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I've been promising this for a while, but I just received word that our house is officially sold so I can finally talk about the insanity that is the housing market in East Silver Spring, a lovely walkable neighborhood with great access to the Metro, grocery stores, breweries...
Back in 2012, we were looking for a house and ended up buying this 1939 Colonial that was in...pretty bad condition. The inspector noted that it, uh, needed a lot of work. But we got it for "cheap"--in the 360s. Not bad for a 3BR, though of course it only had one bathroom.
We pulled the huge, original oil furnace from the basement and installed a dual-zone HVAC system, completely redid the kitchen and bathroom, and turned a coat closet into another half bath.
Well, we didn't do it...but we oversaw it. Here's naive me with one load from Lowe's.
Well, we didn't do it...but we oversaw it. Here's naive me with one load from Lowe's.
Since buying the house, we spent a bit over $100k on all of these upgrades. We were able to borrow a big chunk of that from my in-laws and lucked into being able to pay that off by refinancing because--somewhat unbelievably--rates went down even lower than the 3.5% we had.
The house has an unfinished basement, which we planned to finish so that we would have some play space for the kids and office space, with laundry behind some walls. We planned it out, but just never pulled the trigger.
Then the pandemic hit and I had this as my zoom background.
Then the pandemic hit and I had this as my zoom background.
Our options were basically: spend over $100k to finish the basement and have a 4BR/2.5bath house that still had all of the problems of a 1939 house, buy something else, or do nothing. The big problem with buying another house was that they're all basically like this one.
But something very rare happened! The development that took the place of an old police station on the same street, a few hundred feet from our house, incorporated 11 townhouses that are being completed right now. The prices seemed completely absurd, but... https://twitter.com/graykimbrough/status/1358791136807157761?s=20
I figured that in this crazy market, we could sell our house for ~$600k and actually make it work to buy a place that cost $250k more. So we worked with an amazing realtor to get it ready, put about $10k into work that needed to be done and moving stuff out, and listed for $650k.
The house is quite lovely, and pretty rare in this market because all of the work is from the past decade and very good quality.
At any rate, we moved out to get work done and then planned to come back a week after the listing went live.
It had over 30 showings in five days.
At any rate, we moved out to get work done and then planned to come back a week after the listing went live.
It had over 30 showings in five days.
The listing went live, and appointments were just one after the other through the weekend.
Then people started to schedule "pre-inspections." Basically, nobody has success right now with an offer that has contingencies. So someone "inspects" for ~1 hour before making an offer.
Then people started to schedule "pre-inspections." Basically, nobody has success right now with an offer that has contingencies. So someone "inspects" for ~1 hour before making an offer.
Over the weekend, all of these people were calling our agent wondering about timing because they know everything moves fast. We settled on planning to review offers on Wednesday afternoon, so all offers needed to be in by then.
This was under a week since the listing went up.
This was under a week since the listing went up.
In "normal" housing markets, you might list your house and then have people view it over a few weeks or months. Offers might come in slightly below your listing price, and you need to consider whether to take such an offer or wait for a better one.
This is not a normal market.
This is not a normal market.
On Wednesday, we had five offers, all for above list or escalating above list.
An escalation clause says that you'll beat another offer on the table up to a certain amount. We had multiple offers escalating against each other.
The winning offer was more than $130k over listing.
An escalation clause says that you'll beat another offer on the table up to a certain amount. We had multiple offers escalating against each other.
The winning offer was more than $130k over listing.
Also in a normal market, every offer will have contingencies. You retain the right to walk away if your inspector finds something horrible. You might have a financing contingency. You could have radon or termite contingencies.
Again, this is not a normal market.
Again, this is not a normal market.
Multiple offers waived all of those contingencies, effectively shifting all risk to the buyer. We disclosed everything we could think of that's wrong with the place to minimize that somewhat, and I don't know of anything major wrong.
But the buyers just need to trust us on that.
But the buyers just need to trust us on that.
You also can't really win with an offer contingent on selling your own house. So from what I can tell, everyone needs to sell their house or condo or whatever to get the money needed for a down payment, then find a place to live for a while as they make all of these crazy offers.
One more point there: because financing contingencies are also out and many others have already sold their houses, you are unlikely to have much luck with a plan to put, say, 5% down on a house.
Many of these offers plan to put at least 20% down on a house approaching $800k.
Many of these offers plan to put at least 20% down on a house approaching $800k.
You might ask, how would you get that amount of money to put down without rich parents or already owning a house that you can sell?
I have no idea! We couldn't have done this back in 2012 when we bought with 5% down. So even if you can afford the payments, that's a huge hurdle.
I have no idea! We couldn't have done this back in 2012 when we bought with 5% down. So even if you can afford the payments, that's a huge hurdle.
So we spent a couple of months cleaning out our house, hired movers and contractors, moved out for a few weeks, and now we've got offers. But then, our new place is not scheduled to be ready until the end of June.
So buyers also offered to let us rent back for two months.
So buyers also offered to let us rent back for two months.
To recap, the price escalated $130k over listing, with zero contingencies, closing in a month while we just get to stay here for two more months because we requested that to make it work for our schedule.
What blows me away is that others offered almost all of that... and LOST.
What blows me away is that others offered almost all of that... and LOST.
We made this work because in addition to all of the equity in the house, we had a chunk of money set aside to finish the basement (though it wouldn't have been enough). We had to use that for the deposit on the new townhouse, work on the house, a temporary rental, and so on.
We are absolutely very privileged and of course came out just fine, but it was still pretty tight!
All of these constraints on sellers (needing to sell before buying, needing money to make everything to work, dealing with uncertainty) contribute to such short supply of houses.
All of these constraints on sellers (needing to sell before buying, needing money to make everything to work, dealing with uncertainty) contribute to such short supply of houses.
As @libbyanelson notes, the condo and townhouse markets (especially for smaller condos) feel like a completely different world than detached single-family homes. Right now is a relatively good time to buy a condo, avoiding all of this insanity. https://twitter.com/libbyanelson/status/1390706996115034112?s=20
A lot of people have been baffled by our move from a SFH to a townhouse, which turned out to be an accidentally brilliant move under current conditions.
We're giving up a big yard (I'm fine with that) and gaining a shared wall. But ... it's new construction! For under a million!
We're giving up a big yard (I'm fine with that) and gaining a shared wall. But ... it's new construction! For under a million!
It's still an absurd price, I know. But I'm also excited about moving in next to a 68-unit apartment building full of artists. And 4 of the 11 townhouses are significantly below market rate, so those won't all be occupied by people who could afford a house that's close to $900k.
Switching from a detached SFH to a townhouse means giving up a lot of the price appreciation that these SFHs have experienced.
This comes about because much of the SFH price is in the land, NOT the house. Smaller townhouse lot = less of the price is land. https://twitter.com/graykimbrough/status/1386027055154925578?s=20
This comes about because much of the SFH price is in the land, NOT the house. Smaller townhouse lot = less of the price is land. https://twitter.com/graykimbrough/status/1386027055154925578?s=20
The supply of these SFHs walkable to the metro is fixed, since there's almost no unbuilt land.
The only way to reduce this insanity driven by a huge demand to live here is to build more condos and townhouses. However, we've effectively banned them where they don't already exist.
The only way to reduce this insanity driven by a huge demand to live here is to build more condos and townhouses. However, we've effectively banned them where they don't already exist.
The police station closure meant rare new townhouses in East Silver Spring. I'm glad to move into one and let someone else move into this SFH.
MoCo planners need to understand that we must allow a LOT more of this housing to make #MyMoCoHome attainable. https://twitter.com/montgomeryplans/status/1389611343091798017?s=20
MoCo planners need to understand that we must allow a LOT more of this housing to make #MyMoCoHome attainable. https://twitter.com/montgomeryplans/status/1389611343091798017?s=20
Most households in East Silver Spring live in multi-unit housing. There's a five-story apartment building across the street from this house, and townhouses nearby.
But for this lot, like most of the neighborhood, it's practically impossible to build anything but a bigger SFH.
But for this lot, like most of the neighborhood, it's practically impossible to build anything but a bigger SFH.
