Starter home VS "forever" home

Member since 2020 · 12 posts · 40 votes

Hello, I'm a new investor trying to get a deal in the SLC, Utah area. I've been watching the market for a while now, and I noticed that since COVID-19 started prices of upper class homes ($500-750k) in good neighborhoods stopped increasing and are not selling fast. Many of them are actually reducing their prices (as much as 50k). On the other hand, starter homes are still selling but at asking price. Pre-COVID-19, starter homes were receiving multiple offers, many of them above asking price.

My questions are:

1) Are you seeing the same trend in your area?

2) Do you think starter home prices will decrease in following months?

3) Would you buy and hold upper class homes in good neighborhoods (if its a good deal) hoping that their prices will go back up once the COVID-19 panic passes. Renting them in the meantime.

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Armin Nazarinia
Saint Paul, MN · Member since 2018 · 189 posts · 107 votes
6y
Hey @David Hernandez- I think it all depends on your goals. what are you trying to get out of investing and what type of investing are you wanting to do. If you can rent it in the meantime and it cashflows then great but I think that's where you'll find the biggest challenge. Is this a place you're planning on living as well or just using purely as an investment?
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Becca Summers
Real Estate Agent · Highland, UT · Member since 2015 · 407 posts · 272 votes
6y
@David Hernandez Price drops like that are common in that price point. It's much harder to price homes so everyone is making an educated guess. The reason you are seeing them more is that instead of selling quickly the time on the market is getting longer. Looking at the sales in Salt Lake County for the last two month in the ($550-$750 range) the Median sold was
February $575,000
March $577,000
April $582,475
What I think is going on are people are worried about jobs so they aren't buying which has dropped the buyer demand to just those who need to buy and sell. However, it has also caused people who were selling to drop so supply and demand dropped together. The Million plus price point appears to be doing slightly.
Feb $1,225,000
March $1,151,237
April $1,194,418
I've listed four homes since COVID has hit and three had multiple offers two went above list by $15K and $20K and two went for the list price.
I think the thing that will change the starter is if there are a lot of foreclosures once the forbearance has been lifted. I would get yourself cash-heavy and be ready to jump on something that is a deal that cash flows from day one. That way if the value drops you still cash flow. Interest rates are at an amazingly low level so locking up anything long term as long as you have a stable job is ideal.
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Corby GoadeBusiness Member
Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
6y
I'm in Boise- our market is pretty similar in many ways. While I can't predict the future, I can say that we are still seeing multiple offers and properties selling over asking on starter/entry level homes. Lots of sellers have pulled listings because of the uncertainty, but we still have a housing shortage, so buyers are still buying, but inventory is down significantly. That's not exactly a recipe for a discount.
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