Last weekend I was touring some homes with a new client and he seemed awfully dejected at what $600,000 could buy. I know what he means. I just kept thinking to myself that some of these sellers were either really too out of it to realize how bad their place looked or they just didn’t have the right agent with the guts to tell them they needed to drop the price.
A couple of places had crazy layouts with bad color schemes and poor workmanship in much of the updates that had been completed. My client kept commenting that after a couple of houses he would know there were problems when he kept hearing me go “hmph” several times in a row or I’d comment “interesting” as I walked through the home or even “whoa”.
Now, I know from looking at houses pretty much every day there are plenty of good properties still out there. My comments to this client after we were finished with our tour centered around reminding him that he’d asked me to show him houses that “needed work”.
His main criteria for a purchase was its long term investment value but I had to temper that a little too by telling him that while we are still #1 in the country right now for appreciation we have softened down from being in the double digits (12-35% annually) to the high single digits (6-9%). Granted, that would mean a $600,000 house would be worth (at 7% annual growth for 3 years) around $735,000 a few years later and that’s not including any updates, and the increased appreciation for them, that he might put in.
I’m pretty sure he wouldn’t get that kind of return on his money in the stock market – but maybe he’d get lucky and pick a Google of a stock.
