Unrealistic Expectations
Posted on February 23, 2006 - Filed Under Business |
Business Week has an excellent article that, subconsciously, underscores the mentality of home owners in Orange County.
The article is called "A tale of two markets". The article is a good read and when I can find it on-line, I’ll link it. There was one paragraph that caught my eye and made me laugh.
"Yale’s Shiller surveyed Orange County residents last year on what they expected home prices to do over the next ten years. The average expectation was a 23% return - per year!"
That has to be the dumbest thing I’ve ever read. Having spent many years in the OC, I’ve met some "head in the clouds" people. But this rate of return is absolutely ridiculous.
Let’s put this in numerical terms. A statistic quoted in the article has 7,342 homes selling at more than $1M in 2005 which is up 43% from 2004. So the expectation is that the value of each home will go up more than a quarter of a million dollars per year for the next ten years.
Does anyone besides msyelf find that a bit too optimistic?
Apparently they surveyed the homes in the OC with meth-labs in the basement. C’mon OC people . . . fess up. You know who you are!
But I will state this. I cannot ignore the possibility that this could happen. If you believe in the adage that "There’s a sucker born every minute" then as long as someone is willing to buy at that new price, someone will be willing to sell.
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