Claremont Insider: Buy High, Sell Low

Thursday, May 28, 2009

Buy High, Sell Low

The mortgage meltdown has left a lot of homeowners across the country feeling pretty blue, especially those who bought at the height of the real estate mania in 2007. Those unlucky buyers have seen the values of their homes melt away so that they now owe more than the amount of the loans they took out to buy their houses.

With real estate we should never forget, as Groucho Marx's real estate scammer Mr. Hammer says in The Coconuts, "Oh, how you can get stuck-o!"

The real estate bubble reminds us that when Claremont voters approved the Measure S bond to purchase Johnson's Pasture in November, 2006, they were getting into the real estate market just before the bubble burst. The City agreed on an $11.5 million purchase price in June, 2007, still at the market's peak.'s price graph shows what's happened with the price for Claremont real estate between late 1999 and May, 2009:

Click to Enlarge
The red arrow on the graph is where the City of Claremont appraised the Johnson's Pasture land. You can expect the Pasture's value to have done pretty much the same thing as any other property in the area following the City's purchase. That would bring our $11.5 million investment down to around $8.5 million and falling, assuming the open space market approximates the area's real estate in general. Of course, it wasn't purchased as a financial investment, but the point is that the land could have been had for much less with a little patience, and even back in 2006 there were plenty of signs that the real estate market was headed for a fall.

We're don't want to pick on the City for the mistake they made in miswording the deed for the land - a $1 million boo-boo. We've commented on that error elsewhere. But we do want to remind people that during the many years the Pasture purchase was being debated, one scare that was constantly thrown out was the threat that real estate developers were licking their chops at the prospect of gaining control of the land.

Of course, as cooler heads tried to argue, if the developers really wanted the land that bad, the land wouldn't have sat in probate for a decade. The developer threat seemed to be floated mainly by the sellers, which should have given Claremonters a clue that it was probably a bluff. But, the Claremont 400, never ones to believe in deferred gratification, and always devoted to overpaying for anything, played right into the hands of the sellers by insisting that the land had to be purchased NOW NOW NOW!

So it was.

And that, ladies and germs, should be a lesson to us all. Stick that Zillow graph on your refrigerator as reminder to not take counsel of your fears. The Claremont 400 has over the years shown a signal talent for stirring up fears in order to manipulate people into a false sense of urgency: The world will end if so-and-so is elected; City Hall will come tumbling down if Glenn Southard ever leaves; we must have this or that now.

Next time, be patient and call their bluff by carefully verifying the claims being bandied about on any topic from open space to affordable housing. Or, as UCLA basketball coach John Wooden often said, be quick, but don't hurry.