Phoenix and Las Vegas. Bubble or not? (for sale, real estate)

[vince3vince]

Good read for anybody that is interested. Bubbles Bloom Anew in Desert as Buyers Wager on Las Vegas - Bloomberg

Has anyone actively been looking in the market since last year and have really experienced this drastic change in climate? It's almost comical, I saw this listing that sold on May 24 for $525,000 and put back on the market on July 28 for $679,000 and in their comments section they write: "Additional Remarks: Please inform your lender that this Home is a ''Flip''. This home is non-distressed, free and clear and has been remodeled with high quality materials & finishes. Please no Wells Fargo!"

Are they ****ing dreaming!? Are people really that willing to fork over $100k extra on a 2 month flip with mediocre renovation? Would and appraisal come back that high?

I also recently visited and unnamed new construction community that paused during the crisis years to compare how their prices have changed from last summer. The same model I was interested in is now roughly $120-150k higher- the sticker price only went up $60k but their lot premiums are now $70-90k. I mention that to the sales rep and she just said now that most shortsales/foreclosures have gone, they are at pre-crisis pricing!

[Tall Traveler]

Not a bubble yet in Vegas or Phoenix. Just look at what house prices are in similar type cities. The value is still there but no longer the tremendous value like they were 1-2 years ago.

[WSPHXPELON]

The very nature of US markets is boom-bust; and for that very reason Americans strive to generate capital from investing in assets when they are on the low end of a boom-bust cycle. This is synonymous with repeated bubbles.

If prices are rising, then of course a "bubble" is inflating. The real question is how inflated will the market get before it pops? It does not matter if the "bubble" pops in 2 years or 20 years; either way it is a bubble that is being inflated and will eventually pop.

[jimj]

Originally Posted by Tall Traveler

Not a bubble yet in Vegas or Phoenix. Just look at what house prices are in similar type cities. The value is still there but no longer the tremendous value like they were 1-2 years ago.

I agree. Houses have been terribly undervalued for the last few years, well below just the cost of materials to build it.
Bubble? No more than the price of cars is a bubble.

[pgc323]

From the article, I think Dennis Smith, CEO of Home Builders Research in Las Vegas got it right when he said “I don’t use the word bubble because that implies it’s going to burst and never come back, I don’t see a crash. I see a slowdown."

[Zippyman]

Originally Posted by vince3vince

Good read for anybody that is interested. Bubbles Bloom Anew in Desert as Buyers Wager on Las Vegas - Bloomberg

Has anyone actively been looking in the market since last year and have really experienced this drastic change in climate? It's almost comical, I saw this listing that sold on May 24 for $525,000 and put back on the market on July 28 for $679,000 and in their comments section they write: "Additional Remarks: Please inform your lender that this Home is a ''Flip''. This home is non-distressed, free and clear and has been remodeled with high quality materials & finishes. Please no Wells Fargo!"

Are they ****ing dreaming!? Are people really that willing to fork over $100k extra on a 2 month flip with mediocre renovation? Would and appraisal come back that high?

I also recently visited and unnamed new construction community that paused during the crisis years to compare how their prices have changed from last summer. The same model I was interested in is now roughly $120-150k higher- the sticker price only went up $60k but their lot premiums are now $70-90k. I mention that to the sales rep and she just said now that most shortsales/foreclosures have gone, they are at pre-crisis pricing!

I just gotta say as someone who has bought a few short sales/bank-owned homes - the difference in expectations between a "retail" buyer and a buyer like myself is *huge*. Basically, the contracts for reo's and short-sales give the buyer the middle-finger in legalese. As a buyer, you're forced to sign both the standard ARMLS contract, and an addendum from the bank/seller that may be *longer* than the ARMLS contract, which basically guts *every* protection (for the buyer) in that ARMLS contract.

What you're getting from the bank or short seller is *not* the same as what you're getting from a retail seller - they very idea that a short or REO can even be considered in any way as a "comparable" to a normal sale for valuation purposes is just nuts.

Aside from that - when you consider the condition of most shorts/reos, they aren't staged, they aren't "broom clean", they often stink (literally!), need repairs & have lots of purple bedrooms and awful yards.

You can say what you want about a "marginal" rehab, but frankly, many new homes and resales up to a million bucks have kinda cheesy fixtures and $.79 sq/foot tile on the floors. I put better fixtures in my $1k a month rentals just so I don't get calls from my tenants about drippy faucets, $1.99 towel bars & cabinet drawers falling off the tracks.

If you think about it from a seller's perspective, that $500k short-sale/reo may have taken six months to close, another month of solid work to clean/paint & rehab & then you're dealing with buyers who want to nit-pick about your choice of crown moldings, appliances & doorknobs.

And if there's a problem with the house a month, three months, or a year later - the flipper is viewed as a big-bag-o-money waiting to be tapped for "failing to disclose" whether or not they even knew a problem was possible. There are many *many* threads in the "house" forum where the standard advice for a buyer who finds *any* problem with a used house is advised to sue the seller, from spiders, to mold, to cracked slabs found *under* finished flooring.

Personally, I wouldn't wire $500k off to XYZ bank in the hopes of getting $650k back (before expenses)months later, after fixing a house up for a retail buyer & offering warranties that I wasn't given myself & hoping there weren't problems with the house. There are *always* problems with used houses, and retail buyers are generally stuck in the mode of " but *I* shouldn't have to pay for that" and " I can't be expected to spend $1 in parts or ten minutes in labor on a house I just spent $XXX on!".

To be honest - if you read the posts in the "house" forum for a few days, you'll never want to sell a house again - there are soooo many posts from poor, "victimized" buyers that personally I'd rather torch my house & sell the bare lot when I'm done with it than to deal with retail buyers.

[sunluv]

The press is all over the place. Some claim bubbles already, others say no. It seems to me irresponsible journalism to jump on the bubble bandwagon so quickly, using simplistic arguments and broad brushstrokes.

Recent examples this week:

http://azstarnet.com/ap/business/bub...7609b3c4f.html


Entirely different and probably more accurate take.

http://www.homebuyinginstitute.com/n...s-cooling-447/

[Galaxie Girl]

People who have been investing in real estate for a long time (20+ years) know that this is not a bubble. We are simply coming off the bottom of the market cycle. Here's how the cycle works:

- Prices crash. Lending standards tighten.
- Prices reach bottom.
- Economy starts to improve. Investors pick up profitable deals, reducing available inventory or low-priced real estate.
- Low inventory prompts some to buy, thinking they will get left behind. Lenders have started to loosen standards (just a little). The investors and these buyers start bidding up prices a little because they want in, causing a ~15% jump in prices.
- More people start to list their properties for sale, increasing inventory. This causes prices to stabilize.
- Prices increase at a slow, healthy rate as the economy continues to improve.
- Lenders loosen standards more and more, and unqualified people start buying real estate (because they finally "qualify"). This increased demand drives prices further higher.
- Prices climb quickly as more unqualified people buy, and speculators buy, thinking it's going to last forever and they will be able to sell it for more in 6 months or a year.
- Smart people realize THIS is a bubble, and step back. Demand for real estate drops, the economy falters, the unqualified buyers get foreclosed upon, and you have the next crash.

It's been happening for decades. Cycles are unavoidable.

[sergeym]

Originally Posted by vince3vince

Please no Wells Fargo!"

May be off topic, but what's wrong with Wells Fargo mortage?

[Zippyman]

Originally Posted by sergeym

May be off topic, but what's wrong with Wells Fargo mortage?

on flips, they've been known to ask the seller (flipper) for *receipts* for all work done.. basically ignoring the appraisal & pulling a "reasonable" profit number out of their nether-parts, then holding up funding the loan until the deal explodes, or the seller gives in. even if the home appraises easily, their bean-counters want input on valuation. that, and they're a predatory mega-bank that does an awful job at servicing the loans they do manage to close.