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Holding On To Old Prices
by James Glaser July 3, 2008 If you bought your house for $250,000 five years ago, well then it must be worth at least 300K today, right? Most people think it is worth more than that. At least the people who own homes do. Unfortunately, the people looking to buy don't feel that way, in fact, they think your home has gone down in value, and it has. I know people who have had to bring a check to the closing when they were selling their home, because they took too much profit out of it a few years ago when they refinanced. When they sold, they had a higher principal on their loan than their selling price. Wanda and I took a ride up to Saint Marys, Georgia on Monday. We are looking for a lot to build a home on, and sticker shock hit us hard. Many lots of less than an acre were listed for way over $250,000 and some were over $300,000. Finished houses on the same size lots are not selling for that kind of money, but for years people have been watching the price of land soar, and they haven't figured out that soaring prices have taken a tail spin. I understand that. You listen to investment programs on the television, and many of the so called "experts' are not old enough to remember when times were tough. All they know is that prices go up every year, and they really can't get a handle on what is happening now. The same is true for most home owners. To many, the price of a home or land has only one way to go, and that is up. However, if you drive around almost anyplace in America today, you would think we are in the middle of an election with all the yard signs, but most of those signs are "For Sale" signs. Many of those signs say "By Owner" and I am sure that when told by the real estate professional what their home was now worth, they decided to put their own number on the sign. It is probably a lot like what a SUV owner feels when the car dealer tells them what their two year old 40 thousand dollar car is worth... not much. Supply and demand tell the story. There are many of sellers, but not as many buyers, and those buyers are looking for a deal. Ten years ago my daughter bought a house and paid more than the asking price when she got into a bidding war with three other people. Even paying more, she felt good as there were not many houses for sale in the neighborhood she wanted to live in. How about the people who have a few boarded up houses on their block because they have been trashed after foreclosure? It doesn't matter what you think your house is worth then as those boarded up houses drag down your "comps," and also the number of people willing to buy your home. We looked at a very affordable lot on Monday that would have been great to build on, but the neighborhood wasn't what we wanted, and for sure nobody wants to live in a neighborhood that looks like the set for a Road Warrior movie. So, it is hard for the home owner to look at their cash cow and see that it is no longer producing that 5, 10, or even 25% increase in value they have been having every year. When the average time it takes to sell a house is no longer counted in days, but in months, you know something has to give. About the only thing that can give in a real estate transaction is the price, and as hard as that is to admit to, old prices and old values are no longer on the up-swing. People, like they did for the first two hundred years of this nation, will have to stay put in one home, or they will have to look at buying a home as a cost of living rather than an investment. It is going to take a long time before we see another housing bubble like this last one, and the price of a house is not going to soar like before. Those who hold on to the old prices for their homes, might as well wake up to the fact that they will also be holding on to those homes for a long time.
Last Thursday night we had a long bad storm in Tallahassee. I had shut down my computer and so it still works just fine, however my DSL connection still is not fixed. I am going to have to bite the bullet and call in the Geek Squad as my knowledge of computers doesn't go too far past thinking that it all works by magic. I'll continue to borrow Wanda's lap top when I can to keep writing. |
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