For all those who think the end is nigh, I inclined to say: You're late. For the Real Estate market ended in 2008. The market as we knew it is dead and gone and is not likely to return. Oh, don't get me wrong, this country is as stupid as it is bankrupt, so dumb policies will return. Perhaps 15 to 20 years from now, some sort of bubble will occur again. Washington and Wall Street are driven by greed not conscience or actual interest in doing the right thing.
But in the meantime we have foreclosures out the wazoo, banks that do not want to lend (despite their advertisements to the contrary) and a moribund economy that is sinking for all but the top 2% of earners. Things are great for Bill, Warren and the Donald, but for most others the going is getting rougher. Real wages have been declining for 30 years in America. No one seems to care or has even noticed. Few people realize the government now reports "household income" as opposed to average income, like it did back when I was young. Why, because household income covers the real truth, with a fiction. Sure income looks good, in comparison to the past, but it is with two earners, not one. So in reality it is half of what it would be, if still reported the old way.
I am not a Democrat, nor am I liberal. But I am not a fool and see what few others care to look at. In a country more worried about Brittany Spears or some rapper or sports star, we get the shaft from big corporations, banks and government. It was said by someone far wiser than me: People get the government they deserve.
We deserve what we get, because no one cares and no one is watching. If the herd (by that I mean the average idiot) was as concerned with the voting record of their congressman as they are the next Monday night football game, maybe we would have good government. Until then, expect NO real changes in Washington.
I am not a Republican either, so I am not defending either side. Both are despicable, in my mind. The left has lost their mind and the right has lost their common sense. I wish we could have a 3rd party, a middle of the road party. But don't hold your breath. The Tea party is not middle of the road, they don't know what they want. They define themselves by what they are against.
Well, enough about politics. People, who know me, know that I never really discuss politics, so this rant is not my norm. (The beauty of a blog, I can spout off all I want). But, back to my real reason for this blog, which is defined as a real estate related blog.
What does this all mean for REAL ESTATE?
Well, for one thing, house prices are not going to rise at anywhere near recent rates seen during the boom. Except is a few select markets, the rise will be very slow if at all, for some time. This is for four reasons.
- Foreclosures inhibit prices and there are still millions of them that have to be sold for their effect to end.
- Banks do not want to lend and policies now in place have greatly changed who qualifies in terms of credit rating and income ratios.
- This is NOT a country of savers and with $4.00 gas, who can save up the down payments now required?
- Demand is blunted also by the fact that people upside down in their homes have little desire to move up or downsize and take that beating in real (as opposed to paper) dollars.
- The economy. People who can buy, are afraid to take the plunge.
Some economists and analysts still say further drops in prices are possible (or even likely) in many markets. This scares potential buyers, with good cause. I personally think further drops are likely in some areas and within any city, in some neighborhoods. Homes are still being foreclosed at high rates and this can only prolong the agony.
So if you want to buy, be careful, look at the market, and particularly, the area. Don't buy more than you can afford, the market rising will not buy you out at a profit, like it might have 4 years ago.
Buy a well built home, many pieces of shit were thrown up during the boom years. 80's houses are the absolute worst.
Seriously look at the homes energy costs. Cheap electricity and gas rates are going fast. Huge energy hogs with low efficiency furnaces and a/c units, single pane windows and poor insulation are to be avoided. Replacing windows and complete HVAC systems is expensive and the payback is not there yet. Besides old homes can never be really properly insulated unless you are gutting it for a major rehab anyway.
Look at the long term trend for your city. Is it destined to decline? If so, rent. Better yet move to city that has better long term prospects and rent until you know the area.
I am from Syracuse, NY originally, where real estate never took off during the boom. In fact it went backwards since the mid 80's. Why? The city lost jobs and population. You cannot sell in a shrinking market. Homes there sell for 40 percent of their high in the early 80's. Again, even there some areas held up well and did not decline, but never rose as well as other areas of the country.
Don't buy something only because it is cheap. What you do not know will hurt you, as the whole country found out. If you find something that is almost free (relatively speaking) should you buy it? That depends, on the city, the neighborhood, the home itself and your financial situation and life situation. Owning a money pit never helped anyone, so look before you leap. If the home needs repairs and you can do them yourself and have the cash to buy the needed supplies, then go ahead if the area is ok.
I have seen many homes that are now valueless here in Atlanta. Foreclosures that copper thieves have damaged so bad the cost of repair exceeds the value of the home if repaired. The average price is less than 10 grand here in 3 different zip codes here, according to recent newspaper story. You might have to sleep with a 12 gauge under the sheets, but they are out there.
Is the price right? Not for me, but maybe you like life on the edge! As a home inspector, I am not supposed to influence your decision just report facts.
That is what I do and have been doing for some time. Never buy a home without a good inspection by an inspector who has not performed at least 400 inspections. I have inspected over 3000 homes and I can tell you that it took that many for the learning curve to start leveling off. Even now I still occasionally see something weird that I have never seen before. I love this because I get to learn something new. But I also would have missed some things if I did not have the vast experience of seeing so many screwed up things. Defects do not always jump out and shake your hand, and crooked sellers are still out there, artfully hiding them, more than ever.
People forced to sell at a loss have often foregone routine maintenance and have hidden defects that they are hoping your inspector will miss. And about 40% of them will. I once found over $40,000 (my estimate) in hidden damage on a stucco home. The seller was a crooked realtor. The eventual buyer paid over $62,000 for repairs. I know because the later buyer (I advised mine to walk) hired me to testify against his dumb inspector.
Ironically, I get calls all the time from buyers looking for a cheap inspector. Some fools just never learn.
I am a middle of the road inspector in terms of my fees, not even near the most expensive here in Atlanta. The highest priced ones are often not as good as I am, but like all endeavors in American business, he who advertises the most often gets a reputation that belies the truth.
Lastly, about inspectors; don't assume an engineer is a better inspector than one who isn't. I know several and have gone with them and seen them in the field. The old saying; "Can't see the forest for the trees" comes to mind.
Until the next one…