Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Saturday, October 21, 2006

The Way To Lose Is Simple...


"I used to claim the title of the only person ever to lose money in the history of Sonoma County real estate."

"Not anymore. Thursday's story by Mike Coit said the number of home sales in the county hit a 10-year low last month, and the median home price dropped 7.7 percent from a year earlier. Which means I could have plenty of company in my real estate misery."

"It's actually pretty easy to lose money in Sonoma County's housing market, and it always has been - except, perhaps, for those few crazy years between 1999 and 2005 when annual appreciation was hitting 15, 20 and even close to 30 percent."

"The way to lose is simple: Buy high and sell quick.That was how I lost money. And I did it not once, but twice."

"The first time was in 1981. We bought a place near the fairgrounds for $69,000 (Our mortgage interest was something like 11 percent, if I recall correctly.) Three years and two kids later, when we needed a bigger house and a quieter street, we sold for $72,000."

"After subtracting the real estate commission and other costs, the transaction was a net loss.In 1989, another go-go time for Sonoma County real estate, my ex-wife and I settled our divorce when I bought her half-interest in our house in the Junior College neighborhood. The price was based on the value of the place at the time. When I sold it four years later - during an ebb in the market - it went for $15,000 less, and I was on the short end again."

"I tell these tales not to seek sympathy, but to illustrate an important point: Real estate prices wax and wane. There's no guarantee that housing is a good investment. And there's always a risk of losing money."

"The median, even at 7.7 percent below last year, remains prohibitively high for many would-be buyers. Likewise, it remains lucratively high for homeowners who purchased their property more than a couple of years ago."

"Me, for instance. I bought my current house in 1997 for the then-median price of about $220,000.In other words: If and when I sell, I'll no longer be able to say I lost money on Sonoma County real estate. And all I had to do was stick with the market for a quarter-century or so."


At 10/21/2006 08:10:00 PM , Anonymous tom stone said...

buy today,and you might break even in 25 years.

At 10/23/2006 10:44:00 PM , Anonymous trailer trash said...

"The way to lose is simple: Buy high and sell quick.That was how I lost money. And I did it not once, but twice."

Yes, buying when the market is high can create problems. This real estate precipice is now known as "The Plateau of Denial", according to my economic guru, Charles Hugh Smith. This time, Mr. Smith has outdone himself by presenting a 5-item real estate chart which even Chief Economist of the National Ass. of Realtors, David Lereah, could understand.

In addition to "The Plateau of Denial", (a lofty perch from which we are now descending), the chart also shows "The Point of No Return" (which we are about to pass), "The False Bottom" (which David Lereah says is as low as the market will go) and "The Cross of Doom" (which will precede the collapse of the entire real estate pyramid.)

I took one glance at the chart and had a clear vision the very-near future. To see this marvelous chart, go HERE.

You might have to scroll down the page until you find this heading:

The Housing Market - Plateau of Denial

At 10/24/2006 07:45:00 AM , Anonymous Anonymous said...

My wife and I lost money on a Sonoma Co. house too. We paid too much and then sold the house 11 months later, at the very beginning of the current downturn. We suffered a net loss after deducting the realtor's commission, but now feel like we were pretty lucky to lose "only" $50K.

I think that a lot of people actually lose money on houses if property taxes and mortgage interest are taken into account. By renting (for less than half of the monthly cost of our mortgage payment plus property taxes) we will make up our loss in less than two years.

I've discovered I actually like renting too after 10-plus years of home "ownership". Our hot-water heater quit over the weekend. It was nice to just call the property manager instead of paying to fix it out of pocket!


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