Buyers market.... really? (Chandler: mortgage, credit, loans)

[blueeyz911]

Originally Posted by movin'on

This is how it is supposed to work. The free market. Fair or right does not enter into the equation. It's about who has the money, plain and simple.

I never said it was not "fair" or "right" just frustrating.

I finally got my house so I'm happy and I hope other first time home buyers find their house too.

[ArizonaBear]

Originally Posted by Captain Bill

ArizonaBear, you continuously try to dodge the fact that in 2005 you predicted a 40% drop in average price, and you missed the mark. The average price in the Phoenix Metropolitan Area has declined only 6% since your 2005 prediction.

The zip code you used as an example increased in value since your prediction, and QC has declined about 65%. But the average was a 6% decline, not 40%.

Just admit that your prediction was in error and move on. I don't have any problem with you making a prediction and missing it. Even the NAR misses their predictions.

If I stated that the Arizona housing market has already crashed 40% (even factoring in core inflation).......I stand corrected-------just that we have not seen the bottom yet IMHO.

Some areas obviously will hold their value better than others (Biltmore/Sedona come to mind) whereas others have imploded (Maricopa/Queen Creek).

Face it: even if house prices in dollars remain steady for the next 10 years-------factoring in 3-4% inflation a year------that would put us at a ca. 25-30% decline in real value by 2018.

[Captain Bill]

Originally Posted by ArizonaBear

If I stated that the Arizona housing market has already crashed 40% (even factoring in core inflation).......I stand corrected-------just that we have not seen the bottom yet IMHO.

Some areas obviously will hold their value better than others (Biltmore/Sedona come to mind) whereas others have imploded (Maricopa/Queen Creek).

Face it: even if house prices in dollars remain steady for the next 10 years-------factoring in 3-4% inflation a year------that would put us at a ca. 25-30% decline in real value by 2018.

Your correction is noted.

I agree that we have not seen the bottom yet.

• However, we are seeing some areas and price ranges that are in a sellers market with multiple offers,
• and areas that are gaining market momentum, as shown by the Pending sales.

If one understands why Queen Creek and Maricopa and areas of Surprise were developed, then it's also easy to understand why they were the hardest hit in the valley.

Let's work with this hypothetical scenario that you presented:

• IF housing prices remain steady in dollars, and IF core inflation remains at 3-4%, then you state that housing will have declined in real value by 25-30% in value by 2018?

I'm not going to check your math. However, let's say that the house prices do remain steady in dollars for the 10 years as you state.

And let's say that a buyer paid 10% down on a $100k home. She has 10,000 invested.

She sells the house in 2018 for the same $100,000 she paid.

We'll say the property tax and the maintenance cost has been equal with the tax interest deduction, so that's all a wash.

After 120 payments the mortgage balance is $78k

The house is sold for 100k
Loan balance paid off with 78k.
Cost of sale = 6,000

Balance to the seller is 100 - 78 - 6 = 16k

Money invested was 10k. She was returned 16k, so her profit for the 10 years is 6k, or 60% of the 10k she invested, or 6% per year. (2-3% above your stated 3-4% inflation rate.

Now she has $16k to invest in something else. This profit is tax free because of her $250k exemption.

The same person who rented for those 10 years made zero profit, and ended up paying an increase in rent at the inflation rate of 3% per year, with greater out of pocket money each year. Whereas the payment made by the home owner remained steady with a 30 year fixed loan.

What many people forget to consider is that the money invested in a property is only the down payment, and any profit is on that down payment. That is leverage and is one of the primary reasons that real estate has been such a great investment for so many years. It's making money on other peoples money, or OPM.

Vast fortunes have been made, and continue to be made in real estate because of the leverage advantage. (Of course one must know what they're doing to make a large fortune, like Donald Trump, Joe Kennedy, and other RE mogals have.

If that home increases in real value as little as 1% per year over the inflation rate then here is the result:

The home in dollars is valued at 110,462 at the end of the 10 years.

Balance to seller is 110,462 - 78,000 (mtg payoff) - 6627 (sales cost) = 25,835 net to seller.

25,835 net to seller, minus 10,000 down payment = 15,835 profit. That is a profit of 158% in 10 years on the $10k investment, or 15.8% per year.

The caveat is that one should not buy at the top of a market. But this discussion was around the 10 year period that you described.

[movin'on]

Well, I am no genius, but I say don't buy at the top of the market. We are not at the top, and we are most certainly not at the bottom where is one should be to buy. Sit still. Watch the markets. All is about to break loose (as in hell). Once that happens it might be time to buy. I give it six more months.

[ArizonaBear]

Originally Posted by movin'on

Well, I am no genius, but I say don't buy at the top of the market. We are not at the top, and we are most certainly not at the bottom where is one should be to buy. Sit still. Watch the markets. All is about to break loose (as in hell). Once that happens it might be time to buy. I give it six more months.

Weird that you say that: I keep sensing the 'bottom' will be early 2009 as well-----which is +/- 6 months from now.

[Captain Bill]

Quote:
Originally Posted by movin'on
Well, I am no genius, but I say don't buy at the top of the market. We are not at the top, and we are most certainly not at the bottom where is one should be to buy. Sit still. Watch the markets. All is about to break loose (as in hell). Once that happens it might be time to buy. I give it six more months.

by ArizonaBear. Weird that you say that: I keep sensing the 'bottom' will be early 2009 as well-----which is +/- 6 months from now.

How about letting us in on your secrets.

• What do you use to make the 6 month bottom prediction?
• How much lower will the Phoenix valley market decline in average value before it hits the bottom?
• How will we know when we've hit that bottom?
• What will the market do when it hits the bottom?

[thegirlinaz]

Originally Posted by sheena

I have been saying their is really nothing out there. I am finally moving today!!!!! Anyway I have been checking MLS still everyday to see if I'm missing anything and I'm am not missing a thing. I put a full price offer on mine the way day it was listed.

Well we made an offer on a bank owned home... and it got accepted! Hopefully all goes well with appraisal, inspection, etc.

[twiggy]

Originally Posted by Captain Bill

Quote:
Originally Posted by movin'on
Well, I am no genius, but I say don't buy at the top of the market. We are not at the top, and we are most certainly not at the bottom where is one should be to buy. Sit still. Watch the markets. All is about to break loose (as in hell). Once that happens it might be time to buy. I give it six more months.



How about letting us in on your secrets.

• What do you use to make the 6 month bottom prediction?
• How much lower will the Phoenix valley market decline in average value before it hits the bottom?
• How will we know when we've hit that bottom?
• What will the market do when it hits the bottom?

I would like to know this too? I also am noticing that prices are falling below what pre-boom prices were. It seems in Chandler the prices have fallen back to about 1999 or so in years of what they were selling for then. How is the market correcting itself when it's going below the correction? I'm just trying to understand this and you seem like you might be able to help me out.
Thanks

[ArizonaBear]

Originally Posted by twiggy

I would like to know this too? I also am noticing that prices are falling below what pre-boom prices were. It seems in Chandler the prices have fallen back to about 1999 or so in years of what they were selling for then. How is the market correcting itself when it's going below the correction? I'm just trying to understand this and you seem like you might be able to help me out.
Thanks

Below pre boom prices?!?

Captain Bill and I may have our differences admittedly; I just hope to God that he has a logical explanation that does not translate into a real estate depression.

Remember that housing prices spiked upward on average ca. 40% during 2005. So a dipping below the '1999' figure is chilling.

[silvermountain]

May new home sales drop by 40 percent from last year - Phoenix Business Journal: