He seems to myth the mark

Mr. Joseph Gyourko wrote an article in the Washington Post on Sunday Nov. 16 entitled "5 Myths About Home Sweet HomeOwnership" which was a curious blend of misstatement and simple rot. Sometimes it's hard to figure which is which.

As we all know, location is the operative word for good real estate investing, and the story below is an example of a good investment. Is it an anomaly or could other agents find similar stories? Maybe in Philadelphia and near the U. of Pennsylvania, the market is sinking like a rock.
A case in point: A recent sale. I had sold this person a house 11 years before, so I knew the numbers quite well. It was a 3 bedroom 2 full bath brick colonial, acquired through a foreclosure sale in 1998. The purchaser took advantage of the FHA 203K program for acquisition and construction. This new owner bought the house at $107,000, and dedicated $35,000 to restoration and renovation including a new roof, ac compressor, a renovated kitchen, regraded rear yard, sanded and sealed floors, and was painted inside and out.
Eleven years later, we priced the house at $419,000 with $18,000 in fix up and cleaning in preparation for the sale. We did succeed in selling it in one week, for full price. It closed in one month, priced within 1 percent of the final appraised price.
The seller, my client and good friend, has roughly $218,500 in clear profit at settlement, which is not taxable as it is under $250,000 profit and the owner has lived in the property for 2 of the past 5 years. At this juncture the owner has amassed enough money to buy another house in a different state for $145,000. The new house was completely paid in cash, yet left a sizable chunk of hard cash to help subsidize life in the new location and retirement. What part of the myth did we miss?
The myths, one by one:
1. Was it as good a return as the Stock Market? I guess so, have your accountant or tax professional do the math and tell me where you could buy some stocks or bonds that would return this kind of money and allow you to live in the investment. 3.5% of the $142,000 cost of the property and let’s consider the cash on cash return. The client put up about $5000 in cash and another $4000 in closing costs...let's say $9000 in hard cash at the settlement table. The net profit on the transaction was $218,500. not counting the interest rate deductions over the time in the house. She was in the property for 11 years so whatever you determine was her total rate of return has to be divided by 11 years.
2. Did she worry about the tax credit? No
3. Did it make her a better citizen? This isn’t about civics but the client enjoyed great times in the neighborhood as an owner.
4. Did she worry about the safety of her investment by making a low down payment? The buyer was a single parent of three grown children out of the house who practiced as a financial planner. FHA allows for a 3.5% down payment on the total value of the loan, so the client was able to finance the renovation as well as the purchase of the house. The FHA 203K is an extremely useful tool, which has been available for years and is underwritten by the Federal Government to upgrade homes and communities.
5. Was it cheaper to own the home rather than rent it? Her rent would have lacked any tax shelter, so she would have paid out about $1200 per month for 11 years or $14,400 per year for 11 years or a total of $158,400 of money that would not have had any return. The owner of the house would have enjoyed all of the tax shelters of the investment, not the tenant.
In short, it was a grand slam home run, no pun intended, in my opinion. Our client got to live in this house for 11 years at less than the cost of renting an apartment, taking advantage of all of the interest rate and real estate tax deductions over that time, and a stable environment with nice neighbors. There was room for a hammock in the back yard for long lazy afternoons with a good book.
Was this a lucky break? Was it a fluke?
I guess when our esteemed scribe from Pennsylvania wrote his essay about real estate in general; he was talking about some locations which might not be typical. Perhaps he was talking about the real estate on the Big Island of Hawaii, in the volcano flow and tsunami zones? Or perhaps he was talking about properties abutting a high speed expressway or near an active railroad line, or near an airport. Perhaps he was considering property adjacent to Three Mile Island. Perhaps he was talking about Detroit?

He really misses the mark because his thesis is so broad and generalizes over the entire country. In Myth 3, he branches out to a world generalization and doesn't cite any statistics at all, just his speculations.

And who are these venal real estate agents that he describes in Myth 5?

The real trick in real estate is time. People do make money and sometimes lots of it, but the idea that one can make it overnight is a tough canard. That would have been a more useful myth to explode.