Housing prices

[Rick Potter]

It looks like prices in my area (SoCal) are almost up to pre-recession amounts. This seems strange because the pre-recession price peak only lasted a few months, before falling back.

How about your area?

Rick Potter

[Wade Lippman]

I bought my house in 1993 for $283,000. That was a bargain (apparently) because it sold in 1991 for $420,000. I sold it last year for $235,000.
We had no pre-recession peak; prices just go down.

If you want a real laugh, it was for 2800sf built in 1983 on a wooded half acre, with a creek in the back; in a school district that is always rated as about 50th in the country.

[David Weaver]

They are high here, too, but they never really did drop much here. I'm not sure they dropped at all, they just stayed flat and took longer to sell.

We didn't have much of a pre-recession peak, either, just a steady increase of single digits % per year in the area.

They're higher here than I can ever remember them being.

[Shawn Pixley]

It looks like prices in my area (SoCal) are almost up to pre-recession amounts. This seems strange because the pre-recession price peak only lasted a few months, before falling back.

How about your area?

Rick Potter

Prices have rebounded some, but not to the ludicrous levels previously. The neighbor across the street wanted $7 million for his house prior to the downturn. (Believe you me, my house is not in that range) I watched the construction on his, and it is poorly put together. I suppose they are following the PT Barnum adage and looking for the next sucker. Typically the houses on the beach are listed high but actually close at a much reduced price. There was a very nice house listed at $4.5M. It sold at $2.8M.

The realtors (which admittedly I have a poor opinion of) are trying constantly to promote trading houses. Probably one a week we get a solicitation to sell our house and buy a house on the sand. The tax increase would be a killer. Besides, I like our house. It is well made, fits our lifestyle and suits our aesthetic. I don't want a 6,000 sf house to clean and maintain.

Someone recently offered on our house (unsolicited) at a large premium over what we paid. We declined; as to move we would have to pay more, and our already high tax bill would also increase accordingly. Besides, we have been fixing / upgrading our house every year (ultra-high efficiency furnace, new appliances, and solar panels). Our goal is to minimize bills so that when retirement comes, I want to reduce expenses as much as possible.

Realtors are pushing to keep sales moving' thinking that we should all keep moving-upgrading or downsizing every 3-5 years. I want to pay off the house in the next five years or so. I have thought about this for a while. There has been a propaganda push to think of houses less as domisiles and more as an investment vehicle. This seem a bit out there for me. I watch a friend buy a house that he actively disliked but he felt he could trade up in a year or two. Very silly.

Prices in our neighborhood have risen, but they didn't fall as much as other neighborhoods / communities. The land here is very expensive. Beachfront lots are > $1M for 6,000 sf. We have a 1:1 FAR for our neighborhood. Many of the owners build these as trophy houses but visit once or twice a year. I wish I had that problem (where to put my money). But I still have to work for a living and the lottery is a tax upon those bad at math.

[David Weaver]

Realtors are pushing to keep sales moving' thinking that we should all keep moving-upgrading or downsizing every 3-5 years. I want to pay off the house in the next five years or so. I have thought about this for a while. There has been a propaganda push to think of houses less as domisiles and more as an investment vehicle. This seem a bit out there for me. I watch a friend buy a house that he actively disliked but he felt he could trade up in a year or two. Very silly.


One of the bigger hoaxes in terms of suckering people into "investments". When they say a house is the biggest "investment" you'll ever make, they neglect to tell you that the structure...the "house" is a depreciating asset. Houses depreciate, land appreciates. There are some short term anomalies where that doesn't fit, but can you imagine having a house from the 1950s where nothing had been upgraded and no dollars ever put into it? It wouldn't be standing. When you start taking into account the cost to own a house and maintain it, then all of the sudden it looks terrible. But people, even those who are OK at math, get caught up in it.

[Greg Peterson]

Our health insurance premium are slightly more than our mortgage, so I guess the house isn't the biggest investment anymore. Of course it will need a new roof in a few years, and electrical and plumbing upgrades were sweat equity.

The biggest advantage, IMO, is the privacy a stand alone structure provides. Some folks only need a few feet distance while other need/want acres.

[David Weaver]

I agree with the separate structures, etc. I think there's a TON of value to an individual to find a house they can pay off by the time they're 40 and then try to do it.

And think really hard after that if they want another mortgage.

Clark howard gave an interesting statistic, and I don't remember if it was the 1950s or what, but it may have been...but at the beginning of the period he mentioned, the average house was 2x the household income level. By 2007 or 8, originating loans were something like 7x household income on average.

It's almost impossible to ever pay off a house that's 7x household income when you consider the cost of upkeep and taxes. I wonder what a mcmansion roof costs to have redone with all of the direction changes, etc. Around here, mcmansion owners that have houses in the 3k square foot but with the open floor plan mcmansion style are paying $1k a month in property taxes.

[Brett Luna]

The 2013 tax valuation of my home dropped 4% from 2012 but went up 6% for 2014.

[Brian Elfert]

I just sold my house in April. The price I got is about as high as it ever was pre-recession. If I had waited until spring to list I probably would have gotten 1% to 2% more even. There was no appreciation at all for me. Between buying the land and building the house in 2001 plus finishing the basement in 2007 I broke even on the house not including routine repairs like replacing the roof this spring.

I'm finding prices on the low end are going through the roof here. I may not have sold my house had I known how much prices on the low end would increase. I went a full month between looking at houses because there is nothing out there to buy. Homes were listing at the rate of 10 to 20 a day in May. Now, new listings are at a trickle. A day with two new listings is considered a heavy day right now. There have been days with no listings recently.

[Rick Potter]

They are starting to build houses again in this area. All 'infill', no huge tracts nearby anymore.

We went to look at an open house for about 10 new places Sunday. 6,000' lots with 2800' houses with 2 car garage for $681900. 3396' houses with 3 car garage for $729,900. They went for max footage and cheap cabinets. Get this....Master bath had corian shower, but the other bath had a one piece fiberglass shower. The models had granite counters, but it was extra. The cheapest garage doors I have seen, too. I have better ones in rentals.

All show, no quality.

Oh, yeah, they are right on the 210 Freeway, just like mine.

I often wonder where they find people who can afford these places. Wages around here have stagnated, gone down, or moved to Texas.

Rick P

[Rich Engelhardt]

Location, location, location........

It varies so much around here it's impossible to put a price on things.

Our house maxed out in value ion 2005 @ roughly $189,000.00 - give or take a couple thou. We paid $75k for it in 1986. Zillow lists it now for $162,000.00.

None of our rentals are valued anywhere near what we paid for them.
"on paper" we've lost money on all of them. (Yipeee!!!!! Yahooo!!!! - - I never thought I'd be happy to "lose money" ! )

One dropped from $89,000.00 - what we paid in 2002 for it, to around $52,000.00 today. Zillow says it's closer to $72,000.00, but, that's a cruel joke.
Similar houses in the area are going for $25,000.00 to $35,000.00 & sitting on the market @ those prices for months.


One of the bigger hoaxes in terms of suckering people into "investments". When they say a house is the biggest "investment" you'll ever make,
Man ain't that the truth!
We paid $75k for our place in 1986 & today it's worth roughly $165k. Had we let the original 30 year note run it's course, we'd have paid out over $350k!
IMHO - losing that much money on something can hardly be called and "investment".

Plus the real irony of it all is - even once it's all paid for, the money tied up n the house just sits there and does nothing!
The only way you can use it is to - - borrow money against it & that's going to cost you more money!
Well, unless you invest the borrowed money in something that returns more back to you - but - that's not as easy as it sounds.

[Rod Sheridan]

Average house prices in the city I live are in excess of $700,000.

Of course that's in Canadian dollars so I think its $1.67 US........................Rod.

[Dave Anderson NH]

The concept that owning a house is an investment is pure hogwash perpetrated by the real estate industry, the mortgage banks, and home builders. Anything that you have as a necessity to life is not an investment. As David Weaver points out, the physical plant of a house deteriorates and requires the addition of money, sweat equity, or both to continue to maintain or increase its value. What other investment requires the addition of money to maintain value? Most importantly, unlike real investments, a house is not liquid and can't be easily disposed of quickly or cheaply unless you sell as the owner and get lucky on getting a quick offer. Even then, the transfer and closing usually takes a few weeks while investments like stocks, bonds, gold, etc can be sold or exchanged or transferred within hours at the most. True investments have liquidity and can be sold without leaving you homeless. Second homes, true investment real estate, and other types of real property are a different matter entirely.

[Jim Rimmer]

I wonder what a mcmansion roof costs to have redone with all of the direction changes, etc. .

Interesting question. In Texas, homeowners insurance has changed the deductible on roofs (rooves?) from a set dollar amount to a percentage of value. I can't remember what the percentage is but even at 1% on a $250K house, it's $2500 and I think it may be in the 2 or 3% range. Anyway, as a result many high $ homes that had roof damage from Hurricane Rita or Ike (Rita was in 2005, I think and Ike was 2008) still have blue tarps because the owners can't afford the deductible. Many of these folks are barely getting by in a house above their means and when an emergency arises, they don't have the cash.

[Brian Elfert]

Some home insurance companies are now depreciating roofs. If the roof is ten years old they will only pay 50% of the replacement cost of the roof because they figure you got 10 years out of the roof.

[Matt Meiser]

Zillow says

Zillow is worthless for determining even an approximate value. The day we listed our house Zillow said it was worth 80K less than listing price. Then it magically jumped 30K. It will be interesting to see if the value increase to the sale price after we close.

[David Weaver]

Interesting question. In Texas, homeowners insurance has changed the deductible on roofs (rooves?) from a set dollar amount to a percentage of value. I can't remember what the percentage is but even at 1% on a $250K house, it's $2500 and I think it may be in the 2 or 3% range. Anyway, as a result many high $ homes that had roof damage from Hurricane Rita or Ike (Rita was in 2005, I think and Ike was 2008) still have blue tarps because the owners can't afford the deductible. Many of these folks are barely getting by in a house above their means and when an emergency arises, they don't have the cash.

A relative of mine paid $18K to get a 50 year architectural shingle on a large house. I can't imagine it would be much cheaper on a 3k sq foot mcmansion, and I don't know how often a roof might leak, but it seems like those types have more potential leak points. if you're not planning to spend that kind of money, it's a pretty stiff amount of cash.

[Mel Fulks]

Glad the value of your house is recovering ,but don't forget how much the money has been inflated since the recession.

[Rick Potter]

While I understand the concept that a house is really not an investment, consider the average family, with no concept of stock market, etc. They need a place to live anyway, and finding a home that will probably appreciate is as good as they can expect to do. If it appreciates enough that they can later sell it, and have kept up with inflation, so they can afford to move and get another home, I suggest that is a success for that family. Their payments have remained static (no ARM), and any money they have put into maintenance and taxes is offset by appreciation. Certainly, a recession or calamity will offset appreciation, but it will also effect the stock market.

Renting, for a long term, on the other hand, leaves this family with no way to keep up with inflation if they decide years later to buy.

My personal example:

In 1973 we bought a new home for $40,950. We put down 8K we got by selling our previous home. Our payments were $226 mo., and we were taking a chance on being able to afford it. We decided that we would go for broke, as we had a little shack out on the high desert we could move into (shack means...outhouse, no power, trucked in water for tank). My wife is that kind of girl...she can handle anything.

Anyway, thanks to Jimmy Carter's super inflation, my wages went up appreciably, and within a few years the mortgage was no problem. We lived in that house long enough to pay off the mortgage, a total of $89,360 counting the down. We remodeled and added a shop for $45K, built our own pool for $7K. Lets add the less than $45K taxes we paid, and $55K for normal maintenance, and it all adds up to a total cost of ownership of about $241,360.

We lived there for 32 years, paid off the house, and sold it, at a discount of $100,000 to our daughter. She paid $600,000 for the house in 2005. We had spent a total of $241,000 over thirty years, sold it for $600K, netting us a profit of $359K. As I mentioned at the top, we chose a good location, college town..good schools..etc. Considering that we also had a place to live, I consider that a pretty good 'investment' for someone who knows nothing about stocks, bonds, etc.. As I said at the beginning, this is the only 'investment' most people make.

A different way to look at it,

Rick Potter

[Rich Enders]

+1 on Zillow being worthless. We visited PGA West in LaQuinta, California in March of this year. A home on the golf course was listed for sale at $995 M. In checking Zillow they estimated the value to be $1.6 MM.

[Brian Elfert]

A relative of mine paid $18K to get a 50 year architectural shingle on a large house. I can't imagine it would be much cheaper on a 3k sq foot mcmansion, and I don't know how often a roof might leak, but it seems like those types have more potential leak points. if you're not planning to spend that kind of money, it's a pretty stiff amount of cash.

I just spent $7250 to put a new roof on a 2,600 square foot house. The roof was about 2,000 square feet. My roof had five separate sections which probably increased the price a bit. The roofing products were all GAF brand. Not as many sections as the average mcmansion, but not a straight gable roof either.

[Rich Engelhardt]

Zillow is worthless for determining even an approximate value. The day we listed our house Zillow said it was worth 80K less than listing price. Then it magically jumped 30K. It will be interesting to see if the value increase to the sale price after we close.You should change the figures in Zillow to reflect a more accurate value.
I went to the Monroe County website to see what the actual county appraisal was for your house.
I was met with a message that said I needed to pay a $2.00 fee to view it.

Since Zillow draws much of their data ad bases their Zestimates on public information, I'd point the blame more to the Monroe County auditor & their policies than I would Zillow.

You can always update the information Zillow has listed yourself as the owner of the property.
I've done that with 3 out of the 5 houses we own.


+1 on Zillow being worthless. We visited PGA West in LaQuinta, California in March of this year. A home on the golf course was listed for sale at $995 M. In checking Zillow they estimated the value to be $1.6 MM.
Rich - I can't say why. That's not enough information.
Matt's was pretty easy since he has his location in his profile.

[Matt Meiser]

I believe the actual taxable value on our most recent valuation from the township is 1/2 what zillow showed before we listed. But since Michigan limits the rate of increase except when a house sells it will almost never be accurate.

Now if I update it (didn't know I could) what's the point--now it will show whatever I think my house is worth.

The zillow valuation on every house we looked at was way off the listing price. Nearly every one is pending or sold so the prices couldn't have been too far out of line.

[Brian Elfert]

The Zillow price on my house was almost exactly what it sold for. It has my parent's house overvalued by a good 10% or more. Not saying that I really trust Zillow. I don't know what they base prices on. They didn't use the county's number for sure as the county was a good $15,000 over Zillow.

[Joe Tilson]

We bought our house in 1978 for $38,500. The assessment on it now is $86,000. After all the A/C units, roofing, and other upgrades we would take a beating if we sold it, so here we are.

[Rich Engelhardt]

Now if I update it (didn't know I could) what's the pointIt's always a wise idea to have the (selling)(value) (information) be as accurate as possible.
Just register with Zillow to create an account, then go over all the details of what the house has to offer.
It's a good possibility they (Zillow) missed something or have something wrong.


The Zillow price on my house was almost exactly what it sold for. It has my parent's house overvalued by a good 10% or more. Not saying that I really trust Zillow. I don't know what they base prices on.

http://www.zillow.com/zestimate/

This link tries to explain how they come up w/their Zestimates.

BTW & FWIW - I sound like an apologist for Zillow.
I'm not. Zillow is just one thing I use. I also use realtor.com, realty track .com, a real life real estate agent, the county auditor's site, the county court records, the county tax records & a lot of gasoline and shoe leather to research house values.

[Jason Roehl]

While I understand the concept that a house is really not an investment, consider the average family, with no concept of stock market, etc. They need a place to live anyway, and finding a home that will probably appreciate is as good as they can expect to do. If it appreciates enough that they can later sell it, and have kept up with inflation, so they can afford to move and get another home, I suggest that is a success for that family. Their payments have remained static (no ARM), and any money they have put into maintenance and taxes is offset by appreciation. Certainly, a recession or calamity will offset appreciation, but it will also effect the stock market.

Renting, for a long term, on the other hand, leaves this family with no way to keep up with inflation if they decide years later to buy.

My personal example:

In 1973 we bought a new home for $40,950. We put down 8K we got by selling our previous home. Our payments were $226 mo., and we were taking a chance on being able to afford it. We decided that we would go for broke, as we had a little shack out on the high desert we could move into (shack means...outhouse, no power, trucked in water for tank). My wife is that kind of girl...she can handle anything.

Anyway, thanks to Jimmy Carter's super inflation, my wages went up appreciably, and within a few years the mortgage was no problem. We lived in that house long enough to pay off the mortgage, a total of $89,360 counting the down. We remodeled and added a shop for $45K, built our own pool for $7K. Lets add the less than $45K taxes we paid, and $55K for normal maintenance, and it all adds up to a total cost of ownership of about $241,360.

We lived there for 32 years, paid off the house, and sold it, at a discount of $100,000 to our daughter. She paid $600,000 for the house in 2005. We had spent a total of $241,000 over thirty years, sold it for $600K, netting us a profit of $359K. As I mentioned at the top, we chose a good location, college town..good schools..etc. Considering that we also had a place to live, I consider that a pretty good 'investment' for someone who knows nothing about stocks, bonds, etc.. As I said at the beginning, this is the only 'investment' most people make.

A different way to look at it,

Rick Potter

What you left out was the devaluation of the money. $41,000 in 1973 was the equivalent of about $183,000 in 2005. So "$241,000 over 30 years" isn't really an accurate picture--you'd have to figure out the 2005 value of each expenditure in that total to truly come up with a profit that makes sense. By comparison, if you could get a 7% return on your money, by putting in $8000 per year for 30 years (that's $240,000 dollars), you would have $808,000--but again, that doesn't take into account any devaluation in the money.

BTW, I know very little about stocks and bonds, but I did take an accounting class once...

[Jason Roehl]

Oh, yeah, and Zillow? BWAHAHAHAHA! For that price? SOLD! I'd take that money and run!

[Rick Potter]

Jason,

Don't forget, those figures also gave me a place to live for those thirty years. As I said, it turned out to be a good investment for someone who is not knowledgeable about investing. In my case, I would not have been investing money every month, it would have gone to rent.

Again....location. If I had been in a different area like Joe's example, it might be a different story.

Inflation. What can the average guy do about that, except to try to keep up with it? Having fixed payments for 30 years is pretty much his only option, unless he has money to invest in addition to living expenses.

Rick P

[Shawn Pixley]

Rick,

Thanks for your story on how it can be an investement. The realtors though, are not marketing houses as a 32 year investment. They market houses as investments over a 3 to 5-6 year period. Your house appreciated over a fair period of time and you paid off the mortgage quickly. It seems unlikely to me that most people could pay off a mortgage and realize a return in 5-6 years.

You, I suspect, like me, view our houses as a place to live and raise a family. We purchase the house with that in mind. With the sands of time, the house can appreciate and be an investment. However to realize that investment, you must sell the house and if there isn't another domicile at a lower price point, then the investment becomes a paper exercise. The profits on one house becomes the equity in the next house.

[Rick Potter]

You got that right, Shawn,

We never planned to move. We did not buy for investment, we bought a home we thought would be a safe investment. As a matter of fact, we moved there for the kids schools. They ranged from two to eight years old at the time, and we were in a crappy school district. As a child, I moved many times, and I promised my wife we would live there until the last one graduated from High School. We didn't pay it off quick though, we paid the 30 year loan off in 30 years. Toward the end we got many offers to pay the house off, but laughed at them. The last 10 years of a note are almost all principal.

After the kids grew up, we discussed moving into my folks home when they died, but decided against it...we were set for life. Life changes though, and we did do it after all. Been working on it ever since.

Rick P