Q: With the real-estate market in the toilet today, what are you seeing out in the trenches? Are builders cheapening up their product, taking...
Q: With the real-estate market in the toilet today, what are you seeing out in the trenches? Are builders cheapening up their product, taking shortcuts and so forth?
A: There’s not much room to “cheapen up” the product in the hypercompetitive and closely watched new construction market. It is fairly simple to compare one production builder’s offerings to another based on square footage, location, price and amenities, and buyers are actually pretty savvy about these things.
The market has forced a lot of builders to find different ways to move inventory. They sit on houses or throw in concessions in order to make deals happen. I am seeing upgrades galore. Free hardwood floors, air-conditioning, granite countertops, closing costs and so on are common.
Those with resale homes to sell will sit on their properties if they are not price flexible. Period. This is so different from the market of just five years ago, when people were getting in bidding wars and writing suck-up letters to sellers just for the “opportunity” to buy a house: “Please, please, please let us buy your overpriced home on beautiful Gun Play Avenue; we love it SO MUCH!”
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At the same time, landlords had to compete to pick through the diminished stock of sometimes less-than-stellar tenants through rent incentives, free cable TV and baked goods: “We would love to have you move in to our complex, Mr. Methhead. Please have another fresh scone.”
Now renters and sellers do the begging. It seems like karmic justice on a grand scale.
Interestingly, flippers are where I see the cheapening up. Many piled on to become a flipper in the gold-rush days only a year or two ago. But they had little experience and in some cases relatively little financial backing. When you buy at inflated competitive levels with little down, drop tens of thousands in improvements, the market tanks, you sit on the house for months and suddenly no one is buying, the numbers just don’t work. Then you get a short sale or a repo. A lot of these houses need to go away for $100,000 less than planned.
And these houses are the ones to beware of, with cosmetic beautification by amateurs on a budget with no permit, quite often with serious underlying problems that were ignored in the rush to market (foundation, for example).
Darrell Hay is a local home inspector and manages rental properties. Send e-mail to firstname.lastname@example.org. Sorry, no personal replies.