Comments on: Real Homes of Genius: Revisiting a Past Downey California Home. $305,000 Discount in 2 Years. $1.7 Trillion in California Equity Gone in One Year.

By: Elaine Supkis

Elaine Supkis — Fri, 20 Feb 2009 22:34:40 +0000

The land isn’t the important thing, it is the LOCATION of the land that is hyper-important. Many things come into view here: the view, of course, is a huge factor. What you see is what you buy, a beautiful view is priceless. Next, schools: good school districts are far more valuable than bad ones. Land associated with bad schools is nearly worthless EXCEPT in retirement communities.

Transport: too close to airports=low property values compared to others which don’t have planes in the vicinity. Nearby highway ramps are good but not too close due to air pollution and noise. The list is very long. Next to a lake: good. On a shore: excellent, etc.

By: Tom

Tom — Mon, 25 Aug 2008 15:04:13 +0000

While it is difficult for me to consider CA land values from TX, even the value of the buildings looks out of line. Considering the square footage of the house and even giving it credit for being a very nice model, I could have purchased a similar house near Dallas for around $150,000 at market peak, land included.

By: PrevenTragedy

PrevenTragedy — Mon, 25 Aug 2008 04:38:19 +0000

Dr. HB,

County assessor’s records do not accurately represent land value. Since Prop 13, the allocation of land and building value has become irrelevant. Therefore, assessors make no attempt to properly allocate values. Even the IRS recognizes this and ignores CA property tax bills when allocating land v. depreciable structures.

By: Lee

Lee — Sun, 24 Aug 2008 12:05:43 +0000

I think there is a minor ($1.3 Trillion) error in the amount of equity that has depreciated into thin air. ALL of the 13m houses have depreciated, NOT just the houses occupied by their owners. Using the same calculations, $3 Trillion has evaporated. It has affected landlords and owner/occupiers alike. A landlord can no longer get a HELOC for that European holiday/new Picasso/new yacht etc.

(I haven’t misunderstood something, have I ???)

By: Hugh Pavletich

Hugh Pavletich — Sun, 24 Aug 2008 08:34:06 +0000

Dear Dr Housing Bubble,

Thank you for having a go at the “fake equity evaporation” of residential real estate in California,

I note you used medians instead of average prices and put to one side the rental housing stock, which constitutes near half of the residential stick. It is my view that this should be included as well.

Lets have a rough – very rough – guess at this. With 13 million residential units in California and an AVERAGE price of $600,000 (incl apartments / condos) – this would suggest that there was well in excess of $7.8 trillion of residential stock in California at the peak (likely nearer $9 trillion) which has slumped about 37% or in excess of $2.8 trillion so far since the peak.

Nationally too – the 120 million of all residential stock neads to be multiplied out at the AVERAGE price at the peak – then what the average price is now – to assess the “fake value evapoation” to date.

Anything below three times annual household income should be treated as “real value” – above that “fake value”.

My gues is that there is in excess of $8 trillion of “fake value” to work out of the system in coming years in the United States. Counties such as the United Kingdom, Ireland, Australia and New Zealand have a much greater “fake value problem” – in rough terms near double their GDPs. The United States in contrast has the equivilent of somewhat less than one times its GDP of “fake value”.

I trust you and your readers make more refined attempts at assessing the “fake value” in the California and United States markets.

Hugh Pavletich
Christchurch
New Zealand