Looking into buying my first house, and am very interested with M/I home builders. They have many nice new subdivisions around Columbus, OH. My only worry is that if I buy a house the value will depreciate over time. Is this something I should be concerned about? I appreciate any advice/ personal experience. thanks!
Buying a home from a builder versus buying an existing home? Three to four years ago builders had more people walking thru their new home models and signing a contract to buy their newly constructed homes, so that new homes often commanded a substantial premium over resales of existing homes.
However, today financing for borrowers on any home purchase is much more difficult to obtain, as many banks got burned badly on home loans made from 2004-2007. Over the last two years banks got more conservative. They now require larger down-payments and better credit scores of the borrowers, resulting in far fewer houses being sold. Builders on the other hand kept on building new homes and their inventory ballooned. Now they have to sell to pay back the construction loans. They often can only make a sale at a substantially discounted price, often at less than their cost.
The end result is that you very likely can buy a brand new house for the same or even lower price as an old house. You have fewer worries about wear and tear (and necessary repair costs) that invariably has occurred on that older home. Then there is also the pride and satisfaction that comes with owning a new home.
Future depreciation of home values? Anything is possible, but not very likely. I personally believe that we are at the bottom of home prices now. They can’t go much further down, because it costs more to build them than what you are currently paying for them. Here in the west (San Francisco Bay area), the median home values have actually increased by 10-20% over a year ago. People are often bidding against each other again and offering more than the asking or list price. I am sure Ohio will follow suit in the next 12 months. OK, not the overbidding part, people are less crazy in Ohio than here.
My advise? Go ahead and buy with confidence and conviction, or you will be kicking yourself 3 years from now. If the prices should decline slightly below today’s level, don’t worry because you bought that house as a long term investment (as well as a place to live), not to take any profits out in 6 months.
I was personally very worried about my first home purchase almost 43 years ago, but it was the best decision I ever made. Good luck.
June 24th, 2010 at 10:39 am
Houses usually appreciate. If the neighborhood goes to crap or the market falls apart like a couple years ago it will depreciate. But 90% of the time houses appreciate. Building a home is actually a pretty good decision. Just don’t build the most expensive house in the neighborhood because the cheaper houses will bring down the value of your.
References :
Former realtor.
June 24th, 2010 at 11:17 am
House value always depreciate, regardless of whether it is new or old. That’s why you need to maintain it (with repairs, repaints, etc) to reduce the depreciation. It’s the land that supports the house that appreciate in value because of land scarcity. And generally landed property appreciates in value because the appreciation of the land value exceeds the depreciation of the house value, so overall the net value appreciates.
References :
June 24th, 2010 at 11:40 am
Buying a home from a builder versus buying an existing home? Three to four years ago builders had more people walking thru their new home models and signing a contract to buy their newly constructed homes, so that new homes often commanded a substantial premium over resales of existing homes.
However, today financing for borrowers on any home purchase is much more difficult to obtain, as many banks got burned badly on home loans made from 2004-2007. Over the last two years banks got more conservative. They now require larger down-payments and better credit scores of the borrowers, resulting in far fewer houses being sold. Builders on the other hand kept on building new homes and their inventory ballooned. Now they have to sell to pay back the construction loans. They often can only make a sale at a substantially discounted price, often at less than their cost.
The end result is that you very likely can buy a brand new house for the same or even lower price as an old house. You have fewer worries about wear and tear (and necessary repair costs) that invariably has occurred on that older home. Then there is also the pride and satisfaction that comes with owning a new home.
Future depreciation of home values? Anything is possible, but not very likely. I personally believe that we are at the bottom of home prices now. They can’t go much further down, because it costs more to build them than what you are currently paying for them. Here in the west (San Francisco Bay area), the median home values have actually increased by 10-20% over a year ago. People are often bidding against each other again and offering more than the asking or list price. I am sure Ohio will follow suit in the next 12 months. OK, not the overbidding part, people are less crazy in Ohio than here.
My advise? Go ahead and buy with confidence and conviction, or you will be kicking yourself 3 years from now. If the prices should decline slightly below today’s level, don’t worry because you bought that house as a long term investment (as well as a place to live), not to take any profits out in 6 months.
I was personally very worried about my first home purchase almost 43 years ago, but it was the best decision I ever made. Good luck.
References :
My experience as a real estate appraiser for 38 years.