Appreciation for town homes in Rosemount? (Apple Valley, Stewart: second mortgage, real estate, insurance)

[xingyan]

While I was reading peebah's thread, 'Apple Valley/Rosemount bound...FT homebuyers', I think I have the same concern about the appreciation opportunity.

Basically, I am also going to re-sell the home in the next 5 years or so. Right now, I am really attracted by those new townhomes in Rosemount. With 210k I can have an 3 bed-room end unit with 1800sf (is that a reasonable deal??). Does anyone here know about the appreciation possibility for these new constructions? Does new house appreciate slower than an existing one? Does the large construction going on right now will lower its future value since there are too many similiar homes? What does the future picture look like for Rosemount, anything going on that would make the city a bit more desirable than others?? For example, new roads, new hospital or new shopping center??

[golfgal]

Right now the city has plans for revitalizing downtown, developing some land on the southeast side of town and adding a new sports complex on the northeast side of town, along with all the current development.

If I look into my crystal ball I can tell you what the housing prices are going to be in 5 years but it is in the shop. Seriously, if things continue as they have been you will see some appreciation in your home in 5 years, how much, who knows.

A couple job transfers ago we looked into buying a house in Rosemount and ended up getting transferred before we could do that but at that time the new construction 2 story houses were selling in the $150,000 ranges, these same houses today, 11 years later, are selling in the $400,000 range.

The general rule of thumb in a normal real estate market is that it takes about 5 years to get your money out of a house--recoup your closing costs, etc. In a good market that could take 6 months, in a bad market that could take 10 years.

[AVguy]

xingyan, I believe that your concerns about appreciation on newly constructed townhouses are not necessarily specific to Rosemount. Most outer suburbs are seeing significant townhouse construction due to an aging population that is looking to downsize, and also due to the fact that developers can make a lot of money building more housing units on less land. While I think that many empty nesters will continue to move out of larger homes in favor of smaller homes, I question whether appreciation will keep up with townhouses, as there are already so many townhouses on the market. In addition, it is generally difficult to get very much depreciation on newer housing because this newer housing (usually less than 10 years old) is usually surrounded by open plots of land ready to be developed. And why buy a five-year old townhouse when you can customize your own brand new townhouse? This sounds like the position that you are in now, and so you may want to consider the person who might buy your home in five years.

My bias tends to be away from townhouses if you can afford a house not belonging to an association. The money you put into monthly association dues is money that you could be putting into monthly mortgage payments. My calculation is that you can get $15,000 more house for each $100 you pay on association fees (assuming first and second mortgage rates average just over 7%). This means that, all else equal, you could afford a $250,000 house on the same money that you would spend on a $210,000 townhouse with a $200 monthly association fee. From a financial standpoint, given all the tax incentives for interest on mortgages and for property tax payments, it seems to make more sense to put as much money possible into your mortgages payments over association fees, which are not tax deductible. (I have to admit that I really do like upscale townhouses, but the sky-high association fees are a killer.)

Considering everything that I wrote above, there usually is not a bad decision to be made when buying a home if you can afford your home and you know what to expect. Even if your home does not appreciate in five years, you will come out ahead over renting because of tax incentives. No one knows what the market will look like in five years, but just know that your house does not need to appreciate greatly for you to feel confident in your purchase and feel comfortable with a good roof over your head.

Good luck!

[xingyan]

Sorry for being silent for quite a while, since I was busy with many other stuff. Now, finally be able to get back to my home searching....AVguy, thanks for your opinion. True, I agree with you that a single family generally appreciates more than a TH, and TH has association fee and all that. But I just think TH will fit my needs better since I don't want to deal with all the yard work and snow... Moreover, I almost don't know anything about a house, so I am a bit scared to buy a property for more than 10 yrs. Because I don't want to worry about changing the window or fixing the roof and stuff. However, I guess most of the houses at my price range are more than 10 years old. But I did add single family house to my search just in case if something good comes up.

golfgal, thank you so much for your input. I have one more question for you since you live in rosemount. How do you feel about area at the south of 42 and west of Hwy3? I was looking at something but I am not sure if that is a good neighborhood. It is close to Shnnon Parkway but not quite there yet, it is at the side of Chippendale, not those houses behind Cub. Is there a still ok area? I think you mentioned before that the ones behind Cub are pretty good, these are close, but they are on the other side of the road...

[golfgal]

I think I know what ones you mean and they are fine. That area in general is pretty good for townhomes. It is very much a first time homebuyers type neighborhood so there is a good mix of people from what I can tell driving/walking through the area. I work near there and we don't have any problems.

[Robert P Stewart]

Centex and Rottlund have some nice townhome developments in Rosemount. I've sold a few of those units over the past 6 months. Appreciation? Probably not spectacular - figure 2% per year over the next 5 years to be safe.

As for wanting maintenance free, I definitely have opinions on this topic. What many people don't realize is that the $150-$175 per month that you pay in association dues will buy A TON of maintenance on your single family home. $150 per month will cover your trash collection, yard mowing, snow plowing, will a little extra left over too! That's (relatively) care free single family livin'!

Now, there are some great reasons to have an association and pay association dues - but I'll get to those after I get the screaming 3 year olds downstairs and fed. Ah, being dad in the morning...

[Robert P Stewart]

OK - kids are fed and the world is good...

Associations can be a good thing.

True, you can pay for your own trash collection and yard work/snow removal - but it is sort of nice to have someone else handle it all. Additionally, many associations also cover hazard insurance and exterior maintenance - not to mention shared ammenities like a club house, pool, trails, etc.

And then there's the neighbors. Let's say your neighbor thinks it is perfectly acceptable to start a car repair business in the driveway - nope, not allowed. Major appliances in the backyard? Not allowed. Loud music after a certain hour? Not allowed. Painting his unit the colors of NASCAR? Not allowed.

In general associations go to great length to preserve the appearance (and value) of a development. Are many associations screwed up? Oh yeah. Can I think of any large organization that isn't a little screwy? No.

Hope this helps!

[golfgal]

Originally Posted by Robert P Stewart

OK - kids are fed and the world is good...

Associations can be a good thing.

True, you can pay for your own trash collection and yard work/snow removal - but it is sort of nice to have someone else handle it all. Additionally, many associations also cover hazard insurance and exterior maintenance - not to mention shared ammenities like a club house, pool, trails, etc.

And then there's the neighbors. Let's say your neighbor thinks it is perfectly acceptable to start a car repair business in the driveway - nope, not allowed. Major appliances in the backyard? Not allowed. Loud music after a certain hour? Not allowed. Painting his unit the colors of NASCAR? Not allowed.

In general associations go to great length to preserve the appearance (and value) of a development. Are many associations screwed up? Oh yeah. Can I think of any large organization that isn't a little screwy? No.

Hope this helps!

Just to clarify one point, associations usually cover STRUCTURE insurance on a condo/townhome but rarely cover personal property so if you live in a townhome or condo make sure you have personal property insurance for your belongings and any part of the structure you need to cover, if any. In our area condo insurance is dirt cheep, roughly $20/month depending on how much you have to insure. There are some other things you need to make sure you have with condo insurance like loss assessment coverage so make sure you talk to your insurance agent about these things.

[Robert P Stewart]

Golfgal, that's a really good point.

The insurance you mention is absolutely important, even for renters. I would extend that thought and mention title insurance as well - even for new construction. There is no such thing as an inexpensive title issue.

Robert

[xingyan]

Thanks a LOT, golfgal and Robert!!!!

I have looked at Rottlund's new construction in Rosemount. They look good, I prefer the 209k one but those won't be ready until the end of the year and I was hoping to move in sometime before August... So here is the timing issue here, also, I think other units are too close to each other (maybe try to save space)... one other thing I've been thinking about is they probably are going to have more than 400 units all together in the next couple year, this might affect the resell, I need to compete with those newer ones... I haven't decided yet, maybe I will get one of those if I didn't see other things I like...

Thank you for bringing up the insurance issue. Robert, isn't the title insurance is done at closing?? Or what it is for?? Do buyer have to purchase it??