“IT WAS the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way…” — A Tale of Two Cities, Charles Dickens
A 1977 ad claimed you could get an 80-megabyte hard drive delivered in 30 days for under $12,000.
Google took .19 seconds to find me an 80-gigabyte hard drive for under $46 that could be delivered to my door in 24-hours.
That’s a 30-fold increase in delivery time, a 260-fold decrease in price, and a 1,024-fold increase in storage capacity.
Computers aren’t the only things to change dramatically over time. Consider this bank-owned foreclosure property located in the 92553 zip code.
In Dec-02 someone paid $189,000 for it as a new home. It sold for $460,000 Oct-06.
Then the sky fell.
In Aug-07 the bank took the house back for $396,016 - the amount of the first mortgage. They put it on the market in Sep-07 for $359,900.
Today the bank is asking $280,500 for this 3-bed/2.5-bath, 2034sf house on a 5,227sf lot - a 39% drop in in just 462 days.
So what, exactly, would a fair price be for this house?
The best information I have says that the median price of California homes has increased an average of 8.9% since 1968. That would put the current value of this house at about $289,500.
So the bank’s asking price is a great deal, right?
Not exactly. That same information also says that the worst period for California real estate was from 1990 to 1996. During that period the median value of an existing home fell 10%. Some of those years we worse than other, but the average decline during that period was 1.4%.
Somewhere between the asking price and $260,500 should give you a reasonable margin of safety.
You see, whether you’re Charles Dickens, Bill Gates, Chicken Little, or Warren Buffet, it’s never a bad time to buy real estate. The question is, at what price?