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Category Archives: investment

Wayback Wednesday… To Finish or Not to Finish, That is the Question.

Wednesday, 19 October 2011 08:00
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Map of Georgia highlighting Gwinnett County

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It is STILL one of the questions I get the most from both sellers and people that are enjoying their homes (not selling).

Will finishing my basement increase the value of my home?

While the answer isn’t quite this simple, it is basically, no.  There is obviously a lot more to it, and there can be mitigating circumstances.  One of the biggest is figuring out if you have the capability to do the work yourself, or if you need to hire a contractor.  And when I say “you do the work yourself”, PLEASE remember that “good enough” usually isn’t.  The work needs to be AT LEAST as good as should be expected from a contractor.  And NEVER skip getting any required permits.

There are a lot more details on the original post (link).  And that post was actually a follow-up to an opinion post (link) I wrote in January of 2009.  The older post was based on my impressions from buyers.  The later post was based on data from REDataCenter’s Gwinnett County Market Data and some articles publish by the NAR regarding appraisal guidelines for upgrades to homes.

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Wayback Wednesday… How ’bout Those Housing Starts

Wednesday, 12 October 2011 08:00
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Old photo of the estate Hollander Höfe (Höben)...

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Three years ago I published a little article about how housing starts were at their lowest level since 1991…  There were 820,000 starts in September of 2008.  And to me, that was a good thing.  If there is too much inventory, making more inventory isn’t the best idea.

Well… that was three years ago.  In August of 2011 (the last month with available numbers that I could find) there were 571,000 starts.  And furthermore, aside from a couple of bumps, starts have been bouncing along under 600,000 starts since December of 2008.  And I STILL say that it is a good thing.

Inventory is WAY more balanced than it was, even compared to just a year ago.  However, values are still well below where they should be. And there are still the persistent rumors that “the banks” are going to release millions of foreclosed homes that are “in the pipeline”.  Personally, I have been discounting those rumors for a few years… because the same rumors have been around for several years.  For a couple of years now, there have been rumors alluding to “shadow inventory” that was 3-6 months from the market.

So, if inventory is balancing, and starts have been down for years, how could I think that they need to stay low longer?  Well, it comes down to a few factors…

  • Pricing…  It still doesn’t pay for builders to put up houses in many markets.  Basically, pricing almost has to be below the cost of materials plus land in order to get the house sold.
  • Vacant Inventory…  Even in the depths of the crash, I didn’t see as many vacant homes as I do now.  I don’t have stats to back it up, but it seems like vacant inventory is surging.  (BTW, I think that is actually a sign of a recovery forming…)
  • Buyer Fear…  Despite incredibly low interest rates on mortgages and very low prices on homes (even Clark Howard is saying it might be time to move back into real estate), most buyers are still nervous.

Oddly, if you look over my market reports, I specifically refer to a couple of segments as being WELL into Seller’s Market territory.  And it is hard to square these two points…. that there is an active Seller’s Markets (in some segments) AND that starts need to stay low because the market is still weak.  But it comes down to averages…  One city might be rocking the sales, while just up the road everything is stagnant.

Location…

 

Housing Start Source.

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How to Read a Market Report…

Monday, 10 October 2011 08:00
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A lot of real estate agents write them.  Some have a lot of information, others… not so much.  Some are well laid out and go past the numbers into interpretation.  Others have plenty of numbers, but they don’t even give any sort of scale to use for reference.

I try to give mine a sense of scale, as well as interpret what the numbers mean.  I also wait to post them… until the numbers are fairly solid (and even a few weeks later, the numbers might change a little bit…), but not so long as to make the report outdated as it is published.  Below is an excerpt from one of my market reports:

Market stats for Suwanee, GA, August, 2011 indicate that there are 593 properties on the market (down from 612 last month). Overall, there is about an 7.3 month supply of properties (down from 7.4 last month). August had 83 sales. Compared to 2010 (55), that was VERY strong. Inventory was down, as well, compared to 2010 (636).  The last two months have been very strong, but that comes on a very weak June and just average sales for a couple of prior months.  Obviously, I’d like to see continued strength here.

So, let’s break it down.

  • 593 Properties… also showing the number of properties on the market the previous month.  Is it going up or down?  Which way SHOULD it be moving?
  • 7.3 month supply…  This is the Absorption Rate.  Here is a whole post explaining absorption rates, what they are and what they mean.  Balanced, in most real estate segments, is about 6.  Higher is a buyer’s market, lower is a seller’s market.  I also generally show the level of the previous month.
  • 83 sales…  and to put it in perspective, we also want to know how many sales there were last month AND how many for the same month last year.  Sometimes, in slower segments, we might look at the last three months of sales (combined) and compare those with the previous year.  For low volume segments, that will be a number that doesn’t jump all over as much and will give a better idea of market direction and strength.
  • Interpretation & Prediction…  I try to do a little of this for most segments of the market.  I track 7 different postal cities (not the city limits, but the mailing addresses) and each in 6 different price ranges.  That makes for a LOT of predictions and interpretation…  But I try to give what I think of each one… assuming there is enough data to get an idea of what is going on.
  • Something graphical…  My newest tool is a graphical representation (from Zillow) showing a history of the region.  Even more than the pinpoint data of the report, the simple graph gives the aerial view of what is happening.  However, it needs to be kept in perspective…  The beginnings of trend are pretty hard to spot on a long-term graph.

Hopefully this will help you get the most from my market reports…

Atlanta Metro Zillow Home Value Index

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Wayback Wednesday… Termite Bonds, Which Should You Have?

Wednesday, 21 September 2011 08:00
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Termite mound in Queensland / Australia, betwe...

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A couple of years ago I had a lot of buyers asking me about termite bonds.  I don’t know why, but sometimes questions come in waves.

So, what type of termite bond should you get when you are buying a house… or even if you aren’t buying it?  Should you get a “normal” retreatment bond?  Should you dig for a company that does a repair bond?  Did your termite company even tell you which one they offer or what they mean?

Take a look at the original post…

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Wayback Wednesday… Title Insurance…

Wednesday, 14 September 2011 08:00
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A couple of years ago I wrote a quick little primer on Title Insurance.  (Check out the link for more details…)  Title Insurance is one of the subjects I am questioned about regularly… even by buyers that have previously purchased 3 or 4 homes.

It can be confusing… there are two distinct flavors of Title Insurance, Owner’s and Lender’s.  And while sitting at the closing table, buyers are usually paying for a pant-load of other items.  Sometimes they draw a line and decide that skipping the Owner’s policy is a way to avoid spending another few hundred dollars.  Other times, they just give in and spend the money without knowing what they are buying.

Neither of those situations are good for the buyer.  Some buyers ABSOLUTELY need to have Owner’s Title Insurance.  For others, it is a luxury, or even a waste.  (Sorry, but if you have a loan, you WILL be paying for Lender’s Title Insurance… they will require it, and despite the fact that you won’t benefit, you get to pay for it).

Of course, I would be remiss if I didn’t remind you that I am not a lawyer, and I don’t even play one on TV.  You should always ask your attorney about the legal ramifications of a decision like this.  But keep in mind, the closing attorney is selling the insurance product, and they DO make money from it.  Some of the closing attorneys I have worked with have flat out told buyers that they would NOT answer questions about the suitability of the insurance product because of their conflict of interest.

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