You Get What You Pay For From Free Real Estate Services Sites
Well, it's hard to believe that we're coming upon two milestones at the very same time. This blog is now 1 year old, though my first meaningful blog post was in January of this year. But the real milestone is that today's blog post is the 200th post in the Tallahassee Real Estate Blog! I'm not so sure that when I started this that I thought it would be so involved.
Since this is the 200th post to the Tallahassee Real Estate Blog, I think it is excellent that we have a question from a reader that will serve as the basis of today's article. I think the question mirrors what many people are wondering and really should be the central discussion point for real estate professionals all around the country.
The reader wrote:
Joe, great job on your posts, this is the first time that I have read your blog and I was actually surprised at the detailed level of information. I was expecting a "siss-boom-bah-rah-rah-rah" pro-realty blog and came away surprised with the level of honesty you impart. Thanks. I do have a question. I bought my house in May of 03. It's in-town 3br/2.5 br w/1780 SF, pool and about 1/3 acre lot about 7 blocks away from Leon High. It went for $130k, was appraised in Jan of 07 at $210k and now on Zillow, it rates at $228k. It sold in 01 for $100k (2 years before I bought it). I just can't believe the hype in terms of prices. I am a trained macro-economist and it still seems to me that we are in a a bubble zone. Home prices have gained anywhere from 40-80% since 2003, depending on location, however net income in Leon County has only risen about 4-5% in the same time, how can this be sustainable? I don't believe it can, at least logically if we are to assume new homebuyers don't want to eat cup-o-noodles 6 out of 7 days a week in order to pay for the mortgage?
This is a great conversation starter because it addresses several key issues that we have been discussing on the Tallahassee Real Estate Blog. Rather than just "winging" my response, I've broken the comment down to sections that are each very important:
Home Valuations On Free Real Estate Services Sites
Our reader states that his home was appraised in January of 2007 for $210,000 and now a national real estate web site gives is a value of $228,000. This one little sentence is loaded with important information that all home sellers (and home owners and home buyers) should know:
- The purpose of an appraisal has an affect on the value that the property receives. An appraisal that is done for purchase is usually much more conservative than one performed for a refinance (read this to say that a refi appraisal has been historically higher than what the home could be sold in the market). Remember, no matter what any Realtor or Appraiser says a home is worth, you still need to find a buyer who will pay that amount.
- Zillow, Trulia, Yahoo real estate, and many other "free real estate service providers" aggregate a ton of information on homes and then try to simplify what they have to "ball park" prices on real estate in different parts of the country. Typically, they provide a good service if you only care to know an estimated property value for a home in a mass-produced, single builder area. As soon as you throw variables at these simplistic data mines, the valuations are soon off by as much as 60%. They just aren't ready yet to throw all the valuation criteria that buyers use into a massive equation to be used on a national level.
- Real estate values are local in nature. While the whole country is going through a real estate down-turn right now, I bet there are a handful of markets that are in a bull market, due to local employment changes (like a large new employer moving in) and historic low interest rates. When somebody asks me to give them a value for their home, I'm able to take all the local real estate market conditions into consideration, whereas the national aggregators are trying to do a price per square foot calculation to come up with some non-market-realated opinion of value.
Real Estate Values Are Determined By Buyers
The value of a home is determined by what a buyer is willing to pay in TODAY's housing market, based on the comparison of the home in question with all of the others on the market, in its neighborhoods and others like it in the desired market area. So,
What does not affect the market value of a home?
- What you paid for the house
- Your remodeling costs
- The amount of cash you need to buy your new house
- What you want for your house
- What I say your house is worth
- What other real estate agents say your house is worth
- What an appraiser says your house is worth
- What the tax assessor said your house was worth
- What Zillow says your home is worth
- What Trulia says your home is worth
Home Appreciation In Tallahassee
The reader finally asks a very important question, which I will paraphrase as "If wages are up 5% in the past five years, how is it that Tallahasseans can afford to pay 40-80% more (the reader believes home prices have gained anywhere from 40-80% since 2003) for a home?" I think to answer this, I first want to point out that home values are up, but to a much lesser extent than the reader believes. The following table shows what the "average home price" in Tallahassee has been and how that compares to our current values:
Nevertheless, the question is still extremely valid. Single family home prices in Tallahassee are up 35% since 2003, and yet wages are up much less than that. How can buyers afford these homes?
The simple answer is "they can't!" Prices peaked in 2006 and since then, the number of people who are choosing to buy a home in Tallahassee continues to fall. This falling demand has and will continue to lead to falling prices until buyers feel that they can afford to buy a home. If you look at the following real estate graph of single family home sales in Tallahassee, you'll see that roughly 300 buyers per month are closing now versus nearly 700 per month at the peak of the market.
Readers' Questions Make For Best Real Estate Blog Discussion
I feel as if I've only scratched the surface in my response to this great feedback from our Tallahassee Real Estate Blog reader. I hope more people will provide the spark for our future blog posts and who knows, maybe we'll do a follow-up for our 300th post!
*Joe Manausa Real Estate is a brokerage company headquartered in Tallahassee, Florida. Its unique business model provides specialists to both home sellers and home buyers, and the results speak for themselves. JMRE has significantly more 5-star reviews on google than any other local competitor. Joe Manausa Real Estate is a leader in internet marketing and utilizes search engine optimization, email marketing, social media and data analytics to get their clients’ home sold faster and for more money than any other Tallahassee brokerage firm. For more information, visit www.manausa.com or call us at (850) 366-8917.