The Long Term Investor

Excellent and most accurate article right here about the current housing market...

https://www.wsj.com/articles/these-...s-during-covid-now-they-regret-it-11613062856

These People Rushed to Buy Homes During Covid. Now They Regret It.
Hot real-estate markets across the U.S. led to a number of buyers snapping up homes without performing due diligence

Stella Guan spent months searching for a home to buy, getting outbid again and again in the white-hot real-estate market of the Los Angeles suburbs. Finally, her offer on a “beautiful” Santa Clarita house was accepted in August, she said. The graphic designer, 30, paid roughly $600,000 for the house. But after sleeping there for only a few nights, she had an unfortunate realization. “I was like ‘uh-oh, I hate this house,’ ” she recalled. “I hate this house so much.”

Looking back on it, she said, “I should have seen all of the warning signs, but the pandemic housing fever got the better of me.”

A house, unlike expensive jewelry or clothing, can’t be returned if the buyer is unhappy with it, so a cardinal rule of home buying is that you shouldn’t rush into a purchase. But in 2020, millions of Americans did just that.

Fleeing small apartments, buying vacation homes or simply looking for a change of scenery amid the crushing boredom of lockdowns, people scrambled to buy houses amid the pandemic, spurring bidding wars and supercharging real-estate markets across the country. Now, many are discovering the pitfalls of these hasty purchases, ranging from buyers’ remorse and financial strain to damage caused by unexpected problems.

This spring especially, “people were so panicked,” said Priscilla Holloway, a Douglas Elliman agent in the Hamptons, a popular spot for New Yorkers seeking refuge from the pandemic. “Buying a home is a huge commitment. You have to be thorough. But people were getting all crazy, and they weren’t as thorough as they usually are.”


Many home buyers were apartment dwellers looking for larger spaces to shelter in. “It was a land grab for houses,” said Cheryl Eisen, CEO of the interior-design and property-marketing firm Interior Marketing Group. “People wanted out of apartments.”

At the same time, inventory dropped as many homeowners hesitated to list their properties in the pandemic. The result is that much of the country saw a price spike and bidding wars, brokers said, leaving buyers with little to choose from. In these conditions, many are tempted to waive inspections or skip other due diligence they would normally perform before buying a home.

Ms. Holloway said she helped a family move this summer after discovering that the Hamptons house they had just bought had an infestation of wasps nests in the backyard. The family didn’t find the wasps until after closing because they had waived the inspection in the midst of a bidding war, said Ms. Holloway, who wasn’t representing them at the time. Deciding the property was unsafe for their young children, they immediately put the Westhampton Beach home on the market. Ms. Holloway and a colleague helped them find another house to buy.

Over the past two years, the insurance company Chubb has seen large, non-weather-related losses increase in frequency and severity, according to Fran O’Brien, division president of Chubb North America Personal Risk Services. She attributed these losses in part to hasty home purchases: Buyers moving from a small city apartment to a large home in a rural area may not be well versed in how to prevent the pipes from freezing, for example.

“People are moving to places that they don’t know a lot about,” Ms. O’Brien said. “They’re thinking, ‘this looks like a nice place to live’ for amenities it may have. They don’t understand what risk there could be with that home.”

People are even more likely to overlook those risks, she said, when they are in a hurry to snap up a home before someone else does. “You run into this lack of awareness and lack of time, which is not a good combination.”

A HomeAdvisor report found that Americans did an average of 1.2 emergency home repairs in 2020, up from 0.4 in 2019, while emergency home spending jumped to an average of $1,640, up $124 from the 2019 average.

Nature had an unpleasant surprise in store for Richard and Meaghan Weiss when they bought their first home in Northern California after moving from Brooklyn.

When Covid hit, the couple left their Brooklyn apartment to stay with Ms. Weiss’s parents in Sonoma, Calif. Ms. Weiss was pregnant and they had a toddler at the time. “Being cooped up in an apartment, not being able to see people in New York, sounded like a miserable existence,” said Mr. Weiss, 40, who works in commercial real estate.

After a few months they decided to relocate permanently to the Bay Area, where Ms. Weiss grew up, and started looking for a home to buy. They found the market to be “super-duper competitive,” Mr. Weiss said. They were outbid on one house and backed out of a contract on another when they found out it had serious foundation issues.

Finally, they were able to buy a four-bedroom house they loved in the East Bay, paying about $100,000 over the $1.89 million asking price to beat out another bidder. “We were a little bit overeager because we’d been burned twice,” he said. “We probably didn’t do the due diligence we should have and looked at everything as thoroughly as we probably should have.”

They closed on the hillside house in November. When they returned a few weeks later to move in, “we see all these holes in the siding,” Mr. Weiss said. On closer inspection, they found that the wood on one side of the house was “absolutely devastated,” with some 90 holes in it. It turned out that the culprits were acorn woodpeckers living in the large oak trees surrounding the house. “Come to find out, it’s a systemic problem in the neighborhood,” Mr. Weiss said.

The seller hadn’t said anything about the birds, he said, and coming from Brooklyn, he and his wife didn’t know to ask. Since then, they have tried various deterrent devices and consulted with exterminators, but the only permanent solution is to replace the home’s wooden siding with cement at a cost of roughly $150,000.

If it weren’t for the frothy pandemic market, Mr. Weiss believes they would have discovered the problem before closing. “I think we would have been slower and more thoughtful and more methodical,” he said. “Buying a home becomes emotional. Because we were emotional from losing the first two and the competitiveness, we just kind of dropped our level of diligence and plowed through.”

Ms. Guan started bidding on houses in the L.A. suburbs even before she moved there from the New York City area in July. She had a good experience with her first home purchase, a New Jersey condo, and with interest rates low, she was eager to jump into the California market. “I thought it’s going to be the same as New Jersey. I’ll enjoy the ownership and make money in a few years.”

But she arrived in L.A. to find “the most insane housing market I’ve ever seen,” she said. Every house seemed to get 15 or 16 offers, she said, and sell for $100,000 over its asking price. Her offer was eventually accepted on a circa-1975 house with a renovated kitchen in Santa Clarita. At that point, she had been outbid on seven other houses, she said, so she was determined to get this one, even when the inspection revealed toxic black mold and asbestos. “I was really trying to get out of where I lived,” she said. “I spent five to six months looking. All of these factors made me say, ‘OK, I have to just face it, I can’t back out.’ ”

She sold the house a few months after buying it. After the repairs, agents’ fees and transaction costs, she said, “I lost a lot of money.” She now lives in a rented studio in L.A.’s Koreatown, where she said she’s much happier. “It still hurts,” she said, but “it’s just good to have my money back and move on to other things. And never see the house again.”

Zuk's Comment:
Worth the entire read, and it is PERCISELY what we experience here daily... Panic!
People are buying houses without looking into what theyre getting... And we refuse... REFUSE... to play along.
So we are sitting it out now, this level of stupidity comes with a price and sooner or later people, MANY people, will join the already existing herd of fools who paid the price PANICING to buy a house simply because they felt the need to scratch an itch.
Reminder - my wife and I fled NYC late last year because we, just as the article DESCRIBED EXACTLY, wanted to better our lives.
We researched and found that Columbus/Westerville OH area will suit our needs for a positive distraction, upgrade of lifestyle, freedoms, and potential business expansion... all that at the FRACTION of the cost of what we would pay in NY. And its the smartest move weve made! (btw, doing my taxes now I also found out that OH residents get a 250k deductible on income earned from self owned businesses, HURRAY)
We came here with the thought that by this time of year we would already have a deal on both a commercial AND residential property.
Boy were we wrong! We found out, just as the article pointed out, that we were outbid on each and every property we sought to purchase.
And we went through dozens!
Its too crazy now, its not even about getting a house for a deal, nor is it FOMO, its about not getting caught in the moment and buying something based on EMOTIONS.
So... Were gonna extend our contract here at the lovely condominium for another 10 months next week and I have absolutely NO REGRETS now for making that decision.
Our dream house and business ventures in Ohio will just have to wait.....

 

Thanks for you reply, Yes sir you are correct in your assessment. It is NOT a retirement account, but some are monies I want to use as I get further along in my retirement.lol It is a taxable account.

 

Haha I just now read that W posted that same article I referenced above...
next time I ll hit refresh before posting lol

Nice read anywho!

 

Yup W... Honestly that is such a sad and accurate description of the market...
I've read that article to my wife and she was shocked how accurately that described our situation...
We saw this beautiful beautiful home last week in a very desirable area... But... It was nestled in the woods and was MADE out of wood... But its architecture was so sooo shic... Totally Frank Lloydish... And large!
I fell in love with it immediately, but knew that I would have to work on this house to make it my dream home... And it had some mold, and cracks... I didnt care, but knew Im not going to pay the asking 500k for it... (comps are between 400-500k in that area)....
As we exited our tour we saw this vehicle with cali license plates... out came this older lady and (I think) her husband... Seriously, she was dressed for the Met gala... I knew that moment that that house is gone...
It was sold for 75k more than the asking price...
Congratulations! Welcome to the wild west!

 

WXYZ!!!! This is amazing- I lurked on your threads a long time ago on the not MSN money boards and your philosophy helped shape my perspectives about investing. Thank you for posting about your journey!

For those new to investing or this board, I encourage you to read what WYXZ's posts and glean whichever bits of wisdom resonate with you and use this wisdom to create your own customized strategy that fits your own personality and risk tolerance. Knowing yourself is the most important step (in my opinion), and the second most important is having a true LONG TERM view that WXYZ practices. It is the only way to filter out all the crap and allow one to focus on high quality companies.

WXYZ- I noticed JNJ is no longer in your model portfolio. JNJ was one of my first 3 stock purchases and I sold it all in December 2019 (mostly because I felt management was being lazy). I'll try to dig through 178+ pages (or learn the search function) here to read your thinking there.

 

don't drink the kool aide zuk,

 

Haha emmet I see that... W making friends with others here now... dropped me like a bag of potatoes!

 

I see what you did there

 

Uh-oh.... hope I didn't get into the middle of something.... but it did seem to me like there is room for one more!

With respect to the portfolio model, I can confirm that WXYZ has been remarkably consistent with the same old stuff he has been spouting!

Agree completely about bonds- I'm still younger than 50 but can't see bothering with them in the future. I try to keep a ~50/50 stock / ETF split with new money but find it is more fun to buy individual stocks so struggle to keep adding the same amount the EFT side.

I like some diversification, geographically, small cap/large cap and on a sector basis, but I also heavily favour the same type of companies in the model portfolio. Apple and Costco are 1 and 2, with significant weightings in PG, Amazon and Alphabet.

I try to focus on management, transparency and fundamentals when choosing a company to buy (but don't have specific rules to follow), and will usually only sell if management does something I don't or can't understand or fails to take advantage of their companies strengths. My sell criteria are more subjective, but I rarely sell.

I hope to participate/post regularly- perhaps I'll start up my own thread and call it "the neophyte long term investor".

 

I don't think I ever posted on that board- I don't really care about discussing politics with internet people, nor do I think that short term politics has (or should have) a significant impact on long term investing. I am glad that you found a new home here, because, as I mentioned, there is allot of wisdom in your posts. I don't mind a bit of 'woke' management. SBUX will stay in my portfolio until people stop overpaying for a good cup of coffee.

 

Been a good week. Up 1.22% for the week, 5.71% YTD.

 

Thank you