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What's the housing market going to do?
Old 12-25-2010, 02:41 PM   #1
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What's the housing market going to do?

Does anyone have a sense of how the RE housing market is going to go in the next 6 months?

We are trying to sell a house that my SO's mother lived in for many years. It needs some work - mostly decor - but is structurally sound. She didn't bother updating it at all, and no changes were done with an eye to keeping it spruced up. OTOH it has oak floors in many rooms. It's a ranch from the 1950s and looks dated. To her if it works, how it looks doesn't matter - the Depression generation...

We didn't get any offers on it since September and it is priced very reasonably. We're trying to decide what to do with it - we could do a little fixing and rent it, or do more and sell it... But we might not get any extra money out of it if we sell it - I doubt that we could raise the price and get more for it. It just would sell.

If we rent it, there would be money coming in but the rental hassle is really a concern - it's not near where we live, about 40 minutes' drive. We can hope the housing market will rebound in a few years and meanwhile it's lived in etc.

We probably will have to buy it from her to do any work because she thinks it looks great just the way it is (groan). We doubt she will spend money on it without a fight... She moved into senior housing, so she's still the owner and still stubborn

One more thing - if we buy it and rent it, the cost of fixing it up is deductible. Otherwise we are just out the money, if we can't sell it for enough to cover the improvements.

Any thoughts?
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Old 12-25-2010, 03:11 PM   #2
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Thinker, I don't have a clue about what the housing market will do in the next 6 months, but I thought you might find some interesting reading in this group of threads in the FAQ section: (FAQ archive) Landlording/Real Estate Investment

There is apparently a lot more to being a landlord than meets the eye...
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Old 12-25-2010, 04:07 PM   #3
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Real estate is local. I can tell you that homes in my area are selling just fine if they are priced correctly. Sales prices are about what they've been for the past 2 years.

We had 4 homes for sale out of about 2 dozen in the immediate neighborhood the past 6 months. Only one has not sold, but it was priced about 50% more than it was worth. It will probably sell as soon as the owner prices it similar to the other 3 homes that were sold. No one in their right (or left) mind would buy the house for the asking price especially when 3 recent comps are available.

So what about the homes that sold near your house for sale?
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Old 12-25-2010, 10:06 PM   #4
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Real estate is local. I can tell you that homes in my area are selling just fine if they are priced correctly. Sales prices are about what they've been for the past 2 years.

We had 4 homes for sale out of about 2 dozen in the immediate neighborhood the past 6 months. Only one has not sold, but it was priced about 50% more than it was worth. It will probably sell as soon as the owner prices it similar to the other 3 homes that were sold. No one in their right (or left) mind would buy the house for the asking price especially when 3 recent comps are available.

So what about the homes that sold near your house for sale?
I don't think there have been any comps for sale near this house, unfortunately. It's a small residential neighborhood. This year there was a lot of buying incentive - some federal program that gave $ for buying a home (I forget the details). The point is a lot of people bought homes in the first half of 2010 and then that deal was over. So we suspect that had something to do with no sale.

I've been a landlord - a long time ago, and we know the potential issues. I would like to use a management company - it was THAT much fun...

Houses where WE live are selling - slowly, but we didn't have a price bubble here and they are selling around the same price (or maybe a little lower) than they would a year or two ago.

The house I'm worrying about is a lot different neighborhood, condition, etc. And again, no comps.

I'm just trying to figure out what the trend is. The RE agent thinks it will take a while, and that we should fix it up and not ask more for it. That seems less than desirable. I don't get a sense of whether there is going to be some pent up demand coming in the spring, though...

Thanks, any comments are very welcome.
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Old 12-26-2010, 02:04 AM   #5
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Real estate is local.
+1

It doesn't matter what housing does nationally. It doesn't matter if sales improve in your state. It doesn't matter if prices rise in your city. What matters is what happens in your neighborhood.

None of us could accurately predict price movements in your neighborhood if we lived there. When we don't even know your state, you can guess what you should do with whatever advice we offer here.
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Old 12-26-2010, 07:32 AM   #6
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Does anyone have a sense of how the RE housing market is going to go in the next 6 months?
As others have said, the RE market is local. You can get an idea of the market's direction by keeping on top of local sales - particularly time on market, sale price, and tax assessed values. zillow.com and realtor.com may be useful. Some local newspapers may help you do the research. Plus, some counties/cities have tax assessment information on line.

It may also be useful to talk to a few real estate agents who work in your area. Not only could talking to other agents yield some interesting information, but may help determine if your problem is not the house but rather the agent representing your mom's house.

Quote:
It needs some work - mostly decor - but is structurally sound. She didn't bother updating it at all, and no changes were done with an eye to keeping it spruced up. OTOH it has oak floors in many rooms.
This doesn't sound like real expensive work. A fresh coat of paint, some new carpet and applicances may be all that's needed. Don't forget about "curb appeal". Take a look at the place with this perspective - if you were a potential buyer driving by the place, would you feel any temptation to stop and take a look inside?
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Old 12-26-2010, 07:54 AM   #7
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This doesn't sound like real expensive work. A fresh coat of paint, some new carpet and applicances may be all that's needed. Don't forget about "curb appeal". Take a look at the place with this perspective - if you were a potential buyer driving by the place, would you feel any temptation to stop and take a look inside?
Thanks all - this is a house priced at $100K and so any $ thrown at it will not be recovered (we think). Zillow says it's worth more (but also has the square footage way too high). Most of the interior has been repainted already. In the spring it needs some minor landscaping and maybe shutters to add curb appeal.

This isn't a good neighborhood to spend a lot of money in - it's a small house in a small-house neighborhood. Not a bad neighborhood, at all, but it's not in granite-countertop land.

Although I agree up to a point that RE is local, there still are trends and I can't figure out if there will start to be demand in the spring. I know it went away in the fall after the federal incentives went away - everyone had already bought a house.

Ugh, we may end up as landlords . Thanks. Still VERY open to more comments.
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Old 12-26-2010, 08:39 AM   #8
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I'm just trying to figure out what the trend is. The RE agent thinks it will take a while, and that we should fix it up and not ask more for it. That seems less than desirable. I don't get a sense of whether there is going to be some pent up demand coming in the spring, though...
Or, instead of fixing it up deduct the amount you would spend from the current asking price.
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Old 12-26-2010, 10:51 AM   #9
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Quote:
Originally Posted by thinker25
We are trying to sell a house that my SO's mother lived in for many years. It needs some work - mostly decor - but is structurally sound. She didn't bother updating it at all, and no changes were done with an eye to keeping it spruced up. OTOH it has oak floors in many rooms. It's a ranch from the 1950s and looks dated. To her if it works, how it looks doesn't matter - the Depression generation...
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Or, instead of fixing it up deduct the amount you would spend from the current asking price.
I suspect you're going to have to discount the house substantially if you don't do updates. If it's as you describe, paint is not the issue. Unfortunately what the market is doing isn't as big a factor as you might hope either.

Without a modern kitchen, modern bathroom and floors/carpets in decent shape, it's a very tough sell. Most buyers want these things, but they don't have the cash and/or time to undertake the upgrades themselves. Kitchen and bath upgrades are very costly and disruptive, that scares potential buyers away. Even building in allowances for upgrades is not as desirable to most buyers as a turnkey house ready to move into without any work.

I understand why you don't want to do it, but odds are it will take (much) longer to sell even with a discount without updating it. Buddy of mine replaced the roof on his house but otherwise refused to update his house (kitchen and baths). It took more than two years to sell (sold Dec 09) and he ended up dropping his asking price from $150K to $110K to finally move it. Best of luck...
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Old 12-26-2010, 11:06 AM   #10
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Even building in allowances for upgrades is not as desirable to most buyers as a turnkey house ready to move into without any work.

Best of luck...

We had the 'allowance' for flooring built into ours, didn't help. Along with the potential of a lender not allowing the allowance (due to tighter regs after the meltdown) people looking at the house with the crappy flooring couldn't get their minds around getting the new flooring....we are now reluctant landlords (with new flooring) until the market rebounds.
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Old 12-26-2010, 11:10 AM   #11
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I suspect you're going to have to discount the house substantially if you don't do updates. If it's as you describe, paint is not the issue, it's a modern kitchen, modern bathroom and floors/carpets in decent shape. Most buyers want these things, but they don't have the cash and/or time to undertake the upgrades themselves. Kitchen and bath upgrades are very costly and disruptive, that scares potential buyers away. Even building in allowances for upgrades is not as desirable to most buyers as a turnkey house ready to move into without any work.

I understand why you don't want to do it, but odds are it will take (much) longer to sell even with a discount without updating it. Best of luck...
+1 This is my understanding of how things are working in this buyers' market as well, at least in my area.

Of course, all real estate is local. Here, during the sellers' markets of the past, one could sell such a house for a low price to flippers, for example. But from what I have been told, at present buyers in post-Katrina New Orleans are not going for fixer-uppers as much as one might expect because they are still "once burned twice shy" with the multitude of sleazy contractors that appeared after the storm, charging an arm and a leg for a poor job or swindling the homeowner. And flippers? There don't seem to be any around here any more.
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Old 12-26-2010, 04:58 PM   #12
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I suspect you're going to have to discount the house substantially if you don't do updates. If it's as you describe, paint is not the issue. Unfortunately what the market is doing isn't as big a factor as you might hope either.

Without a modern kitchen, modern bathroom and floors/carpets in decent shape, it's a very tough sell. Most buyers want these things, but they don't have the cash and/or time to undertake the upgrades themselves. Kitchen and bath upgrades are very costly and disruptive, that scares potential buyers away. Even building in allowances for upgrades is not as desirable to most buyers as a turnkey house ready to move into without any work.

I understand why you don't want to do it, but odds are it will take (much) longer to sell even with a discount without updating it. Buddy of mine replaced the roof on his house but otherwise refused to update his house (kitchen and baths). It took more than two years to sell (sold Dec 09) and he ended up dropping his asking price from $150K to $110K to finally move it. Best of luck...
You are probably right. I was projecting. I want a cheap house that isn't fixed up so I can fix it up the way I want.

Maybe ask the real estate agent what would be a better sell in his market?
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Old 12-26-2010, 05:16 PM   #13
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You are probably right. I was projecting. I want a cheap house that isn't fixed up so I can fix it up the way I want.

Maybe ask the real estate agent what would be a better sell in his market?
Want this one?

Already talked to RE agent... throwing lots of money at the house and not raising the price would work. We might fix it up and rent it. At least the fix up would be deductible that way. Rent it using someone else to manage it...
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Old 12-26-2010, 05:30 PM   #14
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My house took over one year to sell... I updated all the bathrooms... almost all new stuff... the kitchen got a new floor... it looked a lot nicer than before...


I thought that I would sell quicker as mine was now nicer than the houses around me and was priced less per sq.ft. but no.... people just did not like the floorplan...

In the first 9 months got one offer that was taken away in a day as they bought another house (made low offers on 5 houses the same day)... then waited another 6 months and sold it on the second offer..

Like you I was about to rent it out.... but I did not want the hassle of being a landlord...
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Old 12-26-2010, 05:36 PM   #15
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One other thing to consider - tax implications. If it's sold now, should be no problem. The house should be under the exemption amount. Rent it and you have to consider rental profit/loss plus potential capital gains or losses later when sold. Plus, if you buy the place from your mom then rent or sell it later, it might get complicated. The sale price might be questioned by the IRS since it's a transaction between relatives. You might want to get some professional advice on this.
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Old 12-26-2010, 05:48 PM   #16
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We didn't get any offers on it since September and it is priced very reasonably.
If you haven't gotten an offer since September then it is not priced "reasonably" for it's condition.

Lower the price or improve the condition in order to sell it.

Next year there should be alot more foreclosures coming on the market I believe.
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Old 12-26-2010, 05:53 PM   #17
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One other thing to consider - tax implications. If it's sold now, should be no problem. The house should be under the exemption amount. Rent it and you have to consider rental profit/loss plus potential capital gains or losses later when sold. Plus, if you buy the place from your mom then rent or sell it later, it might get complicated. The sale price might be questioned by the IRS since it's a transaction between relatives. You might want to get some professional advice on this.
Thanks - I think he would buy it for the current asking price which had no offers, maybe minus a bit, so not too worried about the IRS. But we should check with a lawyer or accountant.

OTOH - this raises the basis for my SO - his mom gets a nice non-taxable profit for selling her residence... he gets deductions for fixing it up...

The not win-win part is having rental property at all - I've been there.
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Old 01-07-2011, 11:12 AM   #18
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This market is very frustrating. I've had my house on the market starting in July and changed RE agents in October. Price started at 409k, I never made any demands, took what prices the agents suggested, and have dropped each time a re revaluation was made, usu. 10k at a time, now down to 379k. Was just told that buyers are looking at shorts and foreclosures first, then homes like mine w/no financial issues. I was told my house is overpriced, even though I never set the price! Makes me scratch my head as the price suggested to drop to is 340 - 350s, but that may be too high. Was given an example of a comp short sale, started at 425k, renovated everything AND dropped the price to 306k! How can you compete with that? We tried a short 6 month rental, but now will consider longer term renting instead. RE agent is frustrated, said it doesn't make sense in this current market, she didn't think it was worth dropping another 20-30k. The soon to be rush of foreclosures the banks are holding has my agent thinking of these options now instead of waiting.
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Old 01-07-2011, 11:37 AM   #19
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The jobs report was pretty bad. The fed is gonna have to step up the bond buying and drive interest rates lower. Japan got into the mid 2% with 100 year terms. I think that type of trend should continue here which should help you out.
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Old 01-07-2011, 12:32 PM   #20
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This market is very frustrating. I've had my house on the market starting in July and changed RE agents in October. Price started at 409k, I never made any demands, took what prices the agents suggested, and have dropped each time a re revaluation was made, usu. 10k at a time, now down to 379k. Was just told that buyers are looking at shorts and foreclosures first, then homes like mine w/no financial issues. I was told my house is overpriced, even though I never set the price! Makes me scratch my head as the price suggested to drop to is 340 - 350s, but that may be too high.
It is very frustrating. We listed our house for sale at 599k last April. Before listing, I told my agent that I wanted to sell as quickly as possible and did not want to maximize price. We live in an acreage subdivision and even in good times houses in this area are all unique and tend to take up to a year to sell.

By the time the listing expired in November we were down to 537. We made 2 price decreases both initiated by me.

It is easy to say we were overpriced...but other houses weren't selling either. Most of the houses listed nearby when we listed either are still listed or the listing expired. None of the houses that have sold are very comparable to ours. Our price at the end was a great price but the bottom line was that nothing was selling. And, we aren't in terrible market either. Some buyers had the problem that they couldn't buy until they sold their house and their house hasn't sold so they can't buy ours. Sigh.
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