real Estate.”
“According to Metrostudy. housing starts of single-family detached homes were up about 15% in Denver and Atlanta in the first quarter, compared with the same period last year, for example. In Las Vegas, they are up more than 36%, says Metrostudy. If new homes are going up, patience could pay off. Chris Langan and his partner put their five-month house search in Atlanta on hold in April after the couple grew tired of looking at houses that cost more than they wanted to spend and more than they thought the homes were worth, he says.”
“‘When I see a lot of people going toward one thing–this mass frenzy–I like to step back and evaluate it,’ says Mr. Langan, 31, a sales consultant for a food distributor. He says they plan to rent for two years, by which point he expects the market to be calmer.”
The Tampa Bay Times in Florida. “Ask Realtors about Tampa Bay’s housing market these days and you’re apt to hear words like fantastic and tremendous. What you probably won’t hear, except in a whispered voice, is: bubble. Yet one research and consulting firm says a data-based analysis it conducted of the Tampa Bay metro area shows another bubble could be forming. ‘You’ve got to be very cautious,” says Hogan E. Copeland III, chairman of Smithfield & Wainwright in Ponta Vedra Beach. ‘You’ve got a lot of speculation in the market right now, a lot of flipping of homes.’”
“According to reports released Thursday, year-over-year sales of single family homes in Tampa Bay shot up 21.6 percent in April with average prices increasing 13.3 percent. That continued a months’ long streak of rising prices that has brought joy to Realtors and sellers.”
“A Tampa appraiser who works all over Florida’s West Coast sees cause for concern. ‘The sharp price rises in some areas is a little scary,’ says Joani Herndon, former chair of the Florida Real Estate Appraisal Board. Herndon says downtown St. Petersburg’s condo market is ‘on fire’ — five condos sold for more than $1 million in April alone — and that demand is hot, too, for newer homes near Tampa’s downtown.”
“‘In South Tampa, builders can’t find enough (vacant) lots so they’re sending people door-to-door to try to get folks who’ve lived in those homes for years to sell,’ Herndon said. ‘A perfect example — I grew up in Sunset Park and never, ever thought that lots not on the water would sell for tear-downs. Now they’re doing it all day long.”’
“In March, a builder paid $475,00 for Herndon’s childhome home and knocked it down. Now a 5,300 square foot house is rising on the lot at a price of $1.599 million. ‘It’s like what’s going on on Snell Isle,’ Herndon says of the upscale area near downtown St. Petersburg where five small homes on one street alone were torn down to make way for million dollar mansions.”
“Founded in 2007, Smithfield & Wainright bases its system on inflation-adjusted sales and rental data from the federal government and on replacement cost data from a private company, Marshall and Swift, that works closely with the construction industry. By focusing solely on rising prices during the boom, banks and investors ‘largely failed to question the intrinsic value of the real estate-linked assets in which they had a massive investment,’ the study said. ‘Perpetually increasing and non-sustainable real estate prices ultimately imploded, contributing to the near-collapse of the nation’s financial system in 2008.’”
