All the listeners in the room were in agreement. The catchphrases and sound bites were buzzing and echoing off the walls, “Prices are crazy! People are paying too much! Can’t keep going like this!”
They all knew the answer to this rhetorical question. They were certain.
“Who in their right mind would pay $400,000 for a house in Alice Springs?”
Correct answer: NOBODY!
Yes, when the conversation ended, everyone agreed, house prices in Alice Springs are way too high. It would be crazy to buy.
Everyone agreed, that is, except me. And, I kept a low profile. I didn’t say much at all. Mostly uttering things like, “Ah hah! Is that so? They do seem high don’t they?”
But, if I told them the truth, they would have locked me up in the funny farm.
Here’s the truth, I was in the process of buying my third house that year in Alice Springs! And, two of the homes were well over the $400,000 mark. I managed to pick one up for only $308,000.
These properties were all 4 bedroom homes in excellent neighborhoods. Even at the time, I felt we got them for bargain prices. Yes, I felt the prices were high, but they were also below market.
Prices High but Below Market Value?
Let me explain.
All three properties had a hard time selling. They sat on the market for long stretches of time.
First Property
The first property went to auction and didn’t get to reserve price. The owners set a $500,000 reserve and got no offers.
By the time I saw the property for sale is was listed at $480,000. Based on current market at time this looked attractive. “Let me get this straight … I can get a 4 bedroom house on the golf course for under $500,000?”
And, it came with an in-ground swimming pool and over 1000 square meters of land. I took a closer look. Then bought it.
You can read about this purchase in my article, “Buying a house over the internet.”
Second Property
The next purchase was a nice 4 bedroom home on about 500 square meters of land. It was priced at $319,000 but we ended up getting it for $308,000.
We knew this was a good buy even at the time. The original $319,000 price tag appeared very low compared to other homes on the market. Once we walked through the home, we knew it was good value.
The house had been under offer but the deal fell through. That’s when we stepped in.
I asked the agent, “How come this house hasn’t sold yet?”
“It was under contract but they couldn’t get financing. So, now it’s back on the market.” The agent answered.
“And, the seller is in a hurry to sell. You should buy it.” The agent added quickly.
I was looking for the reason why this lovely home was priced so low. The agent gave me the answer; we were dealing with a motivated seller.
We grabbed it.
Third Property
Finally, we purchased the house we now live in.
It sat on the market for weeks and weeks. Marieta and I went to at least 2 separate open houses. We had many discussions about buying. I didn’t want to buy but Marieta and the girls did. They liked it. They wanted to move in.
The asking price started out well over $500,000. Then dropped down to $480,000. We bought it for $465,000.
It had some features that scared buyers away. Basically, the house was a rental. As such it wasn’t maintained very well and the presentation was underwhelming. It was going to need some work. Most buyers looked at it as “too hard.”
Marieta wasn’t phased. I felt if we could get it for the right price, then I could live with the fix up costs.
Ask Me Again!
Now, back to the original question, “Who in their right mind would pay $400,000 for a house in Alice Springs?”
Ask that question today and here’s the answer you’ll get …
ANYBODY!
If only you could find a house for such a low price!
The 3 houses we purchased in 2007 are worth substantially more today. We’d probably have to come up with an extra $200,000 for each house if tried to buy them today. So, in essence, by purchasing in 2007, we saved over $600,000! I’m glad we bought back then. I’m glad we didn’t listen to the committee of “they.” I’m glad we didn’t listen to all the “arm chair experts.” I’m glad we took decisive action.
Did I know prices would rise? No. I had no idea prices would climb to their current levels. But, it’s a nice bonus. I don’t normally make buying decisions based on future predictions. I buy based on the deal at hand; what does the deal look like right now?
Adjust Question for Inflation!
So, now we have to change the question – adjust for inflation – as follows:
“Who in their right mind would pay $600,000 for a home in Alice Springs?”
Careful how you answer that!