I am a small property developer. For the past many years, I have purchased homes and rehabilitated them with the intent to re-sell them.
In 2010, I purchased two houses in Tacoma. One was on the Hilltop, the other close to Point Defiance. Both were in deplorable condition, but I gutted them and completely rebuilt them.
When they were complete, market conditions made them impossible to sell at a profit, so I put them in the rental market.
This spring I decided that the market had improved, and I decided to sell them. The Hilltop house was the smaller of the two, about 1,100 square feet with no garage or fenced yard. After considerable research and rumination, I elected to price it at $194,000.
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The larger house, which measures a little over 1,800 square feet, I priced at $370,000.
These prices are very comparable to the similar houses in the respective neighborhoods.
The larger house has been on the market for over a month. I have received no offers. The smaller house I placed on the market last Friday evening. By Monday, I had 11 signed offers ranging between $200,000 and $243,000.
With the offers, I received several touching letters from prospective buyers telling me that they were offering everything they had, and to please consider them because they were desperate to buy a house for their family to live in.
Every one of the buyers was prequalified, and every one of them was employed. All had good credit. They were all offering the maximum amount they could qualify for, based on their income.
I realized that I was looking at a sample of middle America and the housing dilemma it’s facing. Most middle-class Americans simply cannot afford a house that costs in excess of $250,000.
Affordable houses like the Hilltop home I’m selling are few and far between in Washington cities, and in the present economy they will all disappear soon.
So, what’s a person to do?
My advice for all those people trying to buy a single-family home at below $250,000 is to bide your time and save all you can. I know it’s hard, but the key to buying something during the next recession will be cash.
Now is the time to prepare for the next downturn. It’s coming in the next few years. Save as though your life depends on it, and a house you can afford will be your reward.
Jim Lake lives in the Stadium District and has made Tacoma his home since 1988.