There Goes The Farm

[Vaughn]

I've sensed this one coming for quite a while. Elvira's got her heart set on a new house. Elvira mentioned "ZakaZAT'" = order = new construction. She's not someone who's apt to "covet thy neighbor's goods", but she is fond of things new.

  I've expressed openness to her request, and in return asked for patience in light of some plans already in place for 2006. Knowing at least two members here who've recently relocated, never having purchased a brand-new home, and having not dabbled in the real estate market since 1987, I'd appreciate any pointers...

Vaughn

[BC]

Wait until headlines say: 'Housing Bubble Bursts' then 'New Home Starts Down'.. until then save, save, save..

[Vaughn]

Wait - easy for me. Mr. Procrastinator.

We own this place outright, full equity, and she's not seeking a castle; rather, just a modest (but new) house, but the save save never hurts in my experience. Thanks, BC.

[catzenmouse]

I hear you can get a new "doublewide" for a good price!:D:D:D

Are you looking to build or to buy new construction? Neither one is  going to be cheap no matter how you look at it unless you look 100km  outside of town....

Happy Hunting Vau-gun!

[Turboguy]

Actually around here new homes seem to be a better value than existing homes.  May not be the same there though. 

Yes, it is better to wait till the housing bubble bursts.  Of course house prices might double first, but in the crash they will drop to only 50% more than they are now.

What kind of pointers do you want.  Prequalify for a loan, sell your place after and pay it down as much as you can.  Check the reputation of the builder.  Talk to some of the people who own thier homes.   Don't jump into something that is not everything you expect.   Yes, you are looking for a modest home but once you start shopping you will find you end up buying more home than you planned so don't worry about it.  Go for it.  You only live once.

[BC]

Wait - easy for me. Mr. Procrastinator.

We own this place outright, full equity, and she's not seeking a castle; rather, just a modest (but new) house, but the save save never hurts in my experience. Thanks, BC.

In that case sell sell sell before it bursts and set up a tent somewhere.. 'screwed' either way LOL.. yeah get good qualified advice as turbo seems to suggest.

 

 

 

 

 

 

 

 

 

 

[Vaughn]

Yes, you are looking for a modest home but once you start shopping you will find you end up buying more home than you planned

That won't surprise me at all, Turbo. I'm concerned about location - we are 7 miles from downtown in a city of 500,000. It's suburban, heavily wooded, great access to shopping and major roads - I might regret losing this
land parcel.

Ken Catzenmouse:

Are you looking to build or to buy new construction?

Hmmm. ZakaZAT' means literally "Order". But then she mentions someplace "where no one has lived before" which may preclude the need for an architect. She won't fall for the doublewide  

[andrewfi]

Absolute best plan, requires balls of steel and good timing (market knowledge) is to sell up your home as near to peak prices as possible and rent whilst the market declines. That way you get 'good dollars' for the sale and buy the next place with 'bad dollars' - getting much more house for your dollars.

Sell in a rising market, buy in a falling one. Use the rental to tide you over whilst you sit on the liquidity. Chances are that the rent you pay will be less than the interest you get on your cash. The hardest bit when you have your cash in the bank is timing your new purchase, ideally as the market is bottoming out after a couple of years of declines.

What is the land value in relation to the rebuilding cost? Might it be worthwhile, given that you are a freeholder, to demolish and rebuild?

[Vaughn]

andrewfin:

Sell in a rising market, buy in a falling one. Use the rental to tide you over

Makes sense to me. Crossed my mind many times.

BC:

set up a tent somewhere

Now THAT idea just might surface tonight at the dinnertable...

andrewfin:

What is the land value in relation to the rebuilding cost? Might it be worthwhile, given that you are a freeholder, to demolish and rebuild?

Not viable here. Now if we were downtown, beachfront or riverside I'd call in the demo squad...

BTW - She's elated at all the rapid response. Thanks, everyone, I might get lucky today.

[andrewfi]

Sell in a rising market, buy in a falling one. Use the rental to tide you over

Makes sense to me. Crossed my mind many times.

But, the downside is the living in rented accommodation for possibly several years. If what happens in the US turns out as happened in the UK back when I was buying and selling houses, you could find that if you wait too long that you can not sell at any price, but if you sell too soon, you end up in a rental for several years - possibly not what the good lady had in mind!

[Vaughn]

but if you sell too soon, you end up in a rental for several years - possibly not what the good lady had in mind!

Quite honestly, a condo might thrill her - she's about had it with yardwork. I warned her that a new house (around here anyway) comes with its own list of new chores. Like establishing a lawn and getting the builder to knock out a punchlist of troubles.

Realtors always come up with good reasons, despite market conditions, to buy and sell now. Where do I find an unbiased report of current local market conditions?

[jb]

Google search, "overpriced housing market".

There is a wealth of info out there not written by a realitor looking for their next commission check.

[Vaughn]

Thanks, jb.

[andrewfi]

Look for information on how long it takes to close a deal. When the market is slackening the period lengthens. Plot the numbers on a graph. As the market slows you will probably see an upward curve. If the curve suddenly steepens that is the time to sell. No suggestions as to numbers to look out for though!

Another consideration is the value of the average house compared to the average income (in your city). At the moment, the average house, in the US now consumes about 43% of average incomes, practically and historically, it should be about 30%, so, you can consider that your area is close to its peak if the ratio is about 40%, if significantly lower then you may have a way to go. If in your area the ratio is around, or above 40%, I would be looking to sell. Consider closing times and income/price ratios together.

New housing starts are a bad indicator as developers always overhang the market. Closing times are a picture of what people actually want to do and the ratio shows what they can afford and thus how far the market can go. Of course, the local and state/national amrkets are interlaced, so it could be that your area goes into decline before its potential peak if the state or national markets peak out. You can safely figure that this will happen in 2006 because there are so many people saying it will happen. Markets tend to follow people's expectations!

[Shadow]

Do not put all your funds in building or buying the house.

Remeber that the house needs wall covering, floors, kitchen and bathroom furniture. Not to mention the rest of the furniture while you are busy renewing  But if money runs out do not save on the basics that will be fixed. A top-nothc kitchen and bathroom raise the value of the new place.

Before moving out throw away all the things you think are useful to keep for sometime later. That time will never come and it is useless junk.  But keep the things your wife likes. They are very valuable

 

[BC]

If you are going to build think 'low energy'..

[catzenmouse]

Before moving out throw away all the things you think are useful to  keep for sometime later. That time will never come and it is useless  junk.  But keep the things your wife likes. They are very valuable

I sure do hope one of those "useful" things to keep is you Vaughn!!! :P

Ken

[START2]

Vaughn,

Here's a suggestion. Go to www.daveramsey .com  He's the radio host out of Nashville that preaches on debt free living.  Several years ago I hooked up with the idea and let me tell you, there's nothing better than paying cash and not being a slave to the lender. here's my point. Click on the real estate icon on his site and find a realtor  from your area. They're devoted to being the best  and they have the heart of a teacher. Your local realtor will work with you and teach you all at the same time. Have heard some great references from people that have found and sold their homes.

[Vaughn]

Here's a suggestion.

Thanks, Start2, I'll check that out. If we play our hand properly, we won't have to borrow a nickel...

[catzenmouse]

How 'bout this....

 Give Elvira the authentic feel of home. Build a 300 sq ft  concrete box with partial running water and out of date appliances.  Then to make it truly a paradise build a dilapidated building a few  hundred yards away with an out house and a pump well for water and some  garden around it.

Ken

P. S. Don't tell her it was my idea. Let her think it was yours so you  can claim all the rewards of such a truly heartfelt gift...

[KenC]

Vaughn,

In some areas there is a significant seasonal swing in prices.  The optimum time to sell is late spring/ early summer while prices tend to decline around the end of the year.  Most home builders discount heavily or give nice incentives to move any standing inventory before the first of the year.

Keeping that in mind, I would suggest you ready your house for a spring sale.  Freashen up the paint and do any repairs necessary.  Get a realtor to sign you up for an internet connection to your local multiple listing service, so you can track house prices on homes similar to yours.  List your house high early in spring and see what happens.  If you get the top dollar you want, get temporary (month to month rent) housing until you can take advantage of the end of the year price drops.  I know a double move is a pain, but this strategy could make you thousands at both ends.

Keep in mind that there are a lot of hidden costs in purchasing new construction.  Like blinds/drapes, landscaping, painting, decorating and such.  What you get is nothing lke the models you walk through.  Have the builder's salesman walk through the model and point out everything that is standard and everything shown that is extra.  Also keep in mind that you may want to upgrade items like carpeting, tile. appliances and cabinetry during the construction, meaning more dollars spent.

Study your local newspaper's "homes" section, usually in the Sunday paper.  Start visiting model homes now just for reference.  Ask the builders about future developments.  This will be your single most important financial investment, so make sure you know what you are doing before jumping in.  Good luck.

KenC

(built and sold over 20 homes)

[latstaley]

They have been predicting the housing bubble is going to burst for the past 5 years. Personally, I don't see it dropping that much. I think the prices are going to stagnate and stay in place for probably the next 2 years, but they aren't going to drop. I just put my house on the market yesterday, and the prices haven't dropped a bit in this market. It might sit on the market for a couple of months instead of a couple of days like they were selling 2 years ago, but I'm not worried about getting my money out of it. All the doom and gloom naysayers are going to look like fools in December.

[ronin308]

If I had followed the "predictions" for the housing "bubble" I wouldn't have made an extra $50k that I did.  As latstately says the prediction has been out there for a while now and while things slow down, the price hasn't really stopped rising yet.  I think the interest rate swing will slow things further as the $700k interest only house that was affordable at 3% isn't even close at 5-7%.

The advise of watching closings is right on, look at how long houses like have been on the market but keep in mind seasonal variations as Ken pointed out.  

Renting is good on the short term, but there isn't a real good idea if and when the bubble might burst, how low prices will get and how long it will last.  In the meantime you've lost the tax advantages of a mortgage by paying someone else's (which is what renting is) and you're living in a "temporary" situation that means any improvements you do the place you aren't going to get back. 

[Vaughn]

I've been at the tasks KenC outlined for several weeks now. Here's the deal: we're not going to have to rent between dwellings. We're able to buy first and then sell the old place. I don't need nor want the pressure of a contingency sale. The market here has enjoyed a modest 10% growth rate for several years now, and local analysts don't see a burst on the horizon. Having served the area's construction industry, I've got solid homebuilder contacts, guys I know personally (I also know many I won't be calling).

I made a killing on my first home in Spring, Texas, 1981. The second one - well, I couldn't sell it high enough to pay off the mortgage. We came limping back East and started anew. That was '85 when Houston had 1000's of vacated homes with tall grass. Why? OPEC fell apart, the barrel price fell, and hence so did domestic exploration - and nearly everything in Houston was oil dependent, at least then. But the real root cause was the inflated market just prior. Skilled workers were taking out second mortgages at high rates with balloon payments due in 5 years just to get into a house. Then, boom - they're washing dishes and struggling to meet the note. It was the cash-rich investor who did very well then, snapping up great homes that had foreclosed.

[catzenmouse]

When I lived in Calgary in the early 80's people I know were taking out mortgages with up to 15% interest rates just to get a house. It was super booming at that time. 5 years later many of those people just walked away from the house because they couldn't pay the interest let alone the principle. We lucked out by selling our house for what we paid for it (I think we walked away with something like $500 or $1000 in hand) just at the beginning the fall.

I like to fix stuff so for me finding a decent house that needs some work has been the best way to go. Also keeps me busy and out from under foot .

Ken