I would think that you’re crazy if you tell me this statement six months ago. Frankly, RED HOT is not even enough to describe the current market. Here are some of my personal anectodes, based on my bidding in the market:
1. Most listings go into pending on the first two days, or after the first weekend.
2. ALL homes have multiple offers at or WAY above listing prices. It’s getting common to have some 20 to 40 offers if the listing doesn’t get pulled down in the first month.
3. If you don’t work with listing agents, it’s end-of-story for you.
4. Grand opening at new home sites are PACKED!!
5. The bidding frenzy is extending some 60 miles away from the center of the metropolitan area.
6. Even handyman or contractors for flooring/carpeting, etc. won’t answer or return your phone calls. I tried to call a handyman for flooring. Not only that he doesn’t return the calls, he has requested his carrier to post a message: “On the request of the subscriber, this phone number does NOT accept incoming calls.” Frankly, that is just NUTS! And this is not just an isolated experience on one handyman, but my experiences with several handymen are like this as well.
7. MLS inventory was 40% down year-to-year several months ago. I wouldn’t believe this if I didn’t see this myself, but MLS listing inventory is going down to essentially absolute ZERO probably in the next one or two months within the 60 miles radius of my search. Just go to redfin.com, and punch the city names. On the upper-right corner, you can see the inventory plots. It’s a straight line heading down to zero, since last October/November.
With Fed buying 40 billions of MBS mortgage securities every month thru QE3, which will tend to close the spread between treasury bonds and mortgage bonds, it is possible that mortgage rates may go even further down. FHA also may waive the 3-year waiting period after short sale/foreclosure. If that happens, in conjunction with even lower mortgage rate, the housing markets can easily go up by another 20%. FHA down payment is only 3.5%. That is basically nothing, and won’t even cover the transaction cost of buying and selling. Taxpapers are essentially subsidizing all the future defaults (again)!
So where do we go from here? I’m a long-term bear on the housing market, and I have called the short-term bottom five months ago this year. I’m not changing my view (yet). But it is surprising that how much intervention can do to the housing markets. I expect the next short-term peak at about 2016, and the next bottom to come at about 2018 to 2020, but that is at least 6 years away from now. If you need a home, but you cannot wait for 6 years, it may still be better to buy now rather than later. I think the prices at the next bottom may be slightly higher than the bottom that was made in 2011/2012. But you would have saved on rents for sure. Given the current pricing, with the exceptions of being right at the center of metropolitan area, it is certainly cheaper buying than renting.
Best luck on your housing hunting trip, because you will need A LOT of that.