Dear Monty: My wife and I are very discouraged by the mainstream media’s continuing reports on record-high home prices. We have saved a 20% down payment by living frugally. Still, we are afraid the houses we can afford are shrinking in size and amenities. We are also concerned that we are in a housing bubble. Is this a good time to buy a home?
Monty’s Answer: Predicting the future is difficult. Let’s provide you with some options to consider. The mainstream media depends on several sources for data to prognosticate how the market will behave in the future. One source often quoted is CoreLogic, a company that gathers data, packages it and sells it. Media companies are one segment of their customer base.
INTERPRETATION
The most popular CoreLogic reports are overviews of the top 10 or 20 of our largest cities. The media choose these reports partly because higher inflation rates are more newsworthy than lower inflation rates. CoreLogic data also shows the disparity in home price growth across over 350 municipalities. They expect property values to decline in some areas. There are many sources where you can study the data. By doing so, you will know for yourself. Ensure that you are not making decisions based on incorrect assumptions.
CHANGE YOUR HOUSING GOALS
Investigate housing opportunities that are the opposite of what most people are seeking. Here are five out-of-the-box or unique possibilities that may not be experiencing double-digit inflation.
No. 1: Hidden or offbeat neighborhoods: In many communities, buyers often overlook some areas. There are a variety of reasons consumers may shy away from them. A poor school district, small neighborhoods tucked away off the beaten path, or an area recovering from decline will often have more attractive values.
No. 2: Adaptive reuse: These are buildings that were not constructed or utilized as single-family homes. You have probably walked or driven by them and not noticed some visionary converted the building to house their family. Churches, former grocery stores, small single-user office buildings, and even warehouses. These properties exist; one has to search them out.
No. 3: Buy a home no one wants: Every market has homes that expire unsold from the MLS, or the for-sale-by-owner takes it off the market. There are a variety of reasons houses fall into this category. Poor condition, undesirable neighborhood, and other reasons. They remain unsold. Time usually will convince the seller to adjust their reasoning. Seek out homes no one wants to buy; there are often good values if you will tackle the issue.
No. 4: Live in the country: It is not unusual to find better values in rural areas around metropolitan areas. They may be some distance out of town or just across a state line. Because there is less demand for rural housing, prices are often lower. The last time I looked, fewer than 10% of the home sales in my home city were rural.
No. 5: Buy a prefabricated kit home: There is a market for brand-new dwellings that come in a box. You need some construction experience or to know someone who does. You also need a lot and a foundation on which to assemble it. I suspect the “tiny homes” movement may have inspired this option. Several companies sell them online. Here is an example of a 2900 square foot, two-story, four-bedroom, three-bath home for $166,181.00.
Richard Montgomery is the author of “House Money: An Insider’s Secrets to Saving Thousands When You Buy or Sell a Home.” He advocates industry reform and offers readers unbiased real estate advice. Follow him on Twitter at @dearmonty, or at DearMonty.com
