Housing Risk #8. We May Be Counting Wrong

The last seven sales I’ve had have all been to out-of-state buyers. Out of the last seven I’d say five are from California.”

Researcher Allan Weiss, writing in The Washington Post in 2015, explained that “most consumers rely on monthly market reports based on market-wide medians to track changing home values. In these reports, micro home value trends remain invisible and even a metro level divide will wash out and reveal next to nothing. Moreover, the report only includes the homes that actually sold. This is barely more than 1 percent of all homes per quarter. If certain neighborhoods or house types are under-represented, the median sales price will not reliably reflect their price trends.” The Bubble Danger: Owners who sell and do not obtain the lofty prices reported for their general area may blame their real estate broker or appraiser for a “failed” result. They may come to perceive ownership as unattractive and lament the loss of fictional gains, thus reducing demand and contributing to softer prices.




Denver real estate investor Paul Schemmel purchased this home on South Garfield Street for $400,000 in 2016, demolished the existing structure and built a new home on the lot for $675,000, and then sold the new home for $1,325,000 in August of 2017.

a relative bargain compared to the Bay Area of California.

not far behind Seattle on the housing market heat index. The Case-Shiller Home Price Index for Denver was up 7.6 percent in June, fourth highest behind Seattle, Portland and Dallas. “The last seven sales I’ve had have all been to out-of-state buyers. Out of the last seven I’d say five are from California,” said Paul Schemmel, owner of Argentum Group LLC, a Denver-based real estate investing firm. Schemmel said the average price of the homes he sells is about $1.5 million.

Schemmel said he’s bought and sold hundreds of properties in Denver since he started investing in October 2008, constantly evolving his investing strategy to adjust to the shifting Denver market — most recently deciding to move out of the traditional home flipping market, which was becoming highly competitive. “Why don’t I just buy at full price, scrape the lot and build a new house,” said Schemmel, explaining his thought process in shifting strategies. “And

Seattle housing is “still a 50 percent discount on housing costs from the Bay Area,” he said. “A software engineer will make 4 percent less here than they will in the Bay Area thanks to the fact that California has a state income tax and we don’t. But the house will be half price.” Banking on California Buyers The reliance of migrating California buyers willing to pay higher housing prices is a theme repeated in Denver,



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