Monday, November 28, 2005

The Great Disparity in Real Estate

Today the National Real estate Association released the results for existing home sales for the month of October. I know you already heard the general jest of the story - prices declined from august levels, rose from September’s - but what everyone is talking about is the number of homes listed versus selling. The backlog is starting.

Has any checked out the actual website?

Here it is:$FILE/REL0510TS.pdf

What I found interesting is the fact that the average condo sold for $277,700. The average single family house sold for $265,000.

You may say to yourself “What the heck is going on!!! Where I live houses sell for $700,000 and condos sell for $250,000.”

Here is the deal. The mother load of condos are in real estate markets where land is extremely expensive. There simply are no condos in central Iowa. The need for employment drives land prices around DC, New York, Boston. I can tell you though from my personal experience. Right outside the commuting range of DC land is cheap and it is starting to be developed fast down in Southern Maryland..

I pitty you clowns that bought condos for over $70,000, but that is your problem. As the migration continues. You will bleed heavily.

What about those that migrate to the cheap land?

Land is the greatest expense to a home builder. If the Land a house sits on in DC is “worth” $700,000 and the house is worth $150,000. Do you think the homeowner believes he owns a $150,000 house? If the builder develops a similar size lot for $100,000 plus builds a house for $150,000. Will he sell it for $250,000 to the man that thinks his house is worth $850,000? NO!!! People have a false sense of what creates the valuation. Because the clown believes his house is worth $850,000 and he no longer needs the commute to work. $400,000 is a wonderful deal that he will jump on.


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