Thursday, December 18, 2008

What is a Home Worth?

As long as the moon has been circling the globe the tide has come in and gone out. When the tide comes in it raises all boats. When home prices were going up all real estate went up just like boats in a harbor. Today as the proverbial tide is heading out, the question really is "How deep is the water"? That is, as the tide heads out, have we hit bottom or is there still a ways to go? From where I am standing there is no bottom in site. At the end of the day I think a house is worth what you can do with it.

I was speaking at a ULI program recently and I made a statement there that I will repeat here; just because a home on your street was sold for $25,000 does not mean your home or all of the homes on your street are now worth $25,000. I also stated that I am seeing a correlation between 2005 selling prices (not listing prices mind you) and selling prices today. That correlation is the value today is about 1/3 of the 2005 selling prices. It is not a perfect relationship but I keep seeing it over and over again.
With that said, if you have a home with a mold issue and it cannot be lived in then that home is not worth much. If I can rent out a home for $1,000 net per month then that home is worth considerably more.

A friend of mine was driving though Georgia a few months ago and ran across a home in a remote area that appeared to have been built with expensive materials. My friend shared with me that he thought the house was a terrible waste of money. So what is the value of a remote "expensive" home? Maybe zero. Maybe some. Probably not what was spent to build it. My point is some houses will never be worth their construction cost and no minimum price exists. The bottom line is if a home has utility, it's forward value will be based on that utility.

Monday, December 15, 2008

A Couple of Cartoons

I've been traveling and am currently preparing my next blog entry.

In the meantime, here are some cartoons that I found funny. I hope you enjoy them.

Happy Holidays to you and yours.