Trulia says better to buy than rent in PHX (Phoenix: mineral rights, foreclose)
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I just had to resurrect this thread before it died - the arguments continue, as they have for years...
Little bro bought a (small) place last July in N. Phoenix for $65k. For reference, the place sold new in 1988 for $80k. In that particular 'hood, he's the "low" comp, even a year later - and he also had the benefit of remodeling the place @ bottom dollar. Example? He paid $1.10 a sq foot to get 20" tile laid on the diagonal through the whole house - about the same price one of the "factory builders" would pay. Most of his new kitchen & bath was paid for with the tax credit - ( Props to all those who paid their taxes and helped my little bro' !)
His one bed apartment in the same area cost $625 a month with all of the incentives, and piti on the new place is under $500. I'm not sure how much lower things really could GO in that area, I mean - we're talking rioting in the streets @ some level of unemployment, right?
We're already at 15% unemployment if you include "discouraged" workers, and AZ's published unemployment figures have always been wrong, just because the benefits are so low and hard to get that it isn't even worth applying for - unless you're against the ropes...
I don't pretend to know all the answers, but I also know that at some point, if and when there is a "recovery" in the economy, we're in for a heck of a ride, the only parallel I can think of is after WW2, with all of the "pent up" demand for housing and cars. The biggest question is "when" it happens.
I don't think you can compare the upward economic pressures that existed after WWII with this recovery. WW2 surge had to do with GI bills, surge in workforce (to the point of gov't wanting to send GIs to college to keep them from making trouble), and a marriage/baby boom.
Lots of talk of the economy going the "double dip" route. Doesn't matter what a house cost in 2007, only what folks can afford to buy today.
For those who lost a house or a job I don't think they'll be as quick to over-extend. For a lot of folks in trouble this time, his was their first experience with a recession of any depth. I would hope they don't forget those lessons anytime soon, which may mean a slower recovery now, but a more stable one in the long term. "Buy Baby Buy" is IMO foolish to the extreme, even if Wall Street likes it in the short term.
For us, buying is the best option. If we get our shortsale our mortgage will be $477 a month for a 1700 square foot single family home.
My brother rented a 400 square foot studio for more than that.
But it does matter if you plan to stay where you are for long. I don't see the market going up anytime soon so you couldn't just sell very easily if you had to move. I would rent if that was the case.
"His one bed apartment in the same area cost $625 a month with all of the incentives, and piti on the new place is under $500. I'm not sure how much lower things really could GO in that area, I mean - we're talking rioting in the streets @ some level of unemployment, right?"
Just keep in mind that rents do decline in a deflationary environment.
I haven't gone through this entire thread, so please point me in the right direction if I ask a question that's already been answered.
How is the market as far as financing goes? I can understand if the banks or distressed sellers want to unload the properties, but I can also understand if they want to cover their tails and get a better buyer in light of the economic situation. Is it a case of one way or the other on this, or a little bit of both? I'm considering the idea of, once I have a job lined up, getting pre-approved before I look, to avoid as much hassle as possible. Opinions???
If you plan on living in the home for at a minimum five years, and don't see yourself moving for any reason, then buying is probably the best option. If you think there's a chance you could be moving within five years, then renting is probably the best option.
As far as when the market bottomed, I do believe that the very bottom end of the market hit rock bottom late-spring of last year (homes in the 100k or less catagory), but it appears that the top-end of the market is still falling (at least a little). But I'm no expert.
I really hate the "five year" rule of thumb. Anybody want to buy some Phoenix real estate for July 2005 prices?
You're right, that wasn't FAIR....
How 'Bout some Detroit real-estate for 2000 prices? .... ... there is no waiting... operators are standing by!!!
Current values in Detroit are closer to 1970's prices and falling fast...the 5 year "rule" didn't work for them... Truthfully, it NEVER did.
Look at rents and household incomes. If median income is $50k, homes priced for buyers at 2.5 - 3x that income have a wide market. Homes priced at 10-15x that income have a significantly smaller audience.
I really hate the "five year" rule of thumb. Anybody want to buy some Phoenix real estate for July 2005 prices?
You're right, that wasn't FAIR....
How 'Bout some Detroit real-estate for 2000 prices? ....
Current values in Detroit are closer to 1970's prices and falling fast...the 5 year "rule" didn't work for them...
Look at rents and household incomes If median income is $50k, homes priced for buyers at 2.5 - 3x that income have a wide market. Homes priced at 10-15x that income have a significantly smaller audience.
He did not proclaim the five year rule. He said if you buy a house now and hold on to it for five years. This is not Detroit. Anyone who buys TODAY and holds a house in a decent Phoenix neighborhood has a high probability of making a handsome profit over the next five years.
He did not proclaim the five year rule. He said if you buy a house now and hold on to it for five years. This is not Detroit. Anyone who buys TODAY and holds a house in a decent Phoenix neighborhood has a high probability of making a handsome profit over the next five years.
This is true. To compare almost anywhere to Detroit is unfair...the corruption, neglect, and crime in Detroit is something of epic proportions, and there isn't just "white flight" or "black flight" at play - there is a mass exodus. Mind you, there are pockets of development, but the majority of the city is so blighted, that the talk is of bulldozing entire neighborhoods to get rid of all of the abandoned, eyesore properties. It will literally take DECADES to see much of anything happening there.
Phoenix has certain advantages that Detroit doesn't...namely climate, resort living, lots of cultural diversity, and a good stock of housing and commerce. People will come where there's opportunity, and there's opportunity in Phoenix. That, better schools than where I'm at, better cost of living, and friends in the area - those are the reasons why I'm wanting to move there.
Just keep in mind that rents do decline in a deflationary environment.
No one would argue that - however, I would question how far they have fallen and how much further they can reasonably be expected to go.
Our country, though young by many standards - has a proud history of 200 years of inflation.
Our government has roundly denounced inflation for my entire lifetime, yet, somehow even if it's hidden, it has happened.
It's the easy-fix every time, and our government really likes easy fixes.
Prices have fallen by half or more for typical SFR's in almost every area in the Phoenix metro.
How much have rents fallen?
The answer is, rents never doubled during the "boom", and therefore any retrenchment will be less than the price shocks experienced by home buyers.
Those who eagerly anticipate renting for "half-off" peak pricing are going to be waiting for a while. Absent a full-on depression it isn't going to happen.
I read something in the Repugnant a few months ago speaking about how they estimated 30k homes were converted into rentals in 2009, yet later we see another article explaining that people who were walking away from homes were having problems finding equivalent homes to rent.
A one-bed apartment still costs $500 a month in rural Hickville, insert-your-favorite-midwest-state that has double the unemployment of Phoenix.
Decent sfr's in the Detroit burbs still rent for about the same money as Phoenix rentals currently do.
IMHO, buying an inexpensive home in a decent neighborhood with a mortgage you can cover even on AZ's (pitiful) unemployment benefits isn't any "riskier" financially than staying in an apartment (and paying more for the privilege) and hoping rents don't jump even higher whenever the economy recovers.
As far as the rental market goes, it all depends on the type of tenant you want to attract. If you are touting the schools, shopping, community amenities, etc, you will be more likely to attract a financially stable, middle-class tenant, possibly with a young family, that is looking for that sort of environment. Many times, renters will be people who are new to the area, but not sure if they're ready to buy, and are trying out the lifestyle before they commit to put down roots. That's where my husband and I are at - we have school age kids, and are interested in the East Valley, which is where the better-rated schools seem to be. We have been to Phoenix before, and spent enough time there to appreicate the pros and cons of different areas. We would love to find a great deal on a foreclosure or SS, but we know that we also might end up renting for a year while we house hunt, and get settled in a bit.
"The answer is, rents never doubled during the "boom", and therefore any retrenchment will be less than the price shocks experienced by home buyers."
That is because one could not finance rental costs with a suicide NINJA loan. Rental costs are based on what local incomes can afford. And local incomes can afford less every month.
Quote:
"Those who eagerly anticipate renting for "half-off" peak pricing are going to be waiting for a while. Absent a full-on depression it isn't going to happen."
That is similar to what I was told when I said that housing bubble gains would be erased, and house prices would revert by a couple of decades. I was way off on that. Actual rental rates will certainly decline as much as incomes decline.
Quote:
"IMHO, buying an inexpensive home in a decent neighborhood with a mortgage you can cover even on AZ's (pitiful) unemployment benefits isn't any "riskier" financially than staying in an apartment (and paying more for the privilege) and hoping rents don't jump even higher whenever the economy recovers."
One can easily rent a SFH if that is preferred. Many "decent neighborhoods" will lose their luster amidst the volume of turnover/vacancies/defaults currently underway.
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