I saw a house recently that was priced at $659,000. This house had been on the market for 60 days, with no offers, at $659,000. I noticed that they did a price reduction of $10,000 to $649,000 after they were on the market for 60 days. And this begs the question, “is a ‘1.5% OFF SALE’ going to draw buyers into the store?”
Blog Category: house prices
The statement that all real estate is local is shown to be true by taking a look at the Washington DC real estate market. This is the market I work the most in mortgage business, and I see the data first hand. Real estate prices seem to be holding up except for a few pockets in some neighborhoods on the edge. Condo sales, as an example, are way up, a 34% increase for 2009!
When you decide to sell your home you usually think you have a fairly good idea of what its worth, after all, you live in the neighborhood! Most of us schedule appointments with three local listing agents who we know, or we have been referred to, or maybe we have been getting their marketing material in the mail. Usually each Realtor will recommend a different sales price. Sometimes those prices are close together, but usually there are one or more Realtors who give you a much higher number, that excites you, and seems to agree with what you thought your place was worth. But, if this is the case, how is it that most homes seem to sit on the market for a long time, and end up getting the price dropped one or many times? Is it just due to a slow market? But even in a slow market won’t just about anything sell if its priced right? The problem is most of us are convinced our house is worth more than all of our neighbors, for varied reasons.
Should I Buy Now And Avoid Higher Interest Rates?
This is a common question I get. Potential home buyers will worry that rates are going to spike, after all, “how long can they stay this low,” goes the logic. So some buyers assume they should buy now, at any price, and avoid a future rate increase. I am not sure how long rates can stay low, they have been low for almost two decades in Japan! But, I thought for fun, we’d look at some different numbers. Keep in mind the below are based off of broad assumptions of my own:
Buying a three bedroom house today, in the Washington DC Metro area in a good neighborhood, let’s assume costs $700,000. Further, let’s say the buyer is ecstatic to get a rate of 4.875% on a 30 Year Fixed Rate mortgage, and that they have a 20% down payment. Should the buyer be ecstatic?
If you were rich, would you buy a huge, expensive house? Would you spend $39 million on a house?
I did a search for the most expensive home on the market in Washington DC, and came up with 1623 28TH ST NW, WASHINGTON, DC 20007. The asking price is $39,500,000. I have a lot of questions…
How do you come up with that asking price? Are there really comparable sales that can support a price of $39,500,000? Or are you pricing it to sell to a developer, and estimating the value as a developer would?
So where are housing prices going next? Everyone has an opinion, most based on emotion as opposed to facts. The facts are that real estate is local. If the state of Florida’s residential real estate is down 16% year over year, that does not mean that every house in the state of Florida went down exactly 16%. There may even be homes in the state of Florida where there is no price decrease year over year, and maybe even an increase! So always do your homework before stating an opinion about real estate.
We can have a “reversion to the mean” discussion on real estate, stocks, or just about anything. What is Reversion to the Mean? This is a theory suggesting that prices and returns eventually move back to the mean or average.
If you want to be a successful investor of common stocks conventional wisdom says you should spend lots of time analyzing companies or mutual fund managers and then try to pick the best ones. That is fine, but is a mistake if you are solely relying on that. If you want to be a successful investor of common stocks forget about using solely conventional wisdom, and also focus on reversion to the mean. You can be lucky and pick stocks and mutual funds without doing a lot of analysis. Or you can build a diversified portfolio with a clear understanding of the role that reversion to the mean plays in the stock market. And this also holds true in the real estate market and with many other things. Don’t rely solely on professionals, do your own research on the house or assets you may want to buy.
Isn’t it always a good time to buy real estate? There are hardly any Realtors, builders or other industry participants who have ever said it is NOT a good time to buy real estate. There are some very good Realtors and builders, I know many, but let’s not forget these people are ultimately salespeople, not investment analysts equipped with the tools to know the real value and direction of real estate. You hire a Realtor to help you buy and sell real estate, but you should make your own determination as to when is the best time to do so. So that means you are left to your own devices as to determining if real estate is a good investment.
We have to discern if we are talking about buying a primary residence or investment property. Since buying investment property is a simple cash flow numbers analysis, I’ll restrict this blog post to buying a primary residence. And when buying a primary residence your first concern should not be if it is a good ‘investment’. You should not go into it looking for investment returns. It is a home, shelter, a place to live, sleep, entertain, raise a family, and enjoy the community and neighbors. But you do want to make a careful decision and get the best possible financial gain from your home that you can.