Housing shortages coming to a city near you (Phoenix, Chandler: appliances, how much)

[jimj]

Originally Posted by TiredOfyycCold

Just curious....were you satisfied with the appraisal? Do you think it is approaching market value at least? Or is it way out of line with what houses in your neighborhood are selling for?

"Satisfied" is a word that I don't think applies here as there's too many variables to get there (hope this makes sense). What I do think is I'm ok with it at this point as it serves the purpose I was going for which was a refi to lower rates and dump PMI. Do I think it's out of line with others that are selling around me?
Not an easy question to answer given the mix of things selling and for sale. If you put it up against a short sale or bank owned then the appraisal is too high but if you put it up against all the new builds around us then it's too low. This house is only 6 years old btw and was only occupied for about 2 years before the original owner walked away.

The REO (of bank owned if you will) market has been held artificially low in my opinion, I think this is because the banks are/were insulated from the losses and so don't really have the motivation to get the most out of each sale.
I fully admit I bought this house cheap,cheap,cheap as I couldn't pass up this deal and certainly have benefitted from the bank's largesse. With that being said it's not "normal" to repeatedly sell something for less than it costs to make and there's no other industry that would survive doing that.

[MN-Born-n-Raised]

Originally Posted by jimj

"Satisfied" is a word that I don't think applies here as there's too many variables to get there (hope this makes sense). What I do think is I'm ok with it at this point as it serves the purpose I was going for which was a refi to lower rates and dump PMI. Do I think it's out of line with others that are selling around me?
Not an easy question to answer given the mix of things selling and for sale. If you put it up against a short sale or bank owned then the appraisal is too high but if you put it up against all the new builds around us then it's too low. This house is only 6 years old btw and was only occupied for about 2 years before the original owner walked away.

The REO (of bank owned if you will) market has been held artificially low in my opinion, I think this is because the banks are/were insulated from the losses and so don't really have the motivation to get the most out of each sale.
I fully admit I bought this house cheap,cheap,cheap as I couldn't pass up this deal and certainly have benefitted from the bank's largesse. With that being said it's not "normal" to repeatedly sell something for less than it costs to make and there's no other industry that would survive doing that.

Are you saying builders are losing money or that you cannot build a home for what it appraised for? If it is the later, a used home depreciates like anything else. So it should be appraised less than a brand new home under warranty.

[jimj]

Originally Posted by MN-Born-n-Raised

Are you saying builders are losing money or that you cannot build a home for what it appraised for? If it is the later, a used home depreciates like anything else. So it should be appraised less than a brand new home under warranty.

No, I don't think builders are losing money. Given the sqft cost (not including land) this house could not be rebuilt for even close to the appraisal of course depending on what you'd call close. As for depreciation, houses are not a depreciating asset since they do not have a useable life span. Things ON or IN a house can depreciate because they can/do have a useable life span like a roof for example.
The best description of why a house is not a D.A. is that if it was then it would (in theory) have to depreciate to land value only at some point. Warranty has nothing to do with this equation as anyone can buy a warranty not to mention new home warranties are only as good as the builder that's standing behind it or running away from it for that matter.

There's really no concrete explanation that I've heard to justify a $30-$50k swing in prices from a new home to an otherwise equal but used home other than "opinion".

[HX_Guy]

Given two nearly identical homes, but one being brand new and one being old, to me it makes sense that the new home would appraise for more. How much more is debatable I guess but I don't think you can argue that they should be worth the same.

Warranty aside, the older home is well, older. That means older plumbing, older AC, older windows, older energy efficiency standards and so fourth.

[Ponderosa]

Originally Posted by HX_Guy

Given two nearly identical homes, but one being brand new and one being old, to me it makes sense that the new home would appraise for more. How much more is debatable I guess but I don't think you can argue that they should be worth the same.

Warranty aside, the older home is well, older. That means older plumbing, older AC, older windows, older energy efficiency standards and so fourth.

Used homes can easily sell for more than new ones because of location, landscaping, lot desirability, decorating and other improvements. You are building a new house. Do you really think it is going to drop in value the day you move in? Not likely.

[HX_Guy]

But we are talking nearly identical homes, so same location, same lot size lets say. Wouldn't it make sense that the brand new one would be worth more, even if maybe even by just a bit?

[jimj]

Originally Posted by HX_Guy

But we are talking nearly identical homes, so same location, same lot size lets say. Wouldn't it make sense that the brand new one would be worth more, even if maybe even by just a bit?

If it were it'd be based on "feelings" of the buyer. First time buyers seem to love new homes while I think seasoned buyers are less discriminating when it comes to age and to some (many?) would be less likely to buy a new home due to the many things that can/do go wrong with new builds. I've bought a couple new builds and would personally steer away from 'em as they were more headaches than the "newness" was worth.

I could see maybe a bit if you wanted to take the new smell thing into account but $30-$50k+ more?

[HX_Guy]

I don't know, I wouldnt say simply becuase of feeling...again I would take used things into consideration. Used applicanes, used AC, used garage door, older plumbing, older roofing etc etc. As an exmple, if an AC system has a typical 20 year life span, and the house you buy is 10 years old...in 10 years you need to replace it vs if you buy new, you have 20 years. How much is that worth? I dont know, but it has to be worth something.

[asufan]

Originally Posted by jimj

As for depreciation, houses are not a depreciating asset since they do not have a useable life span. Things ON or IN a house can depreciate because they can/do have a useable life span like a roof for example.
The best description of why a house is not a D.A. is that if it was then it would (in theory) have to depreciate to land value only at some point.

Actually, it is an asset that can depreciate, and it does have a useful life. If you look on page 2 or 3 of your appraisal you will see a full cost analysis, including site value, building value, physical depreciation, site improvements, etc. And at the bottom they will estimate the remaining economic life. Obviously renovations/remodeling do extend the life, but houses do depreciate, its the value of the land that appreciates. Insurance companies also recognize depreciation in their cost analysis.

[MN-Born-n-Raised]

Originally Posted by Ponderosa

Used homes can easily sell for more than new ones because of location, landscaping, lot desirability, decorating and other improvements. You are building a new house. Do you really think it is going to drop in value the day you move in? Not likely.

The land appreciates, not the physical structure. Saying that, if material costs double overnight, the structure IS in fact worth more so inflation is part of the formula.

But as a rule, a 6 year old home is losing value just as a car loses value. Even if no one lived in the home after 6 years, styles change making it less valuable. Same thing if you let a car sit for 6 years. Additionally the shingles, windows, paint, etc are slowly wearing out just by being in the elements.