I'm in Boston - I actually live in one of the more "affordable" parts of the city. The cheapest thing on the market in my area is a 500 SF 1 bed for $370k ($738 price/sf). It's a 3rd flr walkup, on a busy street, no laundry, no outdoor space, no a/c, no parking. I think what most people do is buy something like that in their 20s, get some equity, then buy something bigger & so on & so on.

I'd be interested in what some of the realtors on this forum are seeing, since their ears are to the ground with both buyers and sellers. But here are a few of my thoughts/observations:

1. In my small midwest town, that has never seen RE booms and busts, the supply is 30-40% less than normal. That will make prices go up, simple supply and demand. It's happening here, for like the first time ever.

2. If fewer people are putting their houses on the market because they don't want strangers tracking in viruses, then that will likely change this spring/summer as more people get vaccinated.

3. Some markets, like NYC, have seen people leave, so their prices (both rent and sale) have dropped. Perhaps some of that demand has moved to lower cost areas and is driving up prices. My niece and nephew (he works for Google) picked up their family when their lease in CA ended last summer and bought a house in MSP near her parents to ride out the WFH duration in a lower COL area.

4. People that haven't lost their jobs (the 90% NOT unemployed) have more discretionary income, due to nowhere to spend it and government largesse with our grandchildren's tax dollars. They can now afford buying and/or remodeling.

Longer term outlook? Who knows? I think it depends in large part on what happens with WFH, coupled with the general economic recovery.

What does WFH stand for? Work from home?

People that haven't lost their jobs (the 90% NOT unemployed) have more discretionary income, due to nowhere to spend it

This is a big factor - people who have money they didn't spend on vacations are now spending it on their homes, either renovating or moving. Costs for any home renovation or recreation products have jumped hugely since the onset of Covid - that is, IF you can find it available. Lumber, tile, snow mobiles, hot tubs, windows, flooring, etc.

I've been reading RE market research from these guys for years as I like to keep up with market trends. Just got an email with their latest YouTube update. Historically low inventory, along with high demand, equals higher prices.

Altos RE research

"Historically low inventory, along with high demand, equals higher prices."

Yes, that's the basic principle of supply and demand. In my mind it begs the question -- when (if...) inventory rises and supply and demand even out, will that cause a substantial drop in prices or will prices just level off without much of a decline? Worse would be the reverse situation -- high inventory coupled with low demand, will it all come toppling down? Who knows...

@porkchop_z5b_MI, the good thing this time around is that most people who have bought, and are buying, are actually qualifying for the loans and putting money down and the lenders aren't building "a house of cards" with NINJA loans like last time around! Lots of cash buyers too. Bottom line ... who knows what will happen! ;-)

I live in southern WI and prices here are also on the rise in a major way. I bought my house 5 years ago and just had it appraised for a refinance and it appreciated almost $150k!

Yes, WFH = work from home.

Housing prices - heck, property prices - in my area are through the roof!! Just recently a property nearby came on the market. It had been empty and neglected for a number of years and was almost totally overgrown by blackberry vines and shrubs and weeds allowed to grow unchecked. While not technically waterfront - there is a road between it and the beach - it does have a stunning view. But it is an older structure that is little more than a vacation cabin (these used to fill the area) and with no fittings - only a few upper cabinets in the kitchen, no defined bathroom fixtures (plumbing in place, tho) and just a single bedroom on a quarter acre plot. An obvious tear-down, it was listed at $963K and sold within 5 days for $975K!! I find that flabbergasting!!

Then there is this Toronto beauty, for a mere 729k. @Toronto Veterinarian you might know where this is, what are your thoughts? https://toronto.ctvnews.ca/dilapidated-garage-hits-the-toronto-housing-market-for-729-000-1.5332018

"what are your thoughts?"

Hey, ya never know!

There will always be someone out to sell some PoC for overvalue, thinking maybe they'll get lucky. In my opinion, even a 20'x100' piece of land in that area isn't worth that much. For the same amount of money in the same neighbourhood, you could get an actual, functioning house to live in https://www.remaxultimate.com/Details/E5102905/224-Cosburn-Ave. Or not too far away and for a little bit more, this one: https://www.remax.ca/on/toronto-real-estate/1409-woodbine-ave-w-wp_id289857269-lst

I'm a Realtor and from my vantage point the supply issues are mostly from 3 parts of the housing market. 1)Empty-nesters who put their moving plas on hold. They can move anytime. Many simply decided to wait out the pandemic. 2) Foreclosures have stopped so homeowners in financial distress aren't being forced out. Most of these will still hit the market but I don't expect to see an appreciable effect till middle of next year. 3) Landlords looking to sell are stuck if the tenant is not paying b/c of the eviction moratorium. Another investor won't buy in this scenario and a buyer looking for a primary residence can't move in. Until the wheels on these start moving prices will remain high.

I live in a place w high housing values to start with...and now...geez. We did just refinance our home, but I dont believe that it will maintain its current appraised value as is (fyi, its a fixer upper that is slowly being fixed up. It was actually the worst/still livable house in the best area we could afford). I think another key is that in this market, supply is tight but low interest rates are allowing people to buy more house than before -- so demand is going up while supply is tight. In my opinion, market booms (I think of the housing market now, but other markets through the decades) dont last and when people start saying they will (not saying anyone said that yet), it's time to be suspicious.

At the same time, there are a lot of things going on other than interest rates and supply (ex- work from home, a new appreciation for the suburbs in urban areas, etc) and how some of this turns out could have profound effects on certain market segments (good and bad effects).

I'll add my two amateur cents to @C Sparks list. The newest generation buying houses do not want to be far from the action of a city or town. That means they are more interested in homes that may be older but closer to what's happnin'. That is driving my area through the roof on prices. While all prices are solid around here, those housing developments on what used to be farm land but are 20 miles away from downtown, are not rising at the rate homes in my area are. Now that we have a lot more WFH, it's what you do in your leisure time that will drive where people want to live.

As long as interest rates are lower than what you can get in investments, I believe prices will continue to rise. If they ever hit the 13.5% mortgage rate I paid for my first house, everything will go flat.

My parents bought their first house when interests rates were something like 18% so people still buy with "high' rates, they just pay a lower price for the house. You can always refinance when rates go down, but you can never change the purchase price of the house.

"The newest generation buying houses do not want to be far from the action of a city or town.......Now that we have a lot more WFH, it's what you do in your leisure time that will drive where people want to live."

While that's also true here, it's having the opposite effect -- now that more people are working from home, it's hugely pushed up prices of housing away from the city, even into cottage country 4 hours away. For the last year (and maybe the next) there's no action in the city, so people are moving into places with more land and greenspace.

"City" is relative. I"m talking about Raleigh, NC, USA 1M people in the SMSA. It's not Toronto! Even in our "city" we have land and greenspace.

Different cities can be what used to be called concrete jungles but many are and have moved away from that. I have wondered about some things with the WFH escapees. What happens if their employers decide that they want them to be in the office occasionally and their budgets are already stretched because they overbought just to find a place to live. Some will simply learn to drive everywhere to get to what used to be within walking or simply become used to being house bound. Some will be returning to the cities or at least the inner ring of suburbs because of this. While where I live is in the city we do have many types of wildlife which is nice most of the time but the major dissatisfaction is having to drive for everything.

"Even in our "city" we have land and greenspace."

Oh, so do we -- more than many (as was said, "concrete jungles" are dying), but it's still a city with traffic, construction, high costs etc. but without the benefits that it also provided in the before-times.

"What happens if their employers decide that they want them to be in the office occasionally and their budgets are already stretched because they overbought just to find a place to live."

I agree that it will become a problem, and I've wondered the same thing myself; my sister and I were talking about that last week. But these days I think people have rightfully decided that the future is unknowable.

"What happens if their employers decide that they want them to be in the office occasionally and their budgets are already stretched because they overbought just to find a place to live."

This is a timely comment -- NPR ran a story on this just today: Remote Workers Are Making Permanent Moves. What Happens When Offices Reopen? : NPR

I am surprised that it took this long for some place to write about it. Back last summer there were several postings on Hot Topics before it was shutdown or on here about people who were or had family members that were planning to move great distances from their previous work location because they could do WFH. Some were planning on moving several states away. While it does not matter in an emergency to work from a remote location for some companies. Greater security is required at others. There are alternatives such as renting an apartment to live in during the week either either as a single or with roommates or finding a new job in areas that probably do not pay as much as the original job. While there are people who do have incomes large enough to cover the cost of two mortgages during their early working years it is the others that may see a great change in their lifestyle similar to what happened post 2008.

Starter homes used to a lot less of everything than they currently are. People used to make fun of McMansions. Many of the current must have's are straight out of those McMansions although most would not see it.

@Donald so true so true. My expectations on our starter home was shelter to get our foot in the door of not renting. After my husband's mother saw our first house which we thought was amazing, she privately told my husband's sister, "That's okay, they'll get a nice home someday." And indeed we did, by buying fixeruppers, living in them, selling them, repeat, repeat. Such good memories!

Wish I knew the answer to this! Our kids are looking for their first home and the prices are insane. I worry they will pay more than it's worth and will have issues later on!

My wife and I purchased our first home a year ago (settled the day before the shutdown - it was all very crazy). We bought a relatively inexpensive house just outside the city in an okay, but definitely city neighborhood, that needed/needs a lot of work. We thought the market was insane back then but it's even worse now. We paid asking price for our house (had to in this market), but it appraised for about 30% more even back then. Right now houses on our street with smaller yards and less square footage and in average condition are being sold within days for nearly twice what we paid. There's no way this can go on indefinitely, especially with all the economic damage to incomes from the shutdowns and with rising prices of everything else. We have always been willing to put up with a less than ideal situation and to do a lot of work and to have low expectations when starting out, but right now we're afraid of putting in all this work and money and then the market crashing and being stuck in the city with a house that's not worth what we put into it, a growing family, and a house we can't get rid of. The crazy market (among other considerations, like a much smaller reno budget due to Covid - less income and higher prices for everything) is actually making us reevaluate what kind of money we want to put into the house and how long we think we'll stay (now we want to get it back on the market again sooner).

"My wife and I purchased our first home a year ago...... Right now houses on our street with smaller yards and less square footage and in average condition are being sold within days for nearly twice what we paid."

Wow! That *is* insane! The comments about really thinking about how much money to put into the house are good ones.

The acquaintance I mentioned in my OP ended up getting multiple offers on her house right out of the gate and of course for above asking. I'm just scratching my head over this. While I understand the factors that are inflating prices to this degree, I just don't think the house is "worth" that much. I've heard chatter on various programs about what all this is doing is widening the wealth gap. Yep. Totally agree with that.

It's gone crazy. Two houses on my street sold immediately and over asking. One 7% over and the other 12% over. How are people getting mortgages when the comps probably aren't there? Maybe lots of cash out there to bring the mortgage within comp range but one sold to a young single person and the other to a young family. How can they amass that much cash so young? Oh well, hope they have some of that cash for house maintenance when they need it.

Well if they are like our kids they are living at home to save for a bigger down payment. It’s crazy out there. I to to see them pay so much for their first home but they have to have somewhere decent to live and can’t afford to waste money on rent! Ugh.

I meant to say I HATE to see them pay so much. I wish we could edit comments!

@Dyan Weis you should be able to edit your comment. There is an edit in the lower right of the comment, across from the Like and Save.

The younger ones that I have heard of either borrow from older relatives, get a loan from their retirement accounts, or simply draw out the money from the retirement accounts. If they can maintain their employment getting a loan is the best of these three options to me. Maintaining their employment at their current salaries when companies start rehiring people will be interesting. Borrowing from family members normally means the money is borrowed with the best intentions but life gets in the way. Leaving the older relatives with less to live on. The one that drew out the money did not know about the penalties. Then there is that small thing of taxes.

I live in an modest area that is changing because the original or second owners are of the age to give up their homes. One on the next street over five years ago sold for $89K. It was recently purchased for $208K. I expect to hear outrage when this years reevaluations then taxes are sent out.

Taking money out of retirement is the worst thing you can do. Our kids are making another offer on a home this Thursday and I don't have the heart to tell them that there will be a bidding war and it will go out of their price range. Sad to watch. :(

We've bought and sold four homes in four different markets. 2004/2007 Fayetteville NC; 2010/2012 Clarksville TN; 2013/2017 Austin TX; and 2017/2020 Fort Worth. most of those markets were really challenging to sell - nail biters even in military communities with an almost guaranteed buyer. Austin was pretty good and Fort Worth was last year - we sailed out of there.

We've never experienced the frenzy we're facing here in Raleigh. We have a realtor and we were looking at established home purchase, build on our lot, or build a new home. I happen to find the one story home we needed in a new neighborhood and now we're under contract to build a home. It's more than any other home we've ever bought and a little daunting. We have the income(s) to support the purchase however we're using a VA loan and trying to use that on the open market is impossible. First time homeowners are in for horrible experience and I feel bad for those who have to relocate and their next market is not as friendly.

I'm reading people are waving contingencies and inspections, appraisals are out of whack if they don't take forever to get. Bids are way over what most people can do and people are scrounging for really large Earnest monies and down payments.

We are also in the Raleigh area, and I feel your pain. While the value of our own house has increased to a level I never though I would see, our search for that retirement forever home seems to be increasingly out of reach. And the *rap they are building in the outlying areas is depressing. We were also originally going to build, but finding a suitable lot that developers haven’t already snatched up has proved to be difficult, not to mention finding a builder that would be interested in building a house for less than half a million.

@momdino - We moved to Raleigh in Nov 2020. We spent the first three months driving neighborhoods in the greater RDU area - Clayton to Chapel Hill, Wake Forest to Willow Springs which helped us get to know the area and helping us know where we'd like to live. We have to have a 1-story, no bonus which is really hard to find in this market. As we drove around we realized most new neighborhoods are scraped clean of trees while blocks of 2-story homes are erected with no particular flavor or design.

Our future neighborhood has a good bit of trees, has 145 homes, and skews older as there isn't a pool or amenities to speak of. The designs are coastal and transitional. We'll be in Cary, with an Apex address in Chatham County. It's 4-years old in the $500k+ price connected to a new neighborhood in the $900k+ which we hope will keep the price for years to come. We think we'll be here for 10 years.

We tried to build on your lot (with Drees) but finding the lot was as painful. Lots are very expensive, then add on development costs and final construction, it would be as much as or more than our current purchase.

This is why we're so apprehensive about the market and eager to sell our home sooner. My wife and I are young (28 and 31) but after three years of marriage we managed to save for a 50k down payment while only making 35-40k/yr (yep, this is why I did all those years of college and grad school). We made sure we had enough left over to start renovations, but we still ended up having to withdraw some of the principal from one of our Roth IRA accounts. (We moved for a higher paying job but then Covid hit immediately, among other things.) We weren't expecting a McMansion, and got a lower priced house that needs tons of work in an area that's not really amazing. But it was still a lot of money. This housing market is scary for first time home buyers. We are anxious to finish up the work on our house and get it off our hands while the market is still going strong. But at the same time, it's still better than renting. The combination of mortgage payment/taxes/insurance per month is still quite a bit less than rent. And buying another place would be just as bad. So it's hard to know just what to do.

Kinda' like when we watch House Hunters and these spoiled brats are crying that there is no Onyx? That show just cracks me up.

JenK Sounds like you hit the jackpot! Best of luck on your new build.

Quentin You guys are doing everything right. I think if you can hang on a bit longer, I am hearing there is an explosion of new development coming as COVID restrictions are lifted and perhaps we can eventually return to a more normal market🤞

@momdino I'm also in Raleigh (imagine all of us on this thread) and know a builder you should talk to if you're still in the market.

Just a question so forgive if it is poorly worded or wrong place. People keep mentioning investors outbidding them. Since hopefully most of the houses are not needing gutting or teardown although those do happen are the investors doing rentals or after a couple of weeks putting the properties back on the market. If rentals it seems like there will be a glut of them. If resales especially immediately it would seem like taxes would take a large amount of any gain.

@maifleur03 Invitation Homes bought the house next to my parents. They only have yard work and exterior maintenance performed when the (very active) HOA forces it. This is a nice established neighborhood and rentals are dragging it down visually even though sales prices are staying high due to the school system and amenities. Full price cash offers are making it impossible for families to compete and I hate it.

@maifleur03 good question. A few weeks ago my neighbor listed their house on a Friday afternoon for $547K which I thought was a crazy price. They received ten bids immediately, one of which was a bank in New York, (I'm in North Carolina) who said they would meet any bid in $8K increments, up to $608K. The bidding closed on Sunday afternoon. The bank was outbid by a young couple who paid $615K for it. The couple was motivated to bid high since they wanted only this neighborhood and they had lost out on the house next door, which went for $40K over asking a month earlier. No one knows what the bank's intention was.

The neighborhood was established in the early 1970's. Local builders approach homeowners when houses are not on the market and buy their houses for crazy prices so they never hit the market. Those are tear downs. This out of state bank thing was a new one for me especially since the house was not a tear down candidate.

Could the bank have been representing foreign investors? I've heard here and there that foreign investors are gobbling up huge chunks of RE in the US.

Could the bank have been representing foreign investors?

Or even just non-local investors. It doesn't sound immediately suspicious to me.

Tozmo1 thank for the offer. Please do let me know that name.

@momdino It's Phil Gianfortone 919-422-3483. He did my renovation and is doing a friend's addition right now. He also builds on undeveloped land. Good guy, very busy but he's super honest.

Thanks!

Heard this on the radio yesterday https://www.npr.org/2021/03/25/981309847/the-broken-state-of-the-u-s-housing-market. The 5 L's are driving prices up: "the L's - labor, lots - that's land - lending, lumber and laws - like zoning laws." This has driven housing stock way down. Interesting read.