I’ve written several times about a foreclosed house in suburban Downers Grove, Illinois (a western suburb of Chicago.)

Here are the facts:

1710 Maple Avenue, Downers Grove:

Originally listed for $979,000 in 2005
Was foreclosed and then bank-owned
Reduced to $712,900 by August 2007
Reduced again to $682,900 in September 2007
Down to $644,000 in November 2007

In February 2008 it was listed at $618,900 with no buyer in sight.

Well- it FINALLY found a buyer in March 2008.

But, lo and behold, it is back on the market! An investor is apparently trying to make a quick buck.

Thanks to reader JDW who just wrote in with an update:

I just had to post an update because this is too hysterical!

This house finally sold in March, 2008 for $540K. Quite a drop from the original price, huh? Well, if that’s not classic enough, we watched the house getting a “freshening” and thought a family was making it their own. Well, to my surprise the house came back on the market today for $769K!! Wow… For an increase of $230K in 7 months they must have built an addition or something, right? HAH. Nope… The listing lets us know exactly what they did:

“Beautiful Remodeled Kitchen With Granite Tops, Stainless Appliances And Huge Butcherblock Island. Freshly Painted.”

Yeppers, it’s a “put in granite and stainless” and make 200K flipper. If that isn’t flippin’ ridiculous in this market, I don’t know what is! Let’s see how long it takes to sell it this time!

There are no pictures (yet) with the listing but I’ll post them when they come on-line to see what the “remodel” really looks like.

Housing Hasn’t Hit a Bottom Yet
This is yet another indication that we are far from a bottom in housing. There is no fear as clearly someone thinks they can make some quick money here. And maybe they will. We’ll have to see (though listing it with only 2 weeks until November in the Chicago area is never a good idea.)

At the bottom of a crash, people are terrified to buy a declining asset. I don’t see much terror in housing. I see some people fearful but I know plenty of people buying real estate and many more who would buy if only the banks weren’t being so tight and requiring a downpayment.

I hear about more people who want to buy real estate than want to buy stocks right now.

That tells you all you need to know.

No one is scared enough. The housing downturn will continue until the fear outweighs the greed.

But right now, there’s plenty of greed.

Thanks for the update JDW. I appreciate it. The story of this house continues to be interesting.

Some analysts were surprised by the housing numbers out this week which showed that sales actually started to improve in a few cities across the country.

In fact, the one city seeing booming sales is Cleveland.

Cleveland?

Isn’t Ohio in deep financial pain?

Yes and no.

Foreclosures are crushing housing prices in Ohio. So as houses become cheap- suddenly a bunch of people who could not have afforded a house in the past, can now get one. Even with tighter mortgage requirements, they’re still able to buy.

And if prices get really cheap- they’ll WANT to buy.

That is why the housing data is showing a slight improvement in sales. Prices are getting so low in some areas, that some buyers are thinking they’d be crazy to rent.

From CNNMoney:

Still, Larson of Weiss Research said he believes that while year-over-year prices will continue to decline, sales of foreclosed homes will help moderate those losses by taking rock-bottom priced homes off of the market.

“Prices have fallen so much that you’re starting to see sales improvement,” he said. “People are snapping up a lot of distressed properties.”

Foreclosures Dominate the Market

In some cities, foreclosures make up 30% of total home sales. That’s not really a “healthy” market. But it does indicate that the correction is well underway.

That correction entails housing prices that are much, much lower than the last several years. Affordability all but disappeared during the housing boom. And now, without the easy to get loans that required no money down, affordability will be the key to getting this housing market moving again.

What is “affordable”?

I was watching House Hunters the other day on HGTV. They had an episode on about a young first time home buyer who was a school teacher in the Detroit suburbs. She was looking to buy a foreclosed bungalow in the Detroit suburbs.

The price?

Around $70,000.

And these weren’t dumps! They were 1920s-1940s brick bungalows with nice yards. Sure, they were on the smaller side (1100 to 1300 square feet)- but for $70,000? And that was the ASKING price. She likely bought it for much cheaper- probably around $50,000.

Most people in this country couldn’t even imagine a garage space selling for $50,000, let alone a house.

Imagine all the other things that school teacher can now do with her money (instead of obsessing over her house)?

1. She can go on great vacations anywhere in the world.
2. She can max out her 401k.
3. She can save money for a rainy day fund.
4. She can buy expensive clothes.
5. She can buy that iPhone.
6. She can donate to charity.
7. She can buy stocks. Lots of stocks.

And on, and on, and on.

Being house poor is NOT financial freedom. A large mortgage doesn’t make you wealthy. A house is simply shelter- and if you make some money off it along the way then that’s great.

This school teacher has endless ways to create wealth in her life- simply because all of her income isn’t going towards a mortgage payment.

The rest of the country hasn’t yet caught up to Cleveland and Detroit in affordability. But it’s getting there. We’re seeing big price declines in cities where incomes haven’t kept up with housing prices.

Las Vegas is down 28.6% from last year. Miami has fallen 28.3% and Phoenix has slid 27.9%.

This housing bust will bottom out when affordability returns. And not before.

For years, if you lived in the Midwest or the Northeast (or the eastern parts of Canada), there was only one place you thought about retiring- Florida. (Okay- in recent years Arizona also became hot.)

But there is something about the palm trees and the beaches. And family members could actually drive down to see you (unlike in Arizona.)

And for decades, it was pretty darn cheap to move there. Heck, in the early 1990s, you could get a very nice house in Sarasota, for instance, for about $100k. Even beach houses and condos were relatively affordable.

But all that changed with the housing boom. And as much as homeowners benefited from skyrocketing prices, it meant that people from up North began to seriously re-consider whether they could afford to retire there.

A couple of nasty hurricanes and big jumps in insurance rates didn’t help matters either.

Moving to Tennessee

Over the last few years, instead of thinking about retiring to Florida, people started moving to Georgia, Tennessee or the Carolinas.

And then a new phenomena started. Why not still have the beach but for much, much less?

Regular readers here know I’m a big fan of HGTV’s House Hunters and the newer House Hunters International. Recently, House Hunters International had a segment with a couple from Pennsylvania that was looking for a retirement home in Panama. They were looking in a price range around $250,000.

As many know who watch the show, they looked at three houses and then decided which one to buy. Only one was really near any kind of water. The house they chose had lovely grounds but was a good distance outside of Panama City. The house was in their targeted price range but they were going to have to drive for 20 minutes (or more) to get to civilization.

If you didn’t know otherwise- you might have thought the houses they looked at were in Florida. So it got me thinking: why AREN’T they looking in Florida? Is it simply the cost?

And now that Florida real estate is crashing- is it possible that a new generation of retirees will be able to live there cheaply again?

Forget Panama, Nicaragua, Costa Rica. All of those countries have been luring retirees with cheap housing.

Would you retire to Florida if you could get a house or a condo on the water for the same price as in Central America?

True- the “prime” areas of Florida are still pricey. Look at the Florida Keys. Houses are still running near a million dollars for something up-to-date and decently sized.

But even the Keys are feeling the housing downdraft.

Surprisingly, maybe the housing bust will be one of the better things to happen to Florida. It will enable a whole new group of people to move into the state, with their money and their talents. Why are retirees spending their money in the stores of Panama when they can stay closer to home and boost the local economies?

I think the bust has a ways to go before it genuinely gets cheap enough to compete with Central America prices. But with airfares skyrocketing, the cheapness factor might not have much meaning if it costs double the price to fly to Panama City versus Tampa.

Florida will rise again from this bust. And cheap real estate prices will be one of the reasons why.

How do I know that the housing market hasn’t bottomed out yet?

The real estate cheerleaders are starting to be pessimistic. A few months ago the “experts” were all saying that we were at a bottom and that things would pick up by the end of 2008.

Now- they’ve changed their tune. What they’re saying is that things won’t recover until “spring 2009.”

That’s a long 9 months away.

Pending home sales numbers for May were released earlier this week. Usually, the National Association of Realtor’s chief economist, Lawrence Yun, is a huge cheerleader, especially if the number is better than expected. But this time, he sounded more cautious:

“The overall decline in contract signings suggests we are not out of the woods by any means,” NAR Chief Economist Lawrence Yun said in a statement.

And the always bubbly Barbara Corcoran, who started the famous Corcoran Group real estate brokerage in Manhattan several decades ago, sold it for millions, and is now a talking head on the Today Show, CNBC and other venues, is sounding less enthusiastic that now is the “time to buy.”

Check out a video interview with her on Tech Ticker where she says that things have “changed” from prior eras.

The current housing downturn isn’t over and is “much much worse” than past downturns, says Barbara Corcoran, who built The Corcoran Group into a multi-billion firm during the real estate busts of the mid-1970s, 1980s and early 1990s.

This downturn is “grossly different” than those past cycles because homeowners are much more willing to “walk away” from homes, says Corcoran, who sold her namesake firm in 2001 for a reported $66 million and is now an author and widely cited real estate guru.

If people are willing to run away from their mortgages- when do we reach a bottom?

The bottom doesn’t appear in sight. First, housing has to stop going down. We haven’t gotten there yet.

Until then, hang on for the ride.

And for those who will be in the market to buy soon- there will be some incredible opportunities coming your way.