We get real estate flyers in the mail and on our doorstep every day. Bay Area houses that once cost $500,000 early this century have tripled in value, which of course means tripled commissions if the 6% standard rate holds.Brokers have become increasingly brazen, offering to lower the commission rate a little or saying that they have buyers lined up to buy in our neighborhood (right!). Other companies (see flyer) offer cash for homes; no contingencies mean a quick close for an eager seller.
We have seen this frothiness before in the stock and commodity markets, not just real estate. The only practical way for the homeowner to take advantage of this real estate bubble is by selling. (Larger investors have financial techniques such as options, partnerships, public offerings, and loans whereby they can "monetize" hard assets.)
High prices do allow homeowners to take out a large refinancing, but unless they can earn a rate of return that exceeds their new mortgage rate this strategy is unwise. As for us, we have ridden the wave up, and (sigh) we will ride the wave down.
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