Will Phoenix Metro Real Estate Prices Take Another Dive??? (to rent, condos)

[Captain Bill]

Originally Posted by _Charles_

Anyone that thinks that Valley real estate prices are on the rise is smoking something other than cigarettes.
1. The foreclosure wave needs to stabilize. It has not.
2. The job picture needs to improve dramatically. It will but not for another 2+ years.

There are those who will play with numbers and draw imaginary scenarios - lol whatever it takes to feel good.
Reality is reality.

Charles, I haven't smoked anything for many years now; but I do have some good wines. Does that qualify

You make some good points, so let's look at them.

1. Foreclosure wave: Foreclosures are declining. The new forecast for notices of trustee sale for Maricopa County in July is 3,500. They are expecting only 3,400 trustee sales. Both these numbers are very low by recent standards.

2. Job picture: Yes the job picture needs to improve, and there have been improvements, although not dramatically. If it improves more within the next 2+ years as you mention, then that will be great. Remember that the Mesa's Gaylord Convention Center project will be starting up by the end of 2013 and is expected to add 100,000 high paying jobs. Intel is adding 1,000+. If we keep our eyes open we may see more jobs being added.

3. Imaginary scenarios: Now, after a few glass of wine (in lieu of smoking something) I'm going to do some hallucinating:

• Last year at this time the sales had declined steeply until mid-August, where they flattened out.
• In December they shot up, unexpectedly.
• Today, there are many people who are losing out on multiple bids.
• If there are at a minimum two bidders on a house, and one wins, there is still one more demand for a home out there.
• Those people who are losing out on the bids will keep looking until they find one.

People have been advised, wisely, to wait a few months as the buying slows down more. Some of them will wait, and some won't.

• If those who wait all come back in at the same time, then we will have the same multiple bidding situation as now, unless some more Supply is added to the chain.
• With the foreclosures slowing up; banks still holding some inventory back; and regular sellers not putting their homes on the market, we may continue to see declining supply.

This year the sales (last week) declined a small amount; not nearly as much as they did last year, and we're still hovering at just below 10k sales per month level.

I expect to see a little more decline in sales until mid-August; then a flattening out like last year; and again I expect to see an increase in December like last year as all those people who know December should be the slowest month all jump back in the market at the same time.

Pricing: I expect that in general the Prices will lose one or two dollars per square foot, but prices in the high demand areas will either be flat or increase some.

In 2012, if things continue to go the way they have this year, and the way I think they may go the rest of this year, and barring any national or international financial and political disasters, that we will see more price increases.

*****DISCLOSURE:***** Because am a Realtor, and as some have noted, have a personal agenda to create a "buying frenzy", one should not rely on my statements. So as the Chef can attest to, if a "buying frenzy" is created, the credit should go to Captain Bill, the Master Buying Frenzy Creator".

Of course I would have to give a tremendous amount of credit to Mn, who is a great help in creating the frenzy.

On the other hand, if the market tanks by another 40%, then we will have to give credit to the retired broker from Montana who very wisely warned us, through the non-disputable Zestimates from Zillow, that AZ will continue to tank.

*****Back on a serious note:*****

As I've discussed before, Supply and Demand are leading indicators, and Price is a lagging indicator in real estate. Following a change in the Supply/Demand trend, the Price change is not immediate. It can lag by one year and more. That's happening now.

That begs the question: If Supply is still Declining, and Demand is still Increasing, why is it taking so long for Price to follow?

Mike Orr of the Cromford Report thinks it's because around 40% of the buyers are investors. They are holding out for bargains and have to pay less for a property than the regular buyers who are looking for a home to live in are willing to pay. Consequently, they are probably the cause of Prices being slow to change in many areas.

[EdithMassey]

I have been glued to news of raising the debt ceiling. One thing that keeps coming up is ending the mortgage interest deduction. What are the consequences and odds of this happening? Do you remember the good old days of deducting car interest and credit card interest?

[MN-Born-n-Raised]

Moderator cut: orphaned post

I'm not an agent (zero profit motivation) yet I showed you real-time graphs of what housing is doing in the Valley.

If you look at my posts in 2009 and 2010, I argued that pricing was going to come down. Using logic and data I guessed correctly. In late 2010, I said the the Arizona MLS (armls) predictions were not going to happen (they predicted a slide in pricing which common sense told me could not happen). I put my money where my mouth is and I bought a home BEFORE there were bidding wars. Again, I guessed correctly.

Now I am on the record and will say that some of the gains (yes GAINS==appreciation) will be given away this fall. Let's see if I guessed correctly again.

Moderator cut: off topic

Now Charles. Address the posted links that I gave you and show me how I am wrong.

[Zippyman]

Originally Posted by mjd2k

Maybe they wont' sell out for many years. The market is choked by slow bank processes (I tried to buy for 2 years so I have a bit of a clue, not much really but enough to have an opinion).

I have rental properties and the only money I made off them is from appreciation. Now there is no appreciation in Canada so I'm planning to get rid of them. Some investors may start dumping down there too. I have a property in PHoenix also but if it does not appreciate, I can live with it as its
where we vacation in winter.

The wife and I are closing on a rental property in Phoenix Monday (knock on wood) - that property will cash flow by anyone's measure, even allowing for heavy expenses & heavy declines in rent - and we expect neither to happen.

Assuming we close, the property won't be for sale until everyone on this board is very-very old. Even if we were to double our initial investment, we'd be unlikely to sell - we can't get monthly cash-flow numbers like that from any typical investment, nor do we have control over other investment types.

At least with a house, if the value goes to zero, you can have a bonfire and roast some weenies on your "retirement". Losing money in the stock market was much less "satisfying".

We won't be investing a major portion of our retirement in stocks or banks until some of those guys end up in jail - which isn't likely.

[Stokes172]

The Canadian dollar is the highest it's been in two years.

The Canadian invasion has just begun. Multiple bids will be the norm in many Phoenix areas.

[MotleyCrew]

Originally Posted by Zippyman

The wife and I are closing on a rental property in Phoenix Monday (knock on wood) - that property will cash flow by anyone's measure, even allowing for heavy expenses & heavy declines in rent - and we expect neither to happen.

Assuming we close, the property won't be for sale until everyone on this board is very-very old. Even if we were to double our initial investment, we'd be unlikely to sell - we can't get monthly cash-flow numbers like that from any typical investment, nor do we have control over other investment types.

At least with a house, if the value goes to zero, you can have a bonfire and roast some weenies on your "retirement". Losing money in the stock market was much less "satisfying".

We won't be investing a major portion of our retirement in stocks or banks until some of those guys end up in jail - which isn't likely.

We did the same thing with our chunk of loose change and created a mini retirement until the economy picks up and our work comes back. If it doesnt come back we will survive. I really can't think of a better place to put money right now for this kind of return and it beats .1 to 3. percent sitting in a bank.

[MotleyCrew]

Originally Posted by Stokes172

The Canadian dollar is the highest it's been in two years.

The Canadian invasion has just begun. Multiple bids will be the norm in many Phoenix areas.

There seems to be quite a few Canadians moving into the Trilogy across from us. They are all excited about the value they get there. Good for them.

[MN-Born-n-Raised]

Originally Posted by MotleyCrew

There seems to be quite a few Canadians moving into the Trilogy across from us. They are all excited about the value they get there. Good for them.

I agree. Good for them.

If they didn't buy, AZ and other overbuilt sunny destinations would have dropped much further. When we bought our new appliances (the old owner stole them), Best Buy said they were busy because of the snowbirds, investors etc. The flooring people and stone people said the same thing.

[BestintheWest]

Say what you will but good sense says the pain is not over yet.

Almost half of mortgages in Arizona are 'underwater,' report says

[TiredOfyycCold]

I disagree.... just because a home-owner is underwater doesn't mean they will sell or be foreclosed on and the article you quote states that the rate of fore-closures is going down and that the average amount underwater is $60k.... if it were $160k - then that would be cause for concern.

If the home owners are still employed (or earning a stable pension) and happy with where they are living, then being underwater is meaningless UNLESS they want to sell. If they could afford the payments before and mortgage rates have come down, then they can afford them now.

You only lose money when you sell - I would think a lot of people will stay put and wait patiently for home prices to rise to where they should be (once again, if they can make the payments and have no real need to move).

As I have said in a previous post, you can't build most homes in Phoenix for what they are currently selling for. Adding $65k to most home prices still wouldn't bring them up to the cost of replacement so those home prices have to go back up at some point, at least to the cost of replacement!