A Sign of the Times

Real Estate, whether we like it or not has often been used as a barometer of how well the economy is doing, and in the Silicon Valley is more likely an indicator than any other. In the Bay Area, real estate is renowned for being much more expensive than other parts of the country, a price we pay to live in a temperate climate, and in the place where technical advancement proceeds at a breakneck pace.

Buying real estate is certainly nothing new to me, and I've lived in the Bay Area for more than 20 years, so I've definitely seen the changes in the real estate market here. While browsing my favorite real estate site, I realized that a property I used to own was just resold this past year. I looked at its history and realized it shows a good reflection of how our economy has been doing over the years.

I purchased a small 1 bedroom/1 bath condo in 2002 from an owner who had purchased the same condo in 1998. In 1998 the 440 square foot unit cost her $84,000. You may think that's incredibly low priced, but you have to remember how small the unit is. From 1998 to 2002 when I purchased the unit, the economy blossomed in the Bay Area, and I was able to purchase the same unit for $153,000.

The economy kept roaring ahead, and the real estate bubble was in full swing when I sold the unit because I was having difficulty renting it out (everyone wanted to buy, no one wanted to rent). I sold it for a nice profit at $233,000, paying a significant portion of the gain to federal and state taxes.

I sold the property to someone who already had rental property and was looking to move their investment from a rental property in Santa Cruz to one in the Bay Area, and then eventually move into the property. I'm not sure what happened, but the condo was put up for sale in mid-2010. It wasn't a short sale, and it wasn't bank-owned, so the owner must have sold it.

In a true sign of the times, they listed the property for $109,950 and sold it for $106,000, 45 days later.

Using my timeline above, that means the home sold for a value it hadn't last seen since around the year 2000. It's scary to think we've lost that much value in this last bust, that we're back to the year 2000 valuations. But it also reflects how hurt we are from this last recession, and that really it touched all of us. While I may have made a profit selling this property, I certainly lost all of it again by buying the home we live in now.