Do Your Market Research
I read the a question and answer in the Everett Herald about researching the market before buying a home, and I couldn't help but feel that the columnist's advice was a little lacking.
Question: I'm attempting to research the housing market, but I don't want to even think about buying for at least a year because I am committed to a one-year lease. How can I efficiently do the research without a real estate agent? I assume most agents would not be interested in working with a client who will not be buying a home for at least a year. I've attended numerous Sunday open houses, but I feel I may be missing valuable properties.Since the reader apparently isn't in a hurry to buy a house, shouldn't they also spend some time researching whether it is a good time to buy into the market at all? The columnist admits that "the market may be slower by next year," but they fail to address any type of market trend research.
B.G., Bellevue
Answer: You are wise to get to know the local housing market before you make an offer on a house. In real estate, as in most areas of life, knowledge is power. You will not be able to recognize a good deal until you have done your homework.
You are on the right track. At this point in your search, Sunday open houses are the best way to research the market. You should also read the home sale ads in the newspaper every week. After a few weeks of touring homes and scanning ads, you should get to the point where you can drive up to a home and guess its price within $10,000 before setting foot inside.
When you can do that on a consistent basis, you will know that you have a good feel for the market value of homes in your area.
Once you know what a home is likely to sell for, you can quickly recognize a bargain when you see one.
How would you answer B.G. in Bellevue? What kind of research should he be doing to find out for himself whether it really is a good time to buy or if he'd be financially better off renting for a while longer?
(Steve Tytler, Everett Herald, 05.21.2006)
9 comments:
I'm back... went on a nice memorial weekend trip...
But back to topic, the author didn't mention a lot of things... no mention of internet based searches like zillow or ziprealty where you can track home price trends and DOM/reductions...
It's obvious the author treated the reader just like a RE agent would... if you're not buying soon, you're not worth my full attention...
The market is getting interesting... that's all my research is telling me so far...
The thing that strikes me is the premise that looking at a bunch of open houses and getting a feel for what you get for their asking price somehow translates into "educating you". When everyone is greedy and pricing their houses high it's like trying to learn morality from a crook.
When you get a bunch of people buying houses this way, that is what causes a bubble. The process is made even worse when the people buying this way are flippers rather than longer term residents, since it's easier to justify overpaying when, regardless of what you pay, you just mark it up 10-15%. This works well as long as you don't run out of suckers.
The issues with flipping are probably worst in the hottest markets such as Fla, Calif, Phoenix etc and in those markets probably worse in condos than homes. But just in the last two weeks I've run into no less than 4 people who where either already working on a flip house in this area or actively looking for one. This compels me to ask poeple on this blog about how much evidence they see here in the greater Seattle area of flipping - ie, how much of our price run up has been caused by flippers? Personally, I think it's less than the hottest markets but now on the rise and well above the levels that most people think!
This compels me to ask poeple on this blog about how much evidence they see here in the greater Seattle area of flipping - ie, how much of our price run up has been caused by flippers?"
I saw a couple of houses on my street in Lake Hills the last year or so that went up for sale, then sold, then had some remodeling work done, then sold again. They did sit on the market for a while the second time, and one over-ambitious flipper had to lower his price several times to get it to sell, but it did sell. Houses now on the street are going up for over $100k above the Zillow estimate, including the house directly across from the ambitious flipper. I actually laughed aloud when I saw their price, but it looks like it may have sold, much to my surprise.
As he's got a year before he wants to buy, BG is in a great position to research.
Step 1) get a Zip Realty account (www.ziprealty.com). Check the zip(s) that interest you on a daily or so basis.
Keep track on a stickies note thingy right on your computer where you have written the date, the number of properties and the number of price reductions.
Step 2) Interview several realtors. Do this with an eye to finding out who will be truthful and represent your interests well when the time comes to buy.
I just got back from a talk with a realtor. I walked in off the street, no appointment.
I asked questions like:
-how's the market between this year and last?
-Where do you think this market is going?
-How many people took out ARM's in this area?
-Do you think we're heading for a lot of foreclosures?
I was very honest with him as to what I thought about the market and what I was looking for.
He was honest and not hyping the market mindlessly.
He allowed for the possibilty that it may be tanking.
I've talked to several realtors in this way over the past few months.
He is only the 2nd one who gave me what I felt were honest answers.
So interview realtors. There are some good ones out there but they are FEW and far between.
Any realtor who is all rosy about this market right now should be a real red flag to you.
About the flipping. the realtor I just spoke with told me there was a LOT of flipping going on.
I didn't ask for percentages. This guy was so honest I almost felt guilty getting the answers at all.
Since flipping is such a good sign of a market that could fold, I guess I really expected him to say, "Yes, there's some of that, but not much".
What kind of research (besides reading the sunday home section)?
Well let's see...
>Lending rate trends
>Different mortgage types and risks
>Housing supply trends
>Builder's stocks
>Historical housing appreciation
>Housing affordability rates
>Researching quality of various builders, common housing issues, etc.
>Natural hazards of neighborhoods to flooding, earthquakes, lahars
>And anything else useful that a realtor won't tell you (and I undoubtedly missed)
I'll try to post a link to a rather funny article that does, in fact, list some of the problems that BG may want to research before buying.
the title of the article is"Cutting Edge Secrets to Buying Real Estate at 30%-50% Above Market Value".
well, i tried and tried but kept getting te mesage that the tag was broken so here's the address:
"http://www.oftwominds.com/blogmay06/RE-ad.html
Lurking here and other blogs a long time. First time poster.
I have been researching too. Actually put in a bid last spring on a house in Bonney Lake and backed out.
I looked at this one in my neighborhood (where I rent for $1125) last spring. It sold in August 2005 for $261000. Less than 1 year later selling again for $100005 dollars more....
http://www.windermere.com/index.cfm?fuseaction=Listing.ListingDetail&ListingID=7168875
Good luck on that sale!
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