Local Real Estate Drama

Pretty much everyone I’ve talked to lately has a story about someone they know who is flailing their arms trying to keep their head above water. Nowhere is it easier to see than in the real estate market in your area. I’ve been watching real estate pretty closely around our area because I find it very interesting.

About 2 years ago they built an upscale neighborhood of about 25 houses a couple blocks away from my neighborhood. This neighborhood was different than ours in a number of ways. The builder subdivided the lots in to the smallest possible size. This means that the house has about 6 feet from the backdoor to the back of their yard and the front yard is just big enough to hold two average size cars in the driveway without them sticking out in the road. The houses range from about 2900-3500 feet in size and have many upgraded features in the interior. Granite counters are standard as well as hardwood floors and lots of millwork. You get the idea. They aren’t entry level homes.

It has been a very interesting experience to watch people come and go from that neighborhood. They all drive high end cars and at first glance, you’d guess they are all high level executives. (But I’ve read “The Millionaire Next Door so I’m not fooled) It turns out that many of the people aren’t highly paid executives but rather people who fell in love with a house that they couldn’t afford. Over the last year roughly 8 of the homes have changed hands. For a small neighborhood that is only two years old, it’s really kind of surprising to see so many houses with second owners and at least two of those for sale now which will lead to a third owner in the span of a little over two years. Imagine the equity losses people have experienced. What makes it even more interesting is that these houses were sold at higher prices than the general neighborhood had ever seen. The higher grade materials inside certainly played a role in that, but the tiny lots should have also been a reason to hold the prices down.

Today, when you look on Zillow, you see the valuations on those houses at $100K less than they were sold for two years ago. Even if Zillow is half wrong, it’s still a sign that the builder made out quite well, while the homeowners paid too much. The two houses that are up for sale started their asking prices at about $600k. Both of them have lowered their prices this week by almost $50K. One of them paid $614K last November so between the loss in value plus commissions and taxes, they are going to lose upwards of $100K if and when the house sells.

Have you heard of any interesting real estate stories in your area, or have you experienced something like this yourself? Leave a comment. Depending on turnout, I’ll highlight it in a subsequent post.

Here’s a shot of one of the houses: