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     | Wednesday, January 05, 2000 - 06:27 am  Hi Christine, I really enjoy your site, and learn alot from it. I have a question about your last post...why are new homes usually a bad investment? I guess I can see why a car would be, but why a house? Thanks.
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| | Wednesday, January 05, 2000 - 09:02 am There are many reasons, I'll try to sum it up here. 1) As soon as somebody has moved in, it's *used* and the resale value drops immediately. 2) In areas with plenty of buildable land, there will always be other new developments, hurting the resale value of the *used* homes. San Francisco is an example with a very limited supply of land, so that's an exception. 3) Personally, I'd rather live in a home that's been there 20 or 30 years. I'm aware of many law suits in new developments due to poor workmanship and houses sinking into the ground. 4) I've looked at new homes for $450K+ on the San Francisco Peninsula with medium to low quality dishwashers and stoves. The model homes were decorated very attractively, and most buyers just go for the glitz. 5) Building quality in general is often lower than it was 20 years ago. Builders even started using 2x2s instead of 2x4s. 6) Builders usually have a "preferred" finance company they recommend. Often they offer incentives to use that company. This builder-lender relationship leaves the buyer with hardly any way out once the contract is signed. They're "dealmakers" and I have had to go through some incredible efforts to get my clients out of those deals. 7) When you're one of the first buyers in a development, you don't know who your neighbors will be. You don't have any mature trees (shade) and you'll get to eat a lot of construction dust. A couple of tips if you are going for the new home: a) Don't sign in with your real name when you first look at the models. The builders usually won't pay a real estate commission to your agent if you do. The models must be shown by the agent. b) Do you REASEARCH on the builder. Some of the largest Bay Area developers have a reputation for shoddy work. c) Insist on a home inspection. While you might think that there could be nothing wrong with a new home, guess again! Government building inspections are VERY limited. Of course all this pertains to tract homes. If I'd build a new home, I'd use 2x6s and top quality materials and appliances. But over and over I've seen the much better deals in *used* homes. People have a thing for new houses just like for new cars. In most cases, they are not good investments. But they shine and sparkle. And builders and their preferred lenders make it easy to get in. Christine
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| | Sunday, January 16, 2000 - 05:33 am I believe Christine is correct. If you live in an area that is a sellers' market, you will find the prices on new homes or fixer-uppers about the only thing that is affordable. Here in Denver, if you want to buy a new home, at each new community, there are lotteries held every week and you get to see if you get a lot before you can even sign a contract. Yes, you are at the mercy of the builder, as well. New homes will start at a base price and every month go up $5K-$10K. It is unbelievable. The average price for a home here is about $220K and salaries are not in line with those prices. My husband and I make $80K which is OK for here and we can only get approved for $160K because we both have car notes. Homes on an average are going up $40K per year. Small homes (1,000 sq. ft or less) in my area are going for $150K. We're thinking about buying a condo or townhome now and waiting the wave out because rent is escalating just as fast. Ideas???
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| | Sunday, January 16, 2000 - 11:37 am Well, I have to say that I really don't have any advice. I myself got became a stuckee when I bought my last house in the San Francisco area in 88. Every year houses went up $50K+ until I went to sell that house in 90. Had to wait till 98 to finally get my money back on that property. I really don't like condos/townhouses either. There should be some postings on that subject in the old forum. But it depends on YOUR market, YOUR rents, and YOUR likes and dislikes.
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| | Wednesday, January 19, 2000 - 08:05 am >> 1) As soon as somebody has moved in, it's *used* and >> the resale value drops immediately. Spoke with a friend's real estate agent. He disagreed with this in all but the worst of areas. >> 2) In areas with plenty of buildable land, there will always be other new developments, >> hurting the resale value of the *used* homes. This can be true, initially. But after a few years, the area builds up. No more space to build new homes. But, yes, this can affect used home prices. >> 3) Personally, I'd rather live in a home that's been there 20 or 30 years. I'm aware of many law >> suits in new developments due to poor workmanship and houses sinking into the ground. Know your builder (your tip is good). Know the area. And have a good attorney! :) >> 4) I've looked at new homes for $450K+ on the San Francisco Peninsula with medium to >> low quality dishwashers and stoves. If you're spending $450K on a new home, only an idiot would NOT spend an extra $400 to upgrade to the top of the line stove & dishwasher (or purchase their own). >> 5) Building quality in general is often lower than it was 20 years ago. Builders even started >> using 2x2s instead of 2x4s. Depending on the application, this would be an absolute violation of local building codes. The house would never receive it's COA, so I'd disagree with this in any case other than ornamental applications. >> 6) Builders usually have a "preferred" finance company they recommend. Often they offer >> incentives to use that company. Pick up the phone book. Call your own lender or broker. Our builder had "preferred lenders", but I got a great deal from our (own choice of a) lender without any issues or without missing any perks or incentives for NOT going with a preferred lender (anyone can haggle a broker or lender to get him to drop a loan origination fee or a quarter/half point or percentage). >> This builder-lender relationship leaves the buyer with hardly any way out once the >> contract is signed. That's the purpose of a contract. If they just built with their own money and hoped you'd still be there when they got done without some type of binding contract, they'd be jackasses, not to mention out of business soon. >> 7) When you're one of the first buyers in a development, you don't know who your neighbors >> will be. You don't have any mature trees (shade) and you'll get to eat a lot of >> construction dust. This is true. You could end up with undesireables down the road. Trees? So you get to plant some with your spouse and kids and watch them grow. Construction dust only last for a couple of years until the development is finished. To some people, it's worth it to build a new home. Others can't handle the pressure and/or can't afford to buy a new home. Ours will be finished in late March / early April ... :)
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| | Saturday, March 25, 2000 - 03:22 pm How could I forget to mention that builders' contracts are written in favor of the builder? It is so important to have competent representation and never ever purchase without contingencies if you require new financing. An example of what can happen when you don't read and understand your contract.
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