Look at the sales history….
Jun 26, 1992 $137,500
—
Oct 16, 1997 $99,429
-5.9%/yr
Oct 20, 1997 $134,890
>1,000%/yr
Apr 23, 1998 $128,000
-9.8%/yr
Jun 21, 2001 $180,000
11.4%/yr
Oct 05, 2005 $389,000
19.7%/yr
Feb 05, 2008 $310,500
-9.2%/yr
Now if we assume that the home was worth about 95k in 1995 or 1996, which was the bottom before… and it sold in 2005 for 389k.
Thats a whopping 409% appreciation in 9 years. That is just insane.
No, it wouldn’t surprise me at all if that home fell back to $160k. I think its a less insane possibility. Don’t forget that markets tend to over correct too.
Matt,
Taking it back to 95K is pretty arbitrary in my opinion. You had a sale of 137k.5 in 1992. Then you had one in 1998 of 128k one could take into consideration that that number was possibly inapproprite considering housing prices suffered because of unemployment not insane lending and fraud. Given that 97′ was over corrected period of time by your own admission (sort of) chosing 95k as a base price seems arbitrary.Anyway your 160k price with 20% down would be about 800PI with today’s rates. I doubt Temecula would be a ghost town at that point but if it get wrecked as I said anything can happen.
Here is another arbitrary example. Start with The peak price of 389k and knock of 125k for insane lending and fraud. That’s 264k or about exactly double the 1992 price of 137.5 Which probably was a bare lot unless it was a model home. In todays dollars the landscaping hardscaping holds that price alone quasi arbitrarily speaking. PI is $1200 with 20% down. Take into consideration tax changes and regular inflation that sounds pretty good too. Not particularly “perma bullish” unless Temecula is a flop. Double in 16 years is still a high rate of appreciation but not exactly insane given bailouts and other modifications occuring and coming.
Take the 10-20% off low ball approach that I mentioned in the other thread now or into the summer, and this place is pretty much there. Now would I tell someone they had some downside risk. Yes, I’d say if hipmatt is right it will be down another 100k and the payment could be significantly lower. Split the difference in these two quasi- arbitrary approaches and the downside is 50K for however long the loan is held, still less than rent especially including tax break, pricinple is being paid down barely. Drops somwhere beyond the 260 range are possibly to be rate induced and we are at historically low interest rates.We don’t know how long they will stay here or when they will be back if they leave which is more important.
Yes I know the argument about interest rates dropping prices but I also know the arguments about having a higher interest rate that can’t be changed on an ammount that is not significantly different than could have been had at a better rate for eternity at will. Anyway in my arbitrary example rates go up a few 10’s of grands before the bottom.
Not much of a difference in our views and targets.Not that I want to deal with a house in Temecula since my interest would be rentals.Well maybe I’ll keep an open mind.
