Guessing the value of one's home

Today Kathee and I were having the "next house" conversation. We've been in our house for 16 years. When we moved in we had three kids at home: 15, 13, and 10. Now we are empty nesters. We have 4 bedrooms, a den, 4 bathrooms, etc. 3,300 square feet. Too much space!

I believe we are approximately 3½ years from selling.

Our next house will almost surely be a condominium with between 1500 and 2000 square feet of living space.

Our house is in pretty good shape but there are things it will need before we sell. The carpet in ¾ of the house is 16 years old and will need to be replaced. The entire interior will need to be repainted before we sell. The exterior is in exceptional shape thanks to a hail storm 3 years ago. Siding has been replaced on half of the house. Almost every window was damaged then and was replaced. Our roof is a 40 year shingle and it was replaced 3 years ago. Our furnace and hot water heater are almost new and high efficiency. Our air conditioner is 12 years old. It may need to be replaced before we sell. Our driveway was repaved last year.

For the past two years, few houses in our neighborhood have been on the market. So it is difficult to gage the value of one's own home. This week a house up the street from ours went on the market.

We played a little guesstimate game in the car as to what it was listed for. Kathee guessed $ 325K and I  guessed $ 350K. We were not even close!

So without having a realtor connection how might one evaluate the value of one's own home.

Here's what I did:

First I checked the local MLS:

We've been in this house. I think Kathee viewed it when it was last on the market. Our house is at least this house. We have an extra room (a den that could be a bedroom). 

Second I checked Zillow: 

The Zillow estimate is $ 23.5K less than ours. 

Finally I checked the county property records: 

Hennepin County values the above property at $ 21,000 less than ours.

Now just because it is listed at $ xxx,xxxx doesn't mean it will sell for that amount. My own guesstimate on the value of my own home is $ 25,000 less than what this house is listed. So I will need to revisit the MLS site to see if their price is reduced and then after the sale revisit the county website to see the actual sale price. 

Retirement: Moving to a lower cost area

One Secret to Clocking Out May Be a Moving Van

Excerpt:

But for those who long to retire sooner rather than later, there is a way out of workaday life that can be leveraged to great advantage — moving to a lower-cost area.

This route to an earlier retirement is not for everyone, and it favors people who live in high-cost areas and have considerable equity in their homes to tap.

Beyond that, deciding to sell a longtime home filled with memories can be emotionally wrenching. Leaving an area with a strong network of friends, neighbors, family and service providers is not easy. The sheer difficulty of selling a house, buying a new one and moving can be stressful — and may not even be possible in this market.

But when the stars align, moving as part of a retirement plan can be an adventure that results in a richer life, both emotionally and financially.

Planning ahead is crucial to this strategy, and right now it also allows time for the housing market to improve. “Two years is not too long to be thinking about where you want to go,” said Bert Sperling, founder and president of the Sperling’s BestPlaces Web site.

Differences between high-cost and low-cost (but still attractive) areas can be steep. According to Bankrate.com, which offers a free cost-of-living calculator, the average price of a home in the San Francisco area is $813,000; in Boston it is $419,000; and in Chicago it is $361,000. Compare these prices with Asheville, N.C., at $284,000; Lexington, Ky., at $259,000; and Boise, Idaho, at $254,000. Move to a smaller home in one of these areas and the price difference is even more substantial.

Most retirement research is tedious, but researching where you may want to live next can actually be fun. Narrow your search to several locations, and go on vacation to those spots to see if you like them, Mr. Sperling advised. Talk to the locals to find out what life is like there and which neighborhoods would suit you. When you get back, check out the local papers online and make sure that the area is not dealing with severe budget cutbacks or a high crime rate, he said.

Keep in mind that you can rent in a new area — and perhaps rent out the house you now own — before you commit, Mr. Sperling said.

Most people who move to a smaller town want to make sure they are close to a major airport, said Fred Brock, author of “Retire on Less Than You Think” (and a former editor at The New York Times). Given the increasing likelihood of health problems, they also want to be near high-quality medical care. “You don’t want to move to a place that is beautiful and cheap but the nearest hospital is 100 miles away,” he said

Mr. Brock, by the way, is retired at 66 and lives in Green Valley, Ariz., near Tucson, where housing, property taxes and car insurance are all much less expensive than when he lived in Montclair, N.J., seven years ago.

Look at the property taxes, sales tax and income tax in your prospective new area, and be aware that some states tax pension withdrawals while others don’t. The Web site retirementliving.com is useful for making tax comparisons.

Comment: We are still almost 5 years out (to "re-wirement" (as we call it)). This is our basic strategy. We hope to: Move warmer; downsize; live in a state with lower taxes (perhaps Tennessee); and build a home that is handicap accessible.

Time to buy a home?

10 Reasons To Buy a Home

Excerpts:

1. You can get a good deal
   
2. Mortgages are cheap
   
3. You'll save on taxes
   
4. It'll be yours
   
5. You'll get a better home. In many parts of the country it can be really hard to find a good rental
   
6. It offers some inflation protection
   
7. It's risk capital. No, your home isn't the stock market and you shouldn't view it as the way to get rich. But if the economy does surprise us all and start booming, sooner or later real estate prices will head up again, too.
   
8. It's forced savings. If you can rent an apartment for $2,000 month instead of buying one for $2,400 a month, renting may make sense. But will you save that $400 for your future?
   
9. There is a lot to choose from
   
10. Sooner or later, the market will clear. Demand and supply will meet.
    
    
    

Comments: I question the validity of # 6 and 7. # 8 is a wrong reason to buy. # 10 may be later rather than sooner. My advice, if you can project staying in that home for at least 7 years consider it.

Housing: What the US could learn from Canada

Why Canada's Housing Market Didn't Crash

Excerpt:

"In the U.S., the whole idea of owning a home, there is almost a national obsession," Atkinson says. He knows because he's an American citizen as well. But he also knows that the banking system in Canada does not allow for the type of irresponsible buying and borrowing that we saw in the U.S. at the height of the recent housing boom (2004-2006).

For one, there are just six big Canadian banks that own the bulk of the mortgage market, and they don't securitize and sell off loans at nearly the rate U.S. lenders do. They hold nearly three quarters of their loans on the books, and 80 percent of Canadian loans carry mortgage insurance.

Canadian banks also had and have no such thing as the Alt-A, or low-doc, no doc loans that fueled bad borrowing and consequent defaults. At the height of the Canadian housing boom barely 5 percent of loans were considered "subprime," while a full third of U.S. loans were either subprime or Alt-A.

"Nobody stopped a Canadian bank from lending in the subprime market, they chose not to," says CIBC's Benjamin Tal. "It was not the government, it was not monetary policy; there were no regulations whatsoever regarding how much you can lend in the subprime market. Canadian bankers decided not to do so, because it was too risky."

Finally, the biggest difference is that if a Canadian borrower goes into foreclosure, the bank can and will come after that borrower's assets until the balance is repaid.

There is no easy way to walk away.

These are full recourse loans.

Canada certainly sees ups and downs in its housing market, and all you need do is look at the downtown Toronto skyline to wonder if there isn't perhaps a Miami-like condo boom going on right now. But experts say the booms and busts are far more measured there. The condo buildings going up are all presold, and there is not nearly the speculative condo investment there that we saw in Miami.

"There is an element of conservatism that runs right through the Canadian housing industry, from the banking, financing element, to the homebuilders and even in the resale of homes," says Phil Soper, CEO of Brookfield Real Estate Services - Royal LePage. "The innovation has safety valves."

Comment: Summary:

• Banks don't (at least to the extent that US Banks do) sell off loans
  
• Little subprime lending - No "Alt-A, or low-doc, no doc loans"
  
• Canadian mortgages are "full recourse loans". Can't just walk away
  
• No condo building unless it is presold
  

And everyone is better off!

Japan's “capsule” hotels

For Some in Japan, Home Is a Tiny Plastic Bunk

Excerpt:

For Atsushi Nakanishi, jobless since Christmas, home is a cubicle barely bigger than a coffin — one of dozens of berths stacked two units high in one of central Tokyo’s decrepit “capsule” hotels.

“It’s just a place to crawl into and sleep,” he said, rolling his neck and stroking his black suit — one of just two he owns after discarding the rest of his wardrobe for lack of space. “You get used to it.”

When Capsule Hotel Shinjuku 510 opened nearly two decades ago, Japan was just beginning to pull back from its bubble economy, and the hotel’s tiny plastic cubicles offered a night’s refuge to salarymen who had missed the last train home.

Now, Hotel Shinjuku 510’s capsules, no larger than 6 1/2 feet long by 5 feet wide, and not tall enough to stand up in, have become an affordable option for some people with nowhere else to go as Japan endures its worst recession since World War II.

Once-booming exporters laid off workers en masse in 2009 as the global economic crisis pushed down demand. Many of the newly unemployed, forced from their company-sponsored housing or unable to make rent, have become homeless.

Comment: Looks about like a pet carrier! More:

The rent is surprisingly high for such a small space: 59,000 yen a month, or about $640, for an upper bunk. But with no upfront deposit or extra utility charges, and basic amenities like fresh linens and free use of a communal bath and sauna, the cost is far less than renting an apartment in Tokyo, Mr. Nakanishi says.

Still, it is a bleak world where deep sleep is rare. The capsules do not have doors, only screens that pull down. Every bump of the shoulder on the plastic walls, every muffled cough, echoes loudly through the rows.

Each capsule is furnished only with a light, a small TV with earphones, coat hooks, a thin blanket and a hard pillow of rice husks.

Most possessions, from shirts to shaving cream, must be kept in lockers. There is a common room with old couches, a dining area and rows of sinks. Cigarette smoke is everywhere, as are security cameras. But the hotel staff does its best to put guests at ease: “Welcome home,” employees say at the entrance.