It's the worst now only because it was one of those places where it was the craziest during the boom. I inherited a house at the height in the summer of 2005. The house was a complete gut yet I had 3 all cash offers (as in a suitcase of dead Presidents) in the two days I was there to take care of my father's personal affairs.
Strangers knocked on the door, "Sorry to hear about your Dad, by the way, what are you selling the house for?" I received at least two dozen offers in the next three weeks over the phone once the probate docs hit the public and finally took one that was 350% higher than my father had paid 10 years earlier for the house. That was when all of the systems in the house were operational and the house looked good. The price I got was 60% higher than I'd have gotten for it the year before, that's how fast the market was back in 2005.
The guy I sold to flipped it for 20k more immediately (he assigned the contract to someone before closing) to someone (again all cash) who gutted it and put about 30k and 3 months of work into it (everything needed replacing, plumbing, fixtures, flooring, roof, appliances, windows, air conditioning) and put in on the market for about $80k more than I sold it to the first guy. It sat on the market with all the other "updated" houses for about a year until they took it off the market and and decided to rent it. He never lowered his price although he did add, "Will consider all serious offers" to the listing.
Basically there were few end users in the market there at that higher price, just speculators selling to other speculators. Now the owner could probably sell it at the price he bought it for or, at worst, the price I sold it. Since he bought it for cash and used cash for the fix up I doubt he will. He doesn't need to realize his loss. He can afford to rent it out and wait for the next wave. The rent he gets gives him about a 5.5% return on his investment before vacancy, tax considerations and depreciation.
At any rate, that price he could sell it for immediately is still 3.5 times what the house sold for 12 years ago and 60% higher than 2004 prices. This means RE prices are still up more over the last five years than in my area which has also seen tremendous appreciation over the last 7 years. |
