[Real estate gravity] What goes up sometimes falls hard
A tale of distressed property in Charleston that illustrates the point that home values sometimes decline far more than the average because this home appears to be back to where it sold around 2002. Now, you don't really know what the condition of the property is that caused the price to be what I think would normally be pretty much below market value.
As all of you know, Charleston home prices (along with the rest of the country) started to climb around 2003 - 2004 and kept going higher until somewhere in 2007 when price declines began to cause much of the housing mess we still find ourselves in today.
Now hindsight provides all of us with 20/20 vision and it's pretty obvious that the homeowner overpaid for this home in 2006. What we don't know is whether a divorce, job loss, health issues or a death in the family became a financial problem, all we can see are the results.
And easy money was the culprit.
Tax records indicate that the home was purchased with no money down. And if that wasn't bad enough, the homeowner refinanced one year later taking $50,000 in equity out of the property. Now the lender is basically going to lose a lot of money on this deal and it tends to drag down home values for other homeowners in the neighborhood.
But before you mistakenly blame the CRA (Community Reinvestment Act) and Fannie and Freddie for all the lending problems (and they aren't entirely blameless) which seems to be the incorrect assumption on the part of many politicians and others who don't really want to blame the real perpetrators of the mess, this mortgage would have been for higher than the loan limit that Fannie and Freddie guarantee and so this mortgage was one of those that was famously sliced, diced and securitized by those characters on Wall Street who brought you the financial crisis in the summer / fall of 2008 that the grandchildren of today's taxpayers will continue to be paying for.
Oh something else is really cute about this and that is that the home grew in size several times when it was listed and sold. It first grew by 3 percent in square footage and then grew again by 6 percent which is why the Charleston MLS always inserts this phrase in every one of the listings, "if square footage is important - MEASURE".
The bright spot in all this: there are some exceptional opportunities for buyers when they can spot these kinds of deals.