My anecdotal real estate observations

Here's the fact pattern for one we're pretty interested in:

Evidently, a young adult couple lived in a house starting like in 2001. They convinced the parents of one of them to buy the place as an "investment", fix it up real nice, and then of course spin it off into the infinite unicorn profits of real estate bubble world.

But of course they got caught. So now on a place that they paid $600K for and probably put in at least $400K, they have it on the market for $850K with very little prospect of getting over $750K for it. Take out commissions, fees and taxes on sale, and basically they net $700K if they're lucky. And they weren't rich to begin with. I think it was basically a lot of their retirement savings.

It's amazing what probably otherwise thinking adults were lured into. I guess that's why they call them manias.

A somewhat similar situation played out on my street a few years back.

Spoiled girl and new husband develop an irrational love affair with a newly renovated house on my street. Knowing there were other very interested buyers and that she HAD to have this house, she and new husband put in a bid above list price to get the house.

About a year later, spoiled girl's love affair with this house has subsided and she has her sights set on an even more expensive one. She brings in various realtors who all tell her that she is not going to get anything near what she thinks the house is worth.

Spoiled girl turns to daddy and convinces him to buy the house from her for the price she wants who apprently thinks he'll certainly break even if not make a profit.

This was 2 years ago and the house has gon on and off the market and has had 3 different sets of renters. He gave his daughter what was an inflated price even at the top of the bubble so I hope he lives long enough to break even.

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And it struck me - hasn't that whole fake part of our GDP just been permanently lopped off (or at least put on sabbatical for 10 years or so)?

Think about the multiplier effect: person buys house with leverage, uses more leverage to put in expensive renovations, hires plumbers/electricians/carpenters/etc., spends a shitload of money at Home Depot, etc. etc.

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You could think of it that way or realize GDP was at false levels with Greenspan at the helm going back to ~ 2002 and son of Greenspan hasn't been any better.

He certainly can't say no to his little angel, that's for sure. It certainly explains why she was such a snooty kernt.

No one was sad to see her go.

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Spoiled girl turns to daddy and convinces him to buy the house from her for the price she wants who apprently thinks he'll certainly break even if not make a profit.

This was 2 years ago and the house has gon on and off the market and has had 3 different sets of renters. He gave his daughter what was an inflated price even at the top of the bubble so I hope he lives long enough to break even.

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Where? Link to the listing?

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Where? Link to the listing?

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It's not listed currently. He's trying to find new renters again.

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And they weren't rich to begin with. I think it was basically a lot of their retirement savings.

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what we've seen here is a lot of these cases were the income was based on high-commission sales jobs, which were hammered the past couple of years and don't exist any more. And the guy making the money was really un-employable otherwise, outside of a full-commission gig at a 2nd tier company. I have a buddy at Cisco who knew guys in NYC making upper 6 figures, with a very small number of accounts (even 1 in some cases) who went right back to their <100K base when the bottom fell out.

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I seriously doubt that. It's never been "lopped" off before now in my memory, including the 1981-82 recession. People will still move up, move out of apartments, sell their condos, etc. and they always want to put their scent on their new digs. It's human nature.

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Sure, there's always going to at least be some activity at the margin. But HELOC's are much harder to get now and pay has gone down. How does that not kill a substantial percentage of all that sugar high from the bubble?

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How does that not kill a substantial percentage of all that sugar high from the bubble?

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.....does not equal...

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just been permanently lopped off (or at least put on sabbatical for 10 years or so)?

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I think HD's stock price accurately reflects any diminished home improvement activity. It's about 10% under where it was in 2007.