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Author: mishyla Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127815  
Subject: Am I Crazy? Buying a house while selling another Date: 6/18/2012 5:21 PM
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I have posted before on a related topic (sale or rental of our condo) and found the Fools feedback to be intelligent and oh so helpful. Here I am again and looking for any stories, advice, feedback (good or bad), etc., from anyone who has been in a similar situation.

We are a financially conservative couple who purchased a condo in 2003 which was well within our means. We are now relocating from a trendy, young area to one that is more family friendly.

We have had our condo listed since late winter 2011 and have received one offer but it was below our asking and we passed on it. We've had lots of interest in recent weeks but no offers. At the same time, we have found a home in the new area and have an offer on the table. It's definitely a fixer. The home is priced just slightly higher than what our condo is listed for.

This is all about timing. We fear buying without having sold but equally fear selling without having lined up our next place. Who wants to miss out on these rates? However, buying this home without having sold our condo will seriously deplete our ER fund.

This is one time that this risk averse girl is taking a flyer. Am I nuts? Have any of you made the same kind of leap? Or, do you just have any REO advice to share?

I'm all ears.
Thank you in advance.
Mishy
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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 123051 of 127815
Subject: Re: Am I Crazy? Buying a house while selling ano Date: 6/18/2012 5:46 PM
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Hi Mishy,

This is one time that this risk averse girl is taking a flyer. Am I nuts?
You're not going to like my answer; Yes... you're behaving irrationally.

Despite the recent uptick & firming of real estate in most markets, we are *NOT* out of the woods, and I fully expect another significant round of softening. This is hardest on sellers, and makes being a buyer a breeze.

You'll be *far* safer (and still get what you want) if you make your sale 1st... price it to the real market (if you're not getting offers, its simply too high.) Remember, what you paid to get it is irrelevant to what it will sell for today... and you are swapping canoes in the middle of the same river current, so if you get a bit hammered on your sale price, you are equally going to be buying your next place at a hammered-down price as well.

If you are tight on reserves, trying to straddle ownership of 2 primary homes (during a buyer's market) is dangerous. An overwhelming number of foreclosures have occured from exactly this effort.

Do the hard part first... swallow hard & take the discount to get the current place sold... *THEN* (while it is under contract) get your next place lined up.

Luck!
Dave Donhoff
Leverage Planner

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 123052 of 127815
Subject: Re: Am I Crazy? Buying a house while selling ano Date: 6/18/2012 5:49 PM
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We have had our condo listed since late winter 2011 and have received one offer but it was below our asking and we passed on it. We've had lots of interest in recent weeks but no offers.

Please put an actual month/year to 'late winter 2011'.....when I see that, I think Feb/Mar 2011, which means your condo has been on the market for 15/16 months without selling?

This is all about timing. We fear buying without having sold but equally fear selling without having lined up our next place.

Move-up buying is always about timing. However, if you really have had your condo on the market for 1.25 - 1.3 years without selling, I'd be a whole lot more scared about buying a 2nd home without having a solid offer on the condo than I would be about having to move into a short term rental for a few months if you don't have your next place lined up.

Who wants to miss out on these rates?

I wouldn't worry about that for at least another year. Yes, you might have already missed 'the bottom', but very few people are lucky enough to hit that. The rates are unlikely to go up significantly for at least a year - 18 months, if you look at the Fed forecasts.

However, buying this home without having sold our condo will seriously deplete our ER fund.

Besides depleting your emergency fund, will you even qualify for the loan on the new home without having a solid contract (with closing date) on the condo? Especially since your condo has been for sale for more than a year, many lenders aren't going to assume that you will sell it any time soon, and will require that your income be able to support housing costs for both properties.

And how long will you comfortably be able to make 2 mortgage payments? Since your condo has already been on the market for over a year, what if it takes another year, or more, before you get an offer you are willing to take?

This is one time that this risk averse girl is taking a flyer. Am I nuts? Have any of you made the same kind of leap?

Unless you have the cash flow that will allow you to pay mortgages, HOAs, taxes, insurance, maintenance, etc. for both properties at least as long as you've already had your condo for sale, yes, you are nuts. I have only done this once without having a solid contract on my previous home (out of 6 houses sold) and that was in a situation where I had already moved to my new town and was having to pay rent in addiiton to my mortgage anyway, so the increase in cost was less than $100/month. It took 7 more months before my old place closed.

Since you are currently living in the condo, and don't already have double housing expenses, you would be committing yourself to a significant additional outflow of cash each month.

Or, do you just have any REO advice to share?

Well, since "REO" typically refers to "Real Estate Owned" by lending institutions, we'll hope that you aren't going there. But if you don't have the cash flow, committing to buy a new place without selling your old place could put you there very quickly.

AJ

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Author: YewGuise Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 123053 of 127815
Subject: Re: Am I Crazy? Buying a house while selling ano Date: 6/18/2012 6:04 PM
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...received one offer but it was below our asking and we passed on it.

Why didn't you make a counter-offer?

We ... fear selling without having lined up our next place.

(1) Worst case, you rent for a while. Kind of a nuisance to move twice, but not a financial disaster, which buying before selling could be.

(2) Since you're willing to buy a fixer-upper, you won't have trouble finding another place if this one gets away. So many people want "move-in ready" that you'll have little competition when bidding on any place that needs work.

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Author: Watty56 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 123054 of 127815
Subject: Re: Am I Crazy? Buying a house while selling ano Date: 6/18/2012 8:28 PM
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...It's definitely a fixer. The home is priced just slightly higher than what our condo is listed for. ...


It is a long shot but you might check to see if the seller of the house would be interested in a deal where you trade properties along with some cash.

Like I said, it is a long shot but odder things have happend.

You could be dealing with someone who is looked to get a place that requires less maintenance or and investor who will look at the offer as a possible business deal.

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Author: mishyla Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 123055 of 127815
Subject: Re: Am I Crazy? Buying a house while selling ano Date: 6/18/2012 8:46 PM
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Yes, I know there may very well be another round of softening. Yet another reason I'm being so irrational here.

Just curious, what is the evidence you see of more softening?
Thank you for being the voice of reason. If our offer is accepted, we still have the inspection out to save us.

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Author: mishyla Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 123056 of 127815
Subject: Re: Am I Crazy? Buying a house while selling ano Date: 6/18/2012 8:49 PM
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Hi AJ.

Thank you for your thoughts and question. I think maybe all I needed was for like minded financial people to bring me back to earth.

We listed the condo 12/2011 so it's been on the market for 7 months.

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Author: mishyla Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 123057 of 127815
Subject: Re: Am I Crazy? Buying a house while selling ano Date: 6/18/2012 8:52 PM
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Hi.

We did counter but they didn't meet it. We were still below asking and they wanted us to pay closing costs. Of course, now that seems like the one that got away.

Good points about renting and fixing. This is a really incredible house and very unique, especially in the area that it's in. Lots of indoor/outdoor space. We won't find another like it (but that still doesn't mean this is the one for us).

Thank you for your thoughts.

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Author: mishyla Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 123058 of 127815
Subject: Re: Am I Crazy? Buying a house while selling ano Date: 6/18/2012 8:53 PM
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It's an REO. I would be thrilled if the bank would just swap us. :)

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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 123059 of 127815
Subject: Re: Am I Crazy? Buying a house while selling ano Date: 6/18/2012 9:23 PM
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Yes, I know there may very well be another round of softening. Yet another reason I'm being so irrational here.

Just keep repeating to yourself; discounts on my sell side will be parallel to the discounts on my buy side...

Just curious, what is the evidence you see of more softening?

There is a *massive* amount of real estate that is either vacant, or occupied by people not paying their mortgages, which have not yet had foreclosure procedures initiated... many for months on ehd, and some now for year(S!) on end. They are not published, nor reported on any reported balance sheets, but they are out there, and they are *ALL* going to have to *EVENTUALLY* be foreclosed upon, and re-sold at auction (or taken back into swollen REO portfolios to try to sell on a held basis.)

Eventually they *will* be coming onto the marketplace... and their volume will drive prices down (and/or hold prices flat for a long, extensive time period.)

Dave Donhoff
Leverage Planner

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Author: CCinOC Big funky green star, 20000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 123060 of 127815
Subject: Re: Am I Crazy? Buying a house while selling ano Date: 6/18/2012 9:54 PM
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I wouldn't do it, myshyla, again. I did that once and lived to regret it. It's nerve-wracking to pay two mortgages while hoping one of them will soon disappear.

I agree with the above poster that it's inconvenient to move twice in short order, but it's the best course of action, in my opinion.

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Author: YewGuise Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 123061 of 127815
Subject: Re: Am I Crazy? Buying a house while selling ano Date: 6/18/2012 9:54 PM
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If our offer is accepted, we still have the inspection out to save us.

If your offer has not yet been accepted, you can withdraw it.

If your offer has been accepted, and you want out, have a chat with your Realtor. Seller might release you (and return deposit) even without the inspection.

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Author: jrdown Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 123063 of 127815
Subject: Re: Am I Crazy? Buying a house while selling ano Date: 6/19/2012 2:38 AM
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Dave ~

My home in Kansas City qualifies as one such home. It is "for all intents & purposes" a foreclosure but it hasn't gone to that paperwork yet. This home has been on the market since mid-February 2011. Lots of phone calls and letters from Wells Fargo. I swear the left hand doesn't communicate with the right hand.

Had an offer on the house this past March (it wasn't even a short sale offer but one that is what is owed on the house) and they have not responded. I received a call from my Realtor that the bank wants me to bring $2000 to the closing and he told them that wasn't possible and I signed an addendum stating that no money will be given by me.

What is very sad is that the person who wants the house came totally qualified with a great down payment and hoped to move in at the end of May. I am thrilled that he still wants it and is willing to give Wells Fargo another 60 days to make up their minds.

I have heard this is better for me but my credit score was ruined beginning at 60 days past payment. I also read that since I had good credit and score (820+ with all three reporting agencies) that it will take me even longer to recover from this than someone with a median score.

Oh well, I haven't paid anything for a very long time but KCMO water services will not allow me not to pay unless the home is sold or repossessed. I wait in limbo while making monthly payments for water that isn't used. Something about me having to pay $300+ penalty if I don't continue. Sure hope this mess ends soon. It's a great house with upgrades and some family should enjoy it.


Robyn

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Author: chopsueycp Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 123068 of 127815
Subject: Re: Am I Crazy? Buying a house while selling ano Date: 6/19/2012 12:32 PM
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Dave,

There is a *massive* amount of real estate that is either vacant, or occupied by people not paying their mortgages, which have not yet had foreclosure procedures initiated..... They are not published, nor reported on any reported balance sheets, but they are out there


So how do you know?


CP

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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 123070 of 127815
Subject: Re: Am I Crazy? Buying a house while selling ano Date: 6/19/2012 1:30 PM
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Hi Robyn,

Bummer to hear you're getting the "shadow" treatment... keep at them!

I have heard this is better for me but my credit score was ruined beginning at 60 days past payment. I also read that since I had good credit and score (820+ with all three reporting agencies) that it will take me even longer to recover from this than someone with a median score.

Fortunately, that's not true. You can rebuild your credit (and ditch/scrape/nuke the stinky derogatories, allowing the scores to climb amazingly quickly) just as well as anyone who originally had any score. After this "bleeder" is a closed account, ping me & I'll help with some pointers.
==============

Hi Choppers,

So how do you know?

Its an anecdotal collective of "thumb on the pulse" gut feeling. I suspect Robyn's post hit prior to yours but without you seeing it. I have also spoken with *many* in her same boat.

On a personal basis, as a real estate investor myself, I have a home under purchase contract to buy (contract with the owner/seller,) dated to close on or before January 2020. Its a beautiful, well-maintained 4 bed 3 bath split level in a quiet cul de sac hidde 1 block & around the corner from a sub-development strip-mall, grocer, Dairy Queen, McD's, Starbucks (2 within a 3 block walk, bus lines, etc.

The owner had already not made any mortgage payments (1st nor 2nd, both at BofA) for 9 months when I got it under contract about 1.5 years ago. She's living in it rent/mortgage free, which she appreciates (basically its a form of public welfare our government & banking system is providing on a "ghost basis") as a single Mom (with live-in boyfriend) who has subsequently finished her M.A. and launched a family counseling practice.

You'd *never* tag her as a "deadbeat"... neither if you knew & observed her, nor if I gave you the address to do a driveby or a Google street view. She busts her butt in building her education & career, and also keeps the home looking the nicest on the entire cul de sac.

This is just one example... but 10 years ago I spoke with exactly *NOBODY* in this position. Today, I could take a SWAG and say my own random (or non-random) conversations run across maybe 1-2 people like this out of every 10 new introductions.

I don't know if that accurately reflects a 10-20%-of-population assumption... but I think its safe to say there is a *LOT* more than is being reported anywhere.

Cheers,
Dave Donhoff
Leverage Planner

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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 123072 of 127815
Subject: Re: Am I Crazy? Buying a house while selling ano Date: 6/19/2012 2:24 PM
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Mish,

I quickly read through this thread trying to catch up on many days of no TMF. Possible I missed something.

From what I saw you have a condo in a hip young area that you want to sell, and buy an REO that is a fixer but unlike anything you will find in the future.

Where are you? You've gotten some advice that markets will continue to soften, but Dave's advice in WA may not correlate to your area. Just ask CP and all the difficulties he had with competition in buying what he thinks of our market. Could be seasonal, but right now it is hot around here, with properties in my neighborhood getting multiple bids over asking. All real estate is local. IMO only things like financing can be regionalized or nationalized.

So look more closely to your area. What would the rental market be like for your condo if it did not sell? Since it sounds as though it is in a hip place, perhaps it would rent well enough to be cash flow positive. Analyze keeping one place as a rental and one as your new home. Plus, if the new place needs lots of work, you may need to stay elsewhere for a while. Or if you don't want to rent, talk to your agent about local sales trends for your price range and comparable condos. Try to figure out why some of the others sold, why others are still on the market. Go see your competition, and try to come up with a non-price way to be better than they are. If you can identify a strategy, then the risk of buying the second before the first is sold could be a good one.

No matter whether you rent or carry both places, make sure you have a significant nest egg to be able to do so. Don't play close to the edge of that financial cliff. Either way, we don't know enough to give you any advice about your situation. All I'm proposing are some questions for you to ask yourself, and suggesting you dig for more info.

Good luck,

IP,
having bought our future retirement house in Jan while planning on holding on to current house for a few more years

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Author: karenlj Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 123073 of 127815
Subject: Re: Am I Crazy? Buying a house while selling ano Date: 6/19/2012 2:52 PM
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So, Dave...

When will all of this real estate start coming on the market? In Houston.


Karen

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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 123075 of 127815
Subject: Re: Am I Crazy? Buying a house while selling ano Date: 6/19/2012 3:34 PM
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Hi Karen,

When will all of this real estate start coming on the market? In Houston.
That's THE crystall ball question(s), isn't/aren't it?

A) when will they come on market?
B) will they flood out all at once, collapsing the market?
C) will they trickle out over time, consistently depressing/flattening the market even when its trying to become healthy?

Answer; I have no idea... but the banks can't afford to hold them all forever.

Dave

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 123077 of 127815
Subject: Re: Am I Crazy? Buying a house while selling ano Date: 6/19/2012 3:41 PM
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There is a *massive* amount of real estate that is either vacant, or occupied by people not paying their mortgages, which have not yet had foreclosure procedures initiated... many for months on ehd, and some now for year(S!) on end. They are not published, nor reported on any reported balance sheets, but they are out there, and they are *ALL* going to have to *EVENTUALLY* be foreclosed upon, and re-sold at auction (or taken back into swollen REO portfolios to try to sell on a held basis.)

Eventually they *will* be coming onto the marketplace... and their volume will drive prices down (and/or hold prices flat for a long, extensive time period.)


My home in Kansas City qualifies as one such home. It is "for all intents & purposes" a foreclosure but it hasn't gone to that paperwork yet. This home has been on the market since mid-February 2011.

Actually, if your home *is* on the market, it doesn't really qualify for the shadow inventory that Dave was referring to - those are homes that haven't entered foreclosure, nor have they been put up for sale. Since your house is for sale, it's already counted as part of the marketplace, so it's not in the shadows.

Good luck in your attempt to sell.

AJ

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Author: mishyla Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 123095 of 127815
Subject: Re: Am I Crazy? Buying a house while selling ano Date: 6/20/2012 1:36 AM
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Thank you so much for your suggestions. Our condo is in Hollywood (hip,trendy) and we're moving to the SF Valley (great schools, lots of families). We are definitely in a multi-bid market right now on the home side; the condo side is unfortunately not as robust. Hard to tell if it's a lasting trend or seasonal but it sure feels like it's time to jump in.

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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 123096 of 127815
Subject: Re: Am I Crazy? Buying a house while selling ano Date: 6/20/2012 10:31 AM
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I confess I know nothing about your area, being an East Coaster, but the mention of "Hollywood" raises another option to consider: http://www.vrbo.com/search/usa/california/keywords:hollywood...

Vacation rentals, assuming your condo association and local gov't allows it, can be much more profitable than long term rentals. There seem to be companies in the area that would manage the rental for you if you chose not to take that on, but typically that makes it much less profitable. Of course, it also keeps you from taking on a second job of managing your own rental. Again, don't know what is typical in your area.

Let me know if this is something that interests you, and I can share some links and spreadsheets to evaluate the investment. Once our retirement home is fixed up, we will be making it a vacation rental, using it when not rented.

IP

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Author: chopsueycp Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 123097 of 127815
Subject: Re: Am I Crazy? Buying a house while selling ano Date: 6/20/2012 10:48 AM
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Just ask CP and all the difficulties he had with competition in buying what he thinks of our market. Could be seasonal, but right now it is hot around here, with properties in my neighborhood getting multiple bids over asking. All real estate is local.


I can 100% personally confirm that real estate is local. My two target areas were directly adjacent to each other and similar in every geographical way (both suburbs of a major city), but one school district was the best in the area, while the other was spiraling downward. One had lots of commerce, the other had industry closing up shop. You can guess which one had the red hot real estate market, and which one was struggling to sell even bargain-basement-priced homes.

I learned so much in the last year, but this was probably my most shocking realization - every township and school district basically had its own real estate market. While I'm sure there are still some macro forces at play (interest rates, for example), the "micro" forces within townships and school districts are worth by far the most in the perceived value of a home.


CP

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