CA Renter,
That house sold for just under $400K in July of 1997. To close in July 1997 that house was likely purchased under contract in 1996 pulling it deeper down. I bought RE in this area in 1997 and it was cheaper to buy that to rent with 5% down, PMI and interest rates on 5/1 ARM’s in the mid 8’s. In 1997 we were at the bottom of the last cycle and had overshot on the way down.
That house also has a pool and a large lot requiring mucho landscaping expense. Let’s be ultra-conservative and call it $450K.
Since that time the area has improved dramatically (though long time locals might not agree). In 1997, you couldnt find a place that served a decent dinner around here after 9 PM. If there was such a place we never found it. The schools are better, the shopping is better, there are numerous new medical office buidlings and specialists you previously had to drive to UTC/Kearny Mesa now have offices here. And yes Leucadia Blvd now makes that house about 10 minutes closer to the beach/freeway. The diversity of employment is drmatacilly better now than in 1997. So there are definitely very siginifcant improvements since 1997 which was a pricing bottom with high interest rates.
Let’s continue being ultra-conservative and give ourselves 3% inflation since the overshot bottom. It’s 11 YEARS LATER! The 3% compounded over 11 years is about 40%. Throw the 40% on top of our conservative cost estimate (using 1997 costs not 2008 costs) and ya got $623K.
If you think that house will see $450K I’d like some of what you’re smoking. I don’t think a house like that will see $625K but could see it breaking $700K if interest rates climb back into the 9’s.
