EXCELSIOR RELOCATION
 
BUYING A HOME – CAUTION : Why other price ranges negatively affect your investment
For most people, the goal is to find a property that meets their wants and needs. With the optimism that the property will at a minimum hold it value of the coming years. Ideally you and your agent review this data BEFORE you find a home and fall in love.
KEY ITEMS TO UNDERSTAND THE FUTURE MARKET – Tip # 1
Let’s start with a hypothetical purchase price of $400,000. If that were your price point you are shopping for a home, you may think the $500,000 market has much relevance.
HOW THE $500,000 MARKET AFFECTS THE $400,000 PRICE POINT 
The homes in the 500k point have more features and are clearly superior properties. Here is the potential problem. If the upper market is currently experiencing an oversupply of inventory it will most likely see prices depreciating. When this occurs you may experience the 500k homes dropping into the competition of the 400k homes. When this occurs it will be cause the 400k homes to obtain mild appreciation of possibly 1% annually or even depreciation.
Most buyers (and agents) look for closed sales or comps using square footage to determine value. Rarely are agents looking at future market value. While the agent cannot control the market, you the buyer could be asking a few simple questions to gain insight to negative trends.
DATA TO GATHER FOR YOUR PRICE POINT
1. How many homes are for sale in your price point?
2. How many are under contract in your price point?
3. Did at least half sell in less than 30 days?
4. Are the homes appreciating or depreciating? *
* Not what Zillow indicates. Rather look at the history of sales of homes in this price point.
Let’s say there were 10 for sale and 1 under contract. And only 15% are selling in less than 30 days.
There is a high probability that these homes are experiencing mild depreciation. Yes they are going down in value, despite the school district or the wonderful city the homes are in. Clearly, there is an oversupply of sellers, who are overpriced, but reluctant to accept that fact.
Let’s say there were 10 for sale, yet this time there are 12 under contract. And 45% selling in less than 30 days.
With more under contract than are for sale, the market may be obtaining 2-3% appreciation.
 
DATA TO GATHER AT THE NEXT PRICE POINT 
In this case, let’s say the next price point is 500k. And that there are 15 for sale and only 1 under contract. And that this has been the trend the past two years. This market is probably trickling down. With the oversupply in that price point, there is a high probability of some substantial price shifting.
This is not theory. There will usually be evidence of this if a brief study is done of properties at the next tier level, in this case 500k homes. Let’s review their “days on market”, the supply and demand, and ROI. The ROI is “the return on investment”. If the ROI is negative in the price point above your purchase price range, there is the probability that homes in that upper price point could be in your price point in the coming months.
1. How many homes are for sale in the UPPER price point?
2. How many are under contract in the UPPER price point?
3. Did at least half sell in less than 30 days?
4. Is the ROI appreciating or depreciating?
IS IT SAFE TO BUY?
Probably yes. However, we are do for a market correction. It is wise to gather the data. You can still purchase wherever you desire, the goal is to be aware about resale ramifications.
A FINAL WORD
There are several indicators regarding trends. Are there new industries moving into the area? Are there new construction subdivisions nearby? How is the employment rate in this area? How is the momentum in the “move up market?” We actually view many more factors.
In reality, most buyers priority seems to be 90% buying what they want, and 10% about resale concern. Perhaps lower. That is all fine and well, until it is time to sell. At that point sellers often feel they should receive considerable appreciation based on their market growth and improvements.
Let’s buy wisely.
                 QUESTIONS FOR YOUR BUYER’S AGENT
DATA TO GATHER FOR YOUR PRICE POINT
1. How many homes are for sale in your price point?
2. How many are under contract in your price point?
3. Did at least half sell in less than 30 days?
4. Are the homes appreciating or depreciating? *
* Not what Zillow indicates. Rather look at the history of sales of homes in this price point.
5. Ideally the actual “comp data” includes homes that have closed in the last 12 months, failed listings or expireds in the last 12 months, and current properties under contract.
DATA TO GATHER AT THE NEXT PRICE POINT 
1. How many homes are for sale in the UPPER price point?
2. How many are under contract in the UPPER price point?
3. Did at least half sell in less than 30 days?
4. Is the ROI appreciating or depreciating?


The agent is to provide these CMA single line reports via email to you. That way they can be shared if necessary.