Wednesday, March 26, 2008

Our House is Worth A Lot More Than That!

Whenever we invite people to our home, I confess to feeling a bit self-conscious -- not because I designed the house, but because I didn't. Although people are nice enough not to say anything, I can't help but wonder if they were a bit curious to see what kind of house an architect lives in, and then disappointed to actually see our house. The house is basic and small and plain on the outside, though it's pretty nice on the inside with white oak floors throughout the first floor, decent trim and woodwork, and nice spaces. We have paintings by BalticTiger all over the walls and a lot of great Mission-Style furniture which boosts the ambiance.

But we don't own the house, we rent.

We used to own an impressive house with million-dollar views, but we sold it 2 1/2 years ago when I saw the housing crunch coming. Also, we wanted to live IN town during our son's high school years. We sold the impressive house for our asking price back when houses were still selling for asking price.

Nowadays, with so few buyers on the market and so many houses for sale, the only houses selling are those with particularly desirable amenities such as great neighborhoods, those in a particular price range (usually $200-$230K) where the demand is still strong, or those that have drastically lowered prices due to excessive "motivation".

Some people just can't sell their homes at a loss, even if they have no other options. They stubbornly keep the asking price high, believing that "the right buyer" is just around the corner. In the meantime, those who DO lower their prices inadvertently lower the neighborhood "comps" for the others.

We all know about comparables, right? Those recent selling prices of houses similar to the one being appraised that are used to create the appraisal? As comps drop down in coming months, banks and lenders will be dropping the qualifying loan amounts offered for properties because they simply won't appraise for the old higher prices anymore. The effect on appraisals of reduced sale prices, which become tomorrow's comps is a slow process, but it's a sure one. For what it's worth, residential real estate prices are expected by many to drop nationwide between 20% and 30% in coming years. All that equity that people used to own on paper and borrow money against? Gone. Perhaps forever.

BalticTiger and I have been waiting 2 1/2 years for prices to come down, and they already have by about 10%, but we're expecting even more. It's been a slow and stubborn process.

We can wait. Our son has one more year before he graduates high school.

An article in the NYTimes talks about the psychological aspects of selling ones home in a lousy seller's market, and the stubbornness that can hinder any sale. It's always an eye-opener when the media "gets it".


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