Saturday, April 29, 2017

More stupid housing hysteria.

"It's Just Crazy" (Again): 2-Bedroom LA House Sells 40% Above Asking.

This time From Zero Hedge. The Real Estate market is hot to be sure, but every time I read one of these headlines I really have to go over and explore the property.

In this case, the house is a  ~1948~ square foot 2 bed, 1.5 bath. That's almost 2000 square feet! Which is quite a large 2 bedroom house don't you think? The other thing that seems to go along with these hysteria fed headlines is that these properties haven't changed hands in decades. If I look at the tax records I can see it's being assessed for taxes in the 88 grand range. Which is probably what they bought it for decades ago. They might even be the original owners because I can't find any record of the house turning before 2017.  Which is almost always the case when these houses go so far over the asking.

If you do comps on the houses in the neighborhood, they are all going for about what this house sold for. Even with the 40% mark-up. But don't let real numbers get in the way of a headline grabbing know nothing freak out.

These over the top headlines take none of the facts of the properties into consideration. Sometimes original owners don't know how to price their properties and they are well under priced for the neighborhood. For instance, on that same street a 3 bed 2 bath house that's only 1160 square feet is going for 741,000. That's almost 50% smaller than the "its just crazy again" house. And it's sort of a real estate ploy to under price a house. It puts people in that auction bidding mindset and runs the value way up.

Back before the Dotcom bust I'd see people buying stuff on E-Bay that cost more than what it actually cost if you went to the store for the exact same psychology.

Houses double in value about every 10 years. With very few exceptions in time. The 2009 recession is one of them. There is nothing abnormal about what this market is doing. Only people who have "echo bubble" mania. The house that I lived in as a child in Santa Clara went for 30 grand at the time my grandfather bought it. The houses on that street now uniformly cost in the 1 million dollar range on average now. Even through all the recessions. 

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