California Real Estate Insanity
OK, I admit it, I like watching HGTV and TLC. BTW: The shouldn’t call it the learning channel any more. TLC is almost 100% reality TV now. I guess TRC – The Reality Channel. Anyway…
If you have spent any time watching the real estate shows on these channels, then you’ve seen the insane prices for real estate in California. Normally, I just laugh at their foolishness, but this one last night blew my mind completely out of the water. The show was one of the house flip shows. Where someone buys a run down house, remodels it and sells it for a nice profit. That wouldn’t work in most of the country (at least the parts I’m familiar with).
So this investor bought a house for about $550,000. He spent another $55,000 or so rebuilding it. Then sold it for like $749,000. “So, what kind of mansion was this?” you ask. HAH!!!!
This was a 900 square foot, 3 bed, 1 bath, crack house with black mold growing 3/4 of the way up every wall. Holy Crap! They literally had to put new wall up, a new floor in the bathroom (there was a hole all the way to the ground in the floor), every window had to be replaced and it had to be re-roofed.
Does anyone else think one half of a million dollars is a little too much for a unique fixer upper like that?!?!?!?!??!?!
Now, I don’t live in the greatest house in the greatest neighborhood of Southeast Texas. My house is twice that size (1750+ square feet) with no major issues (like toxic mold!) and I paid less than $75,000 for it. For half a million, I could buy my entire block!
This investor did add like 150 square feet, but three quarter of a million dollars for still less than 1100 square feet! And someone bought it for that!
Here’s where the economics comes in. Everyone is paying these astronomical prices for crap… what’s going to happen when someone realizes that California home prices are way out of line? If the entire home-buying community in California says, ‘wait, that’s crazy’, then the real money value of property in California could be cut in half overnight.
Basically, California is saying that the value of their state is about equal to all the land East of the Mississippi. Does that sound right to you?
A few examples that might help you understand how insane California is… (these are from my mom’s trip to CA)
1) a really nice teacher in LA lives in a trailer at the local national park. It was cheaper for her to buy the trailer and pay the weekly site rental fees than even get an apartment. She literally can’t afford anything else.
2) apparently, there are no gas stations in or around Beverly Hills because no one could work there and afford to live. Not many people are willing to commute for an hour in LA traffic to work in a gas station.