Close the Books on 794 27thPosted on Monday, September 15th, 2008 at 3:57am.
Twice this year on Pacific Ave. in the Trees, the market has told recent buyers that they goofed when they bought in.
This past Spring, a one-year-and-out situation presented itself at 3412 Pacific. Folks had paid $1.491m in January 2007 for this 3br/3ba, 2200 sq. ft. home on a corner with a view of the refinery.
Really, they should have known they were overpaying, because the home was on the MLS for several months, last priced $150k lower. They bought it after it canceled off the market, soon ran into trouble and sold it short (with lender's agreement) for $1.199m in May this year.
That means the previous owners paid $292k more than the 2008 value about a year before – or 24% too much.
Same street, much classier home, similar bottom line at 794 27th (on the corner at Pacific).
This supercool Asian-modern remodel offers 5br/4ba and 3075 sq. ft. It's extremely high-style but with some nice family spaces. The gorgeous master suite is oriented to the east to catch the morning sun, which is sweet, but, unfortunately, that also means it overlooks a 4-way stop on a fairly busy street.
In May 2006, someone was blown away by the home and rushed to overpay. It was an emotional decision to pay $2.5m for the home, not a calculated judgment.
Not quite 2 years later, the owner decided to get out of the house. In the meantime, the RE world had changed.
Suddenly, buyers were paying attention to factors that could harm their own resale values. Ultra-contemporary design turns off as many buyers as it impresses. Location problems now matter again.
No one rushed to grab 794 27th when it started at $2.599m this February. It slipped, then chopped and chopped, and finally made a deal with the list price at $2.099m. (See our last dispatch, "You Can Lose in MB.")
The closed price: $1.950m, another $150k off that last list. Talk about driving a hard bargain.
That means the previous owner paid $550k more (+28%) than the home's 2008 value in grabbing it 2 years ago. Quite a price to pay for an emotional reaction to a house.
More broadly, we're not yet at a stage where resales of short holds (1-2 years or so) are commonly selling for a lot less than their acquisition prices. Indeed, many get a tick above their purchase prices.
Late last year in the Trees, another example of a marked decline in market value was 3011 Elm. It was a superb home that went to a bidding war in March 2005, going for $2.8m, about $200k more than asking. Two and a half years later, in December, it sold for $2.650m, basically flat to the list price of 2005, but a loss of $150k for the seller.
Market frenzies, emotional buyers, uninformed and overstretched buyers... all led to substantial losses. In the current market, all these phenomena seem to be far less common.
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