Over the last couple of weekends I’ve been walking about the neighbourhood looking at some open houses. There are a lot of open houses. I think this is because it’s a buyer’s market right now and people aren’t buying. And the reason they aren’t buying is because every buyer is a seller (or at least most buyers are), and nobody wants to try to sell their own home in this market. It’s a vicious cycle.

The houses I was looking at looked very nice from the outside, which is a big reason why this is one of the “most established and sought-after neighbourhoods” in my hometown (to use real estate talk). The homes here are, however, all around 50 years old, built in the 1970s, and not all of them have been well maintained. Here are three general observations I had.

(1) Sellers are still expecting 2022 prices. 2022, in case you were wondering, was a year when housing prices peaked around here, after enjoying a run where they were going up nearly 30% annually. Honest! I was getting agent flyers in the mail all the time back then with the sales backing those numbers up. Of course everyone knew this was a bubble and couldn’t last, but the four detached homes I toured were all listed at between $1.2 and $1.5 million. This is the kind of price they might have fetched in 2022; it’s not likely they’re going to get that today. But it’s hard for people to accept that the biggest asset they own has depreciated by 25-30%.

(2) All of the homes were showing their age inside. And by that I mean three of the four were outright dumps (the one “good” one had spent over $7000 on staging though, so that’s something to take into consideration). I was surprised that even for an open house three of them hadn’t been recently cleaned. But aside from making a bad first impression I saw a lot of stonework that needed replacing. Floors that needed replacing. Windows that needed replacing. Kitchens and bathrooms that needed replacing. Add in the fact that the layouts were old and in some cases downright bizarre and I think you’d be looking at renovations starting at around $200,000 for each of them. Starting at. Because while home prices have been falling, renovation costs sure haven’t!

I can’t help thinking how all these pretty homes are just facades, rotten on the inside. But that’s true of many things in life.

(3) All four homes had basements set up as legal multi-bedroom rental units. On the one hand this makes sense because the location is close to the university and for the last couple of years there’s been a lot of demand for student housing. On the other hand, well . . . (1) it’s quite a nice neighbourhood, or was, and turning it into a student ghetto seems shortsighted, and (2) the university is getting on top of the housing shortage and I think three or four years from now there’s going to be a lot less demand. Which still leaves you living in a home that’s set up with basement apartments.

Sticking with the basement apartments, it really made me think about what is changing. This used to be a fairly affluent neighbourhood. But the understanding now seems to be that nobody can afford to buy these places anymore without renting them out. So you’re not buying a home, you’re buying a boarding house or apartment building. Or put another way, your home is no longer just an investment (and remember when we started criticizing people for treating their homes as an investment?), but an income-generating asset.

Are there that many people comfortable with this? As I say, all four of the homes I went through were set up for this. Closer to my house someone just recently built a second house, basically a shed, in their backyard that I assumed was a sort of granny flat. But it turns out the owner is moving into it and renting out the main house to two different families. Which I guess makes business sense, but how many people want their home to be a business, or side hustle? Being a landlord is a job. If you need the money, sure. But again, these are very pricey homes. We’re not talking about people living on the edge.

Or let’s look at it another way. Most real estate people will tell you that putting an in-ground pool in your backyard does nothing to increase your property’s value. In fact, it may even decrease it. Because it’s a great selling point for people who want a pool, but for everyone who doesn’t (which I think would be around 75% of homebuyers) it’s pretty much a deal-killer. Pools are a ton of work and expense, for no return if you don’t swim. And in this part of the world you’re only going to want to use it for a few months a year anyway.

Well, I think the same goes for these basement apartments. They’re great if you want to rent out your basement, but for everyone else I would think they’re a massive negative. And none of these apartments were nice because when these houses were built nobody dreamed of renting their basements, and no matter how nicely you trick them out you still wouldn’t want to live down there. Personally, I didn’t even want to look at them after I’d seen the first couple. They were that depressing.

Actually, I came away from all of these open houses feeling depressed. It’s not just that these homes are overpriced, but they’re old, in bad shape, and being used in ways that nobody ever imagined them being used. I feel like that’s a pretty good description of a lot of our infrastructure, both physical and human, today.