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 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:
- Real Estate never falls in value.
- Once you sell in California, you are forever priced out.
- 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 home is that I believed a price collapse was coming. Prices did collapse and I got away clean. Vindication.