House for sale: Maybe

As I drove home from my final carpool of the day yesterday, I drove past a house that was on the market last year for US$1.5 million. It is a nice house in a nice location but it pretty much needs to be demolished and rebuilt. When potential buyers come to see it, the sellers tell them that it is in "move-in" condition. It's not. Not even close. And no surprise, no one's bought it yet.

I then passed another house around the corner from my house that is now on the market for approximately US$2.5 million. Someone built this very modern, large house on spec, a European family bought it, then the new owners decided to get a divorce rather than move to Israel so the house is back on the market. Oh, did I mention that it is on a relatively busy corner, directly across the street from my new synagogue. If you are on the second floor of our new building you can look directly into the backyard of the house and watch whoever might be swimming in the pool -- if and when someone actually lives there.

The people who live kitty corner to this very modern, brand new house, also want to sell their house .... for US$1.2 million. It is a very old, and very small house on a small piece of land, and on the same busy corner. The seller's reasoning for such an exorbitant asking price is that if the new house diagonally across the street which is twice as big and on a lot twice as big, is asking for more than US$2 million -- this old, run-down, house should be worth half of the brand new fancy smancy house's asking price. It's basic Israeli real estate math.

Why am I telling you all these stories? Because there is no logic to house selling in Israel. Or more specifically, there is no logic to the Ra'anana real estate market.

Many of the homes in our neighbourhood were built about 25 years ago and are in desperate need of repair. Home building in Israel 25 years ago was not what it is today -- which is still only average. For example, there is no such thing as a house that does not leak during rainy season. If you can show me one then I will eat my hat.

However, Israelis don't see that as a factor. Here's the average Israeli homeowner's logic on selling his or her house. I'm paraphrasing: "I have nothing to do today so I think I will put my house up for sale at a totally ridiculous price and see if any foreigners will be stupid enough to buy it at my asking price. And if they do offer me my asking price too quickly then I will reject the offer and increase the asking price because obviously I didn't ask for enough money in the first place."

Unfortunately, this logic frequently works.

This next little story illustrates Israeli real estate logic at its best.

A few years ago we were looking for a house to buy and we heard about a house available on a very desirable street in our neighbourhood. It wasn't a big lot -- 250 meters -- but the house had a basement (which is just now becoming de rigeur in Ra'anana) and an attic loft, as well as two other floors. When I first heard about the house, the owners -- who were selling privately -- were asking for US$650,000. I thought that the price was absurd so I didn't even bother to go see the house.

A few months later, I bumped into a friend who happened to live next door to the still-available house. She knew I was looking around and she said: "you should go see this house. They're asking US$690,000."

I did go and see it, and it was very nice, but it had a very small lot and I knew that Chaim would never agree to pay such a ridiculous price for a house with a lawn the size of two postage stamps.

Several months later I saw the seller exercising at the club. She walked over to me and said: "If you are still interested in buying my house, it is still available and we are asking US$720,000."

In case you are wondering why the price continued to rise, lucky I am here to explain it to you. The way Israelis view the market is that if no one buys what you are selling then obviously you aren't asking for enough money for it and in turn, you are damaging its prestige. And the longer no one buys it, the more they will raise the price in search of the correct selling point. I am not joking.

I realize that this is completely impossible for the average North American mind to comprehend. I live here and I don't get it, but to old time Israelis it's as clear as the nose on your face.

Which brings me to the one bright light in the middle of Ra'anana real estate madness. Recently people we know decided to move back to the US. They put their house up for sale and sold it within weeks to another local American family. I suspect it was the fastest real estate deal ever completed in the State of Israel. Of course, I still don't know if the house leaks.