Real Estate Questions for experts (that's all of you)

[Codie]

I see real estate from every angle, every day, in my business (inventory,buyers,sellers,agents,cost of financing, etc.etc.). It isn’t going to crash any time soon in the state of Texas (if ever). It will level off at some point, but not crash. All the folks saying “no way I am paying these absorbent prices” today will be looking back 10yrs from now wishing they had picked it up for that “absorbent” price 10yrs ago.

[gingib]

If you buy property and sell it for more than what you paid, you make money

Unfortunately this is not ALWAYS the case to people who know money.

[Capt.Brown]

My entire life people have said “man I wished I would have bought that way back when”. It’s not going down and prob won’t ever go down.

[Maddox]

Their algorithm was wrong, but yet they have more info than almost anyone in regards to real estate. But they still missed it? To me that screams the market has passed its peak. If housing prices were to keep rising then Zillow would not be having any problems right now. So this is still evidence that shows we are now past the peak.

Companies can have all the data in the world and still lack the understanding on how to interpret and use it.

[Killer]

I don't have a strong understanding of economics or housing markets, but I live in a blue collar neighborhood. The neighbors are all fairly rough around the edges. One neighbor came up and asked me to spot him $5 for a joint because the other neighbor next to him only sells them 2 for $10. So this guy didn't have a car, a job, or $10 in his name. Kinda irrelevant and judgemental, but here's the 2nd part of my point...

The houses in my neighborhood are small and only sit on about 1/10th an acre. The homes are about 20 years old, but since they were built, they have doubled and probably sometimes tripled in price. There are currently 1900 sq ft homes selling for $340k+ and only being listed for similar prices.

Like I said, I am not an economist and haven't paid much attention, but that feels very bubbly to me.

Edit...not to mention at some point people's budgets stop accounting for how much inflation and gas causes everyday items to skyrocket. At some point people with less than $10, no job and a $350,000 mortgage will miss a payment.

I can understand this kind of economics!

[Shane]

The "crash" mentality is from people that think that all booms are followed by a crash. The most recent real estate crash was 2008 but was caused by crazy loose sub-prime lending. Though $100 per barrel oil at the time largely insulated Texas from the sub-prime crash.
Current mortgage lending underwriting is fairly strict.

Certainly the current real estate market will slow down at some point. This would likely be caused by a general economic slowdown or rise in interest rates.

Texas real estate didn't crash as bad as other states in '08, because in most other states you can borrow up to 125% of the value of your house. You can't do that in Texas, so mortgages weren't upside down when values pulled back a little. Also, people weren't leaving Texas. People were, and still are, flocking into Texas.

The crazy increases of the last year or two will slow down. Maybe they already are beginning to level off, as some have mentioned. But values aren't likely to crash here for the foreseeable future.

Aside from the talk of home values, what do y'all think about land values going forward? Less than 50 acres? 50-200 acres? Larger properties?

[gingib]

Texas real estate didn't crash as bad as other states in '08, because in most other states you can borrow up to 125% of the value of your house. You can't do that in Texas, so mortgages weren't upside down when values pulled back a little. Also, people weren't leaving Texas. People were, and still are, flocking into Texas.

The crazy increases of the last year or two will slow down. Maybe they already are beginning to level off, as some have mentioned. But values aren't likely to crash here for the foreseeable future.

Aside from the talk of home values, what do y'all think about land values going forward? Less than 50 acres? 50-200 acres? Larger properties?

I see land and home values slowing down or leveling like you said, but not going down!

It is crazy what land prices have done. I got cash set aside for land and its scary around me the prices people are paying

Alot of city and out of state people buying it up

[M16]

I see land and home values slowing down or leveling like you said, but not going down!

It is crazy what land prices have done. I got cash set aside for land and its scary around me the prices people are paying

Alot of city and out of state people buying it up

The prices people are pay ain't scary at all for the people who are selling. If you have cash set aside why haven't you bought already?

[Chad C]

My entire life people have said “man I wished I would have bought that way back when”. It’s not going down and prob won’t ever go down.

That's a fact!

[Shane]

Land prices have definitely shot up a bunch. There are still some deals here and there if you look and are patient, but they're hard to find. We recently bought a couple of places, one 63 acres and another 291 acres. The 291 wasn't listed or advertised, and we bought it for about 1/4-1/3 less than similar places have been selling for. We'll probably sell off some 10-20 acre home sites, and then keep the 160 acre coastal field with center pivot and great water. The hay production is really good. We should be able to pay for the entire place and then some by selling off the home sites eventually.

The 63 acre place was reasonably priced too, but it's just gonna cost me more money. We're gonna build a house on it. I'd also like to buy a couple other places that join it eventually, if they ever come available (hopefully not until after we get the home sites from the 291 sold off). It needs fences and lots of clean up..... But it's a great spot to build our forever home. Has some good deer, too many hogs, turkey, a little coastal, nice oak trees, only 15 minutes from Abilene.... It'll only appreciate over time, but we're not planning to sell it.

[TeamAmerica]

In texas, there is likely no crash coming. simply put. DFW is projected to surpass Chicago in metro size in the next 8 years. this is a conservative projection. it is very important to understand that DFW and most major Texas metros have little to zero physical barriers to growth like NYC, LA, and Chicago do (i guess we will run into the red river eventually!).

interest rates will go up but builders are already adjusting by building smaller houses and buyers are okay with that. ICON is building concrete pre-fab houses in Austin. all the builders and engineers will figure out a why to build cheaper.

[JBJTX81]

My .02 -

We are in a era of inflation. Most everyone has some sort of cash on hand. Last report I saw said US households had record savings. Wages are increasing across the entire job market. Money is so cheap right now too and it doesn't look like the feds are going to raise rates significantly anytime soon.

To me it only makes sense to be a net owner of assets if asset prices are inflating. I mean if you think about it from the combo of cheap money and inflating values a 30 year mortgage makes so much sense for anyone right now. Inflation literally washes out the interest you will pay and then some over the the life of the debt you are holding.

Buy as much as you can. Finance it for as long as you can. Get more rich!

The only fear I have is that cheap money leads to risky investments and we could find ourselves where lots of money winds up in risky assets that fail and you see a big correction. Rates have to go up at some point to help prevent overheating and mitigate the risk that is current building up in the overall financial system. When that happens there will be a slow down in inflation but not a crash or deflation of asset price...just maybe a flattening of the the current increase.

[gingib]

The prices people are pay ain't scary at all for the people who are selling. If you have cash set aside why haven't you bought already?

Have not found the place I want. I am not buying for investment quote on quote, but more a place for the family

No doubt, people selling are loving these prices

[Shane]

I'm not convinced that interest rates will go up much. It's what SHOULD happen, but I think the Fed will keep rates low so that the government will get to pay less on it's mountain of debt. They'll let us all suffer through inflation to pay it off rather than forcing Uncle Sam to be more responsible.

I'd like to be wrong on that, but since they have a solid track record of doing whatever is bad for citizens and good for big government, that makes the most sense.

[bowhuntertex]

as long as commercial construction in the Austin area is booming, the housing market will boom. It kinda reminds me of the Dotcom boom in the 90's, other than I think we have another 8-10 years of this boom not short lived like the Dotcom.