My husband and I were driving around one weekend, looking at open houses. I was struck by the comment of a woman selling her home as a FSBO. I’m familiar with prices in the area, and knew her price was high. What she said though was, “There are several homes for sale on the street, and this one is much lower than the comps.”
I’m sure this lady was sincere in what she said- she just didn’t understand the difference between having the lowest listed price on the street, and the price that comparable houses were selling for. Calculating comps for us mere mortals without access to the MLS is not easy however.
I have found several sites that I have found useful. If the number is only my imprecise estimate, I suspect it’s closer than a lot of the overgenerous estimates done by “professionals” these days. Some of my sources aren’t useful beyond the Phoenix metro area, but I imagine that comparable ones could be found for other areas.
I start with the website of the National Association of Realtors. (http://www.realtor.com/) It allows you to search by general price range, square footage, number of bedrooms- but it is lacking a lot of really useful data. (Like property address and number of days on the market) For this I go to ZipRealty. Although I am not fond of Realtors as a group anymore, I have appreciated ZipRealty’s approach. They allow you to register on their site for free. They provide you with the address of properties, number of days on market, and generally better property descriptions, and exact square footage. Armed with this information, I head off to Zillow.
Zillow is my favorite site for estimating property value. It requires no registration. You just type in the property address, and it will show an aerial photo of the area, give you a value estimate, list comps (and map them). It graphs the property’s value for the last 10 years. Zillow allows you to click on neighboring properties to determine their values. It also frequently can provide you with former sales dates and prices.
Zillow does have some drawbacks. It may not have the proper square footage if a property has been added on to- which can underestimate the value. Another difficulty is that sales have been so slow in our area, there is very little recent data, so some of the comps date back to last year at the height of the frenzy- this can skew prices higher. Zillow won’t take into account that you have $100K more in upgrades than your neighbor. I also know that in this area, a neighborhood 100 yds away may not be comparable- I have seen Zillow use comps from nearby homes that I don’t believe were genuinely comparable. It also may not list new neighborhoods.
Even with it’s problems though, if you take a time to look at the comps listed, and other homes in the area, as well as the time sold, you can start seeing a pattern and make a fair estimate.
It gets trickier to determine values in newer areas not covered by Zillow. For this I turn to the Arizona Republic. They have a nifty page where you can enter a street name and a zip, and they will list the selling price of all homes on that street for the past couple of years. If you can find when the home sold and the date, you can kind of extrapolate to the current value. I also like to take homes listed here and compare them to Zillow to give me another comparision. The Arizona Republic also has a page that posts the weekly sales in the valley by zip code, and compares them to the last few weeks as well as last years sales.
I have been using my valuation method for the last few months, trying to find the best possible value to purchase. Conclusion?
We are going to wait. Given the current trends, even homes currently listed below my estimated value, could be worth even less 6 months from now. I think it could be possible that even with 10% to 20% down, a severe downturn could leave you upside down on a property.
It is going to be difficult to know exactly where real estate is headed until the end of the 2nd quarter. Once school starts and the winter doldrums begin, that is when the market here is going to be looking at more downward pressure.
In the meantime – keep an eye on values – now you know how.
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Hi Debi:
I just read about you in the ahwathukee republic and was so relieved to find you were there with all your research and information particularly at this time in my life when i plan on buying my first house. I am 45, work with a non-profit as a therapist for infants and toddlers, so pay is less than 30,000. however, i have been living with my sister the past 3 years, so have some money saved up.
i am looking to buy a home, looking to get a mortgage. everyone is telling me this is the right time to buy and i need to get a pre-approval for the loan. everyone is telling me the interest rates are going to go up and i need to lock the interest rate this week.
i am nervous. are they right? o want to be careful though, because the houses still seem highly priced. with the kind of income i earn, i want to be really sure.
I am not sure if you want mails asking for advice, but i really will value your thoughts. do u thing given my background, this is the right time for me to get my loan now and buy a house in the next month. or would it be better to wait when schools start as u say…which makes sense to me. but i am not sure, what the interest rates will be then.
please advice, i am looking for a small house with a small yard for arround 250,000 with a down payment of 70 to 80000, in the ahwathuke, west chandler area.
please, please advice.
thanks..and i look forward to hearing from you.
bye
gargi
Gargi-
Everyone’s situation is different, but I would be concerned about people rushing you into something you are not comfortable with. It is true that the Fed is likely to raise interest rates this week (Best guess .25%). However, my husband and I are renting now- we sold our house last year, and we are waiting before buying another home. There are so many houses on the market right now, a lot of people have started to rent them out. We can rent for about half of what a mortgage would be, so we are better off at the moment renting- even with the tax advantages of owning.
There are a couple of things you might want to consider. Virtually everyone is agreeing that at least in the short run, there is not going to be any big appreciation going on in the market. The most optimistic number I have seen is around 3% growth, worst case a 50% decline (for Phoenix market). I believe it’s going to be between those, but I couldn’t say yet where.
One of the basics of economics is high profit = high risk. The housing market ran up a lot in the past couple of years, and that makes it a riskier market. Don’t believe anyone who tells you that the market always go up. People can and do lose money in real estate. (I unfortunately know that one from first hand experience- we lived in an area with a declining market 10 years ago, and we had to sell our house for less than we purchased it for.)
The old rule of thumb was that your mortgage should be three times your annual income if you have little other debt (car, credit cards etc.). More personal debt 25%. That one has kind of gone out the window with “creative financing.” (Which I think is a shame- it was a nice, conservative rule.)
Creative financing was able to get people low payments when interest rates were low with adjustable rate mortgages (ARMs), so a lot of people have purchased homes more expensive than that. With interest rates rising, many people with ARMS have had their payments go up so much, they couldn’t make the payment. Foreclosures are on the rise.
I guess this is kind of the long way of saying, you need to ask yourself some questions. How much risk can you afford? Is your job secure? Will you be in this house long enough to be protected, even if rates go down in the short term? Can you REALLY afford the payment, or are you going to have to live off macaroni and beans to survive? Can you qualify with a fixed loan- one that they can’t raise the payments on you?
I AM NOT A FINANCIAL ADVISOR, I AM LIKE YOU, TRYING TO FIGURE OUT WHEN IS THE BEST TIME TO BUY A HOUSE. Even the experts are guessing at this point, so you have to weigh the whole profit-risk thing.
I have a lot of links and articles on housingdoom. I would recommend educating yourself as much as possible, and not let anyone pressure you, one way or the other. When you buy your house, you won’t enjoy it, if you don’t feel good about the decision you made.
***** NOT FINANCIAL ADVICE***********
Hello. I was wondering if you had any information for people trying to sell there house. I have a house in Higley that we have reduced the price to $265,000 from a starting point of $305,000 in November of 2005. We moved out of state due to a job transfer and now our desperate to sell our house. Our house is still listed and if we don’t get an offer ASAP, we will be really screwed. Any Advice?
Maria-
There are a lot of homes for sale in your area, and not a lot of buyers. You need to be really honest with yourself and ask, “Am I the best deal out there at $265K?” Buyers are really picky right now. If the house is vacant, you can’t have nail holes where pictures were, the carpets need to be clean, the walls need to be white or a neutral color, the yard can’t have weeds, etc.
If you have made the house as nice as you can, and it still is not selling, take a look at a site like ZipRealty (they make you register, but it’s free) That way you can look at pictures and read listings of your competition. Maybe people can buy a bigger house than yours, or one with more stuff for $265K. If you can’t offer more value than your competition at that price, then you will need to consider lowering your price again.
Some people keep hanging on, hoping the prices will go up. Summer is the busiest time though, there will be fewer buyers in a couple of months. The builders are still building out your way, and they are offering lots of incentives that regular people can’t, so sitting with a price higher than the competition doesn’t make sense.
I hope you come out of this ok. When people hurt themselves through greed and speculation, I tend to think they deserve what they got. Unfortunately, their foolishness has hurt a lot of families just trying to get by, and that is the tough thing to watch in this market.
Best of luck!
Debi AKA Twist