Top Three Home-Buying Tips Now
Mark Twain famously said that the reason land was such a good investment is that “they’re not making any more of it.” In the Midwest, that’s never really been true: there’s always another cornfield, just beyond the last one, that can be leveled and developed.
Even before gas prices exploded, that’s one reason why the exurbs were dubious, long-term investments.
That leads directly to home-buying Rule #1: Look for Scarcity — ideally, the natural kind. In the U.S., places like Manhattan and SF are destined to always be expensive because land there truly is finite.
The next best kind of scarcity is the man-made, legal kind. Boulder, Colorado and Lake Tahoe sport sky-high real estate prices not just because of their gorgeous settings, but because the local citizenry long ago enacted strict limits on development. Voila! Artificial Scarcity. People may argue whether such policies are elitist, anti-growth, etc., but there’s no denying how expensive housing is in these places.
So how do you make scarcity work for you in the Twin Cities? Start with the Chain of Lakes and the surrounding urban park system — clearly the crown jewel of the Twin Cities’ metro area.
The many neighborhoods adjacent to the City Lakes — Linden Hills, Kenwood, Lowry Hill, East Isles, Nokomis, Sunset Gables — have proven to be especially strong, long-term performers. Ditto for homes along or near Lake Minnetonka, the Mississippi River, the St. Croix, and White Bear Lake.
Less than 15 miles from Downtown Minneapolis, Lake Minnetonka forms a natural barrier that serves to limit growth to the West: it’s an awfully big jump from Deephaven, Wayzata, and (the city of) Minnetonka on the east side of the Lake, to Mound and Minnetrista on the west. That bodes well for the former group’s long-term prospects.
Context > Location
Rule #2: Context, Context, Context. There’s no bigger cliche in real estate than “location, location, location.” But that’s not exactly true anymore. In a housing market filled with hidden land mines, still-growing foreclosures, and financial uncertainty, it would be more accurate to say “context, context, context.”
In just the last month, the local Board of Realtors added a field to the MLS database for foreclosures. Make sure your agent uses it. There are plenty of reasons to buy a home in a neighborhood with foreclosures — starting with price — but at the very least you’ll want to dig further.
How many foreclosures are there? Are they “stealth” foreclosures (well-maintained, inconspicuous, etc.) or obvious eye sores? Have the foreclosures that have sold been cleaned up and inhabited, or left to deteriorate?
Of course, “context” has positive connotations, too. Proximity to things like infrastructure (light-rail, the airport); jobs (Downtown, the University); good schools; and culture and entertainment (restaurants, the new Walker and Twins Stadium) underpin high values in many neighborhoods.
Rule #3: Buy Quality. Automakers like Toyota and Honda have learned to justify premium prices by emphasizing the “total cost of ownership.” That includes not just the cost (and inconvenience) of repairs, but the likely resale value several years later.
If that approach makes sense for buying a car — an asset with perhaps a 10 year life — how much more relevant is it for a house, which (hopefully) has a lifespan measured in decades (if not longer)?
Floating . . . Homes?
So how can you tell if a home is well-built? Just like car buffs talk about “fit and finish,” contractors and inspectors talk about a home’s “pedigree.” They’ll look for high-end construction materials (brick and stucco exteriors; quality millwork, etc.); evidence of skilled craftsmanship (plumb lines); and features such as crown moldings and built-in’s that show attention to detail and quality.
Obviously, construction materials and techniques have evolved with the passage of time. So just because a home’s walls are made out of sheetrock instead of lath-and-plaster doesn’t mean a home is poorly built (to pick an offsetting example, modern windows — double pane, low E, argon-filled — represent a huge advance over old-timers). However, well-built homes, like Tolstoy’s “happy families,” just seem to have a common feel to them, regardless of the era.
There’s a saying in the stock market that “a high tide raises all ships.” That’s also true with respect to homes. However, I’d suggest an important corollary: “only if they’re floating.”