Single-Family Homes a “Very Attractive Asset Class Now” – Warren Buffett

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The news spread like wildfire.  No, it’s not another politician’s sex scandal or the latest (definitely not greatest) gas prices.  It is the monumental statement made by Warren Buffett that he would buy up “a couple hundred thousand” single-family homes.  The catch is that he would do that if it were something he could practically manage. He may not be able to practically manage it but individuals certainly can.

Think about that.  For months, if not more than that, countless Realtors have been urging their clients and potential clients that now is the perfect time to buy.  Now that it comes from one of the biggest investors of our time, it brings new light to the subject for many investors and has generated widespread industry buzz from the moment the billionaire uttered those words.

In an interview where he discussed several topics, soon into the discussion with Becky Quick of CNBC’s Squawk Box, he said that in addition to equities, single-family homes are probably the most attractive investment there is out there right now.  With the low rates that seem to be heading further down still, he suggests buying at these low interest rates and then for homeowners to refinance if and when the rates dips even more.

He cited that the only reason he has not purchased as many homes as he would have liked is because of the practicality of managing the transactions and properties.  Apartment units might have been more manageable and in his words, he said he would “load up on them” had that been the case. But for the everyday investor it makes perfect sense to seize this opportunity and Warren Buffett highlights this repeatedly in his most recent discussion on CNBC.

Mr. Buffett shared his perspective on the idea of buying homes at distressed prices, fixing them up and renting them out as an ideal way to get a solid return on investment.  Referring to the changing trends and attitudes within the housing market, he also said this is the perfect way to “short the dollar” because with a 30-year fixed rate mortgage it can go two ways; either the interest rate is too high down the line after which you can go and refinance or if it’s too low the other guy’s stuck with it for 30 years.  Could this be the return of the house-flipping craze that we saw boom in the mid 2000s?

Mr. Buffett’s statement brings new light to something that so many agents and mortgage consultants have been saying all along.  Buy now.  At a time when stocks are just now rebounding after four years of inching their way back up, he says that consumers should acquire 30-year fixed rate mortgages and then refinance when rates go down further.

If homeowners can hold on to their property for a long time after purchasing it at the lowest rates the industry has to offer they are sitting on the best investment possible of our time.  Of course equities are still very strong but they have come up quite a bit and Warren Buffett says owning a home is a “leveraged way of owning a very cheap asset”, making it quite possibly the most attractive investment that you can make.

Top Mistakes Homeowners Make In Determining the Value of Their Home

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No one wants their home to be on the market for months while generating no interest from buyers.  If you have a home that just won’t sell, do you know the reason?  One of the most prevalent reasons for a home not selling is that it has been overpriced according to its value and the surrounding market.  How do most homeowners arrive at their listing sale price?  Unfortunately, so many sellers use less than reliable methods of deciding the list price and as a result, they end up wasting time without selling their home at all.

Here are the six things that inexperienced sellers use to gauge their selling price, plus a list that explains what you can do to make sure your home is priced perfectly to sell.

What Not To Consider When Determining the Value of Your Home

THE AMOUNT PAID TO PURCHASE THE HOME

Just because you might have paid a certain amount for the home does not have anything to do with the current market value of the home.  Many homeowners falsely believe they will be able to recover the same amount (or more) as they paid initially, regardless of how the market and economy is performing today.

THE MINIMUM PRICE SELLERS NEED

In a market clearly controlled by buyers when sellers do list their home it is often because they cannot avoid it.  Either relocating for a job, no longer able to afford the house or they need the money and plan to use the equity of the home. Often sellers feel that they can set their price according to their need rather than what the current real estate market dictates.

WHAT HOMEOWNERS WANT

Everyone wants to get the maximum amount possible when they sell their home.  Many times homeowners self-evaluate the home’s value based on what they see as years of upgrades, maintenance and care.

HEARSAY FROM NEIGHBORS

When others in the same neighborhood talk about the value of their homes, they too are often misguided in how they came to the value.  Still it is common for homeowners to want to believe that if the neighbors’ home is valued at a certain level, theirs should be too.

THE COST OF REBUILDING IN TODAY’S MARKET

Inflation is a factor affecting how a home is maintained over the years after purchased.  This does not, however, carry over to the home’s value.  Often sellers try to incorporate the inflated cost of rebuilding in today’s market – a formula that simply doesn’t work.

THE HOME’S VALUE ACCORDING TO ANOTHER AGENT

There is no shortage of agents and when they are competing with each other one thing that can and does occur is false claims of yielding a much higher sale price on a home.  Though it may seem attractive at first, the result is often an unsold home that rarely receives any offers.

How To Price Your Property Perfectly to Sell

EXAMINE COMPARABLE SALES

The best way to determine the price of a home is to evaluate comparable properties in the same area.  Not only does this include location, lot size, property type and square footage, but a Comparative Market Analysis also looks at amenities in the home, types of flooring or other structural aspects as well as the amount of remodeling or renovation that may have been done on the home.

HAVE A PROFESSIONAL APPRAISAL DONE ON THE PROPERTY

Prior to approving a mortgage many lenders require an appraisal performed on the home. A great selling strategy is to order an appraisal independent of the buyer’s requirement for a lender.  Not only does this provide valuable insight as to what the maximum valuation of the home will be per the lender but it also allows the sellers to corroborate the price with potential buyers.

EVALUATE OFFERS RECEIVED ON THE PROPERTY

If the home is already on the market, one way to consider whether you have overpriced the home is to take a closer look at any offers that have been made on the property.  Do they align with the current fair market value?  Are other similar homes in the neighborhood also selling within the same price range? It is important to answer these questions to find out whether buyers perceive your list price as realistic or over the top.

HIRE AN AGENT WITH A PROVEN TRACK RECORD

Qualified, experienced agents are paramount to helping you determine the right price to set when selling your home.  If you choose a Realtor that is well versed in the area and specializes in the vicinity where you are located they will be able to assess your price range based on other like kind property sales through CMAs.  Through direct experience, their knowledge and insight almost always results in accuracy and in turn, quick results.