A number of readers have sent in this link to today’s Bloomberg article, written by my friend Oshrat Carmiel, on spec builders who are renting their creations when they can’t sell them. The story starts with the lady who built 63 Maple Avenue, discussed here from time to time, who finally threw in the towel and rented the place out for $13,000. Her carrying costs are $15,000, but she hopes to make up the loss when she puts it back on the market next March for $4.9 million, $500,000 higher than it was when it failed to sell this year. Good luck with that, ma’am. As I’ve written before, the house is built below grade on a very busy street with cheap(er) houses behind it. Neither of those conditions will change in the next nine months, so why should its price? The place will be older, used, and otherwise the same.
Carmeil closes her report with this quote, which I think nicely sums up the delusions of these builders:
Renting may not be wise for owners who eventually want to sell, said Mark Hanson, president of M. Hanson Advisors, a housing and mortgage research company in Menlo Park, California.
“It’s really doing nothing but delaying the inevitable,” Hanson said. “These houses are not going to double in price.”