
Record low housing inventory is 'freaking us out' says Redfin CEO - anigbrowl
http://www.cnbc.com/2017/05/17/real-estate-ceo-record-low-housing-inventory-is-freaking-us-out.html
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marcell
I own a 1br condo in the Bay Area that I purchased as an investment. I've
considered selling but the very high transaction fees are a big deterrent.
Consider:

7% typical agent + escrow fee (3% buyer, 3% seller, 1% escrow). May be able to
get as low as 5%

~15% capital gains tax

~10% CA income tax

Even on a sale of a 1br condo, these fees can add up to $50-100k depending on
the purchase price and net gain. That's quite a chunk of change! Enough to
make one keep the unit on rental market

~~~
jrochkind1
So you purchased a condo you don't live in as an investment in area where few
but the super rich can even afford to own their own homes, and now you find,
not that you'll take a loss if you sell it, but that you won't make as much
money as you'd like (because of perfectly standard fees and taxes that were
standard when you bought the place too), and can make more money renting it
out instead...

...you're not looking for sympathy, are you?

~~~
diamondlovesyou
What? His success reflects nothing on anyone else and doesn't have anything to
do with sympathy. He/her is saying that current real estate rules aren't
helping incentivize rational decisions to sell. Why would anyone do something
that results in a worse (read: not the best) outcome for them?

~~~
jrochkind1
Sure, I suppose we could tax rental income higher, and incentivize rational
decisions to sell investment property.

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twoodfin
Maybe it's true, but this article reads like self-serving PR: Houses are
selling so fast! Redfin is desperate for inventory! But it's not a bubble so
keep buying!

~~~
anigbrowl
I hesitated to post it because of that single-sourcing, but went ahead because
I think the real estate market is often a good leading indicator of the
economy as a whole. I was perplexed the other day to see that new housing
starts have been falling for a couple of months.

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irrational
"The typical home went under contract in just 40 days, 10 days faster than
April 2016. As a result, 1 in 4 homes sold above their list price."

I'm definitely seeing this in my area (Beaverton, Oregon). A house down the
street sold in a few hours this past weekend for $500,000; which is $300,000
above what the owners bought it for a year ago ($200,000). They had a steady
stream of people going in an out of the house the entire day.

I'm tempted to put my house on the market, but where would I move to? I love
my job and don't want to move out of the area.

~~~
sxates
There's this new game in hot real estate markets where houses are listed
intentionally well below market to attract traffic and encourage multiple
offers. Here in the Bay Area it's standard operating procedure, and houses are
expected to sell 20-30% over asking. The 'list price' is really just an
opening bid, and anyone looking for houses in these markets is adding at least
20% in their head to ballpark it's actual likely sale price. This is a big
change from the past, and from many existing markets that try to list prices
at the top end of where they'd appraise, and were expected to be negotiated
down by a single buyer, not up by multiple buyers.

~~~
phlakaton
From my recent experience in Bay Area homebuying, that 20-30% depends on the
neighborhood, city, property, and timing. In one case we saw it was under 10%;
in another it was over 35%! (It seems to be a fairly open secret in this town
that the realtor involved in that latter case _really_ likes to lowball their
asking price, though.)

My advice (for the little it is worth, as I am not a professional in these
things) is not to assume you know the buffer to apply if you're trying to make
an offer. We used our own previous attempts and our studies of comparable
sales in the area to inform our offers.

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sxates
The article says that the new home construction is mostly going to apartments
because tight credit means more people are renting. But then laments the low
inventory for sale that is driving up prices. So which is it? Too many buyers
or too many renters? Or is it a problem on both ends?

~~~
cvwright
Other reports say that hedge funds and other investors bought up lots of
houses after the crash, and are now renting them out through management
companies. If true, that would both contribute to the lack of supply for
purchase and capitalize on the demand for rentals.

~~~
logfromblammo
In movie metaphor, Old Man Potter finally bought out Bailey Building & Loan
when it went under in 2007, and now Bedford Falls is turning into
Pottersville.

As far as I am aware, the FNMA/FDMC system only guarantees mortgage loans for
properties with existing [appraisable] structures, so borrow-to-build lenders
face significantly higher risks and lower liquidity. It's harder to buy
undeveloped land and build a hovel on it from local materials, than it is to
buy an overvalued 5-bedroom McMansion, built from twigs, bird spit, and a
10-year horizon for its planned obsolescence.

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reviewmon
I am not sure about the tight credit. We were approved for something we would
not be able afford (too much house). It seems like the new wave is to target
prime accounts with over the top amounts. Those account can quickly become
subprime if the economy adjusts.

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kafkaesq
Interesting, if true.

And if true, it'd also be interesting to know to what extent: the current
overheated markets in SV/NYC are skewing the numbers; and (2) foreign
investment (read: money laundering) may be weighing in on the numbers, as
well.

~~~
acchow
Can you explain how one launders money using a condo? Typically this is done
with a small business like a car wash or laundromat...

~~~
nwatson
GP mentioned money-laundering in context of _foreign_ cash. Buying US real
estate with money from overseas bribery/graft is the perfect way to legitimize
wealth. Nobody in the US is going to check the overseas origin very
thoroughly, and US real estate isn't as volatile as home-country assets.

~~~
kafkaesq
_Nobody in the US is going to check the overseas origin very thoroughly,_

Well, plenty of people would very much _like to_. But in practice this is
often quite difficult in many high-value jurisdictions, for various reasons.

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MaysonL
Then again, it may be Chicken Little sky-is-falling time:

 _" [on Calculated Risk, housing economist Tom Lawler estimates] that US
existing home sales as estimated by the National Association of Realtors ran
at a seasonally adjusted annual rate of 5.56 million in April, down 2.6% from
March’s preliminary pace and up 1.5% from last April’s seasonally adjusted
pace. Unadjusted sales as estimated by the NAR last month should be about 2.8%
LOWER than last April’s pace, with the “adjusted/unadjusted” YOY growth
difference reflecting this April’s lower business day count, as well as the
different timing of Easter (April 16 this year vs. March 27 last year.)

On the inventory front, local realtor/MLS data suggest that the monthly
increase in the number of homes for sale last month was slightly higher than
last April’s increase, and I project that the NAR’s estimate of the existing
home inventory for April will be 2.00 million, up 9.3% from March and down
5.7% from last April."_

EDIT: link: [http://www.calculatedriskblog.com/2017/05/lawler-early-
read-...](http://www.calculatedriskblog.com/2017/05/lawler-early-read-on-
existing-home.html)

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devy

       "It's a new landlord nation where everybody is renting out their basement. 
       When somebody moves up they don't sell their old place, they rent it out to
       somebody else, and it's because they want to keep that 30-year mortgage for 30 years, 
       and it's because they can easily find somebody on Airbnb who will take the place," Kelman said.
    
    

So this is Airbnb's fault?

~~~
dsp1234
replace airbnb with craigslist, backpage, or the local newspaper if you like.

The bigger point is that the rental pool is so large, that it's really easy to
fill a vacancy even if it's just a single home rather than a large rental
complex.

~~~
devy
> replace airbnb with craigslist, backpage, or the local newspaper if you
> like.

I am not informative on the housing market, neither do I work in related
industries, so I could very well have the wrong impression here about this
matter. But I haven't heard housing inventory reaching record low (like the
current level) before, given CL/BP/local newspapers exist for a few decades by
now.

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jml7c5
I'm in one of the hardest hit areas in Canada. Rental vacancies hit ~0% last
summer. House prices jumped ~20% last year alone. Amusingly, the crunch has
been so bad that our city has reached the point where we have approximately as
many realtors as listings.

For someone who aspired to one day own a home, the realization that prices
have jumped 125% over the last decade is disheartening to say the least.

~~~
dublinben
Why is there not more construction to increase the amount of housing in your
city?

~~~
arielweisberg
That is the odd part isn't it? At some point the sale price of a new home has
to incentivize building houses.

~~~
acover
Isn't it the zoning rules that limit building densely?

The incentives of existing owners are against development.

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bks
If you want to cut fees there are a huge number of options, from companies
that charge 1% like [https://www.redfin.com/about/one-percent-listing-
fee](https://www.redfin.com/about/one-percent-listing-fee) I just learned
about these guys, not unique but certainly a great option for saving on 3%,
[https://www.homebay.com/](https://www.homebay.com/) they do it for a fixed
cost.

But I get it... I have been in my house for the 10 of the worst real estate
year but on paper, my head is above water however if I sell I loose money.

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erentz
Time for some states to introduce a blanket 1% land value tax. I like the idea
of returning it to all residents as a dividend. But otherwise use it to reduce
sales taxes.

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Overtonwindow
This article kind of feels like a paid advertisement...but putting that aside
for a moment, if it's true, it bodes well for those of us trying to rent out
homes. I have a house in Atlanta I just had to leave to move for a job, and I
am about to rent it out. I've priced it at the low end of the rental market
but there's still a lot of fear that people will choose an apartment over a
nice house.

