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I would agree with that assessment, Ironically the 08 housing bust was likely the best thing to happen in the long run for our state, it forced us to diversify out of Housing, Retirees, vacationers and agriculture/resources into a more varied economy.
Our fastest growth industries are now Tech and Finance which have "high wage" jobs relatively, but we have done this while still growing our older economic sectors and having massive industrial/logistics gains to support low-middle income people as well as higher income people.
Phoenix (and the state by extension) is in a great spot of solid and sustainable growth unlike what we have historically seen.
Large painful corrections can often be a good way to grab the attention of policy makes so that they finally get off their arse and think a little deeper. I've watched many charges happen locally for the better.
Part of that influx that shampoo^^ mentioned is the brain power coming in from other states. That works in the short run. But AZ has a weak college obtainment rate versus other states (one of the worst https://en.wikipedia.org/wiki/List_o...nal_attainment ) If Arizona’s education gap rises during the next 10 years, that will set the stage for larger income gaps. The halves and the haves versus the have-not's are rather deep in the Valley of the Sun.
re: 2019. The #1 reason for the housing market to change (up or down) is when peoples moods on the economy change. So the question to be answered: do people in PHX feel good about the economy for the foreseeable future? For several years, the answer has been yes! Sure, mortgage rates can go up some and that will skew the exuberance and buying power. But if people feel confident, they will buy. The #2 important indicator is affordability. And in PHX, it is in fact more affordable which bodes well for the area. Affordability is a big reason why we are experiencing a 100K net gain in population. They aren't coming for the 110 degree summers.
It's why my gut tells me that in 2019, I smell possible trouble on the upper-end of housing. Those are the houses that have most recently taken off. Of course affordability is defined as a benchmark against CA or Seattle or NYC. But a street smart POV says it also means what people have for a net worth. If you have $$, $600K isn't a lot of money for a house. But a 6,000 point drop in the stock market can mean a guy who is convinced he is worth more than he is on paper, will start to read all kinds of bad news wondering if it going to get worse. That's when people squeeze their wallets.
As I have alluded to before, I sell expensive widgets to people with thicker wallets. My barometer for sales (also measured in phone calls, texts, and emails) is the same as the housing or luxury boats or RV's or _________. The question to be answered does the customer feel good about their security? The people with extremely thick wallets are much less volatile than thinner wallets. Thin wallets find it more of a necessity to obtain basic housing. So it's really simple for me: My business will follow the stock market. If the stock market drops by 6000 points will often shock a person with moderate wealth like buying a $650K tear down in Arcadia. Because when they open up their statement, their perceived wealth just evaporated. Now on the lower end, paycheck-to-paycheck crowd, that stock market volatility is less of a concern.
Additionally, people with thicker wallets are more educated and research more. I propose there are more than a few people who are watching the top end in AZ wondering if it is a good time to buy or should they wait. That influences the all important sense of urgency. Again, the educated are more geared towards wondering. And for the last 3 months, people have taken a pause here in PHX. Partly because of the volatility of the stock market which starts a cycle of negative news reports.
Re:the importance of sense of urgency. I'll give you an example. In 2010, PHX housing was still dropping and in 20-20 hindsight, we have learned that it was positively over correcting. In 2010, the economy was officially out of the recession. Mortgage rates were super cheap. My wealthy customers were starting to come back and buy expensive stuff that they didn't need. So why didn't the home buyers pounce on these deals? Answer: because they didn't think they were going to go up in price YET and they froze! There was no sense of urgency. Basically, I'm proposing there are different trigger points for consumer confidence (education level and net worth). I have no idea if anyone looked at this. But that is how I look at it.
So in short, my non-scientific and non-data driven opinion is that the the higher end PHX market ($600K-$1.2M) in the hottest neighborhoods will feel the most volatility. My guess is the $600K to $1.2M market is being purchased by moderately thick wallets ($200K-$300K family income) and they are more stretched. They view much of their wealth based off of their portfolio. Too many people look at their 401K or Roth and forget that they have not paid their taxes on it yet. I calculate my net worth after taxes. I digress. This group will be spooked the fastest. Shampoo: can you get any data on this as time permits?
So my prognosis is watch the stock market for volatility and corrections. Especially for the bigger dollar homes. In short, I don't feel a sense of urgency to jump in and I don't have a perception that the stock market is very stable. But like every American, I have an extremely short memory. I already forgot what it felt like when the market was volatile in December.
You have been following the Arcadia market for a while. Do you have an idea what that home would have sold in mid 2011 (the bottom)? Thanks for sharing.
You have been following the Arcadia market for a while. Do you have an idea what that home would have sold in mid 2011 (the bottom)? Thanks for sharing.
My guess would be $3-400k but I wasn’t even living here then, so I could be off.
I find it somewhat astounding that it sold for $750k in 2017 before the remodel.
My guess would be $3-400k but I wasn’t even living here then, so I could be off.
I find it somewhat astounding that it sold for $750k in 2017 before the remodel.
I'm a slow learner. Time after time, I'm astounded what is going on in some part of the RE market. Especially spots like LA where you can look for miles on end at homes all worth north of a million. Often, they are nothing special. That's the case with the example you gave. It's decent. Not a lot of street appeal either. Then you look at the demographics (average incomes) and wonder how the hell they do it. I cannot roll that way.
Same goes on all kinds of topics. I was with the Chandler auto auction last week as guest. Several used, 2012-2014 year old premium cars were going for $60K+. I just don't grasp that. Yet, dealers (I'm not in that industry) were swarming those cars. People are willing to pay (or borrow) big money to fit into a perception.
I'm a slow learner. Time after time, I'm astounded what is going on in some part of the RE market. Especially spots like LA where you can look for miles on end at homes all worth north of a million. Often, they are nothing special. That's the case with the example you gave. It's decent. Not a lot of street appeal either. Then you look at the demographics (average incomes) and wonder how the hell they do it. I cannot roll that way.
Same goes on all kinds of topics. I was with the Chandler auto auction last week as guest. Several used, 2012-2014 year old premium cars were going for $60K+. I just don't grasp that. Yet, dealers (I'm not in that industry) were swarming those cars. People are willing to pay (or borrow) big money to fit into a perception.
I understand some of this, but not knowing the buyers of these homes and cars, it's not fair to assume that they are buying based on "a perception". That's minimizing their buying decisions to something solely shallow, when there are likely other criteria being met.
I understand some of this, but not knowing the buyers of these homes and cars, it's not fair to assume that they are buying based on "a perception". That's minimizing their buying decisions to something solely shallow, when there are likely other criteria being met.
I do agree that peoples purchases fill other criteria. But shallow behavior is alive and well in all of us. Including myself. I do my best to keep it in check as we are being marketed to 24-7. Some people are (much) more shallower than others. But we are all somewhat shallow.
re: cars. When people are buying usedand pay more $40K $$'s for an engine (for instance), I'm amazed. I'll jump and call them shallow. Like a fricken Jeep at $100K new (https://www.roadandtrack.com/new-car...ackhawk-price/ ). I think it went for north of $65K used and at wholesale. I guess I don't get it. I forgot what it went for. It went for top $$.
If it was an investment, I get it. But I predict the person who will eventually buy it is a wannabee. It's an educated guess.
Too many people look at their 401K or Roth and forget that they have not paid their taxes on it yet.
Enjoying this discussion and sorry for the tangent - Unless you are talking about folks considering withdrawing more than their total contributions before they turn 59-1/2, no taxes will be due on a Roth IRA distribution. Assuming laws don't change.(not a given, crossing fingers for the next umpteen years)
I do agree that peoples purchases fill other criteria. But shallow behavior is alive and well in all of us. Including myself. I do my best to keep it in check as we are being marketed to 24-7. Some people are (much) more shallower than others. But we are all somewhat shallow.
re: cars. When people are buying usedand pay more $40K $$'s for an engine (for instance), I'm amazed. I'll jump and call them shallow. Like a fricken Jeep at $100K new (https://www.roadandtrack.com/new-car...ackhawk-price/ ). I think it went for north of $65K used and at wholesale. I guess I don't get it. I forgot what it went for. It went for top $$.
If it was an investment, I get it. But I predict the person who will eventually buy it is a wannabee. It's an educated guess.
You're not a car guy then, I suppose. Regardless of the price point, it's prudent to let the initial owner take the most significant depreciation hit. I see all the reason in the world to purchase an $80k Porsche, for example, that's a few years old, over the same car, but new for $120k. There's nothing wannabe about it. It's just sense (and cents).
You're not a car guy then, I suppose. Regardless of the price point, it's prudent to let the initial owner take the most significant depreciation hit. I see all the reason in the world to purchase an $80k Porsche, for example, that's a few years old, over the same car, but new for $120k. There's nothing wannabe about it. It's just sense (and cents).
I positively get the appeal! As in, I have the "itch"that I refuse to scratch.
Here is how I roll it up: If you really can afford it, then buy it new! To me, that means paying cash. So I suppose it depends on how you define "afford". Mine is seemingly a lot more stringent than most. I wouldn't buy a $80K or $120k car unless I'm debt free and have a crap-pot in the savings. Or, if I have terminal cancer I might go out and treat myself! If I have an extra $80K, it's going in savings. It would drive me nuts to buy a rapid depreciating car at $1 to $2 a mile. But to each their own.
Saying that, it is a lot less crazy to buy a one year old $80K Porsche. But I was seeing 2014's SUV's with 20,000 miles selling in the $60K plus region. So while the used buyer thinks they "saved" $60K, add on 4 more years and another 20,000 miles and it will continue to drop like a rock. Depreciation will be measured in tens of thousands more.
In my world, if you can really afford $80K, then $120K is close to the same number. I've been told that 75% of the Penske buyers (the dealerships in North Scottsdale) will finance. It's easy: if you can stroke a check for a used $80K car and it doesn't hurt a bit, then you can afford it. If not, you can't. For the buyers with a multi-million dollar car collection, by all means, buy new and enjoy the toys. Because they certainly can afford it.
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I cannot roll that way.
I do my best to keep it in check as we are being marketed to 24-7. Some people are (much) more shallower than others. But we are all somewhat shallow.
I guess I don't get it. I forgot what it went for. It went for top $$.
Because they certainly can afford it.
