Pulte Snaps Up, Repositions Stalled Avon Housing Development
The landscape is all too familiar. We all are familiar with a neighborhood or two whose developer went under during the recession. You may drive by the neighborhood spotted with a few homes, but for the past few years not too much construction going up and the grass is usually not mowed. The national builders and developers that have weathered the storm are making hay! Locally in Westfield one of those successes would be Viking Meadows. You remember Home-A-Rama 2007 at Viking Meadows in Westfield. Show homes ranged from 1 to 3 million in the Valley View section of Viking Meadows. Featuring 1 acre plus home sites in the gated section of Viking Meadows. Homes sales in the Meadowlands sections ($350,000-950,000) of Viking Meadows were ticking along at a pretty steady pace until around the fall of 2008. Precedent Development weathered the storm for a couple of years until the banks devalued the land to the current market price and called in the note. What happens next??? Nothing! For about a year in some cases more. Then the neighborhood is sold by the bank at an extremely discounted price to a new developer/builder. In Viking Meadows case, just like in this article, Pulte. You really cannot make Pulte or Arbor out to be the villian. They do come in and get great deals on the land. They turn around a neighborhood that is at a stand still and start building homes, complete amenities, and properly maintain the common areas. It is a win win! Right? Well maybe if you are lucky enough to have the new builder/developer continue building similiar styles and price ranges as the homes already built in the neighborhood. Usually not the case. These large national builders do not purchase the land blindly. They have already researched what will sell and sell quickly in that demographic and they know they already have an established product line that will fit perfectly.
For the residents that built prior to the change in builders, they will see even further loss on the value placed on their home by appraisers and prospective home buyers due to the lower average price range being built in the neighborhood. When I say further loss, meaning loss from the recession and overall downturn of the economy. But, if you had to ask what the outlook or value of these homes would be if the neighborhood had not been purchased and were still sitting owned by the bank, then I think we would agree the value is higher now that the neighborhood is moving forward to completion. Pulte had their grand opening in Viking Meadows in March of 2011. Last month marked completion of their first year and sales of 60 plus homes. I think any builder would take those numbers.
http://pro.truliablog.com/news/report-rent-vs-buy-winter-2012-update-on-the-debate/?ecampaign=tnews&;eurl=pro.truliablog.com%2Fnews%2Freport-rent-vs-buy-winter-2012-update-on-the-debateAin't No Lie, It's Cheaper to Buy
This goes hand in hand with the my post on Rental Outlook 2012. Rental markets are good and rents are increasing, that is why as this article states with a breakdown by Americas 100 Largest Metro Areas that most cities are in the position, where buying is better than renting.
The calculation is simple, after adjusting for property attributes and neighborhood attributes they have compared homes for sale and homes for rent during the same time period.
Example:
Asking Price: $200,000
Asking Monthly Rent: $1500
Price to Rent Ratio: $200,000/($1500 x 12)-11.1
Price to Rent Ratio of 15 or Less: Buying is better. (Assuming a 5 year stay)
Price to Rent Ratio of 15-20: Depends on buyer's tax bracket & if they intend to itemize taxes.
Price to Rent Ratio of 20 or Higher: Renting is better, except if you intend to say longer than 15 years.
So, let's see how this applies to Westfield, IN. I did a quick search in the BLC for Westfield, IN, 4 Bedroom homes and came up with a 4 Bedroom, 2.5 bath, 2 story, 2734 sq.ft. in a nice neighborhood (Setter's Run). Then I search for rentals in Westfield. There are only eight, 4 bedroom homes for rent and half of those are huge homes with an asking rent of over $4000/month. So I find one that is just under 3000 sq.ft. and is a 4 bedroom (Oak Ridge Crossing). It is a little newer, but everything else is pretty comparable. The asking rent on the home is $2250/month. Here is the calculation.
Asking Price: $199,500
Asking Monthly Rent: $2250
Price to Rent Ratio: $199,500/($2250 x 12)= 7.4
Clearly buying is better in this case in Westfield, IN assuming a 5 year stay. Why is the rental market so strong then? Well, because not everyone can buy. Maybe you are new to the area and want to get to know the area before you purchase. Maybe your employer has relocated you here for a 2 year contract. Maybe you have just been through a rough patch and your credit is not so good and you need to work on bringing your score up to qualify for a mortgage. Another reason for the strong rental market is simply Supply and Demand. There were really only 4 options for a 4 bedroom in Westfield up to that $2,000/month mark. Families are looking for good schools and safe neighborhoods. Westfield is a popular option. So whether you are thinking about investing in a rental property or buying a home to live in yourself, either way this is a great time to buy!
http://www.biggerpockets.com/renewsblog/2011/12/28/rental-outlook-2012-the-good-times-roll-on/
It doesn't take a rocket scientist to figure out that if you have cash to invest, real estate is the way to go. All markets are different but as this article describes, the best areas to invest are in the cities hardest hit by foreclosures.
The New Normal In Home Ownership Creates Demand: Whether you have just lost your home in a foreclosure or you are part of a growing population that are fearful of buying a home; you are helping to create huge demand for rentals. Most of that demand is for single family rentals. As this article describes, developers are scrambling to develope new multifamily rental complexes. Many of the displaced families that lost homes in foreclosure would like to rent a single family home.
Single Family Fills the Void: Investors are scooping up great deals on homes and turning them into single family rentals. Where else can you find these great deals than in the cities hardest hit by foreclosures. Those families still need a place to live. My experience when showing single family rentals in Carmel or Westfield Indiana is that you better have printed out the application before you show it and be ready to put the deposit down immediately if you want the place. You will be in line with others doing the same. In these same markets you have great schools and convenient to shopping, and transportation. Investors don't have to limit their search to foreclosed homes to find a good deal. There are homes that need a little work that have been sitting on the market over the winter and have not moved. Those homes are ripe for the picking and in most cases will have gradually lowered the price over the time listed so should be a great opoortunity for an investor.
Renting your home: If you are a seller that may be in a position to loose a lot of money selling right now, but need to move, renting your home is sometimes a good option. There are many factors to consider before making this decision. Can you afford to purchase another home while maintaining your existing mortgage? Will you be able to qualify for a loan with your existing mortgage. Most mortgage companies will require a 2 year history of rental income to count it as income. Do you have downpayment for a new home without the sale of your existing home? If you are in Indiana, your property taxes will be higher as a non-owner occupied residence (Homestead Exemption only applies to one home). Renting your home can be a viable option for homes that are in the upper price point as well. I have found in Indianapolis we have a pretty good market of transferees that will be working on a 2 or 3 year contract with their employer, so they do not want to purchase, but will pay in the $3500 to $5,000/month to rent a nice home in a nice neighborhood.
Working with LeAnne was a pleasure. She helped us find the perfect house for our family. Read More
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