Posters on this alarming site flummoxed and vexed all weekend about that Chinese girl-student who snatched a T.O. bungalow for $1.1 million, 40% over asking. This unleashed a torrent of anti-immigrant sentiment matched only by the invective and venom saved for the wrinkly ruling class of Boomers. Now, Boomer-bashing I can understand. The people who invented Duran Duran and K-cars deserve unending scorn.
But the Tale of the Bung was actually not about bags of Chinese money, a yellow tide washing over the heartland or how immigrants are making real estate unaffordable for the indigenous masses of former immigrants. Idiots from Asia are just as capable of making dumbass financial decisions as good ol’ buys from Sarnia or Lethbridge.
Instead, I want you to contrast all this with a small story out of Florida, which also made headlines. Willow Tufano is 14 and recently bought a house in a foreclosure auction that last sold for $100,000. But she paid $12,000. And where did a kid get twelve grand? From selling furniture on Craiglist that she collected in abandoned, foreclosed properties in her neighbourhood.
When Willow was seven, Florida real estate boomed. There were bidding wars in the Miami area and values were at historic highs. For example, the median price of homes in Pompano Beach was $355,000, having increased 133% in five years with another 20% forecast for 2006. Investors were pouring in from Europe, snapping up condos and new subdivision houses with fresh little palm trees in the front yard. Locals complained all this speculation was making housing permanently unaffordable.
That’s no longer an issue. Today the median price in Pompano is $183,000, a loss of 48.4%. There are 1,400 listings in a place with less than 100,000 people, and you have a good selection of condos selling for less than $25,000. At last count, 24.5% of the houses in the area were vacant. The unemployment rate in Miami crested at 12% a year and a half ago (now 10%). When Willow was seven, only 3% of people were jobless.
This is what happens when real estate dies. The same houses that fueled the economy and made foreign investors drool are now worth half, and nobody wants ‘em. Foreclosures are rampant as property values fall below the mortgages slapped on them a few years ago. So an enterprising kid like Willow can collect old coffee tables and golf clubs, flog them and buy a house with her mom. (It’s now rented to a young couple with tats for $700 a month.)
So what, the realtors in Toronto, Calgary and Vancouver cry? It’s different here. We have rising prices. We have horny buyers. Bidding wars. And HAM.
But the juxtaposition of these two young women should be lost on nobody. One represents the top of a market, and one the bottom. One’s shrewd, the other a fool. One has only known rising prices, the other’s only seen them fall. One will see profits, and the other losses.
There’s continuing evidence the American real estate market is forming a bottom and the US economy starting its slow renaissance. Over 227,000 more jobs were created last month, at the same time we lost almost 3,000. US corporate profits are near record levels, equity markets are robust and Obama will romp to a second term. The largest economy in the world will remain that way for decades, no matter how much national debt it accumulates.
It’s as illogical for the average US house to cost $173,000 as it is for the average SFH to sell for $818,000 in 416 or $1.2 million in Vancouver. The pendulum’s swung to extremes on both sides of the border, and only a fool would fail to see what happens next. Over the next five years, American residential home prices will swell, just as ours will fade. Willow’s little story will epitomize opportunity. The Bung Girl will define folly.
Remember, real estate is the most emotional of assets. Prices always revert to the mean. Always.
So let’s say you’re interested in buying 141 King Street, in Dunkirk NY. Nice character house. Two rental units. Long-term tenants paying $500 a month each. And not a bad price: $38,500. Although you can probably get it for less, after sitting on the market for six months.
But the best part of this listing? Instead of a pic of the water heater, you get to see one of the renters. And he’s hot!
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