My parents have been trying to sell their house in Mount Holly, Vermont for three years. 16 prospective buyers, one offer [that was quickly rescinded] and no action.

My initial reaction was to blame the real estate company. They don’t seem motivated, and since it’s a small, local company, perhaps they just don’t think big enough.

Then the 2008-2009 financial crisis occurred to me.

My parents bought the house around 2000, coming off the heels of Clinton’s housing mandate that extended housing to those with sub-prime credit [thus the term sub-prime lending.]

I will note that my parents’ credit was and still is sterling, so perhaps they were not in the basket of borrowers with credit scores of 650 and under.

In any case, let’s just use $100,000 for the starting price of the house. This was in 2000, when the housing market was still heating up, but before the 2001 recession. In any case, my parents were able to buy a second house that they were able to pay off by about 2009. Even through the 2008-2009 dip, the house still reached an appraisal value more than double what they paid. For the sake of this argument, let’s call the appraised value $200,000 even.

Great! The house price doubled, it was paid off, and my dad and I even built a 3 bay garage.

Now comes the frustrating part. My parents put the house on the market in 2013. It has been on the market since then, and has yet to be bought. 2014 was the high-water mark for the appraisal value of the house, $200,000, and yet my parents had it listed for $180,000. Months passed, the realtors said the house needed a roof, and various quibbles from potential buyers drove the price down to $169,000. My parents were still way above water, investment value wise, since their original time of purchase.

Today, they have been considering selling the house for $160,000 despite the book value. Here is where the lesson in book value versus market value comes in handy. Our house sits atop a mountain, but is essentially a small 2-bedroom house with no cell phone service, no internet, and a 3 bay garage [in addition to a garage built into the basement.]

There are 48 other houses for sale in the area, a 15-mile radius mind you, and my parents’ house looks to be the most expensive in the area given the mix of price and lack of amenities.

Now, let’s examine the market value versus book value. The house is still appraised at $200,000 [of course! the appraisal is at $200,000 so they can pay the state of Vermont $200,000 worth of housing taxes.]

Given the remoteness of the house, the 20-minute drive from Okemo mountain ski resort [there are hotels and tons of Air BNB’s to stay in practically on the mountain itself] and the relatively desolate area that the house sits in, the market value does not equate to $200,000. Or even $160,000 for that matter.

To understand why, one must understand how prices work in the stock market, specifically a blow off top. A stock start at $10. Then it runs up to $11, 12, 13…and hysteria pushes the price up to $15 per share. Amid the hysteria, the next day, a trader bids $18 before the market opens, creating a HUGE gap between the previous day’s price of $15, and no continuity between $15 to $18. The stock just jumped $3 on pure speculation and anxious fingers at a trade station. The stock maintains that price throughout the day but….the stock has nearly doubled. So the next day, the stock plunges from $18, back to $15 where it jumped from, and continues down through $14, $13, $12…back to $11 as profit taking traders panic sell.

That concept is called a blow-off top, a concept that explains how a stock can ramp up then JUMP way above its old range to an unsustainable level. The stock jumps to $18 from $15 with no steady buying in between, creating an air pocket for the stock price. There is no market for it at $17, $16 or even above $15, so it plummets like a skydiver with no parachute.

But it’s not really a crash, but rather a MAJOR re-adjustment back to normal prices. When there is an air pocket between yesterday’s price and today’s price, and there is no news to justify the move, you have a perfect storm. I have theorized that the housing market between 2000 and 2007 was all speculation, and 2008-2009 was the blow off top. Housing prices kept climbing and climbing, more people bought houses because they were going up in value for no reason. But eventually, when things go up in price for no reason, that price action stops. As you know, what goes up must eventually come down.

This is what happened to cause The Great Depression. Everybody and their sister wanted to put their money into the stock market. People were making money hand-over-fist to the point that they were literally running out of pockets to put it into!!! Prices went up, and up, and up for no good reason. Until they didn’t.

Stocks were over-valued and therefore grossly mispriced to the upside. There is no way to put a price on a severely overbought stock until the first seller puts out an offer price to sell their stock. The price of a stock that runs from $100, to $175, to $225, $250, $275 and then $300 in a straight line, with no selling breaks is not worth $300.

That is the market price, NOT the book value.


When that selling starts, the first person to panic and put in a sell order might ask $220. This creates a cascade of panic selling, leading to lower and lower offer prices, until somebody decides on a buy price they feel is just. This erases all of the value created in the blink of an eye.

I believe the same thing happened to the Vermont housing market, albeit less drastically and detrimentally. Prices ran up from when my parents bought it in 2000. Perfect timing I might add. I’m glad they didn’t buy at the end of 2007. But now we have a huge supply of houses for sale in that area, that we can assume were all bought in the late 1990’s and early 2000’s, perhaps because the thrill is gone. When everybody is selling at once, it creates that pricing ‘air pocket’ that I just explained.

When there are no bids, the price can be drastically lower than the appraised value, or even the last listing price.

It is for that reason that I believe this house, that was:

Bought for $100,000 in 2000

Appraised in 2014 at $200,000

And on the market for close to $160,000…will sell for little more than $120,000.

After years of maintenance and price appreciation, the market for houses 20 minutes away from the luxurious Okemo Resort is not much higher than where it started. There is no frenzied buying like we saw between 2000 and 2007. Disposable income and available credit for the consumer is not nearly as accessible and free flowing as is was in the ‘good old days’ of the late 90’s and early 2000’s.

The party is over. It’s been over. And all of the market forces, profits, disposable income and money flow from the initial creation and penetration of the internet [which is why the 1990’s boom happened in the first place] have all gone by the wayside. The hot ticket desktop and laptop computers are all sold, and the infrastructure for facilitation of the internet is long since complete. Every dude that wanted a Dell has one. We are for all intents and purposes back to normalcy and stability [though President Trump can and may change any and all of that in another schizophrenic stroke of a pen,] and so appraised housing prices do not reflect the actual price a person could or would afford to pay, given tighter loan terms and regulations.

My guess is that prices for houses to be purchased, real prices that people would bid, and not appraised values, are little more than 30% higher than they were in the year 2000. Appraised values may be close to par with the highs of 2008 and 2009, but that may not necessarily translate to comparable buy prices. And so you see, we are not yet out of the woods.