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Captain Bill. Re-work your data and exclude one parameter: a pool. The options increase by a lot. Plus, you can always add a pool (a lot tougher to add a bathroom).
I mention this because I want a pool and the selection plummets for bank owned properties. A pool might be the killing point. It's almost like the person who got themselves in trouble bought as much house they could and figured on putting in a pool later. I can find 20 homes in Goodyear that work for me but only onethat works with a pool. Most times zero properties will work. If you exclude a pool (reduce the price by $20K to buy a pool later) and saw 4 properties work, then you have multiplied your selection by 4. That is 4X gain in options.
But I do understand your point. If you are buying a home to live in year round it's a whole different situation. For me, I'm replacing a 3rd house. I don't want to leave my home sitting open during the summer that turns into a rental only neighborhood. Someone may want my stuff more than me. I think that the $60 per sq foot price is close enough to bottom; the remaining question for me is how many more will turn to ruin the potential neighborhood. I'd rather pay $30K more knowing I will live in the right neighborhood.
But I could see where a $400K home now drops $80K (20%) and in November it is on the market for $320K. That is where I predict the 20% is going to come from (the higher priced homes). But like everyone, I am only guessing.
Naturally anytime one adds or subtracts a criteria it's going to change the number of properties available. I used the pool as a criteria because everyone that I've worked with in that price range lists the pool as a must-have.
As a point of discussion, a pool is a very strong selling point here in the valley. However, it does not add the full amount paid for the pool to the market value. Which means if one buys a home with a pool already installed it's going to be much cheaper than buying one without a pool and installing one later.
This is an arbitrary number, but while a pool may cost $30k to install, it may only add $10k to the market value of the house.
Naturally anytime one adds or subtracts a criteria it's going to change the number of properties available. I used the pool as a criteria because everyone that I've worked with in that price range lists the pool as a must-have.
As a point of discussion, a pool is a very strong selling point here in the valley. However, it does not add the full amount paid for the pool to the market value. Which means if one buys a home with a pool already installed it's going to be much cheaper than buying one without a pool and installing one later.
This is an arbitrary number, but while a pool may cost $30k to install, it may only add $10k to the market value of the house.
It goes without saying that adding a pool (or any other criteria) reduces the amount of homes that will work for you. Statistically speaking, you take the probability of each criteria and multiply them together.
There are trends.
Foreclosures tend to be newer homes.
Foreclosures tend to be concentrated in newer developments.
People tend to push there budgets when they buy a new home to get as big of a home they can "afford".
Pools usually are installed in bigger $$ homes.
AND I PREDICT pools are installed in a very low percentage of newer homes that end up in in foreclosure. In other words, they really didn't have the $$'s to buy a pool.
So if I am correct (which is DEFINITELY the case for the 3000 sq foot foreclosures in Goodyear area), 90%+ of the foreclosures don't have pools. Mathematically, you take your result for the other criteria and multiply by 0.10. Guess what happens to your number???? Yep, you have only one home that works for you.
So I was explaining that the reason why your example shrunk to only 1 option was because you chose a pool and foreclosure. If you want purple stucco, it will shrink to zero. The bottom line is pools and foreclosures are almost mutually exclusive. That pool was going to be installed in 5 years from now with their equity line when the homes value continued to go up by 20% per year. Because we were all told that home values NEVER go down; once it hits a ridiculous price it will stay high forever.
Take all of the foreclosed properties in your example and see how many pools pop-up. Then take a statistical sample via Google Earth to see how many pools there are. I predict you will see that my hypothesis is correct. Foreclosures and the lack of pools are interrelated. So the reason why I said remove the pool criteria was because of what I was seeing in Goodyear.
Independent of everything else, that is how I would be selling it to my client who wants a pool and I'd search for homes that are $20K less (and having them add it). Unless of course it is a persons goal is to show how little product becomes available and why you should buy now. I'll bet those $30K pools are now $20K. There probably are some hungry pool contractors about now....
For me, a pool is a must. But in order to get 20 homes that work for me I was smart enough to understand that pools were the limiting factor and I worked backwards $20K on the purchase price.
Last edited by MN-Born-n-Raised; 04-16-2009 at 06:40 PM..
Independent of everything else, that is how I would be selling it to my client who wants a pool and I'd search for homes that are $20K less (and having them add it). Unless of course it is a persons goal is to show how little product becomes available and why you should buy now. I'll bet those $30K pools are now $20K. There probably are some hungry pool contractors about now....
For me, a pool is a must. But in order to get 20 homes that work for me I was smart enough to understand that pools were the limiting factor and I worked backwards $20K on the purchase price.
I find that most people looking at existing homes don't want to do any work, such as adding a pool after moving in, unless they are looking at buying a fixer and rehabbing it.
They usually want it to be move in ready with their chosen amenities, and only a minor amount of repair such as paint.
Those buying new homes are the ones who don't mind adding a pool; and many will choose to buy a new home so they can get exactly the amenities they want.
You are an exception in that you don't mind adding that pool. If you get the home at a good enough price then you have done well.
However, if I were going to have to add a pool, then I would subtract the actual cost of the pool plus an amount for my work of having to hire and watch over the pool installers.
While the pool doesn't add the full cost to the value, if you add it later you do have to pay the full cost. But if the rest of the deal makes sense then it can be worth it.
You have a sophisticated comparable analysis type system for research to determine your purchase price.
I also use a comparable analysis, along with my field sense and knowledge of what the seller (bank or individual) may accept; how the home is priced; how long it's been on the market; and what the competition is for that house, if any.
I live in the same area as you do and I am praying this market turns around! We have been wanting to sell our home, but we can't sell for any less than what we owe! (We didn't purchase a home above our means, and we aren't upside down on our loan, we just want to leave this area.) We aren't looking to "make" a profit, we will be happy to break even! I guess we both should be glad there was no huge housing bubble in our area
Where about are you from and where are you hoping to move to? I'm currently living in Austintown, (hopefully) moving to Poland. My fiance wants to sell his home too. It's valued at $170,000 and we'd take $130,000 but no one around here is really buying $120k + homes and if they are, they're newer homes in Canfield and Poland. Even though his house is a great value, I think he's stuck with it. I'm going to buy another home in the meantime and just hope for the best with his home. Worse case scenario, I think he's prepared to walk away. Our only regret is that he didn't re-fi the heck out of it like everyone else. Then we would have had over $70,000 EXTRA in our pocket and in Youngstown, that goes a LONG way. We could have paid for our wedding, 50% down on the new house, and still had $15k- $20k left over. That's actually our only regret, not playing the "market" better.
Up in the northwest area in the Deer Valley Rd and 99th Ave area there are a bunch of homes with low prices; however, a friend of mine tried to look at about a dozen of them and they all had contracts on them. I figured the contracts are from speculators or people who can't qualify but tie up the homes so no one else can buy them. If so, people will start paying too much again just to get a house.
Up in the northwest area in the Deer Valley Rd and 99th Ave area there are a bunch of homes with low prices; however, a friend of mine tried to look at about a dozen of them and they all had contracts on them. I figured the contracts are from speculators or people who can't qualify but tie up the homes so no one else can buy them. If so, people will start paying too much again just to get a house.
You could be right about speculators, but I would think it's people who just want to buy a home and live in it. Speculators usually buy homes when the prices are increasing.
I doublt if someone would tie up a home specifically for the purpose of preventing someone else from buying it. I'm not sure why someone would want to go to all that trouble.
What I see happening is that people who have wanted to buy a home are now buying because the prices have reached their threshold for comfort and affordability, along with the low interest rates.
I'm seeing the same thing in the Gilbert, Mesa, Chandler area. Pick out 8 homes to go see and 2 of them will get a contract before being able to schedule a showing. And some of them will have multiple offers.
I see many good point posted here but one thing I havent seen is affordability. People that live in that area must be able to afford those homes. I used ASU research data to tell which areas are more affordable than others:
Realty Studies (http://www.poly.asu.edu/realty/market_update.html#affordability - broken link)
I am a listing agent for several banks and I have number of pre-listings in Tempe, Mesa and Scottsdale but none in Goodyear, Avondale or Gilbert. I also see the same thing in number of BPOs (appraisals) my team is doing for the properties that are 30 to 90 days late and majority of those are in Scottsdale.
Another thing we need to take into consideration is inflation. Interest rate will go up within next 12 months which will have impact on sale prices.
I see many good point posted here but one thing I havent seen is affordability. People that live in that area must be able to afford those homes. I used ASU research data to tell which areas are more affordable than others:
Realty Studies (http://www.poly.asu.edu/realty/market_update.html#affordability - broken link)
I am a listing agent for several banks and I have number of pre-listings in Tempe, Mesa and Scottsdale but none in Goodyear, Avondale or Gilbert. I also see the same thing in number of BPOs (appraisals) my team is doing for the properties that are 30 to 90 days late and majority of those are in Scottsdale.
Another thing we need to take into consideration is inflation. Interest rate will go up within next 12 months which will have impact on sale prices.
Your point is a good one. It is obvious to me that our standard of living will be dropping for the overwhelming amount of people. We won't be making as much $$'s in salaries and our homes won't be an ATM any longer.
I predict the "bottom" of any segment will be dictated by affordability. I see this in my search. To me, if a 4000 sq foot home is near the same price as a 3000 sq foot home, I might opt for the smaller one. With that 4000 sq footer, I have more to cool, higher property taxes, more rooms to fill with furniture etc. In 2005, I would have never thought like this. The fear of affordability is in the forefront of consumers minds. We all have short memories so that might change but right now, I'm in a "good enough" mode and I am not alone. I'm guessing the mid priced stuff will get battered some more as people shy away from buying all that they can afford; they want some breathing room.
I see many good point posted here but one thing I havent seen is affordability. People that live in that area must be able to afford those homes. I used ASU research data to tell which areas are more affordable than others:
Realty Studies (http://www.poly.asu.edu/realty/market_update.html#affordability - broken link)
I am a listing agent for several banks and I have number of pre-listings in Tempe, Mesa and Scottsdale but none in Goodyear, Avondale or Gilbert. I also see the same thing in number of BPOs (appraisals) my team is doing for the properties that are 30 to 90 days late and majority of those are in Scottsdale.
Another thing we need to take into consideration is inflation. Interest rate will go up within next 12 months which will have impact on sale prices.
Thanks for posting the link. Lot of good stats there.
I found the first quarter 2009 median price for Queen Creek, which shows $225k, to be in error. Must be a typo. QC hasn't seen 225k since mid 2007. Currently, the QC median price is $109k.
I'd like to know how they arrive at their quarterly median prices because they don't match with the Cromford Report. Cromford uses mls listings, and ASU may use the county records.
I would assume that the ASU quarterly median price would be the end of the quarter number, and if that's the case, they don't match with Cromford. They're in the ball park, but it would be helpful if they published their criteria. Maybe they do and I didn't see it. I'm not saying ASU or Cromford is wrong. I just believe they're using different information and it would be helpful to me to know what source ASU is using.
I'm surprised at the new affordability levels in the valley:
Queen Creek wasn't on that report, but it's probably close to the Phoenix number because the median prices are nearly the same.
Here's how to interpret the Affordability Indices:
A value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home.
An index above 100 signifies that family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment.
For example, a composite HAI of 120.0 means a family earning the median family income has 120% of the income necessary to qualify for a conventional loan covering 80 percent of a median-priced existing single-family home.
An increase in the HAI, then, shows that this family is more able to afford the median priced home.
The calculation assumes a down payment of 20 percent of the home price and it assumes a qualifying ratio of 25 percent. That means the monthly P&I payment cannot exceed 25 percent of a the median family monthly income.
The interest rate imputed in this report was 5.3%. The current interest rate is below that rate, which would increase the affordability index.
... To me, if a 4000 sq foot home is near the same price as a 3000 sq foot home, I might opt for the smaller one. With that 4000 sq footer, I have more to cool, higher property taxes, more rooms to fill with furniture etc. ...
If the prices were near the same, I would choose the 4000 square foot home and close the room off so I didn't have to furnish it, and block the heat and ac from the room.
If the price of the home is $100 per square foot, that extra 1,000 square feet is worth $100,000. That is a lot of money. If I can get that for near the same price as the 3000 sf home, I'll take it every day.
And even if we say that a larger home cost less than the smaller home (on a price per square foot basis due to economy of scale) I would still take it because we're only talking about a few dollars per square foot.
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The options increase by a lot. Plus, you can always add a pool (a lot tougher to add a bathroom). 
I think that the $60 per sq foot price is close enough to bottom; the remaining question for me is how many more will turn to ruin the potential neighborhood. I'd rather pay $30K more knowing I will live in the right neighborhood.
Because we were all told that home values NEVER go down; once it hits a ridiculous price it will stay high forever.
So the reason why I said remove the pool criteria was because of what I was seeing in Goodyear. 
