Your home is unique, and what it is worth to you is highly subjective. Additionally, the mantra of “a home is your most important investment” has generally led people to believe that the value of their home is higher than what they paid for it.
The same cannot be said for most markets.
Just because you feel your company stock in your 401(k) is worth $50 a share doesn’t make it so. Stocks are traded on an exchange and you’re forced to deal with the market price of your investment every time you look at your brokerage statement.
Or, take a look at automobiles. Most owners realize their vehicle has declined in value. If they need any reminder, all they have to do is look at the bright yellow numbers posted on the windshield of a similar model as they drive past their local dealership.
Given that 1) turnover in the real estate market is lower than most markets and 2) you are not dealing with a homogeneous product, someone selling their home can have unrealistic assumptions about its value for an extended period of time.
But while real estate prices take longer to adjust to current market conditions, they do in fact adjust. That process is slowly beginning to happen in Healdsburg.
Take a look at 436 North St #7:
This condo was purchased in December 2005 for $255,000. It’s been on an off the market since mid-2007 and is currently listed for $260,000. The owner knows the property is worth at least what they bought it for and are holding out for someone else to realize that fact.
Unfortunately for them, a similar unit (actually 50 sq feet larger) right next door at 426 North St just went on the market for $180,000:
Take a look at the sales history of the two units (notice that the unit at 426 actually sold for MORE than the unit at 436 in the early 90's):
There is no more pretending the unit at 436 is worth close to what it was bought for in 2005. The nearly identical place next door is selling for $80,000 less. As you can see, it’s reality check time.
Interesting analysis. I wonder if the owners of these places know they are both on the market and if so what the rationale for the difference in price is, besides the "my place is special" argument.
ReplyDeleteThe real question I have is why would someone buy an apartment in Healdsburg, when they can get a house down the road in Windsor in the low 200s. I guess they really like to walk to the plaza or something.
I am sure the owner of the $180,000 condo is aware of the neighbor's non-selling, higher priced unit. They priced their unit as if they are eager to sell quickly. I expect that it will. It's pretty close to the "cheaper than rent" price range.
ReplyDeleteDave, agree with what you said about the lower priced Condo. I am just trying to figure out what the higher price owner is thinking. I am wondering if it is a case of "my place is special" or if they feel they have to get a certain price because of what they paid for it. If the latter is the case, it will be another case of sellers in Healdsburg, waiting for the market to turn back to '05, while watching their cash position continue to decrease.
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