Tucson Lost Home Equity
June 15, 2008
Post Tags: All-Real-Estate-is-Local , Hummer , Tucson Real Estate Market , Tucson-Home-Equity
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Panic! Mild Concern! No Big Deal!
Once again Kenneth Harney has cut through the retoric to the heart of a matter. He has been a weekly read of mine for some time. It is a column I look forward to reading every Saturday in the “Arizona Daily Star” business section. Yesterday’s column tackled and Lost Home Equity that has been in the media reported in the billions of dollars of lost equity value.
All of it paper value, none of it real. As one level headed commenter to this article stated, “Your house is worth what you sell it for, no more no less.”
Remember a couple of weeks ago when I wrote the post “Houston we have a problem“? It was about a single mobile home with the total square feet set a 1 sq. ft. as a result of that one error in the data it made the average price per sq. ft. go $6728 per sq. ft. for mobile homes sold that month. When added into all the sales from the month it caused the price per sq. ft. to jump from $138 to $196. This paints a completely different picture of the price per sq. ft. in the Tucson Real Estate Market all because of 1 single entry into the system.
What Mr. Harney is pointing out is that some markets in this country have seen large enough declines that when added into the national figures it makes the entire country look like it has taken huge equity declines in the past year.
I know you don’t want to hear this again, but it has to be said because we all seem to forget that “All Real Estate is Local”. Not just your county, town, or subdivision, it might be down to the difference of the side of the street if there is a divided on that street between school districts, types of housing or county lines. There could be one developer building on one side of the street who when they built the homes years ago used polybutylene piping and on the other side used copper pipe.
If you bought before or during 2003 you saw years of huge increases in “equity” in your home. In the past year there has been a decrease in the paper value of a home based on comparative homes actually sold. However, in almost any transaction I would give a dime to get a quarter.
Everyday I see potential buyers having bought into the mindset that values in Tucson real estate have plummeted in the past year. They have not, you can not buy an acre of land with a 5 bedroom house, a pool and mountian views and city lights for $200,000.
It might be 50 or 70 thousand less than it was two years ago, but it won’t be $200,000 when the average price for a 5 bedroom home in May of 2008 in the North was $956,020 and in the Northwest was $415,543.
You have no gain or loss till you sell or buy and sell again.
It is okay to play the game “My House is Worth . . .” so you can feel good when the market is going up, but put the game away when the market is giving back some of those gains till you really have to or need to sell it. Then don’t take out your game, keep it put away. If you must take out something to look at, look at what you paid for your home when you bought it.
While we are at it, anybody want to buy a Hummer? let me see two years ago they were worth . . .
June 16th, 2008 at 1:14 pm
Great point, too many people are worried about the value of their home when they have no neeed to move or sell for years to come.
June 19th, 2008 at 7:54 am
But vast numbers of people use that equity for loans, now that they’ve lost there are problems. It’s not just about selling the home.
June 19th, 2008 at 7:59 am
Shawn,
To me that is a good thing. Way to many people have been using the equity in their homes as an ATM machine. I put home equity loans up there with reverse mortgages. Use if you must, but only as a last resort.
The draining of equity from a home so you can take a vacation or buy something has contributed to the recent credit crisis. They were borrowing against something they didn’t have, just like the people who were getting “fog a spoon get a loan”.