Most areas of the United States had real estate prices hit their zenith about four years ago. Initially a good number of people saw prices declines as a temporary correction before values would resume an upward trajectory. As the months passed many people started to abandon that view. When months became years there were few people left on that bandwagon. Reality set in and theories of a “lost decade” in real estate began to emerge.
Some held on to the stubborn belief that real estate would soon return to its glory days. We heard the usual reasons – people have to live somewhere, they’re not making more land, populations are expanding creating an ever-increasing need for housing, etc. One by one these holdouts fell away and returned to earth, otherwise known as reality. However, I may have found that last true believer in the axiom that real estate only goes up. It’s like finding an octogenarian Japanese soldier hiding in a Pacific island jungle who still believes he is fighting the Second World War.
The Last Samurai
Where did I find real estate’s last Samurai? Believe it or not, right on my own street. I certainly didn’t believe it. This is, after all, Las Vegas, the foreclosure capital of the United States and the poster child for a real estate boom gone bust. Granted my neighborhood has fared better than many others here. Good location and area desirability resulted in prices only falling about 40% from the peak while many others have fallen 60% or more.
About a dozen houses away from me is what most would consider to be the best house on the block. It sits on the largest lot, has a great backyard with a pool and cabana, beautiful landscaping, and has great curb appeal. If a random person was asked to select the most expensive home in the neighborhood, this one would be picked almost every time. For the owner to think he has the best house is reality. What he thinks it’s worth is another story.
A couple of weeks ago a “for sale” sign appeared on the lawn. Of course I was curious. The original owner had sold at the very peak of the market, whether he was lucky or good is open for debate. The current owner had the misfortune of paying the all-time highest price for a home in the neighborhood – $979,000. Ouch! I searched for the listing to see what the price was and if it was possibly a short sale. My initial search didn’t find the listing; turns out I had set my search parameters too low.
An Alternative Reality
I had searched for houses selling for less than $750,000 – wrong! I revised my search and soon found it. The price? $999,950! To say I was surprised would be like saying the Titanic had a minor mishap. I had an idea what it should be selling for but called one of my agent contacts to be sure. Considering that it is the best house in the area and taking recent sales into account, the fair market value is approximately $575,000. How is the asking price so far off?
It’s simple really; the asking price is based on what the owner paid. He’s wearing blinders and totally ignoring the real estate world around him. I could almost understand it if this was a FSBO but it’s listed with an agent. I don’t know the agent, but I would assume that he or she is inexperienced. It makes no sense to accept a listing from a seller that is so out of touch with reality. There is cost involved in marketing a property and this agent will just be throwing those dollars down the drain. So if you ever need to find that last holdout proclaiming that real estate only goes up, let me know – I’ll give you his number.
Face reality as it is, not as it was or as you wish it to be. – Jack Welch