Phoenix Home Prices Increasing after Summer Doldrums

[Ponderosa]

Originally Posted by jimj

The interesting fallout from this last QE is being predicted to slow housing sales near term since good 'ol Ben has said interest rates will stay on the ground floor for a few years. Without some kind of motivation as in a deadline or indication of rates going up why move quick on anything not to mention possible radical tax hikes that may reduce your ability to pay the mortgage you can easily afford today.

I have not seen that prediction from any credible source. QE purchases of mortgages (QE3) is aimed at making loans easier to obtain by providing a ready secondary market to lenders who make loans at low rates i.e. creating demand for mortgage products. It is an imperfect solution and the Fed could have done some other things that might have been more effective in this regard (negative interest on member banks deposits, for example). In any case, the recent action will not do much to suppress rates as they are already very low. They certainly won't move enough to affect affordability which is at an all time high. Home sales will strengthen in Arizona this winter and prices will once again climb back toward "trend". Prices remain significantly below where they would normally be relative to wages and especially rents, so there is a good deal of upside to be realized still.

[Howard Roark]

I agree Jim, however I am going to pay cash. I would prefer to buy when interest rates are sky high, but that will be far away I think. I do not intend to put more than 1/6 of my net worth into real estate. That way if I buy and houses sink 50% I'm out 8% of my net worth. But after buying I would subtract the house value from my net worth anyway. Like I said, a house is like a car. Not an investment. Good to have but only a fool would regard it as a way to retirement.

Originally Posted by jimj

The interesting fallout from this last QE is being predicted to slow housing sales near term since good 'ol Ben has said interest rates will stay on the ground floor for a few years. Without some kind of motivation as in a deadline or indication of rates going up why move quick on anything not to mention possible radical tax hikes that may reduce your ability to pay the mortgage you can easily afford today.

[Ponderosa]

Originally Posted by Howard Roark

I agree Jim, however I am going to pay cash. I would prefer to buy when interest rates are sky high, but that will be far away I think. I do not intend to put more than 1/6 of my net worth into real estate. That way if I buy and houses sink 50% I'm out 8% of my net worth. But after buying I would subtract the house value from my net worth anyway. Like I said, a house is like a car. Not an investment. Good to have but only a fool would regard it as a way to retirement.

Housing is the major expense of retirement (or possibly medical bills). If one can buy a home at 30, pay it off by 60, one huge expense and worry is completely eliminated. It is like having a large annuity coming in. My parents lived on a very small SS check because they owned their home outright. Unfortunately, the pattern of many is to keep buying up, borrowing against equity, doing improvements on credit rather than paying off mortgage debt. Another approach, of course, is yours - saving and paying cash at some point. For many, though, that is difficult and not desirable. Either way results in a great comfort in retirement and possibly enables one to retire earlier and/or enjoy their retirement years more fully.

[mjd2k]

Originally Posted by Ponderosa

Housing is the major expense of retirement (or possibly medical bills). If one can buy a home at 30, pay it off by 60, one huge expense and worry is completely eliminated. It is like having a large annuity coming in. My parents lived on a very small SS check because they owned their home outright. Unfortunately, the pattern of many is to keep buying up, borrowing against equity, doing improvements on credit rather than paying off mortgage debt. Another approach, of course, is yours - saving and paying cash at some point. For many, though, that is difficult and not desirable. Either way results in a great comfort in retirement and possibly enables one to retire earlier and/or enjoy their retirement years more fully.

Your primary residence is not so much an investment other than as Ponderosa states, once its paid off, its an expense eliminated. Then if you are 70 and decide to sell, it will likely pay your rent easily for the rest of your life with hopefully money left over to spend. Or if prices rise, you have gained equity you may not have otherwise.

However, my experience is that homes are money pits so even when its paid off, you will be putting money in for maintenance.

If I had no home but enough cash, I may not buy either. DEpends on if my rent payments are higher than my returns on the cash value. Having said that, if I mis-time the market and buy a year too late, I may have lost far more than I ever could make if I had the cash invested. Who knows?

To me, the housing industry is not a sustainable growth industry but many in Phoenix seem to think its the major economic factor in the area. If it is, then Phoenix is in trouble. Its really an indicator of the economy, if people are making money and secure, then they will buy and prices will rise. It doesn't lead the economy, it follows.

Depends on the person too. Ownership is nice and I like to be an owner but sometimes it makes sense to rent even if you can buy.

I wonder if many renters are finding out that renting is not so bad and there may be a new trend in the phoenix market where people will just continue to rent. Right now, they are not losing by not buying because prices have not risen much. No reason to say that, just wondering.

Problem with renting is that you have no control. The old theory about building equity through a mortgage rather than paying rent has been blown away. Any equity can become negative overnight. There may be a change in peoples attitudes occuring.

I guess I'm just stating the obvious. Nothing new in this post