Couple o’ months back I was commenting on the serious amount of idiocy fueling the real estate market in this country. The real estate bubble, it was called, and everybody was talking about it. Don’t seem to hear quite as much about it today, and I guess that means one of two things. Either the bubble has started to bust or the media has run out of applicable hype to attach to it.
I sold at the height of the bubble, be it a real or imagined one. I profited from it, and as decisions about money go, it was one of the smarter things I ever did. I’m up to about 3 smart things done in life now, so you can see it was a big deal for me.
But I’ll say the same thing now that I did then.
The only thing that drives up real estate is the amount of tent revival hysteria you’re willing to swallow at any given time. “I hear tell that Bob and Mary Sue paid $200,000 for a ranch house over in Cheaptown, can you believe it? Why, I remember when that place was built, you couldn’t give ‘em away! Them there houses are crap! Location? Well sure, it is right next to the main road, and there is a school around the corner. Hmm. And the lawns are kept up real nice. Hmmm.”
One of the semi-regulars at the Watering Hole is a single Mom, a sailor in Chief Mo’s Navy. She had a house, or the dwarfish resemblance of a house, in the vinyl-clad suburb that I’ll call Green Dung. Which is what all of us 19 year old framers were calling it at the time while we swung hammers and built a house there, every week. It was back in the boom days of the late 70’s around here. Swampland was getting started on the building explosion that hasn’t stopped to this very day.
I can’t remember if I happened to frame Single Mom’s house in particular, but I was in that neighborhood and I can tell you without a doubt that these were throw ‘em up, slap something on the side to keep the rain out and sell-like-hell houses. Little builders were going out on a limb, getting some shaky building loans, selling these things for triple the loan value and getting filthy rich. I personally know some guys that went from being itinerant carpenters to mega developers that way. How did they do it?
Well, part of it was simple need. The housing available in this area was inadequate. But part of it was classic hucksmanship. “You don’t really wanna’ live down in that nasty old downtown neighborhood, do ya? Why don’t cha come on out to the ‘burbs, got a nice shiny vinyl model right here, brand spankin’ new, and I can getcha’ into her for a song . . .”
And after the first wave of owners went through a few years in these houses and found out just how crappy they really were, the hucksters were right there for ‘em. “Well shoot, you don’t have to live in Green Dung anymore! You’re makin’ a little more money now, right? Why don’t cha slide over here and let me show you this little brick honey, just came on the market this morning and it ain’t gonna last long in this market, you can bet on that.” And on it went.
Green Dung went into a bit of a malaise there for quite a while. The neighborhood took a backwards slide, the schools went bad, there was a helluva gang problem. People like Single Mom, on a limited income, or Crackhead Joe on an erratic one, were about the only ones living there because no one else would.
But when the bubble hit, none of that seemed to matter anymore. Single Mom was telling us the story over a beer a few weeks ago. “I put the house up for sale,” she said, to the huge interest of Chief Mo and myself. “The Navy is transferring me again.”
The Chief and I started in with the conventional wisdom, of course. “Take what you can get for it honey, we all know what kind of neighborhood it is, maybe you can at least get out of it what you paid” blah blah. Turns out she paid just under 100k for it, which was highway robbery, but it’s cheap in this area.
She seemed surprised. “You fellas are just a little out of the loop, aren’t you? My realtor says she can get $180,000 for it, maybe more!”
The Chief and I laughed our asses off. “$180k for that place? Oh brother! Sweetie, you just better stop and think. Would you pay 180 to live over there? Bwahahaha!”
Turns out we were right. They wouldn’t pay 180.
But they did pay 190. To say that the Chief and I had jaws scraping the floor over that one is the understatement of the year.
It fits the huckster bill though. Realtors have the famous saying - “They’re not making any more land, better buy now!” - that motivates a need. Lenders pony up those no-interest loans that sound so attractive, until you get about 5 years down the road and have to repackage it. And the people line up and buy like it’s the today with no tomorrow in sight.
Consider this handsome property:
That happens to be the Old Homestead, back on the market after a short period of touch up and repair. Which consisted of putting up new shutters, painting the trim, pruning back a few bushes and new carpet. That’s it. I know that’s it because the Eldest Daughter Beth went on a subterfuge mission a few nights ago and reported back to me. The little devil.
Huckster / developer could not have in any way spent more than 5 grand on this touch up, and that’s being generous. I’m in the business. I know down to the square foot how much carpet he installed, how much paint was applied. This was, after all, the Homestead.
He wants something in the neighborhood of 60k more than he paid for it back in June.
And it’s sitting there, on the market, and it ain’t moving.
Maybe the bigger the bubble, the longer it takes to burst.
Or, have a look at this Dump.
This happens to be a property on the fringe of the Great City by the Sea project that Stu and I damn near went broke over. An old service station, train station sort of thing. It features many broken windows, wild vine running up the sides, a roof stove in around back, rotted floors and paint a’ peelin’. All sitting on 3 acres of sturdy weeds and old tires.
Got an extra $725,000 laying around? This too can be yours. It’s an Historic property, you see. Historic in the sense that it’s pretty damned old and needs to be bulldozed. But they actually are marketing it that way, and as the “Gateway to the City by the Sea! The Gateway, by God!”
What you’d do with it after you bought it is left best to the imagination of those who can envision the impossible. And, in what the picture does not show, what to do with the dozen or so miserable shacks lined up for a mile on either side of it. I guess you’d have to hope for several touches of the same lightning that you’re breathlessly waiting on.
I think I’d be wasting good breath to do it, but I’d like to take this modern day Cartel of realtors, developers and high flying investors aside for a minute and have a word or two.
Think about this. The land you have just assessed at over 1,000 times its’ actual worth, and the ‘Historic’ building sitting on it, haven’t changed in 50 years. It’s the same brick and mortar, the same weeds and the same tired sense of being something that was once built, had a purpose, but the purpose has long since died.
But based on the strength of the almighty Huckstering, that there is a new Marina just down the road (but only a quarter of it filled), new shops and restaurants and boutiques (not one of which is doing any business to speak of), new upscale housing rising from the sand (at this writing, out of 40 overpriced houses, exactly one of which has people actually inhabiting it) you are expecting to sell a Gateway? Is this like the Gateway to the alter of hyperbole?
Could be that your paper fortunes are running out of time here, lads and lassies. Might be time to turn in the (leased) Hummer 2, pay off the haberdasher credit card and take a good hard look at where you are. Sure you made a pile back a year ago. Sure, you’ve got umpteen properties you’re sitting on that you bought with the profits. Sure, there’s always that couple from Kansas City who just might be showing up tomorrow. Or next week.
But if they’re driving in, I wouldn’t count on it. Little trouble getting gas money, I hear.
Maybe you could put in a call to the blue bloods at Exxon. I hear tell they made $10 billion in profit last quarter. That’s three months. Surely they out to be able to drop $725,000 on a piece of property that no one has wanted for the last 50 years. They ought to be just gushing over the opportunity, whether there’s oil onsite or not.
You know, I’m not adverse to anyone making money. Making a profit. Lord knows I try to do so myself.
But when you get to the point that you’re creating a feeding frenzy, just being damned greedy about the whole affair, I’ll cry bullshit on you every time.
And I can tell you for a fact. Every one of you quasi-rich new money Hucksters I’ve met? Are the most soulless, crying in the Hummer and miserable late night drunks I’ve ever met in my life, and I‘ve met a lot of ye.
That, you can take to the bank.
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