Hi guys,
I think I have figured something out in the housing market. I am posting it here, to see if my line of thinking is right (or not).
Now, many of you know me and Baseball boy, and do not think we are ready to buy a home yet. I am still enthusiastic about buying a home, but not 100% committed to it either. I am still just watching the real estate market, and trying to see how Baseball boy and I fit into it. When the timing is right, I am confident that all this market watching will educate me to know it is time to buy.
We have been looking to buy our first home for almost a year now. We have been looking for an older home (pre 1930's), because we love the historical feel, especially Victorian architecture.
Several of the homes we initially saw on the market around christmas time are still on the market today. However,there have been NO PRICE drops in the 8 months we have been looking. "Where are these big discount deals?" we wonder.
I thought maybe because the town was not vulnerable to the flipping mentality, maybe the economy didn’t change so dramatically during the boom that people were buying into the alternative mortgages expecting their incomes to increase, maybe people who buy older homes stay in the homes much longer than people stay in newer homes, maybe because the older homes are 'specialized' in a way and the owners wait for the ONE buyer who will LOVE their house...I don’t know.
I have come to the realization that maybe the fact that it's an OLDER HOME we are looking for is the reason for the steady home values. All these 50-100k price drops are on NEW CONSTRUCTION which was built on city outskirts when there were large population fluxes and economies were booming and job growth in the towns was increasing.
Now jobs are declining somewhat or holding steady, and people are no longer moving to the suburbs because there is plenty of housing available in the cities. And older homes tend to be located in the heart of cities.
So...maybe these big price drops I have been waiting for are never going to happen for me?
I wonder then if my fiancé and I should actually change our dream to accommodate the current economy and the deals available.
It seems stupid to buy a high priced home in a land of incredible deals, but it also seems stupid to buy a deal of a home because it cannot hold its value.
We are looking for our 'forever home' and plan to stay in this home for at least 6-7 yrs, then we are planning to rent it out if we need to trade up for a bigger home/better school system due to family needs. We can’t predict the future, there is a possibility we will need to move, but we still plan to keep this home in our possession for decades regardless of our circumstances.
So do we give up on our plans and learn to love new construction? Or buy a more expensive home that is 'not on sale' because it has proven it will retain its value?
But since it is our 'forever home' then resale value is not very important, or since it is our 'forever home' then we should buy what we want?
Oiy. These are new concerns for me. I wish I was like so many others I know who just go out house hunting and come back 2 weekends later telling me they made an offer on a house and it has been accepted. Housewarming party is in one month.
Old construction housing values
July 25th, 2008 at 09:03 pm
July 25th, 2008 at 10:06 pm 1217023574
& I know I am a frugal contrarian on this issue, but I personally think new construction is a much better value. As you notice, it is cheaper. But it is also about 1000% less likely you will have to have large outlays in remodels and upgrades during the first few years (or entire 6-7 years). I know a lot of people who think older construction is superior, but they also all paid upwards of $50k - $100k in upgrades on their old homes (whereas our upgrade outlays after 7 years are a whopping $0).
Likewise, a lot of the materials in new homes are slated to last forever. Our roof is rated to last 50 years, just as an example.
Finally, the energy efficiency of a lot of newer homes can not be beat. Which means you will save hundreds/thousands on electricity costs, etc.
Anyway, if you were going for a true "forever" home I would wait it out and get an older home that you would live in forever. But for 6-7 years? I'd go with the new construction.
One caveat - once you get used to new construction there is no turning back.
July 25th, 2008 at 10:13 pm 1217023987
I just had to add don't get caught up in the "if you can ever afford a house." IF you can't now, it's not the time. Patience... (IT reads too much to me like bubble talk - which as you see has caused many people problems).
Maybe old homes will never come down in value, but maybe they will stagnate for a while, while you get a chance to save up and get on better footing.
July 25th, 2008 at 10:33 pm 1217025187
We eventually want to be landlords. I inherited a CA property 3 yrs ago and love landlording. Long term its historically been profitable, and fits this baseball lifestyle of needing an income but not wanting to be tied to an office.
Baseball boy and I are looking and loving Savannah GA. It is a great city for us right now, with its size, atmosphere, nightlife, ect. It does not have a good school system. I'm not pregnant now, dont know whats in store for us, but someday if/when we have kids we may move to a suburb or wherever with a good school system.
So we are looking into a townhouse now that will be rentable for tenents in the future if we want out of Savannah.
We are looking for a fixer upper that we can put sweat equity into. It would take a few yrs to get fixed up, but be a project/challenge for us, and we could kind of 'build in' some instant equity into the house by putting in upgrades, rather than being dependant on the housing market. Really, we are less concerned with resale value (since we want to hold onto it) than with fun project work for me. But We want to be smart as we go along.
We live in a new construction HOA community in FL now.
We have been in it for almost 3 years. When we moved in and rented the house, it was a dream come true. "Brand new house- move in ready- and top of the line??!!" But after 3 yrs we know it's just not right for us. It's not right for our lifestyle, it's too suburban.
I think after defending old construction I have realized I would rather pay a good deal more for an older house than get the discount price on new construction.
None of my friends or family will understand this. They will think we are a big ol fool for paying 250k for an old house with problems when there is a brand new, top of the line McMansion 1/2 hr away that I can get for 60k off asking price. Baseball boy and I are the only ones who see the older homes appeal, everyone else salivates over the new construction- the bigger and cheaper the better. I get tired just thinking about having to defend my housing choice when the time comes to buy and people ask what kind of a deal we got.
July 25th, 2008 at 10:38 pm 1217025505
New constructions are waaayyy bigger, already upgraded, and pretty much keep future repairs to a minimal for the next 5-10 years.
Old constructions are homes that pretty much need several thousand dollars work once you move in, and its just a waiting game for the next big expense to crop up.
All dollar signs point to new construction being the way to go financially.
And yet it is the new construction homes that are having their prices slashed, while the older home prices have remained steady (in the 1 town I have been watching).
July 26th, 2008 at 12:15 am 1217031326
I just want to warn you that it takes special care on older homes and like some pp already say, they are not efficient as far as heating up the home, different type of concrete was used back then to make the bricks and such that it is very difficult to repair. You pretty much will be doing repairs on every aspect of the home ongoing and not a once in awhile thing. My hubby and I are very hands on people and DIY as well which makes it possible for us to afford the maintenance. But it creates a lifestyle where we pretty much have to be homebodies to do this.
That being said, I do not advise buying an old charming home only to rent it out to renters. Renters will not properly care for an old home. They will not have the emotional attachment or care to keep up the maintenance if they are not seeing it as their 'forever home'.
A newer home is better and the home insurance is more adequate for modern homes if you are going to rent it out.
What does your baseball guy want in a house? The only things I hear are what you want.
July 26th, 2008 at 12:30 am 1217032228
Its not necessarily true that an old house will need repairs and renovation when you move in. Have you toured any of these homes for sale? I would imagine many of them have been updated and kept in good repair. Just because the house is Victorian age, does not mean that it is falling apart. It may, for example, have the same 50 year roof as Monkey Mama's house. It may have her furnace and air conditioning system, her ductwork, her low emissivity, tripled paned, noble gas filled windows. Especially if it is woodframe, it may have had great insulation put into the walls as well as an additional layer of insulation and tyvex under the siding. If it is one of those tall Victorians, it very likely has attic insulation as well. It may have radiant heat in the bathroom floors, new tight window frames and door jambs, fresh caulking all around, etc. A Victorian shell can have 21rst century improvements.
July 26th, 2008 at 12:35 am 1217032528
July 26th, 2008 at 01:03 am 1217034237
make sure that the house was built correctly, as a house built in the early 1900's will not have had to be built by the building regulations that are in place now. australian building standards and american building standards will obviosuly be different, but i cant stress enough that you make sure everything is done correctly, ie reinforcements etc. you don't want to prepare to renovate down the track only to find that you have to make huge changes to the house to facilitate these renovations. regulations are constantly changing, but they are for the better.
you also have to be careful about the quality of items used to produce your home. while wood is generally better quality the older it is (if it is cared for and not rotted or termite ridden - the reason it is better is because generally it is aged, whereas timber these days is normally plantation, so does not have the density that it would have had) like i said before, there weren't as many quality standards back then as there is now. you also have to make sure that there aren't materials used to build your home that aren't illegal to use now (ie. asbestos and lead paint)
personally BF and I will be building our own forever home new, and i doubt we would buy anything that is older than 15 years. so that is some advice from someone in the building industry!
July 26th, 2008 at 03:42 pm 1217086968
It is the general asking price of older homes that are being listed that blow my mind. $250k for a fixer upper, and in some cases very badly in need of repair. I plan to have an extra 20k available to do immediate repairs to the house after buying it, but in todays market, I'm not sure how many other people have that option available. Yet the homes are all consistantly priced, dont come down in price. Thats what suprised Baseball boy and me, we were expecting to see the deals in the older homes that wesee in New Construction. But there are no bargains. This is keeping us out of the housing market for right now. We will see.
July 26th, 2008 at 04:06 pm 1217088400
July 27th, 2008 at 01:13 am 1217121222
I live in a 75-year-old house and i think it goes without saying that an older house will cost you more; there is always something that needs replacing.