Where do you see the Phoenix real estate market going? (Chandler: 2014, rental)

[Zippyman]

Originally Posted by Tall Traveler

I don't disagree completely but I think the 2008 crash was a once in a lifetime crash the likes of which we aren't likely to see again. About reaching the limits of pricing for incomes, not sure about that because Phoenix is the most affordable city in he West after factoring income and cost.

I recently sold off a couple rentals as starter homes - one was the /only/ single family 3 bedroom house in the zip code for under $200k. In the other zip-code, there were a couple under $200k , but they did not qualify for government financing because of condition. This is city of Phoenix proper, not a high-end burb. There are an immense number of “careers” in Phoenix that don’t pay enough to cover a $200k mortgage, even if doubled. If the people doing the work in your city can’t afford a house to live in, that’s a problem & we’re getting there, even if those with more money haven’t noticed yet.

[DougStark]

Originally Posted by MN-Born-n-Raised

Denver is "land locked" to the mountains. When you turn around and look at the high plains, it's Nebraska. The anything that is worth anything has great mountain views. Or in the foothills like Boulder.

Wrong. The Denver "metro area" is not land locked anymore than Phoenix is land locked by the Indian Reservations.

[Tall Traveler]

Originally Posted by Zippyman

I recently sold off a couple rentals as starter homes - one was the /only/ single family 3 bedroom house in the zip code for under $200k. In the other zip-code, there were a couple under $200k , but they did not qualify for government financing because of condition. This is city of Phoenix proper, not a high-end burb. There are an immense number of “careers” in Phoenix that don’t pay enough to cover a $200k mortgage, even if doubled. If the people doing the work in your city can’t afford a house to live in, that’s a problem & we’re getting there, even if those with more money haven’t noticed yet.

I remember reading that Phoenix had one of the highest income growth of any city in the USA and that is the key. I agree that Phoenix needs more high paying jobs and that is starting to happen.

https://www.bizjournals.com/phoenix/...me-growth.html

Phoenix is less affordable than many Midwestern cities but it's the most affordable city in the West.

I own 3 rental houses in the Phoenix area and the rents are definitely increasing....like you, I'll sell when I think the price is where I think It should be.

[MN-Born-n-Raised]

Originally Posted by DougStark

Wrong. The Denver "metro area" is not land locked anymore than Phoenix is land locked by the Indian Reservations.

My point was Denver is only expensive because of the green mountains which also produces a lot of skiing hiking, and fishing. So people want the mountain views and trees (a.k.a.natural beauty). The high desert is butt-a$$ ugly. So when you look at cost of land, the most valuable property are in the foothills. Followed by land that is close to the mountains. The other draw is downtown (jobs and entertainment).

Aurora CO costs $200 per square foot (up another 5% from last year) while Boulder is $480 a square foot. At a certain point, no one wants to live farther out simply because it is butt ugly.

I've been to Denver 10 times a year over the past 5 years. I put "land locked" in quotations the mountains are a pseudo barrier and they have run out of premium land.

[Zippyman]

Originally Posted by Tall Traveler

I remember reading that Phoenix had one of the highest income growth of any city in the USA and that is the key. I agree that Phoenix needs more high paying jobs and that is starting to happen.

https://www.bizjournals.com/phoenix/...me-growth.html

Phoenix is less affordable than many Midwestern cities but it's the most affordable city in the West.

I own 3 rental houses in the Phoenix area and the rents are definitely increasing....like you, I'll sell when I think the price is where I think It should be.

Taking household income from $48k to $52k isn't enough to measurably move the needle - if the cheapest house in the zip-code is $200k, $52k just isn't going to fly - that's barely existing, not prosperity. The household is on the ropes if they get even one medical bill or major home/car repair - and that's assuming they can hold onto those low-end jobs. Remember, that's household income, not one wage-earner making $52k.

[jimj]

Originally Posted by Zippyman

A huge percentage of the people who foreclosed in the last crash were foreclosing on 3-5 or more homes. That's why it was so bad. It wasn't one person or family losing one house, it was one speculator losing three or five or more homes, the banks booting several families out of those speculative rentals & everyone looking for rentals at the same time.. That's what moved the rental pricing - and it really can't happen again without liar loans & speculative financing.

Phoenix is rapidly approaching rental parity pricing, and there isn't much room for rents to rise versus incomes.

When rent costs the same as buying, there's no incentive to be a landlord. Before the last crash, you might pay $2500 /mo to buy a median home with market-rate financing, $700/mo to buy with a suicide mortgage, and $1,000 /mo to rent.. The spread between the suicide loan and the rent was enough to entice unqualified landlords into the business, as was the $0 down. Now you need a down payment & rents & mortgage payments are pretty much equal.

Phoenix will definitely have another crash as pricing exceeds incomes - likely because of a blip in the economy- if a lot of people lose jobs, they'll lose their houses.. But they won't lose five houses, and displace four other families the same time. However bad it is, it won't be 2009 again.

A bigger danger to the average Phoenix homeowners is the stock market and corporate landlords. The last big burp of foreclosures was sold off to the big banks & hedge funds at teeny-tiny pricing.. If those corporate landlords need cash because the stock market goes nuts again, they own enough properties to move pricing on single-family homes if they decide to dump them quick. So another mega-bank crisis could disproportionately tank Phoenix property values, in addition to foreclosures due to job losses.

I agree <bold>, they own quite a bit in many subdivisions including the one I'm in right now. Those homes and their occupants are one big reason I'm selling and going to a place that doesn't have that issue.
Rents have met new home mortgage costs in my neighborhood, a few renters on my street alone have signed up to buy a new build as the payment is exactly the same as their rent is/was.

It seems that it's taking a bit longer to rent out empty homes now as well as they've really dropped their standards for renters (if they ever had any)...

[kitshipp]

Originally Posted by Zippyman

Taking household income from $48k to $52k isn't enough to measurably move the needle - if the cheapest house in the zip-code is $200k, $52k just isn't going to fly - that's barely existing, not prosperity. The household is on the ropes if they get even one medical bill or major home/car repair - and that's assuming they can hold onto those low-end jobs. Remember, that's household income, not one wage-earner making $52k.

Yep, and we are at the point where anything under $200k is tiny, needs thousands of dollars of work or is in a really rough area. Or a combination of the three.

[DetroitN8V]

Originally Posted by kitshipp

Yep, and we are at the point where anything under $200k is tiny, needs thousands of dollars of work or is in a really rough area. Or a combination of the three.

I think that bar is actually set closer to $300k now.

[BIG CATS]

We're heading for 2008 all over again. I aint buying squat for now. Home prices are bloated, salaries here are crap, subprime mortgages (auto and home) are on the rise, etc. The warning signs are here for all to see, but no one remembers from the past. Too many people buying second and third homes here, or getting approved for homes and cars they cant afford. Dumb people, I swear.

[Flavia84]

It's hard to be unemotional talking about this, as the previous crash is still fresh in people's minds. I know I still have the jitters.

Realistically though, the dip of the same magnitude is unlikely. There is so much cash sitting on the sidelines right now that even if the market tanked, it would be bought up in a blink of an eye by the cash hoarders.

Yes, the housing prices have risen at an unprecedented rate but that was largely caused by people parking their money in housing as a good investment. Those deals are mostly gone, rates are rising and we are likely approaching the peak. There WILL be a correction - there always is - but probably not of the same magnitude as 2008.

I hear your concerns as I'm in the same predicament. IMHO, if you need a place to live - go for it. If you choose to rent and wait, here is no way to tell how long you'll be waiting for - and paying rent in the meantime. But DO NOT look at housing as an investment - those times are gone. Don't overleverage yourself, keep an emergency reserve and you'll be fine. I would also make sure that you're planning to stay in your house for at least 5, maybe even 10 years in case we do see the prices lower.

I think if we see another dip like in 2008, we'll have much bigger problems to worry about than housing, as the Fed will have almost exhausted its leverage in stimulating the economy. Next step would be negative interest rates which would wipe out households' savings. Hope that doesn't happen.