Did you overpay for your house?

Home values in Santa Clara County and San Mateo County have dropped below the spring peak pricing, and some areas are showing a clear declining market. While seasonality is pretty common, and I believe that prices will rise again in the new year, seeing the lower sales numbers after you’ve purchased is disheartening, to say the least.

I know personally that it feels horrible to buy a home and then see the value drop. It happened to me in 1989 with Jim’s and my first home.

The stuff people say if you overpay for your house

graphic: what to say? Did you overpay for your house>

Somehow, people just don’t seem to know what to say when prices fall after you become a new homeowner. You feel sick in your stomach from the fear of having made a terrible mistake. A solid “I’m sorry” or “I’m here if you want to vent” would be simpatico. Most friends and relatives, though, will want to bolster your morale – and come out with strange comments when faced with your sadness or concern in a badly bungled effort to make you feel better.

“It’s just a paper loss”, someone will say, hoping to reassure you.

“You aren’t moving, so it doesn’t matter right now, does it?” offers another.

“You’ll be there a long time – when you sell, the market will have recovered and then some.”

In the end, none of those remarks are helpful, though the intentions are no doubt good.  They want you to feel better. (And, that doesn’t mean they’re wrong – only that they are not helpful to your understandable angst.)

When we bought our first home, the market had just begun to correct after a ferociously hot escalation. We saved a bit from the peak, had plenty of selection, did not face multiple offers, and were grateful. We knew that the market might drop further, but we were in it for the long haul. What we didn’t know was that it was going to be a few years before it started to recover. It wasn’t a steep slide, but it felt never-ending. We wished that our mortgage had somehow been tied to the value and declined accordingly, but of course it doesn’t work that way.

If you have closed escrow and immediately prices fall, it is going to feel bad. You would feel the same way if you put your whole retirement account into one stock or mutual fund and it immediately lost value. (I think more friends & family would be sympathetic if they thought about it along those lines.) So please know that feeling cruddy in that case is valid. Before sharing with loved ones how you feel, you may want to tell them upfront that you aren’t looking for anyone to fix the situation or how you feel, that you just want them to listen. If they do, that’s a gift.

Did you actually overpay for your house?

If you paid in line with what the market was doing the month in which you placed your bid, you didn’t actually overpay for your house. You may have paid at the peak, but that is different from over paying. The first thing I would suggest doing is checking out the data. Did all other homes sell for about the price you paid? If so, you did not overpay that week. Is it about the same price per square foot for similar homes? If so, you were in line with the market. If you paid 10% over list price, and the average sale to list price was 112%, were you too high? It doesn’t look like it.

What is hard to figure out is when the peak of the market will be. Realtors can tell you that most years, the highest price will be in spring, but that’s not always the case.

Put simply: if you paid in line with what others were paying at the time you bid, you didn’t overpay.

If things changed later, the market shifted.

Shift happens. (more…)

Wanted: sucker to buy or rent overpriced property

Real Estate Suckers Wanted!Sometimes it is said that the current owners of the home are the highest bidders on their own property. What does that mean? In a nutshell, it refers to the fact that no one else is going to pay the price that the seller or landlord is asking for that house or condo, so he or she “wins” the opportunity to continue to live there or have possession of it.   Translation: the house did not sell (or get rented out).

In every market, even a red hot seller’s market as we now have in Silicon Valley, there are overpriced homes for sale and for rent.  Some of them may never sell – or take years and multiple listing agents and multiple price reductions before a property changes hands or gets a new tenant.

How do you know if a home is overpriced?