A regular reader posted that 30% of listings on MLS were empty homes. I'm too lazy to qualify this statistic; actually, I'll qualify that statement, I'm too time-challenged to qualify that stat, so let's assume it to be true.
What are some reasons for a glut of empty homes on the market? And why would people be selling them? Any staging professional worth their money (if that isn't an oxymoron to you yet then have a read here) will tell you a house needs to look well-lived in to be attractive to potential buyers, well, because potential buyers are apparently too daft to be able to see how their own furniture or art or whatever would fit into the place. Anyway, digression over, back to the original question and our thought out impending answers:
- An empty house is a flipped house. Maybe. But of the ones we've seen, many are. Here's a quick way to tell: it smells like paint over mould and new carpet glue. Actually, I think the new carpet glue scent has caught on with flippers and may be one of the key reasons why they choose laminate (or engineered flooring for the more refined amongst you). Not all flipped homes are bad. But a note of caution: they're flipping for the money, the less they spent on upgrades the more potential profit there is in the deal. If you're looking at the, ahem, affordable end of the MLS, chances are pretty good that the flip is a floppy deal with lots of mis-tint paint use and cheap laminate flooring.
- An empty house is a must sell. Maybe the seller bought, moved and didn't sell the one you're looking at before they took possession of the new. I know of several anecdotal stories of this taking place and the sellers accepting upwards of 20% less than their asking prices just to be rid of the stress of two mortgages. You could re-read this empty house reasoning as an opportunity to low-ball, but let's say you do and they accept 20% less, then the market corrects 20% (not an outrageous amount all things considered), did you really get a good deal?
- An empty house is a speculator's home. This one may be more prevalent than you may have previously considered. We've seen lots of empty homes that haven't had a lick done to them. Could be that cheap money combined with fast-escalating home values has led to people parking $50-$100K of retirement capital into assets that were gaining 20%/year for the past 3. Not wanting to deal with tenants, or tired of dealing with tenants, these guys just say F$&K it to the rental income and take the easy money. Let's say you did this. $100K of your RRSP 3 years ago would have got you into a house at $350K that is now selling for $550K or more. That's a pretty good return on investment even when you consider the interest on the original mortgage and the penalty for early payout.
- An empty house is owned by an Albertan. Or another "from-away." Similar to the above "speculative investor", from-away's have long-been over-recognized as having a hand in driving prices up and not occupying their new homes here. Maybe a small percentage have spent a combined month or two here to recognize this town doesn't live up to its hype and have decided to sell their pad and take their gains while the gains are good?