Looking for Value in this Crazy Market?

In a large real estate market within a major metro area like ours, good deals are hard to find. When they are found they are found by many other people and the 'good deal' quickly escalates into a bidding war that ultimately tends to lead to a much less better deal. Frankly there are no bargains in this type of market.

But value is not necessarily driven strictly by price. Often I find buyers and sellers hooked on the notion of price per square foot. I even see experienced agents caught in the trap. Read my article on Price Per Foot here. Price per square foot is not a good comparative measure of value at all unless the the properties compared are very similar. A two story house is not similar to a one story house because it is the same size. A fancy house with decadent finishes is not comparable to a similar sized house with cheap finishes. An immaculately well maintained home is not comparable to a run down fixer. Yet people are fixated on price per foot.

When considering price per foot however a value proposition does manifest in the numbers. Ranch homes are expensive for several reasons. First a ranch home has a larger foot print on the lot. Land values locally are very high and represent a very expensive fixed cost. Smaller houses on expensive lots will have a much higher price per square foot than a larger house on the same lot. This is why you will find brand new construction scenarios all over the area where a 1400 foot ranch is $500,000 and a 2000 foot two story is $535,000. The better deal is CLEARLY the larger house. One story homes are also in higher demand because older buyers are often seeking to avoid stairs. In the entry level market smallish one level homes are getting heavy interest from first time home buyers and older retirees downsizing from the family sized house they selling. This creates more buyers for ranch homes, thus inflating their price and price per foot even further.

First time homebuyers that are looking for as much footage as possible inside a tight budget will often find that two story houses are the best way to get more feet for less dollars. There are downsides to small two story homes. If you have a two story house with 1700 square feet it is common to have space upstairs over the garage. In many cases there may be as little as 700 squares on the main level and 1000 squares upstairs. First floor space is more valuable than upper floor space a traditional single family home. That means in general you have a lower price per foot and thus a "value" relative to a one level home. Furthermore, a two story house with equally square footage has a smaller footprint on the lot so you get more yard space on the same sized lot. Again, more "value." Pricing on two story houses in the entry level market are better in general for these reasons and the fact that older people are not interested in these houses. 

There is a disadvantage to small two story designs, mostly in the fact that they can sometimes feel a bit cramped on the main level. If you can get past that, the best deals are going to be on small two story homes with less than 2000 sf. 

Just when I thought things were quieting down

I listed a house in Battleground this week at a price I thought was fair and on point. It was NOT priced for quick sale or to create and auction environment. I figured we would have a steady drip of buyers looking and pick up an offer or two in a week. Sure I put my blitz marketing on as hard as usual, but the tsunami of buyers and offers was rather amazing. 

This market still has a frenzied group of buyers looking for nice clean homes in the mid-price range. Locally a half million dollars is still a mid-range home, but that is quickly slipping towards the entry level.

A thick stack of offers is a good thing and I suppose the "slowdown" was all in my head. Buyers will swarm to clean, move-in ready homes and this house is proof positive our market is still sizzling. 

Buyers you have to be ready to make concessions and not just coming in with a bigger price. Sometimes the terms matter. Letting the seller have a few bonus days to get out after close, or coming in with shorter contingency periods for inspections and loan closing. As hard as it is to be a buyer right now, sellers are in the same predicament when they sell they typically become a buyer.

So here's to the second half of 2021 and a continuation of our robust market, hopefully some extra inventory will fill in the gaps and take some heat off of buyers.

Parents Fleeing Public Schools... What will that mean for Real Estate Values?

The COVID-19 pandemic seems to have been the proverbial "last straw" for many parents regarding public schools. Public schools have long been in decline in the USA and now with COVID protocols and remote learning, mask mandates, and all of the other knee jerk reaction to this pandemic, many parents find themselves home-schooling or paying for private school. The numbers are actually a bit shocking in a state like Washington that has some of the best public schools in America.

Many Clark County school districts are seeing significant enrollment reductions despite massive growth in local population. As is seemingly true with all government entities, they rarely see it coming and often are too sloe to react. School districts are directly funded on a per student basis. District leadership continues to bludgeon parents with unpopular changes to teaching curriculum and a sizable percentage of the public is fed up.

Parents want their students to get an education, in elementary school a rounded mix of English, math, and science as a base for secondary schools where more sophisticated concepts can be introduced. Our schools seem to be off the rails with politics mixing in. There is no place for partisan politics in our public schools, yet they seem to be there anyway. Parents are clearly frustrated and not just one side of the political isle, this has become an almost unifying issue.

So what does this mean for real estate values? There are several areas here in Clark County where neighborhood values are higher largely due to the presence of highly rated public schools. I have often argued that the difference between the best and most popular schools and the least popular is pretty minimal. Washington has an iron clad constitutional mandate to keep all public schools well funded. But that doesn't stop people from paying a premium for neighborhoods with well reviewed schools or districts that have more premium infrastructure.

Parents seeking the best public schools are probably the same parents now making alternative education decisions. Property values that have been driven up over schools could see a slowdown in popularity as parents decide to buy a in a less expensive neighborhood and home school or send the kids to private school. The data is in and it is clear that in person instruction is very important to developing children academically. Hopefully the idiots running the schools at the state level will realize this before the schools suffer tremendous funding shortfalls. 

In the mean time, why would a family pay an exorbitant premium for a particular school district if they are not going to send their kids to those schools anyway. That may spell trouble for those neighborhoods over the next few years.