Jan. 13, 2006: Big money can still be made in hot Phoenix home market
Over the holidays, you were admonished to count your blessings instead of sheep. Today seems like a good day to count your money.
As you know, we've had a huge run-up in home values over the past 18 months. Things have slowed somewhat since September, but not as much as you might think. If you look at the Bloodhound Market Basket of Homes, you'll see that homes are selling at a reasonable pace and values are still going up month by month. Through the end of December, prices are up 1.73 percent, just more than $4,500 on average.
There has been a fall-off in demand, but the more serious issue is a surge in supply - especially overpriced supply.
People watched prices going up and decided to cash in, at a premium over what were already premium prices.
This is taking a while to shake out, with the result that prices on sold transactions can be all over the map. Some homes sell at a reasonable market price, but some go for much lower because the sellers were so clever that they ended up having to cash out at a deep discount.
So if you review real estate listings comparable to your home, you will have to guesstimate a value if you were to sell your house today.
Normally, you would be able to count on something right around the recent high sale. For the short term, you will also have to take account of the currently offered competition, which may be substantially over- or underpriced.
But any way you figure it, you are sitting on a ton of equity. If you can find a way to invest it at a rate of return higher than its interest cost, you can increase your own personal rate of enrichment.
I favor real estate, of course, but almost any investment is better than just sitting on that wealth.
I think we're headed into another great year. Our volume and appreciation may not be as outrageous as 2005, but there should be plenty of new money to count this time next year.
Greg Swann is the designated broker for BloodhoundRealty.com, a full-service Metropolitan Phoenix real estate brokerage. This article originally appeared in the West Valley regional sections of the Arizona Republic.
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