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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: GraceZ who wrote (16107)	1/16/2004 11:58:45 AM
From: Tradelite	Read Replies (2) \| Respond to of 306849

Grace..one last time on this point, which I already made once. You keep pressing the point that homes can be overvalued when VIEWED IN LIGHT OF AN INDIVIDUAL's OWN SITUATION. Very true. Some houses and some price levels hold no value at all for some people. A house can look very overpriced/overvalued to a particular person if it doesn't meet ALL the needs a person wants a house to provide, including size, condition, and a pricetag which fits that person's personal budget and financial/investment strategy. However, what I am talking about is how the market as a WHOLE views the value of that same house. Market value is NOT what one person thinks the house is worth, relative to other housing choices he has at that particular time, including renting. Market value is the price that MANY buyers at the same point in time have ALREADY demonstrated they are willing to pay for a particular property and others like it. The market is not very concerned about what ONE individual thinks of the house. The market is NOT CURRENTLY VALUING RENTALS VERY HIGHLY IN SOME PARTS OF THE COUNTRY, whereas some individuals no doubt find them to be great bargains. If a house attracts three offers from ready, willing and able buyers at the listed price, and similarly priced, comparable houses are generating roughly or exactly the same level of activity, that price is construed to be the current market value of those homes and others comparable to them. To say those houses are overvalued is to assume that buyers continually make stupid decisions about where they want to live, what type of house they want to live in, and how much they want to pay. If they want to rent and believe this will be a better use of their money, they are free to do so. Meanwhile, houses will continue to be priced and sold according to what a significant number of buyers are demonstrating those houses are worth. If they choose to "overvalue" these houses, that overvaluation must be considered the correct price at the time. Question: When you sell your house, are you going to "overvalue" it, like everyone else is doing at the time.....or are you going to "undervalue" it simply because you think it's the right thing to do and are feeling charitable toward those irrational buyers?