Sunday, January 07, 2007

Geographic lock

An interesting discussion happened last night over rediculously priced steaks and wine; several very well paid individuals feel that they cannot afford to throw away the money its costs to sell/buy an upgraded home.

This had me yawning... until the guy, a non-bear on realestate BTW, pointed out that its far better for him economically (transaction costs, prop 13, location) to upgrade his current house than to buy a new home. So he starts going into the details of the cost to move just a few blocks and a light bulb went on...

Anyone who bought more than 5 years ago in California is probably dreding upgrading.

This gentleman owns a 2 bed/1 bath home (remember those?) in the westside. Luckily, they have enough land and rights to expand. He's talking about building a 2nd floor to make the place a nearly double size 3 bedroom 2.75 bath: all bedrooms upstairs, current bath becomes the downstairs bath, one existing bedroom becomes either a family room or a dining room (they haven't decided), the other is sacrificed to make a nicer entry, staircase, and expand the kitchen.


He laid out the costs and it just struck me that the cost of nearly doubling a home's size is only about double the cost of a move.


To me, this implies further stagnation of the upgrade market in 2007.

Plus side, more jobs for contractors. Hey, anyone who really works has my sympathy. I see nothing wrong with them getting paid. Besides, this slowdown is going to be so fast this will be but a drop in the market.

Other local housing observations: Wow, the south bay has a huge flood of townhomes hitting the market!

At PV blvd and Hawthorne (I believe that's Torrance), Along Catalina in Redondo, not to mention all of the condos going up near the various aerospace corporations.

Whatever you do, don't be stupid enough to catch a falling knife in 2007. There is absolutely no reason not to rent. If you want to upgrade your current home... its probably the best short and mid-term solution. Good luck with the project.

Neil

6 comments:

Anonymous said...

You must have gone over to Flemmings. Anyway, I think both markets (upgrade and update)will be stagnant because home equity extraction is expected to slowdown. Home improvement contractors are already feeling the pinch. Look for flood of all housing on the MLS within the South Bay over the next 3 to 4-months.

Anonymous said...

That is the exact same situation I am in. To remodel my house is about $100K. To upgrade would be at least $200K.

andesSMF/Conrad

TJ & The Bear said...

Neil,

Check this out:

B stands for Bubble – and for Bankruptcy!

wannabuy said...

BJ

Very interesting and hair raising. I'm convinced that the bond rating is the best measure of a company's true health. That many "junk" bonds?!? Oh my... Will GE and Wells Fargo just end up buying everything else in the downturn?

Got popcorn?
Neil

TJ & The Bear said...

Who's "BJ"? ;-)

wannabuy said...

Who's "BJ"? ;-)

rotfl oops... typo police. ;)