Frenzy in real estate buying

**LOKMom** · 05-23-2012, 11:42 AM

Is anyone else shopping for a home and experiencing a buying frenzy? I feel like someone turned back the clocks to 2005.... We have been looking since March and if we don't get into the home the first day it is on the market and make a a decision to put an offer on the house, the house is gone. And forget about comps, houses are going for asking or very close to asking even if there is no comp justifying the price.

I feel like there is all this pent-up buying demand right now. Plus I am guessing fewer sellers are putting homes on the market because of the gloom and doom in the news about homes not selling. I am feeling like we should put our search on hold until the market settles back down.

Is anyone else seeing this craziness in the real estate market right now?

**pjrb** · 05-23-2012, 12:28 PM

I imagine it's a seasonal thing. School's over, people want to move during summer. -- ??

**ArcticSplash** · 05-23-2012, 12:38 PM

Spring is the height of buying season. Schools are not in session; gives parents time to relocate before schools go back in session. This is the time when most families with kids are moving.

The weeks around Christmas/NY is when it's nearly dead. Foreclosures in Philadelphia are up 30%.

But home sales in Philadelphia are definitely higher than 2009-2010

**enyo** · 05-23-2012, 01:15 PM

I think things are starting to pick up again. I heard something about appraisals getting higher too.

**robot** · 05-23-2012, 01:36 PM

Originally Posted by LOKMom

Is anyone else shopping for a home and experiencing a buying frenzy? I feel like someone turned back the clocks to 2005.... We have been looking since March and if we don't get into the home the first day it is on the market and make a a decision to put an offer on the house, the house is gone. And forget about comps, houses are going for asking or very close to asking even if there is no comp justifying the price.

I feel like there is all this pent-up buying demand right now. Plus I am guessing fewer sellers are putting homes on the market because of the gloom and doom in the news about homes not selling. I am feeling like we should put our search on hold until the market settles back down.

Is anyone else seeing this craziness in the real estate market right now?

My wife and I have been monitoring 3 bedroom houses in the 500-700K ranges in the Meredith school catchment area and we have definitely noticed that houses in decent condition do not last long.

**phillycat** · 05-23-2012, 02:00 PM

The interest rates are incredible. with prices still down and these rates, I hate to say it, but it's an amazing opportunity.

**JasonMcElroy** · 05-23-2012, 02:24 PM

Originally Posted by phillycat

The interest rates are incredible. with prices still down and these rates, I hate to say it, but it's an amazing opportunity.

Yep. Prices are down in many areas too with some hold-out sellers having listings up for months (and even years).

The correctly priced ones seem to move in days.

We just bought a house a month ago. Was only on the market 4 days and already had full-price offers.

We figured with rates this low and prices depressed, now was the time. Rising rates and prices would likely have outpaced our ability to save more money so we went for it.

No regrets. Bought our first house at the top of the market. Bought this one at an ideal time.

Jason

**thegreattwizz** · 05-23-2012, 04:37 PM

Originally Posted by robot

My wife and I have been monitoring 3 bedroom houses in the 500-700K ranges in the Meredith school catchment area and we have definitely noticed that houses in decent condition do not last long.

Good luck, it's a beautiful neighborhood!

**drala** · 05-24-2012, 09:52 AM

Current data are that 25% of Phila area homes are in negative equity (wow), making it impossible for many people who want to sell to do so. Maybe that is having an impact on supply in the market.

**OldMama** · 05-24-2012, 10:04 AM

I think the combination of low mortgage interest and high rents is bringing new life into the real estate market. When I considered renting out my BV house rather than living in it, I was amazed at how much it could rent for.

**lastmonthsrent** · 05-25-2012, 09:50 AM

Originally Posted by LOKMom

Is anyone else shopping for a home and experiencing a buying frenzy? I feel like someone turned back the clocks to 2005.... We have been looking since March and if we don't get into the home the first day it is on the market and make a a decision to put an offer on the house, the house is gone. And forget about comps, houses are going for asking or very close to asking even if there is no comp justifying the price.

I feel like there is all this pent-up buying demand right now. Plus I am guessing fewer sellers are putting homes on the market because of the gloom and doom in the news about homes not selling. I am feeling like we should put our search on hold until the market settles back down.

Is anyone else seeing this craziness in the real estate market right now?

Remember, when things settle down so does the inventory. I had two clients last year that wanted to "deal" shop during the fall and winter but inventory was scarce. They ended up being
involved in the frenzy market you speak of. It took a bidding war or two but they got into something. (Passyunk area)

Artic splash speaks of the foreclosure market being up which can often serve up a discounted deal. But beware of an untimely response to your offer from the bank and deffered maintenance to the property. If you are creative and patient it can prove worth it.

Another observation that was made that I strongly agree with is while buyer sentiment is strong many sellers have to wait on the sidelines due to their negative or flat equity positions. Often it just comes down to the closing costs.

**thesomersteam** · 05-26-2012, 08:09 AM

Good observations. What is happening is that the inventory of "good products" is low thus the properties that are priced right and are great products do sell quickly, often times with multiple offers and all the other properties will languish until after several price reductions, they will sell.

Personally, I bought a property in Fishtown on Thursday of this past week. Am very bullish on the opportunity. Here is a recent blog on the subject:

The Homebuying Chance of a Lifetime « TheSomersTeamBlog

**randomuser** · 05-26-2012, 07:37 PM

Not only are all of the factors coming into play that people have mentioned previously in this thread but more people are moving to this area (and not just Philadelphia either) and even this state than have in decades. This board doesn't get the majority of inquiries about relocating. Take a peek at city-data though and you'll see what I mean.

**thesomersteam** · 05-27-2012, 08:31 AM

It will be interesting how the real estate market will react once real estate taxes are raised for the third year in a row, if it ever gets approved by City Council to pay for the shortfall of the PSD. That of course will also hurt tenants as landlords will pass along the cost to tenants. With rents escalating at a fast pace, it will eventually bring up the age old question in the future "Why rent when you can own?"

**ArcticSplash** · 05-27-2012, 09:24 AM

Originally Posted by thesomersteam

It will be interesting how the real estate market will react once real estate taxes are raised for the third year in a row, if it ever gets approved by City Council to pay for the shortfall of the PSD. That of course will also hurt tenants as landlords will pass along the cost to tenants. With rents escalating at a fast pace, it will eventually bring up the age old question in the future "Why rent when you can own?"

Renters will absorb the full shock of the property tax resets as soon as their leases roll over. For homebuyers, they'll lower their bid price to match the increased cost of holding real estate. For every $100/month increase in property tax, you're looking about $22K-$25K decrease in what that mortgage-backed buyer will bid on. Give that about a year or two to work its way through the market and you'll get an even stronger case tempting renters out of the market into buying, even with the higher tax.

**ofeibush** · 05-27-2012, 10:04 PM

Every home we had listed in Point Breeze is under contract. More homes have moved in the last 60 days than in the last year. Even homes that are just breaking ground are under contract. Prices are higher than they have ever been here with each home under contract north of 300k

We are getting ready to break ground on 3 larger projects and have offers at asking before we even complete zoning.

I am seeing a tremendous amount of activity in the Graduate Hospital area as well but that area has been consistently strong over the last few years. The pace pails in comparison to PB though.

**ofeibush** · 05-27-2012, 10:09 PM

I do not believe that any of the tax increase will be passed along to tenants. Landlords charge as much money as they can. Your suggestion gives the impression that landlords intentionally leave money on the table....just not the case.

Also, new construction properties are shielded form reassessments for many years to come due to the 10 year tax abatement.

**ArcticSplash** · 05-28-2012, 05:38 AM

Originally Posted by ofeibush

I do not believe that any of the tax increase will be passed along to tenants. Landlords charge as much money as they can. Your suggestion gives the impression that landlords intentionally leave money on the table....just not the case.

Also, new construction properties are shielded form reassessments for many years to come due to the 10 year tax abatement.

That goalpost moves when every landlord in the market is hit with a doubling or tripling of the property tax bill. I don't think that's much of an issue in Point Breeze, but it will be in any area that's got healthy original housing stock that's due to get a rude awakening with AVI.

**StrangeTanks** · 05-28-2012, 06:13 AM

Originally Posted by ofeibush

I do not believe that any of the tax increase will be passed along to tenants. Landlords charge as much money as they can. Your suggestion gives the impression that landlords intentionally leave money on the table....just not the case.

Also, new construction properties are shielded form reassessments for many years to come due to the 10 year tax abatement.

I agree with Arctic. I'm a landlord and I leave "money on the table" all the time. I never raise rents on my tenants that stay year to year, and usually rent slightly lower than market value to attract a good pool of potential tenants. My profits might go down as costs rise (don't forget insurance and water have gone up dramatically in the past few years too) but its also expensive to have turn over. On the other hand, if there is a large increase in my costs I may have no choice but to raise rents.

**ArcticSplash** · 05-28-2012, 06:24 AM

Originally Posted by StrangeTanks

I agree with Arctic. I'm a landlord and I leave "money on the table" all the time. I never raise rents on my tenants that stay year to year, and usually rent slightly lower than market value to attract a good pool of potential tenants. My profits might go down as costs rise (don't forget insurance and water have gone up dramatically in the past few years too) but its also expensive to have turn over. On the other hand, if there is a large increase in my costs I may have no choice but to raise rents.

I would imagine AVI in places like the Lower Northeast will have a marginal impact the closer you are to Wissinoming, but then more of an impact the closer you are to Pennypack. The balloon popped in sale prices in the Lower NE the instant the recession started. Tons of people paying over $1,000 in property tax for property not anywhere close to $150K. But for neighborhoods that are gentrified or gentrifying, the AVI outcome is more drastic.

If you're > $1,200/yr in tax on a $250K-or-over property, the City is likely to at least double that tax bill in the current scheme of AVI (and going by Green's doomsday calc, higher than that). That's more than $100/mo extra in expense. If you are renting the property out for less than a 9% margin right now, I cannot see how you wouldn't raise the rent.

Look at it this way: If the City is asking you to purchase them a brand new 21" high-end Macbook (or two) every year..extra...why wouldn't you pass that cost along to your tenants?