Subscribe RSS 2.0 feed. Leave a response, or Trackback from your own site.

3 Responses to 'Should I buy a house or a lot when the real estate in Utah is at an all time high?'

1. zyberianwarrior - October 28th, 2008 at 8:07 am

   depends on location but the days of 20% increase are OVER! The mortgages are under pressure plus property taxes are way up there and insurance ha! just watch the market conditions and wait is a must right now.

2. SUNYScott - October 30th, 2008 at 8:09 am

   If you are risk adverse, buy a home. If you are willing to buy an investment and not a house, buy the lot (but have the stomach to survive the volatility in the housing market as lots are far more sensitive).

   Land prospecting is a risky business. If I knew the direction a particular parcel of land was going to go in 5 months I would buy it. The problem is there is no 100% certainty.

   In my opinion, buying a lot is riskier than buying a home. A home shares the value of the property between the lot and the structure. As prices move, the cost of the structure hold relatively constant with the price of the land going up and down.

   With a lot, you do not have the structure as a significant cost of the property, and therefore, the land is much more volatile and higher leveraged with movements in the real estate market.

   eg.

   if you buy a home worth $400,000 and $150K is for the land and $250K is for the structure, and the price of land appreciates 10%, the new value of your home is $165+$250=$415,000 (3.75% gain). If you just bought a lot for $400,000 and the price of land appreciated the same 10%, the new value of the lot is $440,000 (10% gain)

   However, this math works in reverse. If the price of land DECLINES 10%, the house shields you from the losses a little and you’d probably only see 3.75% decline in overall value versus a 10% loss if you only owned the lot.

   The reason homes do not appreciate (the structure, that is) is because the labor and materials to construct the home are closer tied to inflation and supply and demand of the materials. After all, there may be a shortage of available plots in Malibu overlooking the ocean, but if one of those homes burned down, you would have no problem locating wood, pipes, roofing, and tile to rebuild it. Also it costs the same to build a 2000 sq ft home in beverly hills as it does in most other parts of california, but the land’s cost is very different.

   If you want independent verification, call an insurance broker and ask them how much coverage do you put on a $400,000 home (they’ll probably tell you like $250,000 or $300,000) the rest is the value of the land.

   Last kernel: a lot loan is more expensive, more difficult to qualify for and may require specific plans as to its development (as the loan is normally only for 2 to 5 years, not 30). Unless you plan on building on the lot versus holding it and selling it when you are ready to get into a house, it may be an expensive undertaking…

3. Insensitively Honest - October 30th, 2008 at 9:43 pm

   if you can wait , or you are wanting something affordable to live in , I would wait , the housing market is falling ,the prices are not far behind that the baby boomer generation is dying off quicker everyday , there is going to be an abundance of housing soon , and when interest rates go up the market price comes down ..plus the default rate is sky high right now because these crooked assed agents are suckering too many people in to these ARM ( variable interest rate mortgages) and these loser for the buyer interest only loans ,all in the namae of profit… the new housing market is going to go belly up if things continue the way they are , they have basically hung their self , they all got greedy , everybody is trying to make a dollar from the sale , they no longer care about the buyer. these new houses are thrown together with all of these cheap assed materials , the builders are taking so many short cuts on quality of craftsmanship , I know tons of people who have bought new ,and are in major need of repairs after a couple of years because of half assed construction with cheap materials… the market will fall flat , and I am going to laugh at all of them ..an agent will tell you anything to get her commission , I no longer even look at newer homes for painting..the drywall is so half assed finished it is really become pathetic how real estate has become , I will not touch a newer house . I would wait until they are begging you to buy , over half the price of a new home is profit for the builder ,seller ,and or agent … do a lot of research before buying , I even researched the lenders , one of them wanted my money , but they funded certian groups ,and things I am against .. wait a few years if you can , research everything , inside ,and out , it will pay off ..remember good things come to those who wait …and remember the housing market needs you …you do not need them , they are getting like a bunch of d*mn ***** heads begging for money it is disgusting just sit back and watch the line of crap they try to feed people to try to get their money , they are even starting to act like a ***** heads who are just dying for the next hit…..real estate agents today ..remind me of the old used car sales man , you know the one dressed up like a disco duck reject from the 70’s trying to get a sucker to buy what he is selling ……just be patient , wait , research , and buy when you are comfortable , it will be yours.. not their’s so why hurry , only fools rush in my friend….best of luck to you

Leave a Reply

Name

Email (will not be published)

Website