11-08-2012 12:17 PM
I have been watching a few places in Montgomery County for the last few weeks, places that I thought were overpriced by 10-20%. I was expecting reductions, but these places have gone under contract one after the other. I thought that I had a good sense of value in this market, but now I'm wondering. Are prices up by 10% in the last few months, or are some people getting desperate with the low inventory and simply overpaying?
11-08-2012 01:07 PM
I am assuming the appraisal refelct the asking price, hence that is what the market will bear. Are your expectations to low? I have seen that well priced properties get snapped up really fast, while over priced ones sit around. If these properties are going quickly, then they have something right going for them
Which are are you looking at? examples?
11-08-2012 01:47 PM
It's hard to say prices are up because you may see the average or median being higher but the property type or condition may in fact be different. On average the prices seem to be increasing 3-7 % maybe higher closer inside of the beltway within good school districts.
11-09-2012 12:25 PM
I think the high prices are a combination of both low inventory and people using bad judgment (or getting bad advice). Although a home price may pass appraisal there is a lot near term risk to home prices that make current pricing very high. Assuming that mortgage rates start to tick up in a couple of years and it does not (in this area) look like salaries are going to be climbing any time soon the DC housing market seems over valued.
11-09-2012 01:03 PM
"If it appraises you didn't over pay."
Wow, that is funny!
You have too much confidence in appraisers. If an appraisal was so real, why do they require a copy of the listing and the actual contract? So they can back into the price to make it work (not always).
Also people do pay over appraisal when they don't care what some guy from west virginia thinks about their DC condo.
11-10-2012 03:26 PM
In some ways my question was silly. Of course, it depends very much on the specific property. I guess what I'm really asking is whether others think that there are more examples recently where properties went for higher than they thought they would.
11-10-2012 03:48 PM
The houses you've been looking at may indeed have been overpriced, but going under contract quickly doesn't mean the house sold for the listing price. You need to check out the sales data in the MoCo real estate assessment database to find out the final selling price.
11-14-2012 08:43 AM - edited 11-14-2012 08:44 AM
Overpriced, compared to what ?? Anything sells at the right price, even Florida swamp and Arizona dessert. So, you're really asking about comparables or the last sale, and whatever the reason(s), the market cleared itself as buyers & sellers adjust their appetite.
There is a segment of the market that must sell or buy, and they are at the mercy of individual circumstances overlay by macro factors.
Appraisers also do a "replacement cost" valuation, and I find it the most interesting, and in my opinion, it drives new home building. However, the valuation is apparently not required by FHA loans and it is marked as not indicative of market value. Replacement cost valuation is still high dependent on the valuation of land (in my case, 40% because I live in the first ring just outside of DC). The remainder (60%) is simply cost per square feet (pick your construction grade) and size, plus grade & below grade improvements. If a builder can't recapture land cost (typically sunken, but value is still market based), plus the cost to build, it simply stops building. Mortgage rates is a cost of financing, and will influence the grade or tier for the builder, but it doesn't adjust selling prices because financing is not their cost (maybe marketing budget). . . (Look at the new car market for some similarities -- it is still a cost based business even though financed is, what, 80% of purchases ??).
To me, the relative position of "demand price" to replacement cost is a good mid-term indicator. When demand price is far below the cost to build, no new units will be added and discretionary inventory will be (relatively) short because existing homes still need to be sold at prior purchase price + commission, as a cost-even proposition for the seller. Then the market will adjust itself if sellers & buyers want to clear their participation, either through foreclosure, short sales and or inventory whose cost is still less than market.
11-14-2012 05:34 PM
The short answer to your question is "yes". Some buyers are overpaying for properties. Inventory is down 30-40% compared to last year in many neighborhoods so some listing agents intentionally price properties high to see if someone will bite. Some buyers don't care about the end price because in many instances they are paying all cash or making very large down payments and appraisals are not an issue. For them, the alternative to overpaying for a property is not having one at all. Highly desirable neighborhoods have experienced major increases in value over the past year. The market is very segmented and neighborhood specific so it's tough to speak in generalities. Ultimately, a property's value is what it's worth to the buyer. An appraisal is only one opinion of value.