Assuming the area reached parity to the long term trendline in 2001 (neither overvalued nor undervalued relative to the trendline), we could reasonably expect a slightly higher value in 2007 because of inflation and CPI increases.
These homes were apparently built after 2001, so I took the liberty of looking at some sales data of homes of similar size on small lots within a mile or so of these neighborhoods during the 2001 period. So we’re talking about homes built in 1999-2001, of 1,800 – 2,200 SqFt in size, and on small subdivision lots.
The sales data I saw ranged in price from about $220k-$250k during the year. For reference, these homes peaked out in the low $500k range and are now selling in the $460k range, so I don’t think they’re too far off in terms of value from the house we’ve been discussing all along. The neighborhood includes mostly larger homes so I think it might be a touch superior to the neighborhood we’ve been discussing.
One clarification I would ask is whether 23109Vcs rental home is a condo unit or a home on a subdivision lot. I didn’t reme,ber the address so I couldn’t look it up. If it is a condo unit by ownership then the value would probably be a little less relative to the homes I was looking at.
Anyways, assuming a 2001 value for the 1999 home in the middle of that range at $240,000, the value today at the trendline would be just under $280,000. This would be the “fair” price for that home today, and would probably hold up well over time. I’d anticipate the fair value for 23109VCs rental home to be a little less than that right now.
Of course, the market corrections so far have always overshot the mark dipping into undervalued territory, so it is not beyond the realm to think that it could return to the original value of $240k.
Bottom line here is that 23109VCs rental at $300k might be a reasonable gamble if he doesn’t mind being underwater for a few years. At that price the advantages of the financing might make up for the possibility of further price declines. At an 8% interest rate, the payment on $240k is $1,749/month P+I, whereas $300k @ 6% is $1,789. A $350,000 sale price would put that payment at $2,087/month, not counting taxes and insurance, Mello-Roos and HOA.
It just bears repeating here that the difference between $350,000 and $240,000 is $90,000.
