Homes Don't Always Appreciate
Issue 46 - August 20th, 2021
Your home does not automatically appreciate in price, and far too many people incorrectly assume they will always make money when they go to sell their home.
A primary residence is so much more than an investment, and you need to understand that it serves utility and purpose above and beyond financial returns. Owning a home does not make sense for every single person and sometimes renting is a better path depending on your life stage or situation. Don’t buy a home “just because rates are low” or because you are “throwing away money on rent”. There are pros and cons to renting and owning, and it all depends on your situation - don’t get caught up in comparing yourself to whatever others are doing to influence an ill timed purchase decision.
Before buying a home, you should understand the responsibilities that come along with being a homeowner and make sure it makes sense for you financially. You need to understand the all-in costs of homeownership like property taxes, maintenance, and insurance fees. You need to understand the impact potential renovations and updates will have on the final sale price when you go to sell - most people don’t care if you spend $50,000 updating a room that no one uses! Pools don’t guarantee a jump in value and remodeling a bathroom with dark colored marble is not great for resale even if it’s brand new!
You also need to understand the fees you will incur when you go to sell your home and make sure you calculate these fees into your expected proceeds in the future. The “sale price” is not the total take home price and sellers typically pay both buyer and seller agent commissions and other fees at the closing table. You don’t just subtract original purchase price from sale price to calculate your “return”.
A home means something different to each and every person. The motivations and desires for buying a home should go far beyond purely financial reasons; unless of course it is a pure play investment property then I do hope you make tons of money!
Newsworthy Links To Share
The BOOMtown that is Austin is now the seventh least affordable city in the U.S. and is expected to become the least affordable metro area outside of California by the end of the year, according to a new Zillow report. (Austonia.com)
Nearly 2,700 homes in Austin sold this year for $100,000+ above their listing price, according to an analysis by Redfin Corp that examined sales through Aug. 11th. While a few US cities saw properties sell at the same sky-high markups, no other metro came close to Austin as a whole. “As a consumer, it seems scary to be in a housing market where the home you’re looking at [is] priced at $400,000, then, when you go to put in an offer, you realize the true price is $500,000.” –Daryl Fairweather, Chief Economist at Redfin. (CRE Daily)
Bidding war heats up: According to Redfin, the number of homes sold for at least $100,000 over asking grew 10x in Seattle and 5x in Oakland on a YoY basis. In Austin, that figure stood at 57x YoY. These premiums reflect how attractive Austin has become for highly paid young professionals who mostly work from home. (WSJ)
One of the largest US hotel owners is testing a new business strategy: charge guests for most services and amenities, just like in the airline industry. They are charing for early check-ins, pool access, or access to the health club as examples. The move comes as hotel owner-operators say they have little choice but to shake things up to stay profitable. (WSJ)
Sequoia leads $13M investment in Aalto, an online marketplace that lets homeowners sell directly to buyers. (TechCrunch)
Lumber price drops (finally) fueling multifamily building boom. (Globest)
Reali raises $250M in equity and debt financing. The company has flat-fee and cash-offer programs for both buyers and sellers, and it has now raked in more than $300 million in total funding since its founding. (Inman)
Bay Area based construction tech startup Diamond Age announces $8 million fundraise to speed up home construction with 3D printing and robotic arms. (TechCrunch)