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Is This House Worth $1.2 Million???

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Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
Since when did "sense" have anything to do with the real estate market? If there's a demand and limited supply, the price goes up. Example- one area has 50's era 3/1's selling for $500K (mostly for the lot) while not far away, the same home sells for $150K, while $500K will buy you an estate home (4000-5000 SF) on acreage 20 minutes north. Price is in the eye of the purchaser.

In the cities with declining populations/jobs, I forecast that the inner city lower value properties will go into severe decline and high vacancies, while the higher-value properties remain just like that -high value.

Well, we'll see.

Roger
 

Verne Hebert

Senior Member
Joined
Feb 25, 2002
Professional Status
Certified General Appraiser
State
Montana
This article is looking in a window of time and likely the examples are on the extreme end of the appreciation range.

We know, from historical data, that single family homes are not investment properties. By definition, the returns on SFR's over time do not meet the expectations of the typical investor. They have been more in the area of 6 %, generally.

Now however, the typical investor, and the novice investor, and the new investor, are looking to something tangible to both "situate" cash, and hey, look at the market, and investment vehicle!

I think the road ahead for SFR's will have a very different look, from all people (and I didn't say Americans), than what we see in the rear view mirror in terms of a pure "investment" vehicle.

Doors are swinging. Don't let them hit you in the a__.
 

Steve Owen

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
Missouri
Great article, Julio. Thanks for posting it. It doesn't really tell the whole story, though. I highly recommend that everyone who reads it check out the link to the commercial story:

http://www.fortune.com/indexw.jhtml?channe...l&doc_id=209839

Now, why is commercial different. One reason is that people buy houses to live in. To fill a commercial space, you must have business. When the housing market softens from oversupply, new people come into the market as prices fall, so they usually don't fall very far. Housing, unlike other investments, has utility. People have got to live somewhere. Office space, on the other hand, can easily be overbuilt in times of plenty.

Instead of cooling down, prices keep hurtling upward, defying the laws of economic gravity just as grievously as those unmentionable dot-coms once did.

However, unlike the dot.coms, you can live in your house.

...Boston and the San Francisco Bay Area as well as New York, Miami, and Portland, Ore. Each is trapped in a classic paradox: Prices keep booming while jobs are vanishing. Clearly that can't last.

I've said it before - don't want to sound like a broken record. But, the only way there will be a nationwide crash in housing is if there is a severe recession or depression. Otherwise, recessionary trends will cause overheated individual markets to make corrections. So, there may be some bubbles (like Boston or San Francisco) but there probably won't be a nationwide bubble.

One other thing:

Looking at total appreciation, as the article does is deceptive and confusing. Appreciation, like inflation, must always be viewed based on the time factor (not just the total). So, the first house that increased 319% actually appreciated at an average rate of 53% per year (if it sells at that inflated price; as appraisers, we all know that what they ask is often not what they get). That's still pretty hefty appreciation - in my market 2 to 3 percent per year has been typical lately.
 

John Hassler

Senior Member
Joined
Jul 23, 2002
Professional Status
Certified Residential Appraiser
State
California
Steve Owen said:
So, the first house that increased 319% actually appreciated at an average rate of 53% per year (if it sells at that inflated price; as appraisers, we all know that what they ask is often not what they get). That's still pretty hefty appreciation - in my market 2 to 3 percent per year has been typical lately.

Steve

They were quoting selling prices in that survey. One of the properties listed (Mill Valley) is in my subject market and I checked my public records and a property did go from from $432,000 (1997) to $969,000 (2002) but who's to say there wasn't $150k of remodeling (not unusual for the area). My rule of thumb has been to multiply 1992-1997 sales prices by 180% to estimate their current value which is an annual compound rate of 12-13% for 1997-2002.

Unlike what the article says about the coasts, I don't see a big bubble in my market - just north of SF. Local unemployment has jumped from 2% to 4% per the newspaper which is about the historical local average. Rarely do I see a downpayment of less than 20% and most of the refi work I've been doing has been rate & term or small cash-out, not "max-refi". I hope I'm reading these economic tea leaves correctly, I'd hate to be blindsided.

John Hassler
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Boy am I glad I am not in your market. Our little 6 to 8 % a year is enough for me.
 

Jim McGrath

Junior Member
Joined
Jan 25, 2002
Professional Status
Certified Residential Appraiser
State
Florida
Boy am I glad I am not in your market. Our little 6 to 8 % a year is enough for me.

It's only a few highly suspect ones, Mike.

Jim
 
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