How far has some REI fallen…
April 11th, 2008 by KenricFrom time to time I check on the real estate pricing of homes that I used to own. Sometimes its just hard to believe where the prices are these days. When I pull up some of the prices I am amazed at where they are today.
Certain subdivisions I have very good knowledge of because as a resident and an investor I followed the subdivision from its inception to its builder close-out to its peak and its downturn.
When I reflect on these stages I also remember the market sentiment at the time.
This particular subdivision that I am reflecting upon was started in the fall of 2003. During this time, the Phoenix real estate boom had not occurred yet. Homes were somewhat easy to purchase, there was no such thing as a waiting list. You could walk into the model homes and purchase a home that day. Remember, this is late 2003. Home prices were not inflated yet. Investors were not flying in and scoop up everything in site.
A 3300 sf home in this subdivision was a mere $235,000 at this time. I purchased a home here in April 2004. At that time, I did not believe that the housing market would skyrocket. Getting a new home on a large lot for $0.71/sf seemed unreal.
Fast forward to January 2005. My house was still a foundation and its projected value was $389,000. In between April 2004 and January 2005, the housing market was accelerating. People were sleeping overnight at the model homes to buy a home in this subdivision. The builder stopped selling to investors.
June 2005, my home was complete and could have been flipped for $450,000. Between January 2005 and June 2005, the market went absolutely insane with prices going up $10,000 a month on almost every home in the valley. I could always look back and say that I wish I sold, but I was going to live in this house so it was looked upon differently.
It’s been downhill since about September 2006. The prices first remained level and began to drop slowly for two years and then the bottom fell out. Now it appears that the bottom is leveling out. The graph below just shows the price points of a particular model home in this subdivision.
The prices are back down to Phoenix price run up levels. In fact some homes are priced below the builder’s pre-construction pricing! I really cannot believe that prices would ever come down back to 2003 levels. Back in 2003, the cashflow numbers made sense in many homes. I think we are close to that pricing now.
Posted in Real Estate | 2 Comments »
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Based on your knowledge of the Phx market, are houses below replacement cost these days?
By Andres on Apr 11, 2008
I ended up on several points on the graph. In June 06 I flipped a new construction home in Desert Hills and made about $150K in less than a year.
In August 07 I tried another new construction flip in south Phoenix and was lucky to squeeze out a small profit. would have been worse had I held on.
Long term I like Phoenix and the cash flow numbers are starting to look ok again. Maybe a time to start buying or at least looking. What do you think?
By Al Young on Apr 16, 2008