Until recently, the calculation was fairly simple for individual real estate investors. “You put $5,000 down and you sell it for a $100,000 profit,” sometimes almost before the paint dried, Mr. Burns said. “And then you roll into 15 more houses.”
The speculators are gone. But builders predict that the current downturn will last no more than six months to a year, arguing that prices and sales will start rising again after the homes on the market are absorbed by the normal influx of migrants to the area.
“By the time all the dust settles, will this be an 18-month correction or a 36-month correction?” said Thomas Bruin, chief executive of Hearthstone, a firm based in San Rafael, Calif., that invests pension fund assets in land and residential real estate. “Nobody really knows.”
Economists note that the construction sector, itself dependent on the housing boom, accounted for about a quarter of all new jobs created in the last six years. Lower-paying retail jobs added about 15 percent.
Wages rose, too, but not nearly as fast as home prices. In Maricopa County, which includes Phoenix and Scottsdale, median home values — half the homes are worth more, half are worth less — increased 64 percent, to $212,700, from 2001 to 2005, while the typical household’s income rose just 5 percent, to $48,711, according to the Census Bureau.
The housing correction has, thus far, had only a modest impact on the broader economy. While home builders have cut back, contractors remain busy erecting shopping malls, office buildings, schools and civic projects. Builders and contractors say the costs of concrete, drywall, copper and other building materials remain high, though the supply shortages seen last year have dissipated.
But smart investors, he argued, were absorbing the surplus by buying up homes that builders were now unloading at bargain prices — some for as little as $60 to $80 a square foot, which local experts say is barely enough to cover construction costs let alone land expenses.
At such prices and with interest rates still low, an investor can cover his monthly costs, maybe even earn a modest income, by renting homes for $900 to $1,400 a month while the market recovers, Mr. Caldwell noted.
“It is not a get-rich quick scheme,” he acknowledged. “But investments in real estate,” he added, “do go up over time.”