Buyers market.... really? (Phoenix, Mesa, Glendale: neighborhood, depreciation, construction)

[tolovefromANFIELD]

Why are you all so focused on the average price? That doesn't tell us anything. The average price can be skewed by either too many homes selling in a lower range and the opposite in the higher range. The median price is a true indicator. I am not sure in either third quarter 2005 or 2006 the peak median home price in the Phoenix MSA per NAR was $267,000. What is it now. Low 200's? Case and Schiller has it at a 20%+ decline yoy.

[borborygmi]

Anyone who is seriously considering buying in Phoenix in today's market should read this first, and pay particular attention to the table showing what your equity would be in 2012 if you bought now:

34 cities where it's still better to rent - Rentals - MSN Real Estate

Sobering data, to be sure.

The truth is that, in Phoenix and numerous other markets, renting right now is still a better idea financially if you have any uncertainty at all about where you'll be living in another 10 years. There are myriad reasons for this, but I think the biggest and most important to me is that the standard 30 year mortgage has esentially outlived its usefulness, if it ever had any. The truth is that almost no one stays in a home for 10 years anymore, let alone 30. Some posters on here like to point out, if homeownership is seen as a long term commitment, not an investment- then it's "always a good time to buy". But these days, the sad truth is that the concept of "settling down" for the long term often turns out to be an illusory concept. If you think you're settling for the long term, and buying a home to live in for the indefinite future- well, statistically speaking, you're probably wrong. Job tranfers/losses, divorces, illnesses, many numerous unforeseen circumstances are a part of life in today's society, and unfortunately, in America in 2008, those families who live in the same home for a decade or longer are almost nonexistent. We've become a very mobile society, much more so than 40 years ago when the 30 year mortgage made sense.

The bottom line is that if unforeseen circumstances were to arise for someone who buys a home in Phoenix today, forcing said person to move in under 5 years from now- that person would be in a very dire situation indeed. So if you're thinking of buying now, under the impression that you're buying a home to live in for the long run- well, I sincerely hope for your sake that you're right.

Now having said all that, I do agree that the concept of homeownership makes sense for those who do have a very stable living and employment situation, and who don't have to leverage much money. If you can put down enough cash that you're essentially earning equity immediately, then it's a better deal, and in the long run, homeownership is a useful hedge against inflation if nothing else. Few people actually "make money" when they sell a home, if they've owned it for 15+ years- by time you factor in inflation, repairs, closing costs, interest, renovations, and all the other hidden costs associated with homeownership over multiple years, any "profit" you might make due to the home's inflation-adjusted "real" appreciation is likely negated when you really sit down and do the math. It's more realistic to think of it as a large rebate- you get back what you've put into it, in the end, if you stay there long enough. Plus, you save the money you'd have flushed away by simply renting.

Now for more bad news- I think that anyone who has a basic understanding of finance and economics can look at today's situation with both the housing market and the national economy as a whole and clearly see that there are more storm clouds on the horizon, and things are going to get a whole lot worse before they get better.

In particular, look at Fannie Mae and Freddie Mac- this is a much more serious problem for the housing market and the economy than I think most people understand. Recognize that these companies- which financially back $5 trillion in US mortgage securities- are crippled by capital depletion right now, and almost wholly leverage dependent. If they were to fail, it would plunge the country into a depression almost immediately. They won't, because the Fed recognizes their importance and will guarantee them support. But essentially, a government "nationalization" of their liabilities would add $5 trillion to the federal balance sheet- meaning that the US public debt burden would double overnight. That's going to further put the squeeze on the American consumer like never before, at a time when our economy is already reeling. And with ever fewer private companies willing to back mortgage risk, bank loans will be increasingly harder to get. The long and short of it is, if these financial giants cannot replace maturing debt, they have to stop buying home loans and sell the loans and securities they already have. This would send mortgage interest rates soaring.

The upshot of all of this- fewer and fewer buyers in the market. That means more drastic price declines for the foreseeable future. Sorry if this seems pessmistic, but it's the way it is.

[ArizonaBear]

Originally Posted by tolovefromANFIELD

Why are you all so focused on the average price? That doesn't tell us anything. The average price can be skewed by either too many homes selling in a lower range and the opposite in the higher range. The median price is a true indicator. I am not sure in either third quarter 2005 or 2006 the peak median home price in the Phoenix MSA per NAR was $267,000. What is it now. Low 200's? Case and Schiller has it at a 20%+ decline yoy.

Even the 'average' vs. 'median' prices are not always accurate.

You could have one (1) home sell for $600K with four (4) places going for $100K each----------each home on paper would be 'worth' $200K.

[tolovefromANFIELD]

Originally Posted by ArizonaBear

Even the 'average' vs. 'median' prices are not always accurate.

You could have one (1) home sell for $600K with four (4) places going for $100K each----------each home on paper would be 'worth' $200K.

Not true. The median of the example would still be 100k.

[mdxc90]

Originally Posted by borborygmi

Anyone who is seriously considering buying in Phoenix in today's market should read this first, and pay particular attention to the table showing what your equity would be in 2012 if you bought now:

34 cities where it's still better to rent - Rentals - MSN Real Estate

Sobering data, to be sure.

The truth is that, in Phoenix and numerous other markets, renting right now is still a better idea financially if you have any uncertainty at all about where you'll be living in another 10 years. There are myriad reasons for this, but I think the biggest and most important to me is that the standard 30 year mortgage has esentially outlived its usefulness, if it ever had any. The truth is that almost no one stays in a home for 10 years anymore, let alone 30. Some posters on here like to point out, if homeownership is seen as a long term commitment, not an investment- then it's "always a good time to buy". But these days, the sad truth is that the concept of "settling down" for the long term often turns out to be an illusory concept. If you think you're settling for the long term, and buying a home to live in for the indefinite future- well, statistically speaking, you're probably wrong. Job tranfers/losses, divorces, illnesses, many numerous unforeseen circumstances are a part of life in today's society, and unfortunately, in America in 2008, those families who live in the same home for a decade or longer are almost nonexistent. We've become a very mobile society, much more so than 40 years ago when the 30 year mortgage made sense.

The bottom line is that if unforeseen circumstances were to arise for someone who buys a home in Phoenix today, forcing said person to move in under 5 years from now- that person would be in a very dire situation indeed. So if you're thinking of buying now, under the impression that you're buying a home to live in for the long run- well, I sincerely hope for your sake that you're right.

Now having said all that, I do agree that the concept of homeownership makes sense for those who do have a very stable living and employment situation, and who don't have to leverage much money. If you can put down enough cash that you're essentially earning equity immediately, then it's a better deal, and in the long run, homeownership is a useful hedge against inflation if nothing else. Few people actually "make money" when they sell a home, if they've owned it for 15+ years- by time you factor in inflation, repairs, closing costs, interest, renovations, and all the other hidden costs associated with homeownership over multiple years, any "profit" you might make due to the home's inflation-adjusted "real" appreciation is likely negated when you really sit down and do the math. It's more realistic to think of it as a large rebate- you get back what you've put into it, in the end, if you stay there long enough. Plus, you save the money you'd have flushed away by simply renting.

Now for more bad news- I think that anyone who has a basic understanding of finance and economics can look at today's situation with both the housing market and the national economy as a whole and clearly see that there are more storm clouds on the horizon, and things are going to get a whole lot worse before they get better.

In particular, look at Fannie Mae and Freddie Mac- this is a much more serious problem for the housing market and the economy than I think most people understand. Recognize that these companies- which financially back $5 trillion in US mortgage securities- are crippled by capital depletion right now, and almost wholly leverage dependent. If they were to fail, it would plunge the country into a depression almost immediately. They won't, because the Fed recognizes their importance and will guarantee them support. But essentially, a government "nationalization" of their liabilities would add $5 trillion to the federal balance sheet- meaning that the US public debt burden would double overnight. That's going to further put the squeeze on the American consumer like never before, at a time when our economy is already reeling. And with ever fewer private companies willing to back mortgage risk, bank loans will be increasingly harder to get. The long and short of it is, if these financial giants cannot replace maturing debt, they have to stop buying home loans and sell the loans and securities they already have. This would send mortgage interest rates soaring.

The upshot of all of this- fewer and fewer buyers in the market. That means more drastic price declines for the foreseeable future. Sorry if this seems pessmistic, but it's the way it is.

One of the best posts in the thread so far. I am moving to PHX in December and want to rent for at least 6 months before making a decision to buy.

[altus2006]

Originally Posted by borborygmi

The bottom line is that if unforeseen circumstances were to arise for someone who buys a home in Phoenix today, forcing said person to move in under 5 years from now- that person would be in a very dire situation indeed. So if you're thinking of buying now, under the impression that you're buying a home to live in for the long run- well, I sincerely hope for your sake that you're right.


Now for more bad news- I think that anyone who has a basic understanding of finance and economics can look at today's situation with both the housing market and the national economy as a whole and clearly see that there are more storm clouds on the horizon, and things are going to get a whole lot worse before they get better.


The upshot of all of this- fewer and fewer buyers in the market. That means more drastic price declines for the foreseeable future. Sorry if this seems pessmistic, but it's the way it is.

This is well written and expresses many thoughts I have had when considering buying a home instead of renting one. We are retired and getting older, so I am concerned that one of us will die and the other one won't be able to sell the house. Even now I could not live by myself due to health problems, so I would be in a real bind if something happened to my husband and I could not sell the house.

There are a lot of retirees here and more coming, so I am sure my thoughts are also on the minds of others in the older age categories.

altus2006

[Captain Bill]

Originally Posted by 61scout80

what about from say, 2003?

Prices have increased since 2003.

[ArizonaBear]

Phoenix housing market posts third-highest price decline - Phoenix Business Journal:

An 18%+ decline in housing prices between early 2007 and the same time 2008-----and, prices have dropped further since then.

[ArizonaBear]

Valley home prices continue downward

This link is from today's Arizona Republic.

[sheena]

Originally Posted by ArizonaBear

Phoenix housing market posts third-highest price decline - Phoenix Business Journal:

An 18%+ decline in housing prices between early 2007 and the same time 2008-----and, prices have dropped further since then.

In my opinion the prices needed to drop. Did you see the crap that was selling for 400,000 during the boom? Just by looking at the MLS there's still a lot of square boxes on 4000 sqft lots priced at mid 200's that should be low 100's.