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A case of Too Much Money

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John Hassler

Thread Starter
Senior Member
Joined
Jul 23, 2002
Professional Status
Certified Residential Appraiser
State
California
Having been an appraiser for nearly half my life I am still amazed by the things I see and hear.

I had a job of a 1-bed 1-bath condo. SP $385,000. Comps all from the same project and all same model in a seller's market: $365K, $375k, $377k, $455k. Wait, back up $455k what the ???. OK, $455k ... must have killer view or exceptional remod - I don't think I will used it but have to do a drive-by and take a pic just for my own peace of mind.

Just as I push that digital shutter Ms. $455k walks out of her unit - wants to know what's going on. I use every ounce of charm I have to get some info. "How's the view?" ..... 'hills' (typical). "Any remodel?" ...... 'no remod'. I'm at a loss - then she blerts out "well I think I might have over paid but I just loved the way the sun light came through into the shower".

Next revised URAR I want a row labeled BHTMM -- Buyer Had Too Much Money - Neg. 15% adjustment! I'm crossing my fingers my other three sales don't have similar stories.

John Hassler
 

Blue1

Elite Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
California
BHTMM would work well in my market. We have folks selling their "lower" California property for 500K to 1 Million and coming up here buying our "top of the market" 2,000 to 4,000 sq. ft. "mansions" for 200K to 300+K. Not many jobs up here.....the locals just can't afford such "luxury" but, the buyers have the money!!!! They've driven our market to a 3% to 9% per month increase in the past few months!!! (In certain areas) this is really nuts! Can you say "bubble?"
 

xmrdfghap

Senior Member
Joined
Jan 15, 2002
Professional Status
General Public
State
Florida
Can you say "bubble?"
<span style='color:brown'>
Bruce, I am not too sure "bubble" is a proper term. It would be if these folks are looking at the purchase as an investment, but they bought places to live. In an investment bubble, at some point these people are going to want to sell their investment and receive a net profit or gain. And, I am sure, some are going to experience a difficulty in selling and returning to their former home areas the way they are going to want to (some folks discover the country isn't what they expected). But by and large, I would bet most new residents are happy with their home, enjoy the amenities, and plan to stay.

Calling it a bubble is similar to describing an area where everyone drives chevvies and a few people buy caddies that those that buy caddies are creating a bubble.......

Will those homes sell for what they paid for them? maybe....will have to wait for the second and third round of sales and see what the prices are.</span>
 

George W Dodd

Senior Member
Joined
Jul 9, 2002
Professional Status
Certified Residential Appraiser
State
Virginia
Goodpasture

As usual you have missed the point. Do you any any empirical data to back up your opinion?
 

Dee Dee

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Though I can't roll out any data on other areas of the country, I can tell you that once your 'average joe' can no longer afford a mortgage because the average wage won't allow it, things start to change.
What I'm seeing in the Denver/mountain areas is the old timers are moving on, and the younger set can't afford to get their foot in the door.
 

Dee Dee

Elite Member
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Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
As time goes by I have decided that the 'bubble' theory is a bit extreme.
The term 'bubble' implies that there will be a sudden change that is explosive, but my observations of what is happening in the Denver/mountain areas is more subtle and slower moving.

The old timers that have been here for awhile are moving on, as are the retiree set because it simply costs too much to stay here. Younger people can't get a foothold because the housing costs exceed what is reasonable on the average wage. Your 'average joe' has to move out into the sticks and commute because they can't afford a home in the 'boom' areas. Either that or he has to settle for a much smaller home than what he could have afforded before the sudden increase in home prices.

There is no 'bubble', so to speak, but rather a shift in demographics that does not favor those who are especially young, old, or making lower wages. Many will just throw in the towell as they realize they are putting in far too much effort for not enough progress. You can only spin your wheels for so long.
 

mikegoff

Sophomore Member
Joined
Jan 28, 2002
Professional Status
Certified General Appraiser
State
Florida
Dee Dee,
I agree with you, our market in southwest florida is the same. When prices climb to a economic ceiling, these folks sell and move to areas more in line with their income. Thats when shortages of service personnel surface. Is there a bubble? I think thats just the new buzz word this year for a demographic shift.
With your insight and observation skills, you could work this market.
 

John Hassler

Thread Starter
Senior Member
Joined
Jul 23, 2002
Professional Status
Certified Residential Appraiser
State
California
DeeDee

We're working parallel markets as I have seen the same here for the past 15 years. The first timers have been priced out for years and only the Average Joe's who haven't spent the equity on their first house can move up. So be it. I think you will find that when (not if) the market turns you will see less of a drop than other areas.
What's making my life difficult is that it's hard to rationalize the sales when they can "afford" to overpay. It is going beyond the "need" for housing to the "want". And many seem to, and can afford to, want it now with price becomming secondary.


John Hassler
 

Dee Dee

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Oops!
Sorry for the double post, folks. Wasn't trying to bore you by being redundant. Didn't think the first one was sent properly thanks to some glitches with my ISP that froze up the computer just as I was sending it. :oops:

Mike,
Working a market like this is definately a challenge. It isn't so much appraising the homes that is hard to deal with, but rather the emotional toll of seeing how the changes impact the community.
It would seem that prosperous newcomers would be a blessing to the local economy, but when the home prices, taxes and cost of living start to rise beyond what the locals can afford, it's kinda sad.
 

Dale Smalley

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Florida
Hey John cant you just add the sunlight adjustment in the grid 8) :lol: 8)

I know I paid too much on our home BTWWI (because the wife wanted it) and something about if I screwed this up......
 
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