Will Phoenix Housing Price continue to drop? (Congress: mortgage, credit)

[NiceJohn]

Thank you. All the data suggests price will continue to drop. That is the hard fact. I will wait for lower price and lower interest rate.

[Axiom]

Top 10 risky RE markets, and the percent chance that home prices in each will be lower in two years than they are now, as taken from mortgage insurer PMI's just released quarterly rankings of the 50 big US housing markets.

1. Fort Lauderdale, FL 99.5% chance
2. Inland Empire, CA 99.5%
3. Orlando, FL 99.4%
4. Miami, FL 99.3%
5. Tampa, FL 99%
6. Las Vegas, NV 98.5%
7. Los Angeles, CA 98.5%
8. Orange County, CA 97.7%
9. Jacksonville, FL 97.5%
10. Phoenix, AZ 96.3%

Link to 12 page PMI report:
http://www.pmi-us.com/media/pdf/prod..._eret08v4s.pdf

*bailout plan would be the wildcard here since that was not taken into consideration

I'd still be comfortable waiting things out a bit longer in Phoenix.

Originally Posted by JonGriffith

Losses aren't incurred until you sell the asset. Real estate increases in value over time. Renting is a quick way to throw away hard earned money, but if you don't have the cashflow (which is always king) then you may have to rent.

Let's look at the picture in Phoenix right now:
1 From what I'm seeing, you can rent for less than you can buy the same or similar house, often times substantially less.
2 We may disagree about how long or how far the market will continue to decline, but the fact is that right now it is declining.
3 Especially in the first years of a loan most of your monthly payment does not go to debt reduction but to paying interest. Sheesh, you could be negative and chewing into your down payment every month in a declining market.
4 I'll give you the tax benefit (although that very much depends on individual circumstances as well) but spending a whole bunch to save a little isn't always the best financial move.

So even if the OP can afford to buy; in a declining market where it's cheaper to rent than to buy right now, how is he/she not throwing money away as much or more so than someone who is renting?

[azjack]

"Losses aren't incurred until you sell the asset. Real estate increases in value over time. Renting is a quick way to throw away hard earned money, but if you don't have the cashflow (which is always king) then you may have to rent."

Yes, yes, we know. It's always a great time to buy. Renting is throwing money away. Buy now or be priced out forever. We received the NAR memos long ago. Check out Axiom's posting above for some fact-based analysis.

[mwwwin]

Originally Posted by Axiom

Top 10 risky RE markets, and the percent chance that home prices in each will be lower in two years than they are now, as taken from mortgage insurer PMI's just released quarterly rankings of the 50 big US housing markets.

1. Fort Lauderdale, FL 99.5% chance
2. Inland Empire, CA 99.5%
3. Orlando, FL 99.4%
4. Miami, FL 99.3%
5. Tampa, FL 99%
6. Las Vegas, NV 98.5%
7. Los Angeles, CA 98.5%
8. Orange County, CA 97.7%
9. Jacksonville, FL 97.5%
10. Phoenix, AZ 96.3%

Link to 12 page PMI report:
http://www.pmi-us.com/media/pdf/prod..._eret08v4s.pdf

*bailout plan would be the wildcard here since that was not taken into consideration

I'd still be comfortable waiting things out a bit longer in Phoenix.




Let's look at the picture in Phoenix right now:
1 From what I'm seeing, you can rent for less than you can buy the same or similar house, often times substantially less.
2 We may disagree about how long or how far the market will continue to decline, but the fact is that right now it is declining.
3 Especially in the first years of a loan most of your monthly payment does not go to debt reduction but to paying interest. Sheesh, you could be negative and chewing into your down payment every month in a declining market.
4 I'll give you the tax benefit (although that very much depends on individual circumstances as well) but spending a whole bunch to save a little isn't always the best financial move.

So even if the OP can afford to buy; in a declining market where it's cheaper to rent than to buy right now, how is he/she not throwing money away as much or more so than someone who is renting?

Exactly...there are RENT versus Buy calculators...look at those. I know many places where you can rent for less than half of what the mortgage is - this translates into a home that is overpriced. You can take what you save in mortgage payment and invest it. Wait till the prices come down to 2001 prices or so and then buy....you've saved and made interest on what would've been half your mortgage and now you buy for 100K or so less. Couple this with the money you saved on not spending on a huge mortgage and you could be 150K+ ahead after two or three years...

And yes, of course, if you stayed in the home for long enough it will probably come back. But how unpredictable is life? Most people end-up moving in five years at the most and can't wait 10+ years for the home to appreciate back to what they paid for it. I've spoken with many CPAs that rent and say that oftentimes (especially in today's market) we're being sold a bunch of bull that "it's a great time to buy" or that it's the "American dream" to own a home...the corporations want you to believe that so they make money...

If you're looking for the best price point, renting right now is smart! Ask all the people that bought in the last five years what they think about renting versus buying...

[mwwwin]

Originally Posted by azjack

Yes, yes, we know. It's always a great time to buy. Renting is throwing money away. Buy now or be priced out forever. We received the NAR memos long ago. Check out Axiom's posting above for some fact-based analysis.

You read my mind AZJack...this character probably just got out of real estate school, is pumped to make a million dollars and is drinking the Kool-Aid that they taught him/her...

[ArizonaBear]

I will say in all fairness: if looking at a home for, say, $70K.........one may be better off buying it with 5% down because the monthly payments would still be comparable to rent----------even if said house drops another $10K in value.

[NiceJohn]

Originally Posted by ArizonaBear

I will say in all fairness: if looking at a home for, say, $70K.........one may be better off buying it with 5% down because the monthly payments would still be comparable to rent----------even if said house drops another $10K in value.

Who is going to buy cheap house like 70K? A house like that should be located in ghetto areas or remoted desert. For a livable house in the nice area, we should rent now. I have been searching houses to buy. Now, I have decided to rent instead of buying. I am going to sign a one year lease. Even afeter tax breaks, mortgage is still much higher than renting, and housing price is depreciating.

[ArizonaBear]

Originally Posted by NiceJohn

Who is going to buy cheap house like 70K? A house like that should be located in ghetto areas or remoted desert. For a livable house in the nice area, we should rent now. I have been searching houses to buy. Now, I have decided to rent instead of buying. I am going to sign a one year lease. Even afeter tax breaks, mortgage is still much higher than renting, and housing price is depreciating.

I was being rhetorical.

For the record: I saw a few single family houses below $70K in the 86014 area (central Phx) on realtor.com.

And; there are some gorgeous enclaves there. Older houses with vegetation and sidewalks.

[mwwwin]

Originally Posted by nicejohn

who is going to buy cheap house like 70k? A house like that should be located in ghetto areas or remoted desert. For a livable house in the nice area, we should rent now. I have been searching houses to buy. Now, i have decided to rent instead of buying. I am going to sign a one year lease. Even afeter tax breaks, mortgage is still much higher than renting, and housing price is depreciating.

x

[mwwwin]

Originally Posted by ArizonaBear

I was being rhetorical.

For the record: I saw a few single family houses below $70K in the 86014 area (central Phx) on realtor.com.

And; there are some gorgeous enclaves there. Older houses with vegetation and sidewalks.

70K?...you're definitely getting what you pay for at that price point...

You're assuming rent is simply in the $800 range...the cost to rent has no cap on it...it depends on what one is renting. I know people renting million dollar plus homes - Shaq is renting in Paradise Valley - I think I read his monthly rent is around $10,000!!!!...of course it's a drop in the bucket for him...

I'll give you an example. I know people that are renting one bedroom condos in the Optima on Camelback in Scottsdale for $1800 monthly. These same condos sold for around 450K in the peak and now are around 375K - these things are dropping fast...one was just listed for 279K. People that bought there are realizing they'll be so upside down and they can't afford them...also there's another phase being built. The Developer is trying to keep prices up there with adding a bunch of upgrades but there will be no way controlling all the impending foreclosures...

When calculating mortagage, insurance, taxes and HOA, once these drop down to the 225K range they'll be great to buy. To live there will be less than rent....you have the tax write off and can rent it out and at least break even if you have to move...

Furthermore, I know folks that are renting homes that would cost over a million dollars today for $3500/month. Payments on something like this would be in the $7000/monthly range. One is better off renting. Take your savings and invest it and wait until prices come down to where a home like this should be priced at - about 700K. With tax write offs now one is close to cost of rent. What homes rent for is a pretty good indicator of what the montly mortgage and hence sales price should be...make sure to calculate in tax breaks and way distant future appreciation...

All my opinion of course...