Over the past few days I’ve seen some large price drops on areas that I’m familiar with in Phoenix. In the outer areas we are very close to being back to 2004 pre-run prices.
One of my new construction houses that I purchased at $235k in June 2004 and ran up to $440k in June 2005 is back down to $299k. Based on the prices of the many homes I looked at in 2004 and 2005, I’d say we are back to January 2005 prices.
There’s a short sale in Goodyear on a 3000sf home for $199,000. Homelife Communities has new construction 3300sf home starting at $139,000 in Pinal county. Can you even build for that price?
Can we really have a 50% price drop from 2005? Remember how crazy that sounded? If you have cashflow or breakeven you can survive this. That’s why cashflow is so important.
Sometimes I wonder about buy & hold. If I had 1000 shares of Google I would have lost $100k in past week. I don’t believe that you can buy and blindly hold. Although I believe that buy & hold is a good strategy, I don’t believe its the most efficient for real estate. Real estate cycles are slow and can be somewhat timed so you can buy on the trough and sell near the peaks.