There is a total shift happening in the market right now. I’m not sure if home prices are going to go down, but what I do see is a trend towards either retrofitting older houses with high efficiency standards, or demolishing old homes and building new.
The truth is, the cost to retrofit these outdated properties is usually a lot less than purchasing a house already equipped. Right now, the market is willing to pay an incredibly high premium for homes that already have the work done, which means that in order to get a good deal, you have to look for those houses that may need some work.
The bottom line is that if you want to find value in today’s market, you need to look for homes that the rest of the market doesn’t value as much – that’s where you’ll find the lowest prices. Why aren’t they valued as much? It’s usually because they have an old furnace or the roof is shot, or it’s because it’s in a weird location or just has outdated kitchen cabinets. The point is, sometimes the lower value is attributed to something serious, and other times it might be for something that is actually quite cheap/easy to fix or update. Regardless of the reason, these things can all be changed. Because we know that the market will pay a premium for a better furnace or more contemporary cabinets, if you instead take the time to plan, prepare, and educate yourself on the home remodeling or construction process, then you will be able to add that hidden value and increase the comfort and energy efficiency of your property.
Even though the market is really tight right now, there is still a lot of opportunity out there. I think that if you’re just purchasing a home for these reasons – to have a better roof, for example – then you’re probably paying a little too much. Prices have risen quite a bit in the last couple months, and homes are selling for more than they may be worth. I don’t have data to back this opinion up other than the extremely low inventory levels, but my gut instinct tells me that if you can build or remodel for less than what it costs to purchase an existing home with those amenities already intact, the better bet is to buy the fixer-upper because you’ll get more bang for your buck. If a savvy buyer sees the opportunity and is willing to put in the work, then he or she is certain to get a great deal.