11/15/2019 by Ray Wiese 0 Comments
Home Value: Where to find the best return on your lifestyle
Myth 1: Housing is overvalued. I read a very interesting article in Trulia.com “Bubble Watch” which is about real estate price indexes and where the value (or bubble) is relative to historical prices, incomes and rents. Trulia’s Economist was able find a very reliable algorithm that shows the historic and current conditions that can aid in understanding real estate valuation trends.
I was surprised that nationally, real estate is about 4% undervalued and Americans are already worried about the next bubble because prices have rebounded so well with real estate lately. The important take away other than the obvious historic rise and fall is that real estate is a very important part of our economy, our life, and also an investment that appreciates like any LONG TERM INVESTMENT. You can find that article here.
Myth 2: We won’t be here long. According to a survey on Zillow.com, males consistently view the short term in real estate purchases, and females had a long term vision on staying in one place, which certainly adds fuel to the argument between the sexes and improving the current home. In this survey, other differences had shifts such as the importance of commute, locality of entertainment or shopping- but the strongest agreement was that men and women wanted a good school system.
So why do I often hear “we don’t want to over improve, we may be here less than 5 years”? I think this communicated time-frame is an attempt to find a happy medium, if he says less than 5 years and she says more than 5 years, or it’s a way to say “please don’t spend our money poorly”. But the fact is that the mean – 47% of Americans (according to recent information provided by the National Association of Home Builders) stay in their homes for 15 years. So most of us do stay put a lot longer than that 5 year mark.
Myth 3: My renovation should be scaled to recover my full investment. If someone calls and says they want to remodel their kitchen- but not too nice because they are moving in 3 years, I tell them to skip it. Developers would never buy a home, put in a new kitchen and try and flip that for a profit- why would you? An average kitchen renovation in your neighborhood will net a 75% return on average- so if your neighborhood does $100,000 kitchens, you may want to be there long enough to enjoy the $25k cost of enjoyment. Of course that number fluctuates, but knowing the cost of enjoying your home more should put things in perspective and keep you from making mistakes based on trying to make money on your real estate short term.
If you embark on a poorly designed and constructed home renovation, and end up in your home for more than 5 years- you either get to enjoy the disappointment longer or invest even more in another renovation. Here are some pictures of a kitchen we are almost done with- showing mistakes made about 20 years ago, like unnecessary soffits, make for a bad kitchen renovation. Keep in mind that most of our projects involve renovating spaces at least twice that old. Follow us on Facebook to see this kitchen complete in about 2 weeks!
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