Daily Money - About those sky high home prices …

Plus swimming pools for rent + an update on mortgage rates
July 24, 2021 | Issue #1
Money Moves
Good morning! I’m Sam, the real estate editor at Money and I am so excited to offer you a sneak peak of our newest newsletter: Money Moves.

Every Saturday morning I’ll get readers up to speed on the latest housing market happenings. Whether you’re looking to buy a house ASAP or just love browsing Zillow, my goal is to help you feel in the know.

Like what you see? Subscribe to Money Moves.

To the moon
Gatsby
How much do you think Gatsby would have asked for his home across the bay from Daisy? Photo: Courtesy of Everett Collection
A few years back, a very-rich man invited me to tour his home, which he thought he could sell for $1 billion. (Yes, that's a billion — with a b.)

It had a massive private beach, a nine-hole golf course, separate wings for each of his children and a guest cottage larger than the house I grew up in. Honestly? It was spectacular. But $1 billion?! That’s just crazy.  

In the world of very-very-rich men and ultra-ultra-luxury real estate, this kind of “aspirational pricing” has been going on for a while. In today’s crazy housing market though, even owners of more modest abodes are trying to aspire their way to bigger profits. 

With home prices soaring, some homeowners figure it can’t hurt to shoot for the moon. But, as Aly Yale explains in her uber-popular story on the trend, overpricing your home actually comes with big costs — like longer time on market and lower sale prices in the long run.
Home
Sellers — don’t get greedy. Work with a knowledgeable real estate agent to price your home. Comparable sales data — not emotion — should be your guide. These days, there’s a good chance buyers will bid the price up higher than you could have dreamed anyway.

I don’t think this is how negotiations are supposed to work …
 
Graph
For two months now, more than half of homes have sold for above list price. Faced with abysmal inventory and routine bidding wars, homebuyers are pushing prices up instead of down. 

While being a little aggressive is sometimes necessary, buyers could be setting themselves up for heartache — and big losses — if they’re not careful. Before offering more for a home (or falling for a seller’s unrealistic expectations), consider the long-term prospects of your local market and whether you can wait out a downturn.
Home
Read more on this trend and get tips: Half of Homes Are Selling for Over Asking Price

Tiki break
If that over-asking stat is stressing you out — I feel you. Take a deep breath and admire this lovely Philadelphia rowhome, which happens to have a Tiki bar in the basement. If you buy this home, please invite me over for Zombie Punch.

Price: $299,000, dogs in Hawaiian shirts not included.
Dogs
Source: Compass
Thanks for guessing the price in our Twitter real estate challenge. How close were you?
Home
Bonus: Is it ever a good idea to put pets in listing photos?

How low can they go?
The average rate for a 30-year fixed-rate mortgage inched down to 2.78% this week. In case you aren’t also obsessively tracking interest rates — that’s incredibly low.

How low? The month I was born, the average mortgage rate was 10.27%. If you’re thinking I must just be getting old, consider that rates never dropped below 3% until last summer and the lowest they’ve even fallen is 2.65%.

Lower rates make the same sized mortgage more affordable. They are a big reason why home buying and mortgage refinance have been on fire for the last year or so.
Home
The hard truth? Now is the time to grab a low rate — the challenge will be finding a home you love at a price you can afford.
Home

Low rates are great — if you can get them
It got a lot harder to qualify for a mortgage last month, according to the Mortgage Bankers Association. 

When the coronavirus pandemic hit last year, lenders responded to the economic uncertainty (and a flood of refinancers trying to take advantage of low rates) by getting a lot stricter. The average credit score necessary to secure a mortgage went up and overall credit availability went down. 

Mortgage availability hadn’t fully recovered from that downturn, but things had been steadily improving for more than six-months — until June.
Home
Don't panic. The tighter standards are not being applied to everyone or every loan type. Refinancers, investors, self-employed buyers and second home buyers are most likely to run into trouble.
Home
For more on the outlook and how to improve your odds read: It's Getting Harder to Qualify for a Mortgage

No trespassing required
Pool
Good news: You can stop plotting to sneak into your neighbor's yard for a quick dip.

Swimply, a startup helping homeowners rent out their swimming pools, exploded in popularity during the pandemic. You can think of it like Uber or Airbnb, but for backyard fun. Over the last 12 months, Swimply has facilitated over 122,000 bookings and currently has more than 13,000 pools listed on its site. Some homeowners are earning six-figures from the setup.
Home
Home
Bonus: Look for another way to make money from your pool? Consider selling

Parting wisdom
“When sellers start hearing how hot the market is, they get tunnel vision,” says Phillip Salem, a Compass agent in New York City. “They think their property is the hottest one on the block.”

Happy hunting,
Sam
P.S. Share your stories about overpriced housing with me on Twitter @samsharf or via e-mail at sam.sharf@money.com.

P.P.S. Have a friend who loves real estate or is looking for a home of their own? Please forward them this e-mail or send them to the Money Moves subscription page.

Money’s Essential Home Buying Resources: Summer 2021
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