In case you missed it yesterday, Jonathan J Miller from Matrix gives us a truly great mental image in his posting, The Housing Blame Game. As a real estate professional, of course all of this has been on my mind. While all of our buyer clients have done very well in the Phoenix market, I’m aware that a big part of their success is that they bought without intending to flee the market if and when it changed — and they used good sense funding the houses they bought. Our sellers, too, have done pretty well in general. Certainly those who agreed to list their houses at the right price in the first place have achieved their goals. So, I admit that I have found myself guilty of playing the blame game a bit myself. With all the oracles out there writing articles that foretell the doom of the real estate market, I keep hearing a mental replay of FDR’s voice warning our nation in the depth of the Great Depression that the “only thing we have to fear is fear itself.” In contrast, here we are living in a wonderfully prosperous nation, having just gone through a period where more people probably than ever were able to realize the dream of owning their own homes. And yet so many doomsayers are wringing their literary hands that things must get worse for those homeowners, based on the simple fact that things have until just recently been so good!
I am not unsympathetic to the fact that some of those new home-buyers or mover-uppers may have gotten in over their heads. Some may be going through life changes that create a need for them to move before they are able to stay in their new homes long enough for the new-home smell to have faded. But, in general, anyone who must sell in this market who has owned his house for at least two years, will be able to sell and make a handsome profit, as long as he didn’t make poor decisions regarding refinancing during the past year, and is not making unrealistic demands on what his house should sell for today.
And so to keep a level head as Henny-Penny rushes around blaming his own headache on the acts of the gods, or the media, or the the Realtors, or the lenders, et al, I turn to the heady wisdom of the Ludwig von Mises Institute, which reliably explains the market as we see it played out, not just in theory. As an example, I recommend Thomas Woods’ post today: Do Rent-to-Own Stores Hurt the Poor? Truly, in a free market economy, your own role in the market — what you stand to gain or lose — is most greatly dependent upon the choices you yourself have made.
Technorati Tags: arizona, arizona real estate, phoenix, phoenix real estate, real estate marketing
Todd Tarson says:
People responsible for their own choices?? Why I never!!
Thanks for the link. However I will say that I can see where the critics are coming from and how easy it is to feel that way, but still it does not match up with the fact that personal responsibility still trumps all. No one forces anyone to rent to own electronics or to take out a mortgage on a home. These are choices we are lucky enough to have, and I bet it sure beats waiting in a bread line.
August 4, 2006 — 8:22 am
carefulwithnumbers says:
So tell me, should one buy a home in Phoenix right now if they know they have to sell it within three years?
>In contrast, here we are living in a wonderfully prosperous nation, having just gone through a period where more people probably than ever were able to realize the dream of owning their own homes.
Also, put that comment in perspective for me. It would seem that more people than ever have been priced *out* of home ownership. Nothing fantastic has happened ecomomically in the period you’re talking about other than the runup in home prices.
Are you suggesting that people who had been previously been unable to buy homes, got themselves somehow got into leveraged real estate and used that income to buy their own personal first home? The only other possiblity would seem to be through the help of creative lenders.
August 7, 2006 — 2:32 pm
Cathleen Collins says:
Now is certainly a good time to buy in Phoenix… We’re enjoying a buyer’s market, which as you know means there are more sellers than buyers, and interest rates are still relatively low, as low as they’ve been since April, and at just over 6%, they’re in the zone of what we’ve come to expect over the past five years. I’m not talking about creative financing… I’m looking at 30-year fixed rates, which are actually too conservative for the typical home buyer, who doesn’t plan to live in the same house for 30 years.
If you’re going into an investment with the thought that you’ll have to sell it in three years, I’ll suggest that you talk the investment over, whether it be an investment in real estate, stocks, bonds, fine art, etc., with your financial advisor. And then, if you are satisfied that you can afford to invest in anything that doesn’t have a guaranteed return, that is if you can afford to take on some risk, I will be honored to help you find a home that is likely to appreciate over the next three years, where you should end up selling for a profit after costs. (And, you weren’t paying rent over those three years.) Of course, whenever you consider investments, there’s always risk – risk of being too aggressive or risk of being too conservative then kicking yourself down the road because you didn’t take advantage of that golden opportunity…
But in real life most people don’t buy their homes knowing going in that they’ll have to sell in three years. Most people buy homes with plans to, well, make homes of them.
Phoenix’s housing market is a healthy one. With exception of a couple of anomalous years, Phoenix homes appreciate because Phoenix is a growing metropolitan area. There is no reason to believe this won’t be the case for at least another generation or two to come. Notwithstanding some of the comments made by the hyenas, most of us who live here came from somewhere else, and live here because we like Phoenix so much better than any of the other places we’ve lived. I know many young people who were born here, went elsewhere to experience other places, and have come back home.
The tremendous appreciation we saw in prices over the past two years was an anomaly, and the slow market we are in right now is also an anomaly. As a long-term investment, Phoenix real estate has always done well, and even in this slow market, houses that are priced to today’s market and marketed appropriately should bring the sellers a net profit. Of course you can always come up with the exception, but dig a little deeper and you’ll understand why that’s an exception. I’m talking about reasonable expectations, and I try to always work with reasonable people. This is one of the reasons I love my job so much!
Oh, I almost forgot to respond to your final thought. I don’t have the same experience as you say you have. I have found that people who have made good decisions with building their credit, and have good employment history, are indeed able to buy houses in today’s market. Sometimes they have to learn to be realistic on location or amenities (there are many places in our great Valley of the Sun where I can’t afford to live), but there are many lovely, affordable starter homes here… enough for anyone who’s looking. But you’re the numbers guy… what are you basing your opinion on? All I can really talk about are the happy first-time buyers who we have been able to help, this year, last year… And no, they weren’t consigned to “creative” financing. Nothing sleazy here… just good people helping good people. Keep me in mind if you decide to move here. Even if we decide to not work together, I’ll be glad to talk to you some more about what a wonderful city this is!
August 7, 2006 — 8:15 pm