Wednesday, April 27, 2011

Trashy Homes Pulling Home Values Down Further

Home prices are being affected by more than just foreclosures and short sales.

In years past we had a "flipper" market. Investors bought homes that needed updating and it was easy to drop a few thousand dollars into paint and carpet and turn around and sell the home for a good profit.

That was then.

That was when money was easy.

That was when home prices were rising.

Those days are gone.

We are now seeing homes in a serious state of neglect like never before. And this is contributing to further errosion of home prices.

These pictures are of a home that just sold in March for $115,000. A pretty cheap price for sure. But just how much money would need to be put into this home to make it habitable again?

And after improvements could the home be sold for a profit?

There is obvious mold issues and one would question whether it should be just torn down.

Because of these types of properties, we forecast that future average and median homes prices will continue to show declines.

But these declines need to be clarified.

1. Average prices will show decline based on deteriorating home conditions.

2. Average prices will drop because most of the home sales are under $300k.

3. Home sales above $500k are scarce and this anomaly pulls down the averages as a whole. There just isn't alot of home buyers looking in this range.

This can skew the data and give false signals that all home values are declining. Which may not be the case.

Homes that are in great condition with good street appeal are selling and selling quickly. This home sold in 17 days for around $315,000.

Home buyers are out there taking advantage of lower home prices and low interest rates. If you're looking for a home that is a "place to live" for years to come, there are plenty of fine homes to choose from.

If you're looking for a "fixer" to flip, be careful. Know what you are getting yourself into. Prepare to spend money on pre-inspections before sealing the deal. There may be many hidden defects that only a professional inspector can determine. Know what your improvement costs are going to be and then add another 20% for unexpected items. Unless it's the right house at the right price, in the right neighborhood we don't advise it. This not the right market for the unexperienced "flipper".

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