Fast closing, less hassle. House across the street from me had an open house on Sunday, by Monday the sign was down and the moving trucks were there. New people came in surprisingly fast. Cash offer 10 grand over ask. Current homeowners in most situations don’t have cash and have a mortgage, perhaps 2 because they have to move into their new home, too. The faster they close the faster they can pay off their mortgage and not be carrying costs for 2 homes or be in limbo. financing deals and pre-approvals fall through. Lender might require repairs, the appraisal comes in low, all kinds of things.
Or, of course, they could promote policies and candidates who would remove the decades of promotion of artificial scarcity and bring about higher-density mixed-use neighborhoods.
This would crash home prices, of course. Having a city/metro area actually promote sufficient housing for its population so that they continue to have the ability to work/live/shop in a way that promotes economic development for all instead of a select group of elites and those lucky enough to have purchased at the right time.
Anecdote coming: I did a money event on Wednesday at a local hospital. Next to me was a realtor. Nice guy. However, one person came up to him to talk real estate and said something to the effect of, “How much has my house gone up today?” I can think of no more chilling question, from an economic and sustainability point of view, than that. It shows an arrogance and a total misunderstanding of what’s going on in our local market.
Now, I know nothing of Columbus these days. I’m in Charleston, South Carolina. But I can’t imagine Columbus is any hotter a market than here. My own home has increased in value more than $100,000 (65% of my buying price) in four years. My location is simply out of reach of regular, working class people even though it was specifically designed to be for such.
But, whatever. The working class and poor get screwed no matter what. Whether it’s housing poverty, overly long commutes, cramped conditions - the house next to me at one point had four couples living in a four bedroom house so they could get a place - or whatever. It’s not like communities have a vested interest in having people of all walks of life be able to afford to live within them. Doctors, lawyers, engineers and stockbrokers should only interact with similar people.
We’ve learned very little from 2008.
Ayup. When I was repainting some walls of my condo and recarpeting, I made some choices that others might not care for. As I commented to the contractors when we discussed what I wanted, the next owners will probably hate my taste but so what? I won’t be around and they can do what they want.
Lord knows I hated the previous owners’ decorating choices. 
Back before the big housing market crash, banks would pretty much hand you a bag of cash with minimal questioning, and if you did manage to be in bad enough shape to not get approved for the loan you wanted they’d almost always be able to find some loan for you. Appraisers would ask the bank how much the loan was for so they could be sure the house would appraise ‘properly’ and not derail the sale. The people making loans didn’t care whether you actually paid, because it was going to get packaged and someone else was really taking the risk. The whole process would take maybe two weeks. In that environment, there’s not much of an incentive for cash offer over mortgage offer, although a cash offer will always be faster.
Now bank regulations force them to actually check that you can afford the mortgage, appraisals have to be real, banks will have to deal with the cost of a loan if you can’t pay it, and they spend time checking all of this. A cash offer can easily close within a week, and has essentially no risk of falling through. Meanwhile a mortgage requires weeks of time for all of the checks, and can fall through for a variety of reasons like ‘house doesn’t appraise for enough’, ‘the 47th document they finally collected disqualifies the borrower’, and so on.
So while it used to be more of a ‘money is money’ situation, now it’s a choice between getting the money inside of a week with no hassle, or getting the money after a month or two with a chance that they deal will fall through and you’ll have to put the house on the market again.
As was explained in more detail, if the two deals proceeded equally fast with equal probability of falling through, then yeah a i is a . But in general it’s slower with more chance of the deal falling through, or additional demands being made on you as seller or else it falls through, if there’s the added moving part of a lender.
But blaming people for having the cash to buy a house is just as ridiculous as the letter quoted in the OP.
The only sensible measures to counter housing ‘shortages’ are public policies that reduce obstacles to, or reduce unnecessary costs to, build new housing. And even so in a devolved political system people who live in a given town have some right to choose how much more crowded it’s going to get. Imposing zoning requirements from too high a level above the local place becomes tyranny even if democratically enacted tyranny.
I live in what wasn’t at one time but has become a very desirable and expensive area immediately adjacent to Manhattan. It’s been built up massively, and that still doesn’t make prices go down: it’s a function of demand in the whole NY area including money coming in from overseas (albeit generally not directly here, usually into further upscale properties in Manhattan but then the effect flows downhill). But it’s completely reasonable if we don’t want this particular place to get any more crowded, it’s already way more than it was 30 yrs ago. And economic nationalistic policies like putting up obstacles to foreign buyers of Manhattan real estate almost always backfire. Realistically the places that could fit more housing and where the real cost is going to come out reasonable are further from the center of Manhattan. That’s just life.
It may be “the market” working as it should, but is it public policy working as it should? The significant difference between the stock market and housing is that the stock market is purely financial and mercenary by design: stocks are issued only to raise money, and people invest in them only to increase their wealth. A share of stock is not a basic necessity of life; shelter is. And soaring house prices affect everyone, because they affect lesser neighborhoods as well as greater ones, outlying suburbs as well as urban areas, and directly affect rental markets.
And another difference is that “price discovery” may be valuable in the stock market because you can, if so inclined, tip off others to the deal you found, and for a while at least the same buying opportunity is available to all. In housing, once you’ve “discovered” that value, you’ve taken it off the market.
The young couple cited in the OP are idiots for blaming “greedy sellers” for the runup in house prices, but one could have some sympathy for them if they had simply observed that in many areas the ratio of house price to average salary had been increasing precipitously. In my general metropolitan area it’s not uncommon to speak of doubling and tripling of prices in modest periods of time, while average income has increased only marginally. You can’t talk about detached house prices any more without using the word “million”, even in the suburbs. I’m torn on this subject because as a long-time homeowner I’ve reaped substantial financial gains from this trend, but I can see the hardships and social problems it’s causing.
And I have zero sympathy for mercenaries who are responsible for prime real estate actually sitting empty while people scramble for a place to live. It was recently reported that London currently has some 20,000 homes worth over $12 billion sitting empty, many of them owned by speculators waiting for higher prices (including many foreign ones who never had any intention of living there), while homelessness in the city had risen 54% in the previous six years. That, too, can be technically described as “the market working as it should”.
Just one thing, and I’m not sure whether you’d consider it a major difference or a nitpick, but: what we’re talking about wouldn’t be the imposition of zoning requirements, but the abolition of some of them. Whether that still constitutes tyranny when it comes from above, or whether it’s regarded as liberation, kinda depends on your POV.
But it’s the presence of zoning requirements, not their absence, that makes for housing shortages.
According to this story from last year there are over 99,000 unoccupied homes in Toronto. The story mostly points fingers at speculators. All of this may have changed since the market has cooled in the last year.
Wow, that totally dwarfs both London (UK) and Vancouver! A quick multiplication of the average price last year of Toronto area housing of all types, which takes into account the fact that many of those are condo units, puts the value of all that unused real estate that is mostly held for speculation at about $73 billion!
Meanwhile the City of Toronto reports that in 2014, 16,000 different people used various forms of homeless shelters, except for approximately 500 who slept on the street.
The cash means a sure sale. If a buyer wants to get a mortgage, he may not be able to get it - and you waste a month dealing with him before you find that out, and lose the opportunity to sell to the cash buyer. If the dollar values of the offers are the same, a seller is better off accepting the cash offer.
Maybe this is no longer the case but when I bought my house, people could get preapproved for a mortgage up to a certain amount.
And sometimes the fix is only cosmetic (painting a colorful flat all-white); it may even cover serious defects without fixing them (areas with humidity damage). One of the reasons I bought fixer-upper was to be able to fix to my taste; another, to avoid those false fixes.
Pre-approval isn’t approval. Until you get an approved mortgage there are many ways things can fall apart.
Pre-approval means the bank took a really brief look at your financials and said ‘yeah, we don’t rule out a loan at that amount’ - usually it just requires something like looking at your income and maybe a basic credit check. It doesn’t mean that the bank is actually willing to loan you that amount, just that they don’t entirely rule you out. Pre-2008 there wasn’t much risk of not getting approved, on the off chance that you couldn’t get a ‘real’ mortgage they’d get you one of the shady ones. Now they’re a lot tighter on it, and they need a LOT more documents for a real mortgage than pre-approval.
My dad would sagely tell me this advice too.
It took me a few years till I figured out, “So what?” We are supposed to push back at unfairness and not just meekly accept it. Accepting unfairness because life is unfair is a bad policy in general.
That said wanting the best price for your house is not unfair to anyone. I wonder if this person will listen to a sob story in 20 years and sell their house cheap? Willing to bet they won’t.
There is also this very relevant Calvin & Hobbes strip.
Young people are dealing with an economy that has been hostile to labor for decades now (which means their Parents are in less of a position to help and they themselves are struggling), with high housing prices even after they cratered a decade ago where jobs are all contract with little security. Forgive them for being frustrated and try to remember what its like when you were starting out and trying to build a life. The nastiness and dismissiveness is unpleasant in this thread.
Relevant cartoon (parents are berating their child wanting to move back home and telling him that at his age they started with nothing…the child is carrying a gigantic load of school debt on his back and says he wish he could start with nothing).
That said to call a homeowner selfish for trying to maximize the amount of money they get for their house is ridiculous.
Heh. I’ve been reading forums for a free-to-play game (that makes its money by hooking the players and then offering to sell them ways to speed up progress and cosmetic vanity items), and it’s shocking the number of “suggestions” players come up with that boil down to “give us the purchaseable content for free!”
You can already do very well in the game without spending a dime.
It’s a worldwide thing and not just in the Yew Ess of Eh. Too little housing being built, wealthy investors buying up bargains, the average Joe not having enough money. The solution? Up to a point, build more housing. But build the sort that people need. These days there is an increasing need, worldwide, or at least in the developed countries, for housing for childless couples, singles and single parents. Also for retirees.
Policy preventing supply and leading to scarcity is a bigger problem than house flippers or investors.