GRANT ME ONE PREMISE.
Square feet for square feet, foreclosures and short sales are the best buy for home buyers today. The next best buy is new construction from inventory from named builders who are well financed and can build to spec.
These theories have been reinforced over the past 6 weeks through my experience previewing about 75 homes and showing about 30 of them to two sets of home buyers over the past 5 weeks.
What's available in the price range $350,000 to $425,000?
Home for sale in Charles County, MD - Priced at $340,000,
FORECLOSURE SALE in White Plains
8 year old Colonial with 4 bedrooms, 3 1/2 baths, living room, family room, dining room, 2 car garage, on 1/3 acre lot with full finished basement. 2400 square feet above grade.
Home for sale in Charles County, MD - Priced at $320,000,
8 year old Colonial with 3 bedrooms, 2 1/2 baths, living room, family room, dining room, 2 car garage, on 1/4 acre lot with full finished basement. 2100 square feet above grade.
Home for sale in Charles County, MD - Priced at $325,000,
REGULAR LISTINGS (not foreclosure or short sale)
25 year old Rambler, with 3 bedrooms, 2 full baths, living room, dining "L", 1 car garage on 1/3 acre lot with finished basement. 1400 square feet above grade.
New Homes for sale in Charles County, MD - Priced at $390,000,
New Home Inventory in Charles County, MD
New homea for sale from established builders, Colonial with 4 bedrooms, 2 1/2 baths, living room, dining room, family room, on 1/4 acre lot with finished basement. 2600 square feet above grade. 1 year builder's warrenty and 10 year structural warrency.
WHICH HOME WOULD MOST HOME BUYERS SELECT?
- Location: Same area
- Price: Same price range
When viewing homes in a specific price range, this is what home owners are seeing in my market area of Maryland and Northern Virginia.
FORECLOSURES and SHORT SALES ARE OUR MARKET with NEW CONSTRUCTION A CLOSE SECOND. The condition of most short sales is comparable to the regular listings. The condition of the foreclosures is likely to need cleaning, carpet cleaning, paint, appliances, etc. New homes are wonderful and will increase in value faster than resales.
Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988.
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Hi Lenn! Love your hat!
We are seeing a number of builders fold and the ones that are left standing stopped building spec homes over 6 months ago so, our new construction market numbers are below those from last year--thankfully; we have plenty of resales!!
Great Post, Lenn and I agree, your hat is awesome. Where can I get one?
Lenn- As we all know Charles and Prince George Counties have been hard hit. But I would be surprised if you were to find the same in Anne Arundel. Yes we have our foreclosures and yes they are affecting our market but....the market is different and so are the comparables. Its a local thing.
Lenn,
"Square feet for square feet, foreclosures and short sales are the best buy for home buyers today."I could not agree more, I think this is universally true!
"The next best buy is new construction from inventory from named builders who are well financed and can build to spec." I could not disagree more, I suspect this is rarely true!
This is obviously when we have to remember the most important three words in real estate: Location, Location, Location! I would never question your expertise in your market,but this is not what I've seen and frankly it defies logic.
As a group one to two year old homes and homes with mortgages that old have taken the worst deprecation in value. Builder cost have not gone down, but the values have! There are allot of reasons to buy a new home, if you can afford to, but cost for benefit is not one of them. In the last two years homes have become like cars, a slightly used one has almost all the benefits and you save a small fortune.
"Square feet for square feet, foreclosures and short sales are the best buy"absolutely! Followed closely by sellers afraid their home may join that list. Builders can be in trouble, too. The last house or two in a spectated subdivision have always offered opportunity.
Respectfully,
Bill
Price combined with location/condition in the end rule the day, unless it is for investment and then it is a business not personal / emotional decision.
Debe. Large national builders are still building specs here. It's my favorite thing to sell. Either specs or fall-outs. I also have a list of builders who have a few selected models that are "loss leaders", priced below costs.
Janice. It was a gift. I'll ask if they wish me to post their name.
Martha. I ran AA yesterday and find about $630,000 average price (detached) and $366K average price foreclosure/REO/pre-foreclosure. The foreclosures are centered in Annapolis, Pasadena, Glen Burnie and Severn. PG is hard hit, but AA is too. Of course the water front in AA give a much higher average price and they're less likely to go to forelcosure or short sale.
Bill. New homes are indeed a good buy in my area. Of course, I'm only referring to national or well financed local builders. I don't sell niche builders. New home construction has led the price down in my area. Home owners with a mortgage cannot compete because so many of them are upside down. The builder prices to sell, not to pay a mortgage.
OTOH, that 1-2 year old home that the buyer paid $XX for is not going to sell for what they paid. Even home owners with 10-20% down are upside down. They cannot compete with new, foreclosures or short sales.
Gary. Exactly. I don't work with investor buyers, only folks looking for a home. Once we have identified the location, look at the listings, the best buys are foreclosures, short sales and the closest new construction.
Wow what some great deals out there! I highly advise looking at the price per square foot of a home. This is the great equalizer that brings all homes down to the same playing field.
Great post and timely for me. My husband and I were actively looking for our son in Howard and Montgomery Counties for a short sale or foreclosure when he all of a sudden remarked that he wanted one in Arlington! Do you suppose your formula holds there as well? Any northern VA, specifically Arlington, REA's: What do you think? I mean I think it's logical, but what about an older area like Arlington?
Buyers are always in the position of having to decide what is the best buy within the current bunch of homes that are on the market - and it is not always about price, condition or location. With buyers, emotion plays a very important role. Having a large back yard with a tree swing could end up being the deciding factor! Sometimes it defies logic.
Kelly. Indeed. What we found in the past few weeks is that the amenities that attract home buyers, the back yard, privacy, storage, parking, large kitchen, master bed/bath, etc. are all in the foreclosures and short sales at much better prices than the regular listings, in the same neighborhoods.
Patricia. Arlington is unique. With the price of gasoline unpredictable, Arlington is a "high demand" area, even in this market. I'm sure their agent will provide them with comps.
Sal. We always look at price per square feet. Always. No to worry. We know how to value properties.
We ae still lucky in Charlottesville that we do not have enough foreclosures to significantly skew the market. When you do the resales just can't compete.
We are pretty much out of new home inventory -- but that's ok, we've got a lot of the old stuff!
Lenn - Interesting post almost a mirror image of our market here in Renton South Seattle. Even the same price points. This one and the one where you pointed out that values are being set by REOs and foreclosures, same here.
List and Sell (and always listen to Lenn, she know markets clear across the US) Gary@RentonHomeFinder.com
With all things equal the new home wins hands down. Good comparison.
Lenn - some of the new homes in my area are a great buy becuase builders want to finsih selling their inventory and in some cases have really slashed the prices. Almost as good as some REOs but in great shape, move-in ready, and no repairs.
Jeff
Around here I would say that new homes by builders that are not well financed are the better buy. They will almost give them away to get out from under the carrying costs.
Had to stop by and comment about your hat! Nice o see you looking a bit festive!
I agree Lenn. Prices are being controled by the short and foreclosure market but some of the foreclosures require a lot of work that buyers must add in to the cost. The new construction is the best bargain here for now if the house was built on speck or if the builder is almost done. With "to be builts" I am afraind that some builders may start to skimp to make ends meet and I am afraid of what may be behind the shiny new exterior.
Pam. Charlottesville is a unique market place. I doubt that the housing depression will be felt in your market as in some others.
Ann. It could work. However, over the years, I have met many home buyers who will not consider anything but new construction. Folks from many cultures are not going to buy if new isn't available.
Gary. Thanks. I've learned many markets across the country from ActiveRain friends. I did notice the similarity betwen my market place and Seattle.
Terry. Agreed. You are smarter than the average bear.
Jeff. You have hit on the primary reason(s) why I prefer to sell new construction. The long range benefits to the home buyers is significant.
Best Spot. Same here, within reason. We still have some buyers in our market. Many builders are taking losses on some homes that "come back". But, the large builders, especially luxury builders, will sit on inventory rather than cut too far.
Susie. I'm always festive. It's in my genes.
Paddy. In reality, most of the new homes in inventory in my area are not built to spec. They are homes that were built for a buyer who didn't close, either because they couldn't get financing or simply defaulted. That's happening a lot in the luxury market here.
Lenn,
Your premise is absolutely on the mark!
Mike in Tucson
Thanks Mike. I love affirmation.
Lenn, It seems, regardless of market conditions, the outer lying suburbs are 6 months or so behind the Beltway. We're finally starting to see price movement where it needs to be to reduce inventory and bring price stabilization back to Southern Maryland. The only way to compete with short sales and REO's is price and sellers are starting to get the picture. Thanks for the comparison.
Craig. That's to be expected. Sadly though, many folks who would like to move out of that starter home in St. Charles and move into their dream home in Agricipia can't sell because they owe more than the home will sell for.
Lenn, oh wise one:) You are right on the money. I'm SO thankful that my market is not there, yet. Hope it won't be. Why would any buyer even consider the smaller home you showed? Just doesn't make sense! We have so many engineers here...good luck getting them to buy emotionally, lol. I think that is what has kept our market fairly strong. Yes, it's off a bit, but still looking decent.
Elizabeth. That was very funny. You are absolutely right about engineers. Glad to see your market is holding up. Ours is in a capitulation stage, I think.
The short sale is the best buy in that group. Providing it would actually sell at that price. What the short sale has going for it over the foreclosure is seller foreclosures and most likely condition. The spread between an eight-year-old home and a brand new home is still significant.
Elizabeth. The spread between new and resale is significant. However, we have a number of buyers who will only consider new construction, yet very few who only want resale.