Big Bear Bummers

Address: 42415 Heavenly Valley Dr, Big Bear Lake, CA 92315

Link: https://www.redfin.com/CA/Big-Bear-Lake/42415-Heavenly-Vly-Dr-92315/home/4114021

Beds/Baths: 3 bed, 3 bath, 2,200 squares

Purchase Price (9/2023): $980,000

Asking Price: $999,000

Difference: +$19,000

Commission (3%): -$29,970

Total Loss: -$10,970

In September 2023 our intrepid investor plunked down $980,000 for this place. Then, just 16 months later they listed it for $999,000, a price that will largely cover their realtor’s fees and allow them to get out of this mess scot free.

How convenient!

But it’s not going to happen.

By late 2023 rates were already sky high and the market had stalled out. Poor suckers like this probably assumed rates would come back down quickly, but then they watched in horror as the demand for second homes and Airbnb “businesses” flatlined.

Pretty much anyone who bought in 2023 and is trying to sell today has no chance of breaking even (whether they realize it or not).

The pricing history of this property illustrates just how crazy things were during the last decade-plus of cheap money. In 2012 this place was valued at $390,000, and by 2020 it had climbed to $600,000 – a 50-percent increase in eight years.

That’s pretty wild by itself.

But then in the three years between 2020 and 2023 it appreciated another 63 percent ($600,000 to $980,000)! It should have been blindingly obvious that this was a completely unsustainable bubble, but many people jumped in anyway.

And now it’s going to cost them.

Look, this house is nicely sized, well appointed (the decor is a bit hokey but I appreciate their enthusiasm) and on a nice plot of land in a great neighborhood. It has a lot going for it.

But getting $999,000 is just not going to happen. Just look at this monster payment:

Purchase price: $999,000
Down payment: $199,800
Monthly nut: $6,624/mo (@7%)

That’s a huge monthly nut for a second home! Sure, people shopping in this price range are loaded and can easily swing it. But it’s a question of value.

Can well-heeled buyers, who are savvy enough to have amassed a million bucks for a vacation house in the first place, be convinced this thing is worth $19,000 more than it went for in 2023 at the absolute peak of the market?