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Home Price Appreciation Expected to Rise Another 10% This Year

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Red Pear Luke
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9:49p, 3/2/22
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Cross posting this from a real estate thread on the DFW forum…but if anyone was hoping for a little dippy dip in the Real Estate Market, doesn't look like the crazy price growth is planning on stopping market participants even with the Russian Keebler Elf stomping his feet in Ukraine.

https://www.reuters.com/article/usa-property-poll/u-s-house-prices-to-rise-another-10-this-year-reuters-poll-idUSKBN2KZ1IL
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Medaggie
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11:12p, 3/2/22
I do not see how prices do not keep going up if prices for land/new build/material keeps going up.

If a 2k sq foot house today went for 200K and next year, building a new 2k sqft home in the same neighborhood costs 400K then wouldn't it make sense that prices will go up?

More fed money being pumped into economy = inflation = higher costs of goods

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Rustys-Beef-o-Reeno
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6:58a, 3/3/22
AG
Exactly, whenever someone in my neighborhood is shocked that houses are selling for X amount. I ask them, how many house options at that price point are there in this area, how many people are looking, and what do you think that would cost to build new.

There is still room to run on appreciation due to the increasing cost to build even basic houses let alone nice houses in established areas.
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Shooter McGavin
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7:42a, 3/3/22
AG
What I get a kick out of is when someone says, "I'm thinking about cashing out! I'm going to sell my house and take this enormous gain!"

Then their facial expression when I ask where they are going to live and they tell me something like "in a van down by the river" type plan. I ask how the wife is going to enjoy living like that for a few years.

If you sell now, prices and rates will be higher whenever you finally find something to buy.

This "bubble" is not bursting anytime soon. Absent some major stock market crash or WW3, it ain't happening.
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Martin Q. Blank
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In reply to Shooter McGavin • 7:48a, 3/3/22
Shooter McGavin said:
This "bubble" is not bursting anytime soon. Absent some major stock market crash or WW3, it ain't happening.
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94chem
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12:45p, 3/3/22
Quote:
If you sell now, prices and rates will be higher whenever you finally find something to buy.
This is the "other shoe." People locked in at ~3% on 30 year mortgages won't be able to move if the rates are substantially higher.

If I decided for some unimportant reason to sell my house and move into the identical home next door, I still have get a mortgage on the new home, I'm gonna seriously reconsider if the interest rate on the new loan is double what it was.
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one MEEN Ag
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In reply to 94chem • 1:19p, 3/3/22
AG
94chem said:
Quote:
If you sell now, prices and rates will be higher whenever you finally find something to buy.
This is the "other shoe." People locked in at ~3% on 30 year mortgages won't be able to move if the rates are substantially higher.

If I decided for some unimportant reason to sell my house and move into the identical home next door, I still have get a mortgage on the new home, I'm gonna seriously reconsider if the interest rate on the new loan is double what it was.
One step further, I'm locked in at 2% 15 year. I'm not selling this home even if I move out of state. Its not that I can't move, its that I got such a good deal I'd rather put up with the headaches of renting, let it pay down the mortgage, and keep the asset.

Low interest rates don't force our hand, they make it so attractive you don't have to give up your home.
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94chem
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In reply to one MEEN Ag • 3:00p, 3/3/22
Good point. Counter to the way most of us were raised. Take on as much debt as you can because the interest rate almost forces you to do so.
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one MEEN Ag
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In reply to 94chem • 3:10p, 3/3/22
AG
94chem said:
Good point. Counter to the way most of us were raised. Take on as much debt as you can because the interest rate almost forces you to do so.
This is similar to what is also causing a logjam of people never moving once they buy in california. The tax rate of your home is locked in when you purchase. So the longer you hold onto your home, the better a deal it is. If you ever move, the rate resets. I've heard of stories of people's parents buying a home in the 1960-70s and are still paying just $400 a year in property taxes. If they move to even just across the street it'll market true up to $40,000.

I wouldn't be surprised if california has the highest rates of dead grandmothers stuffed into closets because of this.
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Diggity
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In reply to one MEEN Ag • 3:29p, 3/3/22
AG
one MEEN Ag said:
94chem said:
Good point. Counter to the way most of us were raised. Take on as much debt as you can because the interest rate almost forces you to do so.
This is similar to what is also causing a logjam of people never moving once they buy in california. The tax rate of your home is locked in when you purchase. So the longer you hold onto your home, the better a deal it is. If you ever move, the rate resets. I've heard of stories of people's parents buying a home in the 1960-70s and are still paying just $400 a year in property taxes. If they move to even just across the street it'll market true up to $40,000.

I wouldn't be surprised if California has the highest rates of dead grandmothers stuffed into closets because of this.
Looks like tax assessments are capped at 2% a year unless you do a major remodel or sell.

Also, the lower tax assessment can be passed on to unlimited descendants so granny's corpse can be buried now.



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one MEEN Ag
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In reply to Diggity • 3:40p, 3/3/22
AG
Diggity said:
one MEEN Ag said:
94chem said:
Good point. Counter to the way most of us were raised. Take on as much debt as you can because the interest rate almost forces you to do so.
This is similar to what is also causing a logjam of people never moving once they buy in california. The tax rate of your home is locked in when you purchase. So the longer you hold onto your home, the better a deal it is. If you ever move, the rate resets. I've heard of stories of people's parents buying a home in the 1960-70s and are still paying just $400 a year in property taxes. If they move to even just across the street it'll market true up to $40,000.

I wouldn't be surprised if California has the highest rates of dead grandmothers stuffed into closets because of this.
Looks like tax assessments are capped at 2% a year unless you do a major remodel or sell.

Also, the lower tax assessment can be passed on to unlimited descendants so granny's corpse can be buried now.
I did not know it could be passed on. Yeah thats going to cause further market distortion.
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Diggity
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In reply to one MEEN Ag • 3:43p, 3/3/22
AG
yeah, they were arguing the the poor kiddos would be priced out of house & home when the parents kicked the bucket.

If I have my numbers right, and we're to assume a .75% tax rate along with the maximum increase of 2% per year, the "$400 a year" house would have to have been assessed at around $22K back in '78 (when Prop 13 passed). With no major additions or remodels, that house would have to be worth ~$5.3MM today to get hit with a $40K yearly tax bill.
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one MEEN Ag
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In reply to Diggity • 3:54p, 3/3/22
AG
Diggity said:
yeah, they were arguing the the poor kiddos would be priced out of house & home when the parents kicked the bucket.

If I have my numbers right, and we're to assume a .75% tax rate along with the maximum increase of 2% per year, the "$400 a year" house would have to have been assessed at around $22K back in '78 (when Prop 13 passed). With no major additions or remodels, that house would have to be worth ~$5.3MM today to get hit with a $40K yearly tax bill.
You know it sounds unreasonable, but because its california you know its still not implausible.
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Diggity
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In reply to one MEEN Ag • 4:05p, 3/3/22
AG
ha...agreed. never say never. It's only about a 13% CAGR
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Red Pear Realty
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In reply to one MEEN Ag • 6:16p, 3/3/22
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one MEEN Ag said:
94chem said:
Quote:
If you sell now, prices and rates will be higher whenever you finally find something to buy.
This is the "other shoe." People locked in at ~3% on 30 year mortgages won't be able to move if the rates are substantially higher.

If I decided for some unimportant reason to sell my house and move into the identical home next door, I still have get a mortgage on the new home, I'm gonna seriously reconsider if the interest rate on the new loan is double what it was.
One step further, I'm locked in at 2% 15 year. I'm not selling this home even if I move out of state. Its not that I can't move, its that I got such a good deal I'd rather put up with the headaches of renting, let it pay down the mortgage, and keep the asset.

Low interest rates don't force our hand, they make it so attractive you don't have to give up your home.


This is exactly what I'm seeing on a macro level. A lot of folks have stupid low interest rates and monthly payments, and with rents rising so much, there's no reason to sell for a lot of people. So it's a triple whammy against home buyers (especially first time buyers) because of:

1. Reduced inventory of available homes for sale
2. Increased cost to build similar new product
3. Hundreds of thousands of people moving to Texas from out of state.

Most people build wealth via real estate in the US, so the above worries me a great deal for future generations of buyers not being able to do so.
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SteveBott
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In reply to Red Pear Realty • 11:42p, 3/3/22
AG
Pretty sums it up. Good evaluation.

First timers are my base business. They are having a really tough time.
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ag009
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8:51a, 3/4/22
AG
It is a crazy world out there!
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PlanoAg98
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In reply to Diggity • 3:05p, 3/4/22
AG
Quote:
Looks like tax assessments are capped at 2% a year unless you do a major remodel or sell.

Define a major remodel.

How do they know?
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Red Pear Luke
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In reply to PlanoAg98 • 3:23p, 3/4/22
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You have contractors who pull permits and they can see the estimated size and scope of the project.
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Diggity
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In reply to Red Pear Luke • 3:30p, 3/4/22
AG
yep....they also use satellite imagery to see if floorplan changed.

nosy neighbors are a good source as well. When you have such a wide gap in what new owners are paying vs. original owners, I promise there is some resentment there.
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swimmerbabe11
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12:56p, 3/5/22
this makes me want to vomit. I work in new home sales now, in training, started back in november and my dumb self didn't buy before I quit my old job. Now, even though I have a sizeable amount for a downpayment, there is (probably) no way for me to get approved for a loan... and it feels like by the time I have enough experience/income in my job, I will just still be chasing being able to buy something.

Meanwhile, my landlord is holding my rent price, but won't let me do shorter term leases.
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PlanoAg98
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In reply to Red Pear Luke • 1:39p, 3/7/22
AG
Quote:
You have contractors who pull permits and they can see the estimated size and scope of the project.

Do they have to pull permits for new flooring and countertops? I just spent about 100K this past year on such and hopefully that does not translate into my next appraisal.
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one MEEN Ag
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In reply to swimmerbabe11 • 1:41p, 3/7/22
AG
I wouldn't count yourself out completely. You might be able to find a lender who will still underwrite the loan. You will probably lose considerable negotiating ability on the interest rate. But I wouldn't say that all home lending is closed off to you.
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Diggity
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In reply to PlanoAg98 • 1:46p, 3/7/22
AG
PlanoAg98 said:
Quote:
You have contractors who pull permits and they can see the estimated size and scope of the project.

Do they have to pull permits for new flooring and countertops? I just spent about 100K this past year on such and hopefully that does not translate into my next appraisal.
$100K on flooring and counters? must be nice
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SteveBott
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In reply to swimmerbabe11 • 1:54p, 3/7/22
AG
Give me a call. It's free and worth finding out if there is a path for you. At least we can set up a plan. Contact info in my profile
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Sea Speed
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In reply to swimmerbabe11 • 2:10p, 3/7/22
AG
swimmerbabe11 said:
this makes me want to vomit. I work in new home sales now, in training, started back in november and my dumb self didn't buy before I quit my old job. Now, even though I have a sizeable amount for a downpayment, there is (probably) no way for me to get approved for a loan... and it feels like by the time I have enough experience/income in my job, I will just still be chasing being able to buy something.

Meanwhile, my landlord is holding my rent price, but won't let me do shorter term leases.


Jay@agsreward.com. do yourself a favor and email him.
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PlanoAg98
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In reply to Diggity • 2:23p, 3/7/22
AG
Quote:
$100K on flooring and counters? must be nice

3000+ sq. ft. of porcelain tile with Schluter-DITRA underlayment and new baseboards/door trim & 3 full bathrooms (counters/sinks/etc.).
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Diggity
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5:55p, 3/7/22
Red Pear Luke
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In reply to PlanoAg98 • 8:55p, 3/7/22
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PlanoAg98 said:
Quote:
You have contractors who pull permits and they can see the estimated size and scope of the project.

Do they have to pull permits for new flooring and countertops? I just spent about 100K this past year on such and hopefully that does not translate into my next appraisal.


I'll be completely honest - it depends upon the convo with your contractor and their warranty/workmanship.

Personal take: I didn't have the fence contractor at our old house pull a permit. I don't want to give them a reason or one they know the scope of at least. So
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Rustys-Beef-o-Reeno
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9:10p, 3/7/22
AG
Why would you pull permits for flooring and countertops?
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bkag9824
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In reply to Rustys-Beef-o-Reeno • 9:53p, 3/7/22
AG
Rustys-Beef-o-Reeno said:
Why would you pull permits for flooring and countertops?
Shouldn't.

See above reference to nosy neighbors who like to talk **** to talk **** and make sure others "pay their fair share".
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swimmerbabe11
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In reply to SteveBott • 11:18a, 3/8/22
shot you a text to schedule something
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AlaskanAg99
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In reply to one MEEN Ag • 8:08a, 3/10/22
AG
one MEEN Ag said:
94chem said:
Good point. Counter to the way most of us were raised. Take on as much debt as you can because the interest rate almost forces you to do so.
This is similar to what is also causing a logjam of people never moving once they buy in california. The tax rate of your home is locked in when you purchase. So the longer you hold onto your home, the better a deal it is. If you ever move, the rate resets. I've heard of stories of people's parents buying a home in the 1960-70s and are still paying just $400 a year in property taxes. If they move to even just across the street it'll market true up to $40,000.

I wouldn't be surprised if california has the highest rates of dead grandmothers stuffed into closets because of this.
Nah, they have a clause in the tax code that allows for a parent-child transfer which keeps the house in the same family and at the same tax rate. The only time the tax bill goes up is if you remodel or do an addition. Then that part that is remodeled/add on is taxed at the current value/rate which can lead to some interesting valuations.

This is also why you will see dumpy 1940's homes next gorgeous homes. They can't afford to remodel or move, so the house stays as it is.

The other way around is through a trust. How do I know this? I worked for 13 years in the tax assessor's office in San Diego. Probably some 140yr old grandmothers out there, but there are loop holes to keep the taxes low.

This also is what lead to CA taxing incomes and business at a higher rate because they aren't getting the revenue they want for what the want to spend. And this leads to the boom or bust cycle. Plus high gas taxes, which is why CA pays the highest per gallon for unleaded. Fun facts.
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AlaskanAg99
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In reply to PlanoAg98 • 8:25a, 3/10/22
AG
PlanoAg98 said:
Quote:
Looks like tax assessments are capped at 2% a year unless you do a major remodel or sell.

Define a major remodel.

How do they know?
They keep a record for each house, often with photos taken from the listings. If they house was 2,000 sq ft in 1980 and then sold in 2010 for 3,000 sq ft, then that will flag. Each home is compared to the last time it was shown plus helpful tips such as (Kitchen remodeled in 2005). They can, and do, go back after you for up to 5 years in a process called "Escapes", as in you escaped paying taxes.

Today's imagery is much more exact, and it's not satellites, just specialized planes taking orthophotos around the 6" level of accuracy. They can also do obliques and they also do LiDAR to penetrate trees (multiple uses for this, in TX it's mostly used for flood planning). From this they can create building footprints and there's software to do change detection to flag homes. It's so advanced the can even see 2nd story additions. This just kicks off a manual review of the home.

So if you don't pull permits, no one will know unless you're ratted out if you don't change the footprint/exterior of the building. However, they can get you at the time of sale, but they cannot go back the whole span if it was done 10-15 years ago. Just 5.

Also if they catch unpermitted work, they can go back after you for permits/fines. When I bought out there so many homes had unpermitted work, which could make insurance tricky. Man, I'm so happy I left.
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one MEEN Ag
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In reply to AlaskanAg99 • 8:47a, 3/10/22
AG
Thanks for the explanation.

Personally, I'm more in favor of an income tax compared to a property tax. Income taxes only take from you when you make money, property taxes take from you regardless of your income. This isn't as big a deal when working, but when you stop working and stop making as much money high property tax states are brutal. You never really own what you've worked for. Lots of widows and poor people pushed out of their houses. The only problem is, that governmental officials can't just keep their hands to themselves, and the taxing authorities if given the ability to tax both incomes and properties will do so, and eventually at an untenable rate.
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