S*&T Happens

My grandparents moved to San Mateo from Detroit in the 1950s, seeking open space and opportunity. They purchased a classic rancher (3/2, approx. 1600 sf. Ft.) on a nearly double sized lot for around 35K. This was on par with the sale price of their house in Michigan.

At one point in the first few years of their relocation they considered moving back East. After flying into a snowstorm while undertaking a house scouting trip to Detroit, my grandfather found a phone and immediately called my grandmother back in California. Take the house off the market, he said, I can’t go back to snow. The property remained their home until my grandmother’s passing in 2018.

The trustee fixed it up a bit from its ancient glory and put it on the market for 1.95 at the end of August. Another house of comparable size listed for several 100K under. Though a smaller lot, the renovations were top of the line, and the property is more walkable to downtown.

On the day bids were due, the real estate agent representing the estate was frantic. They hadn’t gotten anything higher than 2 million. It was inconceivable!

Then, at the moment you thought the wave wouldn’t crest any more, it did. Once a bid for the other house was accepted, at well over ask, the losing bidders did an about take. After a little jockeying from two of the castoffs, the house sold for 2.1 in October.

At the time, my natural route through San Mateo still took me by the house. One day as a slowed for a touch of nostalgia, a resident caught me staring. I looked sheepishly at the friendly, breaded man who stood with his two young daughters, and explained myself.

He smiled warmly.

“We love it here.”

It was filled with a sincerity so compelling I was touched to the core. Visions of their family staying 60 years, filling it with several generations at a time for decades on end, danced in my head. This is not a family who would raze a beloved landmark of my childhood in order to erect a mini mansion.

The young family was comfortably settled in their brand-new dream home, happy as could be.

What could go wrong?

Less than two years and one pandemic later it hit the market for 2,288,000 in August of 2020.

Now as exuberant as the market may be around the Bay Area, it is also rarely completely stupid. Here were some people who had to sell. Job loss, divorce, flight to family, all of the above – who knows. Point is, this is a deal that gets circled by the vultures.

It sold at the end of September for 2.155, a mere 2.6% above the 2018 sticker price. Including moving costs, and closing costs, staging charges, realty fees, the lovely and very long fence erected in the front yard, and their losses soar into the low six figures.

Based on Realtor.com’s estimate, it is now valued about 2.215, or 5.5% above the sale price in 2018. They also contend that the value of said home went up 111% in the last 10 years. If this is the case, over 100% of that value came between 2011 and 2018. This does not bode well for today’s buyer.

If I recall, my grandparents spent about 35K on that house. Based on the sticker price, the asset’s return was 6000% over 60 years, which blows the national average out of the water. Good thing he went house hunting in the winter, because Detroit’s stats lack the same luster.