Spinning off from the Tonights Flip This House thread, IONEGARM got me thinking about what is a home and what that means to the market.
IO’s position was that flippers en masse destroy the bottom end of the housing market. Done right, I don’t think so, but that’s not our current housing market.
It seems that if a home doesn’t have granite countertops, Viking Range and sub-zero fridge with travertine floors and $500 faucets with a $800 raised bowl bathroom sink from Home Expo, that it is labeled a fixer needing TLC. In fact, even in the hot market, if it didn’t have those they tended to move slowly and RE agents often advised people to spend so of the equity to get maximum dollars.
My question, or posting, has do with what that affect is on the market psychology. I know currently in the OC, only the most fixed up of the homes are moving, and they’re priced competitively against those that aren’t.
Going forward, we won’t be walking into a home with new carpet, new floors, new cabinets and baths. Well, maybe we will, it just won’t be granite, travertine and luxury bathroom fixtures.
Are buyers ready for that? I’d say sellers aren’t, they seem to be in complete denial that they can’t through a piece of junk up and have it sold in 30 days anyway.
But… what happens as the equity dries up and the homes can’t be refurbished and modernized to dress for sale. Is a price correction from $700K to $550K enough if the home is no longer sparkly? Or will buyers get frustrated as prices move down and the level of wear and tear moves proportionately up with it?
Could housing get extremely illiquid because buyers become unwilling to buy “used” homes they can’t readily finance the expensive upgrades to refinish?
Upgraded kitchen and bathrooms will be the new standard just like air-conditioning. That’s how we improve our standard of living. Dishwashers used to be luxuries but they no longer are.
In a down market, builders will have to provide many upgrades to entice buyers. Resellers will have to follow suit or cut the price.
Compared to 15 years ago, travertine, marble and granite are really cheap now. Natural stone has been commoditized with product being imported en masse from Turkey and China. It’s the labor to install that’s expensive. Actually there’s an almost infinite supply of those materials because stone is what mountains are made of. We now have better equipment to quarry and diamond saws to cut the stone.
I should also mention that Viking appliances, fancy lavatories and faucets are no better than the basic kinds. It’s the design that you’re paying for and the profit margins on those items is enormous. Design is also being comoditized so we can expect to have better products for the same or lower prices.
Personally, when looking for property, I first look at price per square foot. I won’t even consider a home with defects if there are upgraded homes nearby.
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