December 22, 2008

Some "Older Folks" (His Words, Not Ours) Perspective On The Market

Some excerpted perspective from an older experienced plugged-in reader:

Us older folks (48 years myself) have seen this all before. I sold my second home in Santa Monica in 1990 which at that time had the same bubble energy of late 2006 here. I had 6 offers within 48 hours, almost all over listing price, which was 25% more than any other similar home sold for in my neighborhood that year.
Back then L.A. was going through a bubble that reminds me very much of what we see here. The buyer had to hold on until 2000 to be able to finally sell it for what he originally purchased the home for, not more. This was a nice area, north of Montana, with many media stars living nearby and listed architectural gems by noted architects such as Neutra, Wallace Neff, Gordon Kaufman, etc., including at that time the bizarre residence of Frank Gehry. This was the "real Santa Monica".
10 years is a LONG time to have to wait to get your money back...

That it is. Especially if one was sold on "normal" returns or is counting on building equity to fund the purchase of a move-up home.

Perhaps It’s The Market That’s More Unbelievable To Some... [SocketSite]

First Published: December 22, 2008 11:30 AM

Comments from "Plugged In" Readers

Similar story here: bought in Elk Grove CA in 1991. Listed it in 2000 for the same price I bought it for. Had no buyers. Sold it in 2004 for double what I bought it for. The question is not: when do we reach the bottom? It's more accurately, how long will it stay on the bottom?

Posted by: nickswish at December 22, 2008 1:24 PM

At least your homes came back. In the late 80's in Texas, my recently purchased home for $190K sunk to a value of $150K, almost overnight. It was sold in 2003 for $203K, but that's only after spending close to $40,000 in maintenance and improvements over 17 years (including $12,000 for a cracked slab). After 51 years in Texas and 3 homes, I can say that I only made money on the first home that I bought during the 1970's, as that's because high inflation took the value up.

Since moving to California in 1999, I have made about $300,000 on my real estate purchases. Not much, by California standards, but a gold mine compared to my experiences in Texas.

Posted by: Money Man at December 22, 2008 1:33 PM

Same story here. Bought a property in 1988.. sold it 8 years in 1996 for a 5% loss (not including RE fees)

Posted by: mac at December 22, 2008 2:35 PM

My story diverges from mac's. Bought in 1987 just as the appreciation was accelerating. The price was dead on the local median price. I watched the median go up and then stagnate and slide in the 90s, but it never dropped below my 1987 purchase price.

Posted by: The Milkshake of Despair at December 22, 2008 2:45 PM

Bought in the East Bay in 1990. Sold in 1997 at a loss.

Posted by: eastbaymike at December 22, 2008 2:47 PM

611 washington when new was asking 750k 1987?
I paid 555k in 93 .Sold in 95 for 435k.
Last sale was 2002 1.7 million 1b 2 bath 1900sf

I hope to buy it back for 400k in 2010

Posted by: mark at December 22, 2008 2:50 PM

Too bad the seller in the story couldn't have held out until 2006. He would have made a killing!

Posted by: McBravio at December 22, 2008 3:24 PM

I’m not speaking from personal buying experience, but I think this drop is more severe than the one in the 90’s. If you look at some of the numbers, the LA and SF metro areas have dropped deeper and much more quickly than then. According to CS, prices dropped around 27% from peak to bottom in the 90’s. This took around 7 years to happen, and then prices started rising again. Consistent with what nickswish said, prices didn’t fully return to the peak for 10 years. In the SF MSA, prices only dropped around 12% during a 5 year time frame, and they took around seven years to fully recover.

So far in the current fall, prices have dropped by more than 30% in both LA and SF MSA. Remarkably, this has all happened in the past 24 months. For the record – I think that for SF proper, prices are stickier on the ups and downs (i.e. – don’t swing as much as some locales). CS numbers include the entire MSA, so they arguably overstate price changes that are happening in the city. I also think that this correction will be shorter than previous ones due to more market transparency, government intervention, etc.

With that said, this seems to be an unprecedented correction in California RE prices.

Posted by: Lance at December 22, 2008 3:28 PM

My story: Bought in November of 1981 for $210,000 in the "real San Francisco", Noe Valley. Sold in August of 2001 for 1.2 M. I guess I should have waited until 2005 or 2006 and made even more of a killing but I was able to move on to another part of California and make a lifestyle change.

Posted by: gotoutintime at December 22, 2008 3:37 PM

gotoutintime - Noe wasn't "real" in the 1980s. You made a really good buy purchasing before Noe got real.

RE wisdom in the 1950s : buy in the path of development
RE wisdom in the 1970s : buy in the path of gentrification
RE wisdom in the 1990s : buy in the path of "real"ness

Posted by: The Milkshake of Despair at December 22, 2008 3:45 PM

RE wisdom in the 2000s: rent

Posted by: plan C-sparky at December 22, 2008 3:50 PM

And to finish it off....RE wisdom in the 2010s: buy in the aftermath of the bubble implosion

Posted by: Dude at December 22, 2008 3:55 PM

@ Milkshake: Yes you are correct about Noe in the 80s. Lucky for me Noe was "real" when I sold in 2001! Saw quite a few changes over 20 years!

Posted by: gotoutintime at December 22, 2008 3:56 PM

Daly City will be real in 2010.

Posted by: lainsf at December 22, 2008 10:31 PM

Daly City is plenty real already.

Posted by: fluj at December 23, 2008 8:45 AM

Just googled the 1980s NYC real estate bubble. I found these articles. Rule of thumb: History Does Repeat Itself:


This market started to get stronger by 2000 and, definitely boomed these last few years. Today, the same market is troubled, once more.

Posted by: Pumpkin Patch at December 23, 2008 9:25 AM

Just to add to the above history on the 1987-90 housing bubble:

Median home values adjusted to 2000 dollars. Years are listed as 1980, 1990, 2000:
CA 167,300; 249,800; 211,500
CT (NYC tristate area) 129,900;227,200;166,900
NY 90,000;168,000;148,700
NJ 119,200;207,400;170,800

Posted by: Pumpkin Patch at December 23, 2008 9:48 AM

Ooops...I put random dates down for the 1980s housing bubble on the intro...but, the median prices are correct...

Posted by: Pumpkin Patch at December 23, 2008 9:51 AM

Deja Vu...I work for a real estate developer. In 2005 we bought 2 apartment buildings in the East Bay totaling 48 units. We renovated the property and sold all the units as condos. (The units were already mapped as condos, so we didn't have to go through that hassle). Apparently as the condo market collapsed in the early 90's during construction, the developer just rented them out. 15 years as rentals...

Posted by: TelHillrenter at December 23, 2008 10:44 AM

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