Friday, August 29, 2014

New on Small or Old on Big?

The trends in home building for middle income buyers has been larger homes on small lots. Builders have been stuffing 2200 square foot homes onto 4000 square foot lots. There is a wow factor when a prospective buyer walks into a brand new house with 2200 square feet of space and all the nice modern features.

The trade-off has been in the "real estate" portion of the deal. These gorgeous big houses had nearly no yard and a tiny so called two car garage. For the very same money a buyer could look at a 20 year old home with 1800 square feet sitting on a large 10,000 square foot lot. Sure, that house was a more dated design, but often the seller had done updates to improve the feel of the home.

So buyers that find themselves in the local market with a $250,000-$300,000 budget will face the same dilemma. 'new on small' or 'old on big'? That trend of new on small even pushed it's way into the bottom of the upper income homes. There are a great many 3500 square foot homes stuffed onto 5000 foot lots here in Clark County as well. Some of these are top quality builders cramming luxury homes onto postage stamp lots up on Camas' Prune Hill.

Buyers should consider that land is valuable. It is a major part of the real estate equation. Having a large, safe yard for children or grandchildren to play in can be most valuable. Summer parties in a real backyard are hard to beat as well. Buyers are well advised to look at a range of homes from new on small to old on big before making that final decision. There are strong merits to both concepts. personally I am at a point in my life where a big house on a small lot would be just dandy! One should just make sure they are choosing the property that will serve them best rather then the property that offers more bling.

Friday, August 22, 2014

New Construction is Back...Bigtime

From Stonebridge Homes, Ridgefield, WA
The last twelve months has seen a boom in the new home construction market here in Clark County. Builders are erecting beautiful new homes and buyers are snatching them up. The pre-crash trend of bigger homes on smaller lots continues during this post-crash recovery.

Builders are able to offset the fixed expenses of infrastructure when they can squeeze more homes into less land. This allows buyers to get a really nice home for a reasonable price. Families looking for the rancheria spread on the jumbo 1/4 acre lot will likely need to did deep into their pockets or continue working the 1970s and 80s resale market.

There are several builders that have setup shop across the county. New Traditions, AHO, Manor, Osprey, Olin, and Pyramid have been here before but we also are seeing new faces from Lennar and Stonebridge as well.

I helped a client get into a new home last month and he got a lot of house for a great price.2700 squares with nice upgraded trim and a decent sized lot at 6,000 squares for a great price of $313k. Prices are moving up though. That same floor plan is now fetching $325k in the same subdivision.

Getting in early can sometimes be a huge advantage price wise. Builders tend to increase prices as the phases of development are added in. The advantage to a phase one purchase is price, the disadvantage is the uncertainty of how the development will "feel" when built out.

New construction can sometimes soften the resale market and I think that the slower resale appreciation this year could be directly linked to the increased builder activity. That is a short term dilemma. The long term benefits associated with new construction are usually worth any short term loss. New development increases the value of real estate in the area. It aids in infrastructure improvements and provides needed local government revenue. It also aids in resale value long term.

Here in Southwest Washington, most builders list their new homes in the MLS. You can have your trusted real estate professional help you find the best value in a new home. Buyers that are trying to find a newer modern home should consider a new construction. It could be just what the doctor ordered :)

Friday, August 15, 2014

Back to School Brings Opportunity

There is typically a nice little summer boost in the number of real estate transactions. June and July enjoy a robust seasonal perk up as many families prefer to move in the summer while kids are out of school, and while the weather is fair for moving. The summer month's totals are usually about 20% higher than the average month. Mid-August tends to see a slight slow down in activity that is most likely due to families with children in "back to school" mode.

This slight reduction in buyers, means a little less competition for the remaining listings. Buyers that have not found their ideal home or that have been outbid may find a reprieve from the craziness. Likewise, sellers that did not sell over the summer may be ready to take that slightly lower offer that would not have been accepted a month ago.

Sellers with homes that are not selling of course should consider evaluating the price but also other factors that might help sell. One problem that is all too common among sellers is the availability to show the home. Selling a house that is lived in is a difficult pain in the rear end. But the more easily an agent can show the house, the more buyers will be able to see it. More showings will directly translate into more or faster offers. The next 3-4 weeks will mark the end of our late summer sun and making listed properties available until 7 or 8 o'clock can be the difference between sold and sitting.

Buyers should revisit homes they passed over in June and July. If they are still on the market the price may now be reduced or the seller may be softened up and open to a lower price offer.

We continue to see appreciating prices but the rate of appreciation has slowed dramatically from the skyrocketing prices of 2013 to more modest upward trend in 2014. There is no guarantee that prices will continue to move up. The economy is fair and interest rates are a major factor in the recent real estate turn around. Sellers should not assume that they will get a better price next year. They might; in fact they probably will, but it is by no means set in stone. A good solid offer today that generates the cash needed to do what the seller wants to do should not be underestimated.

Don't worry if you missed out on the peak summer sales cycle, there is plenty of opportunity as the Autumn approaches.

Friday, August 8, 2014

Two Ways to Invest in Property When You Don't Have a Ton of $$ to Start Out With

I am on vacation this week but take a look at this article by my one of my colleagues

by Dan Jensen
Relocation Services Director - Equity Northwest Properties Group

Investing in Real Estate is a dream for some, a practical activity for others, and the path taken by so many people over years and years of our Country's history to amass significant financial holdings and net worth!

Okay, so RE is a sound path to building your financial empire, but what if you don't have a ton of dough to start with? Is it still possible to invest in real estate?

Short answer is 'Yes Indeed'.

Example/Tool Number One - Option

You see a house you like that's for sale or may be soon... someone you happened to be talking with who said they need to sell their house in the foreseeable future but aren't quite ready at this point. Maybe next year after the kids finish the school year. You express interest in the "possibility" of buying their house and ask if they might consider selling you an Option to Purchase the home - say $500 for the option right to buy the home at a price you both think is "fair".

The Option can be good for any length of time, but let's say this one is good for one year. As time moves along, the value of similar homes increases just a bit, 5% in this case, and the agreed upon price you and the owner set is now a few thousand dollars less than "Fair Mkt Value" for the home. You run an ad in Craigslist offering to sell your Option for $2500 and whoever buys your Option owns the lower price for the house that you negotiated. Whether they exercise the option and buy the house or not, you've made a little extra that allows you to do 2 or 3 similar options and roll up the totals over time to "bankroll" your other RE investment strategies that do require a bit a coin to complete.

Example/Tool Number Two - Lease Purchase

You do your research and find a couple of houses that haven't sold for several weeks. One of the owners just lowered the price on their house to try to attract a buyer, and the other one is running ads that have words like "Urgent", "Hurry", "Must Sell NOW", and the like, telling you they really need to get out from under their mortgage.

You make a couple of calls and ask if they will consider you taking over their payments IMMEDIATELY and put together a Lease Purchase for 3-6 years. The IMMEDIATE relief from their next mortgage payment is enough to persuade one of the owners to accept your Lease Purchase proposal, you write it up with a "Fair" price for their home stipulated, and run a different ad on CL this time...

You're looking for a buyer-tenant for the house. You've made the first mortgage payment ($1600 or so) to your home owner, which buys you a month to find a suitable and interested buyer/tenant for the home. Your Buyer/Tenant wants to own a home, but they can't get a mortgage for whatever reason, so your Lease Purchase offer makes home ownership possible for them as they repair their credit, season their time at their job, or whatever the case may be.

In short, your are providing them with the opportunity to own a home, something they deeply want, and in doing so, they are not only fulfilling the terms of your Lease Purchase agreement with your seller, but your new Agreement with your Buyer/Tenant is sweetened a bit and will yield money down and a little monthly cash flow for you as well. Well constructed and negotiated, there's likely another bit of cash for you on the back end of the deal when your Buyer/Tenant buys the house!

Not a bad deal throughout!

The details are key here, and too many to try to summarize here, but this Tool allows you to create 1.) cash in hand on the front end, 2.) cash flow throughout the agreement term, and 3.) profit spread on the back end when your Buyer/Tenant executes the purchase of the home.

In both examples above, you have never "OWNED" either home, but you negotiated "CONTROL" OF both homes that results in PROFIT FOR YOU!

As small pieces of profit begin to add up, AND WITH SMALL amounts invested by you, it opens the door to additional Investment Tools that benefit from having more of a financial capability. We'll cover a couple of those ADDITIONAL TOOLS in our next post here.

Friday, August 1, 2014

Slow Down? Not Really

Some indicators are suggesting a slight slow down in resale activity and a slower rate of appreciation on homes. The latter has been true but not so much the former, at least in Clark County, Washington. Resales have softened a touch but that is as likely due to the robust new construction activity that has spawned in over the last 12 months. Yes, the builders are back.

Pricing on resale homes was quite brisk, year over year in 2013 and I certainly did not expect back to back double digit increases in the annual appreciation rate. The market is still quite healthy and for those competing in that under $220k range it is often a multiple offer over asking environment.

Check out this article from the Columbian newspaper about new housing, building permits.

The bottom line remains consistent that now is the time to act. prices have moderated a bit and that allows sellers to take advantage of last year's spike while not having to face a huge uphill spike this year for their new home to replace the one they sell.