Why Are So Many Houses For Sale In The Phoenix Area? (Chandler: mortgage, environment)

[sheena]

Originally Posted by jco

More people are moving here than they are moving out. The home builders and investors have made the market what it is. In 2004-2005 investors bought tens of homes from new home builders and turned around and sold them right after they were finished. In the six months it took to build it, they made thousands of dollars on each one. The market went down and all the investors are stuck with their houses. Really, I don't think this sort of thing should be allowed.

I could have made 300,000 in 6 months back a few short yeard ago. I was going to buy a Standard Pacific home for 280,000 I decided no too because I thought it was too much money. A few months later it all happened the lotteries came and they were selling for 599,000 6-9 months later. This was in 2003 if I'm not mistaken. That would have been like winning the lottery.

Whoever doesn't beleive those numbers are accurate have your realtor pull up the tax records in Country Meadows in Gilbert in 2003 and compare what they were selling for 6-9 months later.

[Dazgaz]

I bought a house in Glendale three years ago for $300k. It's now apparently worth over $550k. I don't care. Me & my family love the house and we're not selling it, so it's worth far more to me than anyone is prepared to pay. Within reason of course. Anyone want a nice 3100SF house in Glendale for, shall we start the bidding at $1m????

[sheena]

Originally Posted by Dazgaz

I bought a house in Glendale three years ago for $300k. It's now apparently worth over $550k. I don't care. Me & my family love the house and we're not selling it, so it's worth far more to me than anyone is prepared to pay. Within reason of course. Anyone want a nice 3100SF house in Glendale for, shall we start the bidding at $1m????

Everyone has a price

[AskForNelson]

It's true. There are way more people moving in to the Metro Phoenix area than are moving out. It seems that there are more homes on the market only because they are on the market longer. Some sellers are unrealistic with their prices. Others purchased at the peak hoping to get the same 30-50% returns we experienced in 04 and half of 05. Since then prices have been adjusting to normal (not declining) and in some areas and price ranges, home inventories are at seven months while other areas are at a three month inventory level.

This is the Valley of the Sun after all!

[nevercoldcall]

I haven't read all the replies but here is a big reason:

About half of all homes sold in metro Phoenix from 2005-2006 were on "interest-only" loans. People enjoyed $1,000/month intro payments. Now that they payments are doubling or even tripling, those people can't afford them anymore and are rushing to get out of the houses before they go into foreclosure.

It's a sad situation but too many people bought on emotion instead of logic and this is what is happening. The same is true in Las Vegas and San Diego and much of LA.

[63ragtop]

Originally Posted by nevercoldcall

About half of all homes sold in metro Phoenix from 2005-2006 were on "interest-only" loans.

Can you please post a reference for this? I was not able to confirm this despite several Google searches. I did find a reference for 2004 being 38%.

38% Reference:
http://www.msnbc.msn.com/id/8171385/

[AZ_Engineer]

In order to understand why there are so many houses for sale now, you have to step back a few years to right after the .com crash of 2000. The Federal Reserve knew we were on the cusp of a severe recession as a result, and in order to prop up the U.S. economy, they lowered interest rates to all-time lows and kept them there for an unprecedented length of time. As a result, debt became incredibly cheap. People began refinancing their mortages, pulling cash out of their homes, buying more homes than they could afford, and investing in real estate as never before. Cheap credit created unsustainable and artificial demand as people spent all their future money in the present. The result was a boom in housing and housing related industries. In fact, some estimates are that housing was responsible for nearly 40% of jobs created since 2000.

As it seemed that there was an inexhaustible supply of people to buy houses, builders kept building, speculators kept speculating, and debtors became more and more indebted. Prices were driven to all-time highs. As the price of a home began to outstrip the ability of first-time buyers to pay for it, creative financing options became widespread. People committed themselves to ARMs with teaser rates at a time when interest rates were still at historical lows - exactly the opposite of what logic dictates. 100% financing became the norm as first-time buyers could not afford to put down even 5% on a starter home that cost a quarter million. Eventually, the whole pyramid scheme began to collapse as debtors were unable to make payments on a home they could never afford. Now banks are getting hit hard and are pulling back on easy credit. Originators of subprime mortgages are going out of business faster than you can count them. Foreclosures are increasing at a faster rate than any time in history. Although all markets in the U.S. are going to suffer as a result of the housing bubble, Phoenix is one of a handful of places that is going to be absolutely hammered as it was one of the principal markets for speculators from California.

Lest any of you think this correction will be over in a year or so, take a look at the following chart:

http://www.smugmug.com/photos/136440158-O.png

This shows the dates at which all the ARMs that were originated in the past few years will reset to higher rates. We are in month 5 of that chart. This correction will probably take a decade to work itself out. My advice is to get your financial house in order right now. Avoid taking on any new debt. Pay off whatever debt you can, and start saving for a few rainy days because we are in for a financial hurricane unlike what most of us have seen in our lifetimes. The party is over. It's time to clean up the mess.

[foma]

As a future first time home buyer, I can tell you there is not a whole lot we can afford right now - unless it's a beat up old trailer home. We don't want to fall into the trap of teaser interest rates and all of these other creative financing options so we're doing it the old fashion way: 20% down, fixed rate. I'm sure many must think we're totally stupid for doing this but I don't care. I don't want to buy a house and not be able to afford vacations. I don't want to dip into our savings to purchase the home. I don't want to have to choose between a mortgage payment and buying a new computer or tv or whatever. More importantly, I don't want to choose between a mortgage pmt and groceries or electricity! I don't want the purchase of our new home to become the bain of our existance!

[AZ_Engineer]

Originally Posted by foma

As a future first time home buyer, I can tell you there is not a whole lot we can afford right now - unless it's a beat up old trailer home. We don't want to fall into the trap of teaser interest rates and all of these other creative financing options so we're doing it the old fashion way: 20% down, fixed rate. I'm sure many must think we're totally stupid for doing this but I don't care.

Anyone who thinks you're stupid for buying this way is not someone whose opinion you should value anyway. My bigger concern for you is buying at all right now. Traditionally, the median price of a home in a stable economic environment is around 3X the median income. Right now the median price of a home in the Phoenix market is $275,000 while the median income in Arizona is under $40,000. That's over a 6:1 ratio, or twice what the historical data suggests it should be. Unless we're all expecting our salaries to double in the next year or two, the only option is for prices to come down by around HALF what they currently are. In this case, he who hesitates will make out like a bandit. Keep renting.

[CodyW]

Nevermind.