Trulia says better to buy than rent in PHX

[Zippyman]

Originally Posted by azjack

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.




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.



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.

I was a "doomer" long before most, based on household incomes. That said I've been convinced by the numbers that Phoenix represents a solid value now. I've shared an example of the home my brother purchased for $65k last year - his payment of <$500 includes taxes and insurance.

Homes like his in the same neighborhood pop on MLS as rentals in the $850-950 range and disappear a couple of days later. Before you mention "maintenance" , allow me to observe that when the economy was better his home was a rental, and was listed last for $1100 a couple of years ago.

The home was a money factory - pumping out dollars for the original owner for many years, until one-too-many-trips to the "heloc ATM" took the owner down - the original mortgage should have been paid off, or nearly so, but greed sent the home into foreclosure instead.

I'm all for using the numbers to generate a value - This is a real house, I've quoted real numbers. Would you pay a 50% premium for the "freedom" of renting? It's fine if you know you're doing it, and have a reason to, but it has it's downsides, just like owning does. ...

I think we agree on more than you might expect - when an "investor" can do a $300k "suicide loan" with a $700 payment - renting it out at $1200/mo looks like "easy" money, and it was, and renters benefited from that. It's the reason rents never caught up with prices.

Now, I think that horse has left the barn.

[Howard Roark]

Originally Posted by azjack

Actual rental rates will certainly decline as much as incomes decline.

Very good point.

I have two anecdotes of income dropping. My own, for example: I used to work a lot of overtime from 2004 to 2008. Then my client company stopped paying overtime. I got a 4% pay raise in the Fall of 2009 but that nowhere near made a difference. My income in 2007 was 17% higher than my current income. The other anecdote is of one of my sister's - in Oregon though. She took a 30% paycut to work in Oregon after moving from Phoenix because she did not like the heat in Phoenix (yes, I'm embarrassed for Miss Prima Donna). On top of that, they cut her income 8% a year or two after working at that Oregon job. She is in her 50s and cannot afford the lifestyle of a woman older than 29.

Income is dropping everywhere. State employees are furloughed in many states. And coming soon: State pensions will be cut. This will mean state employees will have to start saving their own money in other retirement plans and have less money to spend on...gulp...a roof over their heads!

In my case, the extra income in the "go go years" of overtime went to savings. I knew nothing good lasts forever. But 99.999% of the people in my shoes would take out a 30 year mortgage on that overtime income. Very stupid for that on their part, but very true.

Indian and Chinese incomes still have a lot to go to catch up to American incomes. More likely, American incomes will continue to be cut until they reach the low level of Indian and Chinese incomes.

[Howard Roark]

IMO, fifteen years is the minimum. This RE bubble was unprecedented. The Florida 1926 bubble was basically Florida. This one was nationwide and worldwide.

In the Phoenix area, Zillow shows prices are at the 2001 levels. In the higher end zip codes, prices are still at the 2004 levels, which is bubbly.

The $150k to $225k range shows prices are still falling and are thus lower than the late spring of last year prices. I haven't checked the $100k range though.

Originally Posted by Ritchie_az

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.

[Howard Roark]

Coincidentally, Yahoo Finance posted this gem that incomes in 2009 are on the average no higher than incomes of 2000:

why-youre-not-making-more-money-than-a-decade-ago: Personal Finance News from Yahoo! Finance

There you have it: And people in Phoenix still "bought" houses more than 3 times their income in 2006, and those houses are valued at 50% now of what the purchase price was.

The smart person would assume his income stays flat for half his career (due to outsourcing). Not only that, but also should be sure his job is not outsourcable. Then decide to buy a house at 2 and a half times that income (and no more) if he can live in that house for fifteen years.

Originally Posted by Howard Roark

Very good point....

Indian and Chinese incomes still have a lot to go to catch up to American incomes. More likely, American incomes will continue to be cut until they reach the low level of Indian and Chinese incomes.

[Greatday]

Cost of buying varies by area, size and type of home someone wants. As an example though you have a smallish family you can actually get a home (free standing or condo) for 90K or less (I have seen a few even in the 50,000 ish). A payment of 350.00 to 750.00 per month is VERY doable.

[Captain Bill]

Zillow is not an accurate value reporting site. They event state that.

There is a lot of misinformation floating around about what the market has done, and one would be well advised to look at the actual statistics rather than guestimates:

Below is a one year annual price appreciation chart for June 1 2009 to June 1 2010

This is a snapshot of what has happened in that one year. It is not a trend chart, nor a forecast.

The chart is courtesy of The Cromford Report


Today the sales in the upper ranges have picked up because the prices have come down a lot.

Investors are still coming in from other states and Canada, and buying up the lower range properties.

I spoke with an out of state investor recently who is buying a lot of properties here for varying purposes. Some will be fix and flip. Others will be hold and rent with a 3 to 7 year time frame. It all depends on the individual property.

These are "investors", not the speculators that came here in 2005 not knowing what they were doing. These are experienced investors with sharp pencils who understand the market and know what they're doing.

[JohnQp]

Originally Posted by algia

Of course they say that....there are a lot of homes for sale and a lot of hungry RE's! I say this...with all due respect, buy when you're absolutely sure you can afford it on one income or worst! or when you're 300% sure you'll WANT to be where you buy....I say that because there is no point in buying if you're going to end up relocating somewhere else! you're not having enough time to build equity and in this market...good luck with that as it is!

Why not just buy land and build your own home? That's my plan, land is cheap in Arizona and with the SUN you can go totally green imho (depending on power consumption) If the structure is built properly you can keep the temps down in the high desert regions and collect water/and or drill a well. My biggest concern is a septic system and regs regarding that. I plan on building my own septic and taking whatever course needed so it passes county regulations. Obviously most people don't have the time for dealing with all this.

However, picking up 5 acres cheap and not living right on top of neighbors is the way too go! Depending on commute and income you can buy or finance a fuel efficient car for commuting.

BUT going in over the head and having a bank foreclose would be a real heart-breaker, better to have all the details worked out way ahead of time.

[Greatday]

Originally Posted by JohnQp

Why not just buy land and build your own home? That's my plan, land is cheap in Arizona and with the SUN you can go totally green imho (depending on power consumption) If the structure is built properly you can keep the temps down in the high desert regions and collect water/and or drill a well. My biggest concern is a septic system and regs regarding that. I plan on building my own septic and taking whatever course needed so it passes county regulations. Obviously most people don't have the time for dealing with all this.

However, picking up 5 acres cheap and not living right on top of neighbors is the way too go! Depending on commute and income you can buy or finance a fuel efficient car for commuting.

BUT going in over the head and having a bank foreclose would be a real heart-breaker, better to have all the details worked out way ahead of time.

Drop a well? Fine - if water is available.

Put in a septic? If the county will let you

Finding land that is not landlocked. Contrary to popular belief - it is legal to sell landlocked land. Not in all cases mind you - but in some. I'm representing some clients who bought landlocked land in Black Canyon City - and their Title Insurance had exceptions for LL land.

Flood Plains are / can be an issue.

Etc

[JohnQp]

Originally Posted by Greatday

Drop a well? Fine - if water is available.

Put in a septic? If the county will let you

Finding land that is not landlocked. Contrary to popular belief - it is legal to sell landlocked land. Not in all cases mind you - but in some. I'm representing some clients who bought landlocked land in Black Canyon City - and their Title Insurance had exceptions for LL land.

Flood Plains are / can be an issue.

Etc

That's EXACTLY why i'm moving out to AZ and performing 'due diligence' before i spend one dime on a property. However I wouldn't mind discussing this issue when ready for a purchase. The whole land buying is pretty darn confusing with title searches, title insurance (had your client purchased the later) they would not be a client correct? Lot's of ins/outs for sure....Plus just because something looks great on the web doesn't mean diddly in real life. I think people especially those whom are well off think buying land is akin as buying stock commodities. But land is the way to go hmmm so this septic issue is a new one something that slipped by me...sigh i'll just add that on the list. What good is the land if you can't develop it. edit on the title insurance.....i'll have too make darn sure this doesn't happen with me. darn check this out especially the mineral rights now mind you i'm not interested in this property but accordingly from what I can make out here a company like BP could theoretically come in and scoop my land up for mineral rights! Looks like i'll be hiring a real-estate attorney before any monies change hands. Clearly i'm in way over my head here but I am trying very hard educating myself. http://grantlands.com/auction/AZ/Mohave/TitlePolicy/252-11-004.pdf (broken link)

[Greatday]

Originally Posted by JohnQp

That's EXACTLY why i'm moving out to AZ and performing 'due diligence' before i spend one dime on a property. However I wouldn't mind discussing this issue when ready for a purchase.

I applaud your efforts and doing your due diligence. So many buyers do not and get burned.

Another suggestion / website for you:

Arizona Department of Real Estate

This is to the AZ Dept of Real Estate. At this site you will find MANY links to other state / Federal agencies and resourses including the State land dept, AZ Dept of Water Resources (ADWR), Geological information, Tax information, County Planning and Zoning etc.

Good Luck to you.