Vindication

In 2005 I watched the real estate craze from a front row seat in San Diego. My home value rocketed up to insane levels. Those with homes were drunk with excitement on how much money their home was worth. I got suspicious, just like I got suspicious during the craze of the dot-com days. After lots of research, which included reading the 2nd edition of Irrational Exuberance, I came to the very unpopular opinion that the party was about over and home prices would plummet.

Irrational Exuberance 3rd edition
Irrational Exuberance 3rd edition by Robert J. Shiller – This is still one of the greatest books ever written on investor psychology. Highly recommended.

I was told by many people:

  1. Real Estate never falls in value.
  2. Once you sell in California, you are forever priced out.
  3. I was making a mistake.

Well the house sold in early 2006 and I escaped to the rental market where I have been ever since. We all know what happened next. Real estate prices fell hard. However, up until yesterday I did not have a hard number to tell me what would have happened to me personally had I not sold my home.

My old house was sold in February 2010 for $200,000 LESS than what I sold it for in 2006. And this is after the new owner put $100,000 of upgrades into the home, including a swimming pool.

On March 9, 2006 in the post Won the Lottery, I said this:

Yesterday, I received the money for the sale of that house. It was A LOT of money. The amount of profit was insane. I am another winner in the California home seller lottery. The reason I’m a winner is because I’m not buying another home. More on that topic in another post.

Well that “another post” I referenced 4 years ago is today. The reason I didn’t buy another another home is because I believed a price collapse was coming. Prices did collapse and I got away clean. Vindication.

Published by

MAS

Critical MAS is the blog for Michael Allen Smith of Seattle, Washington. My interests include traditional food, fitness, economics, and web development.

One thought on “Vindication”

  1. Good man…I made a similar move but it was in ’03 that I sold after doing much research not long after the 911 catastrophe and the dot com bust. A year and a half later I bought a mobile home on a small lot that nobody wanted because they were to busy upgrading to bigger homes and suv’s.
    Looking forward to your follow up post.

Comments are closed.