sd_resident, it sounds like your analysis is conservative which is good. If you want it may be wise to built in more margin to your estimates given the fact that the lending climate is substantially more difficult now then it was 2 months ago. Also the fact that these closings occurred in the past two months indicates the homes were on the market in the spring or at least late spring. Are there any actives on the market currently?
Do you mind if I ask what part of town and if you are in a condo or a home? (Don’t answer this part if you don’t want to)
Chris made a valid point about chasing the market down. So you have to ask yourself what side of the downturn we are in, the beginning, middle or end. Also that question will vary (at least in my opinion) on where you live and what type of home you have. Also how fast has the neighborhood appreciated? Do you think many people around you are susceptible to distress (risky loan vehicles) etc? Another thing to remember is that there is time you need to account for to recover after the market bottoms out. So that time is also opportunity cost with respect to your investment. One thing you may want to do is run out some scenarios. Say over the next 3 years plot out a 7-10% depreciation and then a 4% appreciation to see how long it takes to get back to where you are. Play with the numbers (maybe 2 years instead of 3 and maybe 4 instead of 3. Also vary the depreciation rates) and see where you end up. Also compare that to say a very conservative investment of say 5% and then vary that investment… 3% to be ultra conservative and go up if you want to be risky…
It is one thing to ask opinions but when you run the numbers and have it in front of you sometimes that makes the decision easier.
We all have varying points of view here as you know. Is it conceivable for homes to go back to 2002 or 2001 prices? It could happen. Again it depends on where you are and what you have. I have seen 2003 prices in some areas already. In others I have seen much stronger resistance to the depreciation cycle.