The worst of residential real estate performance

Posted on Posted in Investment, News and Politics, Retirement

BH

I’ve been negative on residential real estate as a financial asset for at least the past 12 years but that’s perhaps mostly because I’ve personally taken such a beating in suburban Philadelphia and along the bayshore region in south Jersey.

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Ten years ago in 2006 this historic (c 1901) stone home in Bala Cynwyd on the outskirts of Philadelphia appraised for $268,000. I took out an 80% mortgage of $214,000 based on the bank appraisal in 2010 and am still paying that mortgage off. Since then, we’ve spent over $50,000 in major whole house renovations including HVAC, roof, electric rewiring, plumbing, windows, repointing, raised ceilings, deck, landscaping, etc. We still have tens of thousands of dollars of upgrades planned but not complete. Yet now, in 2016 Zillow estimates the price at $217,788. In simple terms, that’s a paper loss of more than $100,000. (217k-268k-50k).

nantuxent

I hate to say it, but some of our New Jersey properties have done even worse than the PA house. One that we bought in the center of the map above for $117,000 in 2006 and spent $28,000 on bulkhead repairs is now appraised at about $45,000. That’s another paper loss of over $100,000. And it goes on from there. My main cabin (pictured below) in NJ lost more than 80% of its value since the peak of the market in 2006. We are praying that the state makes us an offer to buy for open space at pre-Sandy prices since the market has dropped sharply since then. And yet I don’t know where we could move by transferring the sales proceeds; apparently our PA and NJ houses are already in the lowest price areas in the nation. Most parts of the country would be unaffordable without a significant additional cash investment.

cabin 1

In the larger picture I see that most people, especially my father’s generation, have done well with their residential real estate ownership. And I know that other parts of the country still do much better than the suburban Main Line and the bayshore. But still, I have to conclude that real estate ownership has been a financial disaster for me.

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