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?
17 comments:
That number I threw out there could be give or take 5% but there was more than I have seen before and I usually look at the ones under $550,000 or so.
One factor could be an estate sale but usually they leave the furniture in it. The ones I have seen seem to have that shiny new hardwood floor look that wouldn't be gramma's house but more like a flippers.
I agree vicguy, there are an awful lot of empty remodelled homes on the MLS. I think there is a lot of flipping going on.
Where I used to live, one house on the street sold three times in approx. one year.
I do see a lot of the same houses on the MLS that were there last year and I do wonder - Did they not sell and they are simply being re-listed, or are they being flipped?
Anyways, it does not bode well for Victoria(or it does depending on how you look at it I guess).
Well, I spoke with one fellow last week who admitted that he was a "flipper" and lives a year and a half in each home, puts in a new kitchen, floors and gives the home a paint job. I asked him how many properties he thinks are "flips". He answered 40%. I must have looked surprised, so he iterated 40% with a smirk and a nod.
Siobhan
Just did a quick look thru my usual MLS scan settings within Victoria, Esquimalt and East Saanich and in the first 50 houses there were 12 vacant and 4 or 5 that appeared empty cause they have no inside pics but the yard shots show no signs of life you usually see plus several more places that look staged. That runs an anecdotal 25% or so,more than you would think.
So if we are talking 25% flippers then who is gonna be the first one to flinch ? quite a few say "Priced For Quick Sale" and still look expensive for what they are.
Well, one thing they had a lot of in Florida before the crash started was flippers.
If people are buying houses and flipping them, and that is their "job", they are not actually providing much of a useful service, and if they get burned, well that's the flip side of the good times.
There were a lot of people holding Nortel at over $100 a share back in 2000 who felt very smug about how well they were doing. Unfortunately, a lot of these people never thought of selling, until it was way too late.
"flip side of the good times"
:)
The 20% off deal could be good depending on the circumstances. Was the property not already inflated 20% over it's actual market value? Even if prices drop 40%, how much will be from inflation just eating away at it.
But yeah, I'd be willing to bite on a $350k house - 70k discount. =)
It's not a house....
Looks to me like listings are going up the past day quite big too. I updated the hot sheet from the site roger provided twice this morning and there have been 100 new listings at the least.
I havent followed it close lately but last night decided to to note what was the last few new listings and they were gone as per 6:55 update and at 8:55 there is a complete new page of another 50 listings. The tide is shifting folks.
Interesting news release from the CREA site about the economic benefits of MLS home sales.
http://www.crea.ca/public/news_stats/pdfs/PR%20-%20Clayton%202007%20with%20study1.pdf
S2
I have to echo the activity in listings over the last few days... 5 houses and 4 condos in two days in my market watch segment... I'm still seeing fixer uppers for $425K. Until Realtors catch on and start pushing those prices down, I can't see a change coming soon. You'd think the more savvy ones would want to get back to a sale/week type volume, gotta price low in this market to achieve that. Their commissions won't be that much different between $425K and $399K especially if it sells 4 weeks sooner.
BC Real Estate Association June 19, 2007 news release:
http://www.bcrea.bc.ca/news_room/2007-05.pdf
"potential buyers are apparently too daft to be able to see how their own furniture or art or whatever would fit into the place"
It does make a difference, though. We went to two open houses in the same building, same exact floorplan, both empty but one was staged. The one with furniture looked bigger, because the room just swallowed it up. Even if you know the measurements of your own place, it's hard to visualize how furniture would fit in an empty room.
Anonymous,
I have to give Cameron Muir some credit for not spinning it like David Lereah over at the BC Real Estate Association. Experienced realtors must know what's coming, even if the mainstream media isn't jumping in quite yet.
Check out this link on my blog for further confirmation of what is happening with sales versus listings.
The main thing to observe is that, even with all the construction going on, and new unit completions, unit sales are essentially flat.
Someone has to take the hit if more demand doesn't come along soon, and since interest rates are rising, what happens when the music stops playing?
For anyone who doesn't think supply can overwhelm demand, there were several years in the early 90s, in a smaller local market, where turnover (sales) was in the 5,000 unit a year range.
In these "boom times", those numbers have never been approached, let alone eclipsed.
This raises another question: How many of those flippers are rank amateurs? Have they done faulty wiring? Bad plumbing? Is it possible to get a permit history on a house?
Dave, highly unlikely that flippers take out permits... unless structural changes are made, most people people don't believe they are necessary, which of course is false, but not enforced without complaints.
Listings up another 50 since 9am,thats over 150 for the day.
Global supposed to have a big segment on the mortgage rates/housing etc tonite.
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