Lost Decade: Real Estate

[tryan]

My realtor emailed a active listing of a property I sold in 2001. The list price is $100 less than I sold it for.

She had said prices are back 2001 levels ... this confirms it for me. So it's no longer just a lost decade for stocks.

Your results may vary.

 

[laurence]

I sold my house in 2009 for $75k more than I paid for it in 2001. At that point I thought I was moving at the bottom of the crash. At the peak in 2005-6 my house was estimated at $580k and ultimately sold at $350k (I bought for $274k). I didn't mind because I bought my almost dream house for $490k instead of the peak price of $700k+

My former neighbor with the exact same floor plan obviously used my sale as a comp and put his house on the market in August of this year for $350k. He just reduced his price to $299k. Meanwhile my "bargain" is clocking in at ~$450k. But hey, your primary house is your home, not your portfolio!

 

[unclemick]

My realtor emailed a active listing of a property I sold in 2001. The list price is $100 less than I sold it for.

She had said prices are back 2001 levels ... this confirms it for me. So it's no longer just a lost decade for stocks.

Your results may vary.

Camp(aka house) over Lake Ponchhartrain went in Katrina(uninsurable) and bought a house in Kansas City 2005 with 20% down/30 yr mortgage.

Unerwater market price wise.

heh heh heh - notice the choice of noun.

 

[Chuckanut]

My community has gone backward seven years in price. What else is new?

 

[clifp]

We are in a Biflation environment.

Biflation: Everything you own goes down in price; everything you need goes up.

 

[landover]

One of my ex coworker is selling his house in DC suburb in MD. They bought the house for around 500k around 2002-3 and now asking 950k for that. I don't know if they will get it but also don't need to go down to 500-600k range to sell.

 

[W2R]

As far as I know, the housing market is still in deep water in most areas. I am confident that at some point it will recover, although this may take a long time.

Think of all those who have an unfulfilled desire to move. When the market finally recovers and houses are selling, so many people will want to move. The market could soar.

 

[Beryl]

The house I sold in 2010 resulted in >$200K gain but I bought/built it in 1993. My current house, purchased in 2007, has lost $16K in value (more when you consider the $30k improvements I made) which puts it back to its 1995 sale price. Not happy with this but I don't plan to move any time soon.

 

[Backpacker]

I built my current home in 2001 for about 160k. Have an accepted PA for 157k right now - 2011. In between I had an appraisal for 213k. I often wonder if it really was "worth" the 213k.

If this sale goes through we hope to be totally debt free, hoping to be able to find a bargain for less than what we'll net out.

 

[ERD50]

Isn't this a good thing in many ways?

Lower home prices mean that more people can afford homes. Isn't this good for 'upward mobility'? Does the outrage over the lack of upward mobility in the US end if one does not see their own property increase at the rate they expected?

And if you are making an upward move, it's good for you. If you are making a sideways move, it's a wash.

If you are downsizing, not so good. If sinking prices have you locked in an upside-down position, not so good.

Seems the good outweighs the bad?

-ERD50

 

[HFWR]

The market could soar.

Is that a "whee"?

In actuality, I'm under water on my house, if you include the upgrades/repairs/interest. I could sell it for much more than I owe, and likely 20% above what I paid, but I wouldn't really come out ahead...

 

[Andre1969]

I bought my old condo back in late 1994, for $84,000. The previous owner had paid something like $78,000 back in the mid 80's.
By 2001, it probably would have sold for around $100-110K, although I remember trying to get an appraisal to refinance a second mortgage around that time, and they came in at $95K. I needed it to come in around $98K, and asked them if they could fudge it up just a bit, and the guy at the credit union just looked at me like I asked him to pimp out his mother!

I'm sure that, a couple years later, they wouldn't have had a problem making those numbers come in where I wanted them!

Anyway, by early '04 I was in the house, and getting ready to have the condo fixed up to sell. Real estate agent said I could probably get around $150-155K. Well, the contractor doing the renovations screwed around, and ultimately bailed on me, so the place didn't get put on the market until the end of '04, much later than I wanted. But, as the real estate market started taking off, that delay actually worked in my favor. I settled in December 2004 for $185,000.

The guy who bought it from me sold it in March of 2007 for $245,000! And that's about where the market peaked in that neighborhood. Prices managed to stay fairly strong though, or at least optimistic. I remember just a year or so ago still seeing similar units list for $240-250K.

Currently though, there are two similar units for sale. One's asking $150K and the other is $155K, and they're both short sales. And the whole neighborhood is so under-water they won't let you do FHA financing and such anymore.

 

[Onward]

Biflation: Everything you own goes down in price; everything you need goes up.

 

[Andre1969]

Isn't this a good thing in many ways?

Lower home prices mean that more people can afford homes. Isn't this good for 'upward mobility'? Does the outrage over the lack of upward mobility in the US end if one does not see their own property increase at the rate they expected?

-ERD50

I'm not convinced that more people can afford homes, though. True, prices have plummeted, but there are also a lot more people out of work, or under-employed. Also, don't a lot of lenders require much larger down payments these days?

Plus, a lot of houses built in the last decade, in my neighborhood at least, are over-sized pretentious albatrosses, or condos, with very little in between. With the big houses, the monthly payment might be more manageable than in the past, but you're still contending with a big down payment, high utilities/maintenance/upkeep on the beast, and property taxes that probably haven't come down much, despite the drop in assessed value.

And condos, of late, seem to be running into their own problems. You have a cheaper point of entry, but often the condo fees are sky high, because of poor management, high vacancy rates, delinquencies, etc.

 

[TromboneAl]

As far as I know, the housing market is still in deep water in most areas.

So that's why so many homeowners are underwater.

 

[W2R]

So that's why so many homeowners are underwater.

Glug, glug! That's why.

The few houses here that sell, seem to go for 2003 prices. I'm glad I paid mine off years ago, so that when inventory starts moving I'll be able to sell without any problem of being underwater.

 

[ERD50]

I'm not convinced that more people can afford homes, though. True, prices have plummeted, but there are also a lot more people out of work, or under-employed. Also, don't a lot of lenders require much larger down payments these days?

Plus, a lot of houses built in the last decade, in my neighborhood at least, are over-sized pretentious albatrosses, or condos, with very little in between. With the big houses, the monthly payment might be more manageable than in the past, but you're still contending with a big down payment, high utilities/maintenance/upkeep on the beast, and property taxes that probably haven't come down much, despite the drop in assessed value.

And condos, of late, seem to be running into their own problems. You have a cheaper point of entry, but often the condo fees are sky high, because of poor management, high vacancy rates, delinquencies, etc.

That may be all true, but higher prices sure wouldn't help the situation, would it?

-ERD50

 

[Mysto]

Some areas are a lot more than a decade. We just bought a condo in Sun City Center FL for 65K. The original owners bought it for 87K in 1987.

 

[sheehs1]

I bought my home in 1993 for $135K. Added a $80K addition around 1995/1996. Tax assessment at the height of the market in 2006 was $450K. Total square footage is 3400 to 3500. Doubt I could get $300K for it right now (in our small city) but also think I could get over what I paid for it which is $210K. Total money in with landscaping, maintenance, insurance costs and projects thru the years means I would probably be lucky to break even. That's not too bad...considering the fake appreciation that happened. Besides, it's home and we don't plan to sell.

 

[Koolau]

One of my ex coworker is selling his house in DC suburb in MD. They bought the house for around 500k around 2002-3 and now asking 950k for that. I don't know if they will get it but also don't need to go down to 500-600k range to sell.

Apparently, gummint is the only growth "industry" left in the US - thus the demand for housing in DC.

Here in Paradise, housing prices are relatively stable, but have (nominally) appreciated in value since Tryan's starting point of 2001. My old home was recently on the market again (back in the midwest) for just about the same nominal price I paid in 1997. There was a brief period in the early 00's where price had appreciated about 10%. Of course, adjusted for inflation, housing prices are down significantly in that area even though nominal prices are near to being even.

Makes one wonder if anything has escaped the lost decade. Precious metals are the only thing that comes to mind, but I'm sure there are other things - maybe guns and ammo, illicit drugs, some "sin" stocks. Not very good signs for the future unless you believe it will all get better next decade. As a resident pessimist, I'm not counting on it.

 

[tightasadrum]

It all depends on the timing of the real estate purchase. I'm certain that my home is worth significantly less than what I have in it. (purchased in 2005+initial renovations+extensive basement development aka man caving). But since I never intend to move, what does it matter? I love living here, and, much more importantly, DW loves living here. But I do feel for those folks who want to move for better job opportunity, but can't because of non-sale of their house. So much for THAT part of the American Dream (Nightmare. )

 

[glippy]

Isn't this a good thing in many ways?
...
Seems the good outweighs the bad?

I was saving up for my first real estate purchase all through the last decade. It kept seeming like prices were going up faster than I could put money away (and I was tucking away a LOT of money, especially compared to the typical young worker). I figured I'd be doomed to living in studio apartments for the rest of my working life and then retiring to the middle of nowhere to build something I could actually afford. It was ridiculous.

I couldn't get the typical fly-by-night mortgages they were giving out like lollipops either because of some bad credit from my teen years. Turns out, thank goodness for that.

Then, low and behold, in late 2010, rather than having just a down payment saved up, I was able to purchase a place outright, twice over.

 

[arebelspy]

Regarding the thread title "Lost Decade: Real Estate"

...Are we sure that title is correct? Anecdotal evidence aside, this picture was circulating last February:

Then this update in September:

Of course I don't know if those charts are accurate (I've just seen them around), but I'm sure some research could verify fairly easily.

Of course, even if true it's a fairly cherry picked time period, and equities smash real estate over the last 30 years-ish. However real estate has been through a rough 4 years or so, but if the chart is true even that hasn't made it a lost decade for RE.

 

[ERD50]

I was saving up for my first real estate purchase all through the last decade. It kept seeming like prices were going up faster than I could put money away (and I was tucking away a LOT of money, especially compared to the typical young worker). I figured I'd be doomed to living in studio apartments for the rest of my working life and then retiring to the middle of nowhere to build something I could actually afford. It was ridiculous.

I couldn't get the typical fly-by-night mortgages they were giving out like lollipops either because of some bad credit from my teen years. Turns out, thank goodness for that.

Then, low and behold, in late 2010, rather than having just a down payment saved up, I was able to purchase a place outright, twice over.

Good for you! Over a lifetime, I think what separates most successful people from those less successful ones is getting themselves in position to take advantage of
opportunities that present themselves. There is some luck in all that, but overall, if you can swing at some of the right things and some turn out for the good, and avoid some of the pitfalls, you will be way ahead of the game.

I was lucky that the stock market bull occurred in the 90's. But if I had not got myself in a position where I had money saved up to invest, and the basic knowledge to actually invest it, it would not have helped me one bit.


-ERD50

 

[clifp]

Regarding the thread title "Lost Decade: Real Estate"

..


Then this update in September:

Of course I don't know if those charts are accurate (I've just seen them around), but I'm sure some research could verify fairly easily.

Of course, even if true it's a fairly cherry picked time period, and equities smash real estate over the last 30 years-ish. However real estate has been through a rough 4 years or so, but if the chart is true even that hasn't made it a lost decade for RE.

I am pretty sure that Real Estate return is accurate since the Case Shiller index starts at 100 as of Jan 2000 and is currently at 141.3. The stock returns on your chart don't correspond with the Morningstar numbers (I suspect they ignored dividends and maybe some other things).

This chart

Shows the total return of 10K invested on Jan 1,2000 to Sept 1, 2011
Dow $13,117
S&P 500 $10,153
VFINX $10,047 (Admiral shares would higher)
Nasdaq Composite $12,201

Now it require $13,149 today purchase $10K worth of goods in 2000. So the only investment that beat inflation since 2000 was Real Estate. I guess the best horse in the glue factory.