Down the street from us a new subdivision went in at the peak of the housing bubble. They were clearly high end homes aimed at the influx coming from California, and ranged from 1.3M to 1.8M. (Two-story and about 6000 sq.ft. with a huge basement.) Only a couple of them sold back then. The developer went belly up and many of the homes sat unfinished for over a year before they were completed. I saw one of the first ones that sold listed on Forclosure.com for $350K. Even if that was one of the low-end homes, that is quite a loss.

Without all the bubble buyers there just aren't many buyers left. Going from NINJA 100%+ LTV loans back to traditional loan qualifications, especially in this economic context, probably takes half or more of bubble-era buyers out of the market.

1: determine the median income for your area
2: multiply it by 2.5 to 3.5
3: that is what the house is "worth", though it may end up dipping below that as an 'overcorrection'

the 3x income rule was valid at a normalized mortgage rate of 7.5%. A better way to value is, find out what a comparable house can rent for in market and capitalize the income at a market rent.

In utah being a tertiary market, I'd say maybe a 8% annual cash return. So if a house rents for 2,000K a month Id say goes for 300K.

There is incredible price compression here. For example, one of the new homes showcased in our annual Parade of Homes was 1800 sq.ft. with a small master “suite”, 3 tiny bedrooms, 2 baths total, and a combined kitchen/dining/family room. Location was nothing special. Price was $247K.

This home in foreclosure is certainly a much more upscale home over 3 times the size with “architectural” features made possible by its original hefty price tag. Now it is just 100K more?

There are some incredible deals out there, which may be why the sales seem to be picking up.

It cost way more than 300k to build a 6000 sq ft house. Plumbing, hvac and electrical will run you 120k for that size. Unless you hire unlicensed contractors. These ridiculously undervalued homes will be bought and you'll never see these prices again. Commodities are in a permanent bull market due to demand issues. Good luck building a 6000 sw ft house for
300k.

I'm a general contractor btw.

No real deals in my Houston area for newer homes. I am fighting with the appraisal board every year to reduce the appraisal value/taxes. They claim that prices did not go down a single year since 2007. I decided to look why they claim it and find out that we have a lot of very stubborn homeowners in our area.

One house in particular was on sale since April 2009, got NINE! price changes and still was not sold, hence appraisal board cannot use it sale value (because it was never sold). My arguments that ZIllow shows value fell of deaf ears in the last two years. Frustrated.

Laswyguy

rents will go down if the cost of gas and electricity food continue to go up

incomes are always a good measure as Otiswild said

I could buy an identical condo to mine (though I don't know its interior condition re upgrades), a foreclosure for a bank asking price about 30% less than the one I bought less than a year ago. I wouldn't care since I planned to stay here forever but a recent issue has come up with my university which might mean moving on. I hope not. I would hate giving up this weather.

Quote:

It cost way more than 300k to build a 6000 sq ft house. Plumbing, hvac and electrical will run you 120k for that size. Unless you hire unlicensed contractors. These ridiculously undervalued homes will be bought and you'll never see these prices again. Commodities are in a permanent bull market due to demand issues. Good luck building a 6000 sw ft house for
300k.

I'm a general contractor btw.

Just bought a 5500 sq/ft. house in OR. New in 2007. never occupied, for $370,000. Had to add 2 A/C units and some minor stuff (knobs and hardware). Call it $385,000. I don't think it could be rebuilt for the same money.

Hehe...

Seems I heard this argument about undervalued houses right here.....2+ years and 100k ago.

Gen-

I agree with you (in general). My plan was to wait until 2013 to buy. Houses in this area go for around $165/sq/ft. This home even with upgrades is less than $75/aq/ft. Plus, I'm saving the $40,000 in rent that I would be paying while waiting for the prices to fall.

yeah Karl,
I also remember those same people saying that CS wouldn't show a double dip too

Yep.

Price != value.

What the hell do you want the 6000 sq ft home for? In a few years that tax bill will be unbearable. As soon as they get a comparable house sold for $800k or so.

Buy it to flip it in a couple of years yes. Even then I'd put 5% down and get a non recourse loan.

I can relate, small "plots" of land with a existing(mobile Home), with-in a few hundred yards of the Waterfront of the ICW are goin @ 20K..
(yes; I WANT one)...

I'd be more concerned about utility bills than property taxes on something that big.

I'd worry about someone buying the 6000 sw house and chopping it up into 10-15 ****ty rental units for sec8 ghetto rats. This sort of thing happened frequently on the south side of Chicago during the White Flight.