Wikinvest Wire

Losing money with House Hunters

Monday, February 16, 2009

Sometimes you have to wonder how much truth there really is in Jim Sollisch's WSJ editorial a month or so ago when he blamed television in general for the late great housing bubble and HGTV in particular:

The cable network HGTV is the real villain of the economic meltdown. As the viewership reached a critical mass over the past decade -- HGTV is now broadcast into 91 million homes -- homeowners began experiencing deep angst. Suddenly no one but the most slovenly and unambitious were satisfied with their houses.

It didn't matter if you lived in an apartment or a gated community, one episode of "House Hunters" or "What's My House Worth?" and you were convinced you needed more. More square feet. More granite. More stainless steel appliances. More landscaping. More media rooms. More style. You deserved it.
We happened to catch an episode of House Hunters last week where a couple was looking for a home in Bend, Oregon (see below), so we tuned in to see what we might learn.

First off, when they started showing places in the $700K to $800K range, both our eyebrows went up because we've been looking in that area online and what they were being shown were nice houses, but priced a couple hundred thousand dollars too high.

Going strictly from memory (the show has long since been deleted and is apparently not available online), the couple was shown three homes that listed for $850K, $790K, and $730K and they ended up buying the middle one for about $720K.

Presumably this was sometime last summer since it appeared to be warm outside and we spotted the lowest price house still for sale, albeit at about $40K less.

It is not known with any certainty, but if I had to bet, I'd say that the house they bought appears in the Zillow popup to the right.

This one is in town with a tiny little lot that the husband agreed to after a fair bit of kicking and screaming.

If this isn't the one, it doesn't really matter because the important thing is the difference between the Zestimate and the sale price which, in this case, indicates a virtual free-fall in prices that is consistent across nearly all home sales in this price range.

A couple more samples are shown in the table to the right and, while Zillow's price estimating method is far from perfect, it does provide a pretty reliable indication of the trend and the pace of the trend which, in this case, doesn't bode well for those who made purchases in the area last year.

One thing that is surely adding to the downward price pressure is foreclosures which, if is to be believed, are absolutely soaring.

Note where the transition from foreclosures to preforeclosures occurs below - 604!
IMAGE This couple seemed so happy when they were on the show (except for the husband, at times, who clearly wanted a bigger back yard).

I wonder if they would have purchased if not for being on show - they were renting in the area at the time and presumably could have continued doing so.

They would have saved a lot of money.

I also wonder if they have any idea how rapidly home prices are falling?


Nostradamus, apparently said...


Your plan to rent is crucial. Prices are falling so fast in some of these bubble areas like Bend that no one knows where it will stop.

It's the old 'catch a falling knife' story.

I don't believe the Zillow estimates mean much. Trying to find someone who has $500k for a house these days is not easy. Bend is a long way from anything significant and, IMHO as a former resident, has a long way to go before it stabilizes in all respects.

It's a poorly laid out city with, as someone else said, a VAST split between the new money and the poor, green-tooth natives back in the woods. This makes for a palpable tension in most public places that is not noticed when you're just breezing through for vacation.

The bottom of this housing market will be very hard to call but it won't occur until the economy stabilizes (if it doesn't collapse!). Economic stabilization won't happen for several years.

As a renter, you'll have your pick of many houses at ever-falling rents. Don't lock in for a long term lease, if possible.

I used to own a pole house in Sunriver and we loved going there. If you don't have to live in a city for some reason, have you considered renting a home in Sunriver? It's a great place to hang out for a while. If you haven't done so, you should visit it on your next trip to the area.

Also, consider what Bend will look like as the property tax revenue dries up and the vacant homes pile up. There is simply nothing in Bend for people to do for a job except work in the low paying tourism industry. That industry is going to suffer along with the economy and Bend can look like a ghost town in a recession. I know, I've been there...

As long as you're just a renter, you'll be able to change your mind. But, even if you change your mind, where will you go? I've been thinking of that for a couple of years now and I can't think of a place in America that doesn't have major potential problems.

GOOD LUCK! We all may need it...

buzzp said...

Ep 3205 - aired 2/12/09 - features the Gottrons - seems there's a chapter two to the story, which I doubt HGTV will feature.

buzzp said...

Addendum - that Gottron house was bought back in 2005, and it's always possible that HGTV repurposed a show shot then - I'm in the biz, and it's been known to happen

buzzp said...

Oops, I meant 2007, not 2005

Tim said...

And it's now for sale again - asking $659K with a current Zestimate of $531K

Yeah, a follow-up would be nice.

buzzp said...

The listing agent no longer has the listing, so the MLS listing is just hanging over - the Trustees sale (repeated link as previous one seems to be broken) appears to the latest

Anonymous said...

FYI, the people on House Hunters have already purchased the home prior to taping the show. Thus, I highly doubt the show pushes those on it to buy a home.

Anonymous said...

So I can't help looking into these kind of things when I see them. Found the episode description for House Hunters episode 32:

"Doug and Valerie Gottron and their kids have all left suburban Maryland to Bend - a lovely little town nestled at the base of the Cascade Mountains in Oregon's high desert. Everyone but David likes the land which they have chosen, but he'd like a place with more land. They've enlisted the help of agent Linda Judd to find a place that will quench Doug's yearnings for the great outdoors while providing a community where Valerie and the kids will feel at home."

A search of Gottron in the Deschutes County Clerk system shows they purchased the home for $737,641 on 8/17/2007. They took out a mortgage for $437,641 at that time.

Fast forward to 12/5/2008 and we find a notice of default on the property for delinquent payments from 6/1/2008 of $2,917.57 per month.

So they paid their mortgage for all of about nine months.

Jared Castle said...

We just watched this episode! We recorded it on our DVR. After the first 10 minutes, we knew something wasn't right. The Bend real estate market has been in free fall, yet this couple was looking at homes that were obviously overpriced.

A quick Google search landed this article and, after reading the rest of the story, my wife and I restarted the episode as high comedy.

Thank you for the follow-up. Too bad other media doesn't turn a critical eye on HGTV shows like House Hunters.

Tim said...

You're welcome.

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