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I am trying to figure out what's better for resale, what will hold its value better. Can y'all help?
Would you rather buy a 2,000 sq foot house built in 1960 that has been renovated (new kitchen, baths, electric, plumbing, roof, etc.) in a 5-star neighborhood,
OR,
Would you rather buy a NEW house in a 4-star (or even 3-star) neighborhood?
I used to think that 5-star and old was better. But that is not what I am seeing going under contract in my area (most sales are for newer construction). It seems that people are willing to settle for less neighborhood if they can get a new house (something newer than say, 2005). So I am not sure that buying an older house is a good idea anymore.......
I am trying to figure out what's better for resale, what will hold its value better. Can y'all help?
Would you rather buy a 2,000 sq foot house built in 1960 that has been renovated (new kitchen, baths, electric, plumbing, roof, etc.) in a 5-star neighborhood,
OR,
Would you rather buy a NEW house in a 4-star (or even 3-star) neighborhood?
I used to think that 5-star and old was better. But that is not what I am seeing going under contract in my area (most sales are for newer construction). It seems that people are willing to settle for less neighborhood if they can get a new house (something newer than say, 2005). So I am not sure that buying an older house is a good idea anymore.......
Think again. Not everyone wants a new house in a subpar subdivision if they could get something that needs a little TLC in a better neighborhood. Generally the older neighborhoods are closer to major cities and they will appreciate in value, especially well-established neighborhoods, whereas some of these new subdivisions could go either way and I have seen this happen. I have seen formerly "desirable" subdivisions turn into dumps in the space of 10 years. Personally I would rather have a 3-star house in a 5-star neighborhood than a 5-star house in a 3-star neighborhood.
If by "resale" you mean 10+ years out, my bet would be to ignore everything except proximity to transit and energy efficiency.
With homebuilding technology set to make a sea change soon, even today's "new" house will be outdated in 10+ years. Look at things that won't change, but will increase in value-- walking distance to a train, subway or bus. Walls thick enough to keep house climate controlled before you turn on the heat/ac (or walls that can be upgraded with blown in insulation). Is the yard conducive to geothermal? Is the roof conducive to solar? Are there amenities nearby that aren't going anywhere, no matter what the economy does?
I know this sounds a bit tree-hugger, tinfoil hat, but that's what I'm guessing.
Keep in mind, 10+ years out there will also be an ARMY of baby boomers downsizing and selling or dying. Depending on when you think you're going to sell, you're going to have a LOT of competition.
Regardless of time-frame in residential real estate the #1 factor is ALWAYS location.
The current situation, with the market distorted by the soon to expire first time buyers credit, may make it seem like the newer houses in lesser areas are selling in greater numbers / more quickly BUT when those buyers end up needing / wanting to sell they are going to learn the very hard lessons that many first time buyers get rudely awakened to: their "new house" is no longer the "latest" and if their neighborhood was never the "greatest" they are NOT going to get the kind of price that top flight areas command.
The sellers in "newer" areas often look to move up to better areas, as do relocation folks, and of course the smartest buyers entering the market. That will NEVER change.
While I somewhat agree with other points above, the fact is energy efficiency has been on the radar of builders for 30+ years, sometimes it also works its way into the minds of buyers, but more often it is way down the list of priorities. Even if we anticipate a further move to the "think globally, act locally" mindset (which for a variety of reasons seems uncertain at best...) there will always be some people buying older homes -- and math says those older homes will make up a larger percentage of sales. Just as right now, even in the warmest climates you can purchase a home that does not have central air, I suspect that unless there is radical worldwide shift in the laws relating to the transfer of real estate all kinds of 'upgradeable' homes will always be sellable in desirable areas.
Finally I have, in 20+ years of being involved in real estate, never been unsurprised by the quantity or kind of buyers that are present in the marketplace -- things ALWAYS shift in largely unpredictable ways. Only in hindsight do these shifts make sense. Some immigrant groups have cultural differences that hold them back from buying real estate until a fairly mature point in their life, while other folks want to own real estate as young as they can. Some boomers have no desire to move as they age and some want nothing more than to be free of home ownership. Financial factors are similarly wholly unpredictable -- if even 14 months ago someone would have asked me to predict the odds of mortgages being widely available under 5% I would have put that at the very far end of unlikely. There is simply no way to know how those factors will evolve over the next decade...
It seems that people are willing to settle for less neighborhood if they can get a new house (something newer than say, 2005). So I am not sure that buying an older house is a good idea anymore.......
What do you care what other people are willing to settle for? What do you want?
I like location, my wife likes new. We bought a 20 year old house in a good location that we are updating now, although she notices all the things an old house has...creaks, clunks, etc. I think she still would like a new house, but really is loving the location. I think she is now torn, where before she just really wanted new. In the end, I go location.
What do I want? I want to NOT make a $400,000 mistake! That's what I want!
In my area, from what I glean from sold comps over the past year, it seems that Buyer A is more willing to spend 450k on a newer house in an okay neighborhood, than 400k on a fixer upper old home in the best neighborhood. That is what I am seeing. My question is, are other realtors seeing this in other states/cities?
FYI by "old" I mean a house that is 50 years old or older.
I agree with Chet, the fixer upper/renovated home on the best street is the safest bet. And that's always been the common wisdom. I wanna know whether that's changing.
I am also hearing of a lot of buyers who are wary of RENOVATED old homes, because many buyers think that these repairs were done cheaply in the boom for flipping purposes. So Buyer A would rather go for brand new in 3 star street than renovated who-knows-how-well in a 5 star street.
Personally, I'm much happier in an older house in an established neighborhood, despite the fact that the house is small and lacks all the bells and whistles of new. Some buyers, particularly young ones, may fear maintenance expenses and prefer new and pristine, and they seem to be the ones buying right now. They may not have the experience to understand that the downside of a new community is a lack of neighborhood history. Knowledge is power. With older homes, you usually have the opportunity to research your new neighbors and community. It's not fool-proof, but at least you're not going in completely blind.
Good point. Lots of the buyers now are allegedly first-timers (young, I assume). Although I have yet to see anyone provide stats to back this up. I might have missed it.
Of my friends who own homes the ones who have the most woe and expense associated with homeownership are the ones who bought newer construction. The ones who have had trouble selling were also the ones in newer construction because they lived so far away from the city. Do with that information what you will!
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