Less risk that the loan comes through. “Pre approval” doesn’t guarantee that the loan happens. If the loan fails and the buyer pulls out, the house goes back on the market. In SF, that’s the kiss of death. Buyers now assume that there is something wrong with the house.
When we sold our place in SF, we sold it to a person who bought it for cash. He wasn’t the highest offer. We negotiated him up to the highest offer (well above asking price), but would have still taken his all cash offer at the somewhat lower number in order to guarantee that the money was there.
It’s possible. Now that I’ve bought a house, seems bound to happen
I think that a key difference here is that most of the price increases have been in coastal cities, and there’s a plausible case to make that supply will be constrained in those places for the long term because the current residents like things just the way they are and don’t mind seeing their house values keep going up, so why not vote for incredibly restrictive zoning.
What caused the 2008 crash was the predatory ARM with 1 or 2 year buy-down, wherein the seller pre-paid the interest for 1 or 2 years, making a $400,000 mortgage about $300/mo.
When those ARMs “reset” to the underlying rates ($3000/mo or so), the suckers found themselves unable to get a new $300/mo loan (duh!) or sell for the $400,000 they “need” to pay off all the loans.
An instance: my house. It went on the market in 2007 at $370,000 to cover the $269,000 the owner owed.
It (like virtually every other house within 200 yds of it) went into foreclosure (another fine Downey S&L loan) and sat empty for 2 years.
Downey got less than 50% of what they had in it when they finally found me.
I have a nice, respectable 30 yr fixed, so I am not going to be panicked by a “reset”.
But: from 6/09 when I closed to now, Zillow thinks it has more than doubled in price.
How people are making the payments on the new, inflated prices, I do not know.
A big part of real estate price inflation is wealthy individuals and groups buying homes with cash and renting them out. It isn’t the same as 2008 when you had a bunch of middle class homeowners who couldn’t pay their mortgage after the rates adjusted.
Denver has been going nuts for close to 3 years now. Mostly because of then number of people who are moving in last year we were the fastest growing city in the country at over 200k new residents per month. It started with legalization and then got energized last year when we were picked the best place to live. I bought my condo for 99.9 in 2002 and it was worth 80 according to Zillow 3 years ago now it’s at 160.
I don’t see any way for this to crash unless people stop moving in. The city is predicting the population of Denver to double by 2020.
This is the same as my experience here in Chicago. We bought a house in 2011 and again this year (just moved in today, in fact.) The mortgage process tightened like hell in 2011 compared to the early to mid 2000s, where they were throwing loans at me that there was no way I could afford, and, this recent round of getting mortgages, with excellent credit scores, on a mortgage less than 1.5x my wife and I’s annual income was insane. They wanted even more information and documentation than they did in 2011, when it was a pretty tight mortgage market. Hell, when we first approached Bank of America, it took us one and a half hours on the phone before we could even get a preapproval letter, something that normally would take 15-30 minutes. (We ended up going with a mortgage broker, and that went smoother, although the documentaion involved was pretty intense compared with what we had to go through before.)
We’ve seen some big jumps in our neighborhood. We bought in 2014 at what we thought was maybe a bit higher than the market, but since then, houses have been going for much more - and in some cases, for less house. We’re happy with the trend, to say the least.
