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What’s Going On

Basketball, music and real estate have been mainstays of my life. A classic album came to mind when looking at today’s real estate market: Marvin Gaye’s What’s Going On.

Marvin spoke of problems that, if you listen to his lyrics, haven’t changed much in 48 years.

Other than the title, the album has nothing to do with the rest of my writing. I just wanted to plug a top 5 album of all time. So what’s going on in the real estate market today?

Inventory of homes for sale remains low and homes in the $200,000 to $300,000 range are in demand. Low inventory and high demand have led to “bubble” pricing in certain (not all) areas.  That is not the case in higher priced homes – $500,000 +.

When a client is considering a home for purchase, Homebuyer Associates prepares a written market analysis to determine the home’s value. We steer clear of the popular real estate mantra of “Pay anything, you can’t lose on real estate.” You can lose.

In the past year, in some areas, we’ve adjusted our analysis to reflect a “value” number and a “what you might have to pay to get the home” number. The latter number is often higher. Traditional real estate agents don’t note a value number. We do.

Our clients get the final say on what they want to offer on a home, yet we believe they should know the value number for a sense of how long they must own the home to get back to even.

Recently our analysis for two homes was as follows:

Asking price   Value Analysis  Client Offer

$260,000        $255,000             $275,000

$215,000         $212,000             $220,000

Our clients didn’t get either home. In each case our clients decided that based on where they wanted to live, they were willing to spend more than asking price to get the home. As they did not get either home the question is, “How much more does one spend than value?”

We often judge the quality of our decisions based on outcome. “I didn’t get the home so it was a bad decision.” But a good decision doesn’t guarantee the outcome you want. (It happens to me often in tennis.) Outcomes are a simple means of measurement but may not reflect the quality of a decision.

I would argue a good decision in real estate is a bet against the field and the field contains a traditional agent selling, randomness, luck and poor decision-making on someone else’s part – which can affect your outcome. The outcome did not make your choice bad.

 To increase your chances of buying a home at value I’d encourage buyers to broaden their search parameters   as well as consider homes that may need “paint up, fix up.”

I’ve been involved in the rehab of over 100 homes in my lifetime – some personal and some as manager of a   housing rehab program. It takes vision and effort to upgrade a home but it can result in a better value than   paying $20,000 to $30,000 more than value for a home.

One final thought: If you are a baby boomer who is thinking of downsizing now is the time to put your home on the market especially if your downsizing will involve renting. Rates are low, inventory is low and demand – in some areas – is high.

If you have questions about real estate, please feel free to contact Seamus, Mike or me. If you have questions about basketball or Marvin Gaye, I remain available.

Thanks for reading,
Michael D. Holloway

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Homebuyer Associates
1835 N. Riverwalk Way
Milwaukee, WI 53212
Phone: 414-254-4129