Neighborhood Update

This is an update of my tracking of a specific neighborhood in my area, in an effort to gain further insights to the current state of residential real estate market.  The last update is here.

Things are starting to get interesting.  Since the last update there have been 4 new sales.  All were for a higher price than the prior 2.  Sales prices ranged from $359,000 to $425,000 (the prior 2 went off at $335,000 and $352,000).  The sale at $425,000 boasts "extensive upgrades."  In the meantime, there were 2 new listings.  That brings the total active listings to 10, of which 2 are short sales.  The lingering short sale has once again had a price reduction down to $350,000.

There appears to be some consistent themes arising from my neighborhood review:

Short sellers continue to aggressively pursue sales by reducing price.
Houses attractively priced, well appointed & move in ready attract buyers.
The good news for this neighborhood is that there is probably only one more house on the market that has the potential to come close to the $335,000 low ball price.

I think the implications here are that in a neighborhood where all the homes are very similar:

It might still be hard to make a flip work.  If you picked up the $335,000 home, to resell it costs 8%, plus you need to recoup the costs to upgrade it.  So, with a purchase price of $335,000, plus $30,000 in paint, carpet, granite, stainless steel, etc and 8% in closing cost, you would need to sell at the $425,000 top price to make 6.25% cash on cash, on the flip.  A successful flip would require some sort of angle to avoid the listing fee of 3%, by being a Broker or something else.  Also, if the purchase could be leveraged by a hard money lender, your return could be substantially higher.  For example, if you put 20% down on the purchase, added $30,000 in upgrades, saved 3% of the selling price, and, sold for $425,000 the return would be closer to 25%.  The big risk is that home prices could fall another 5% between now and next Spring.  Flip opportunities should be better pickings in early Winter.

On the other hand, there appears to be great opportunities for resourceful home buyers.  If a potential home owner does their homework and works the short sale/foreclosure market (not for the faint of heart) they could try to score the $335,000 home, do a remodel and make it the $425,000 home, therefore, protecting themselves from any 5% further decrease in value.

Lastly, this exercise has been a bit of an eyeopener for me on the state of info available on the internet.  None of the popular real estate websites (Redfin, Zillow, Realtor) have completely reliable information.  I have had to compare/contrast info from all these sites, as well as, conduct drive by inspections in the neighborhood to feel I had all the info.  I'm sure there is a lesson in there somewhere.