I wrote last Friday about how I was going to write about the segments of the market that I expect to experience the most pain. Irresponsibly, it has taken me until now to write about those pockets. When I say “pain,” I do not necessarily mean “foreclosure;” pain is a relative term, and everyone’s pain threshold is different.
Understanding that the market has shifted from a pure Sellers’ market to more of a Buyers’ market, and that this sudden flip was mostly unexpected is the start of this analysis.Â The only ones who had predicted the “bubble” bursting/hissing/leaking – whatever analogy you want to use – were the ones who had been saying the same thing for years. I could say every day that it’s going to snow 10 inches tomorrow … eventually I would be correct.
— Condo conversions:
Those who purchased in the third or fourth round of a condo conversion. There is one condo development in town that has multiple condos on the market – at a very wide price disparity. Picture this – several units on the market in the same development. Two two-bedroom, one-bath units are for sale: can be had for either ~$150k and another for ~$230k. Granted the one for $230 is sweet. But … $80k sweet?
Condos remain a good, affordable option for many people. Make sure that you are purchasing it as a place to live, rather than an immediate profit-center.
Those who purchased with the intent to do some minor renovations, when major ones are warranted. Buyers simply will not accept what they perceive as deficiencies anymore. For example, I competed for a listing about two months ago and ultimately was not selected for representation. The primary reason is that my market analysis said that the market value was $40k less than what their asking price turned out to be (It’s still on the market). They purchased the property six months ago for $100k less than they are asking and did about $30k in renovations. This market is no longer able to absorb this type of investment.
Unless you can find the perfect property for flipping, your time, money, energy and emotions will be best spent elsewhere.
— Those who purchased purely with the intent to sell in six or twelve months.
This mindset was quite common, and feasible. Not so much anymore.
If you are able to comfortably live in and afford your house, then it was a smart investment.
A couple of national stories: