Alan,
My wife recently sold her condo in Evanston on Central. We both loved the area, but wanted more space(yard) than most houses in that area have so we moved further out. We close on the new place Friday. Now we are getting ready to sell my place in Des Plaines.
Neither of us believe in carrying debt as well. We will have a mortgage, but no other debt. In my mind, it's the easiest way to building true wealth that anyone can do. We consider ourselves to be quite fortunate so I don't want to overstate that item, but not paying interest on "stuff" will get you ahead in the long run.
As to the real estate, the difference between your friend and the builders is that the property "profit" is not his main or only source of income. Additionally, the builder is going to have a lot more of his personal money tied up into the property and his carrying cost on the building he is constructing is a lot greater than you friend. Some of these guys have 2 or 3 houses working simultaneously and they cannot afford to sit on them for 6-9 months. We started searching for a new house 7 months ago before we were even married and I can tell you that there are still realtors setting unrealistic expectations for their selling customers.
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