East Mesa housing bubble (Tucson, Gilbert: for rent, houses, job transfer)

[mortimer]

Winkleman opined:

> Ponderosa:
> > another 12 months or so of flat prices ...

> Saying prices in Phoenix will go sideways for the next
> year is being pretty optimistic.

I guess it depends on your definition of "sideways."

Staying well under the peak prices, but staying above, say 2004
prices, fluctuating in a band +/- 10% doesn't sound unreasonable.

It will certainly frustrate a lot of buyers and sellers if it does that.

[FunkyPioneer]

The news was saying that 40% of homes are investor owned. Ive been looking at renting in Mesa and I have never seem so many people so desperate to rent a home. Every time I call a rental they practically beg me to rent and throw tons of incentives my way. As a native Arizonan who has seen the market before the bubble, expect prices to drop to 2000-2001 levels at least. With all the mortgage companies going bust and the stock market tanking, it may get worse than any one ever imagined.

[Winkelman]

I agree. I think its more of a renters market than a buyer's market.

I friend of mine in Tucson rents a house in the foothills for $1,500 a month. The house next door was listed for $675,000 and the owner had to drop all the way to $500,000 to sell it. The new owner will be paying double the going rent for the mortgage payment.

Best scenario is a 30-40 percent correction. It would shake out all the subprime, all the leftover flippers and the foolish people who bought at the peak this past year and leave a very solid foundation for a housing rally. It would also put mortgage payments back in line with rents.

[mortimer]

Winkleman informed us:

> ... its more of a renters market than a buyer's market.

I've heard a rule of thumb that says if you can't rent your
property for, at least, 1% of its value every month, then
you should sell and get out of that property.

That makes sense to me - 12% annual gross return before expenses
is not great since there are taxes, upkeep, and most of all - risk.

> ... all the leftover flippers and the foolish people who bought at
> the peak this past year ...

You mean all the people who bought at the peak were foolish or
all the people who bought at the peak and were, additionally, foolish?

Note that most of the people buying and most of the people selling
are just going about the business of upsizing/downsizing, relocating,
etc and are not speculators.

Sometimes, you get lucky on the timing. Sometimes, not.

[Winkelman]

"I've heard a rule of thumb that says if you can't rent your
property for, at least, 1% of its value every month, then
you should sell and get out of that property"

looking at craigslist, there are lots of homes that people are either trying to sell in the $200,000's or rent for $1,100 or $1,200 range. Barely .5% per month.

You mean all the people who bought at the peak were foolish or
all the people who bought at the peak and were, additionally, foolish?

You have a good point, there are different reasons people bought the past couple years.

[sierraAZ]

Originally Posted by Winkelman

"I've heard a rule of thumb that says if you can't rent your
property for, at least, 1% of its value every month, then
you should sell and get out of that property"

looking at craigslist, there are lots of homes that people are either trying to sell in the $200,000's or rent for $1,100 or $1,200 range. Barely .5% per month.

You mean all the people who bought at the peak were foolish or
all the people who bought at the peak and were, additionally, foolish?

You have a good point, there are different reasons people bought the past couple years.

Well, I don't think I've ever seen a 200K house renting for 2K... Have you?

[Winkelman]

4 years ago you would see $100,000 houses renting for $1,000

[sierraAZ]

Originally Posted by Winkelman

4 years ago you would see $100,000 houses renting for $1,000

Well, maybe in Phoenix... I can't say I remember exactly and there's probably no data on that, but in Tucson I still don't think they used to rent for more than $600-700. Could be wrong, though. Anybody not suffering from amnesia?

[sheena]

Originally Posted by sierraAZ

Well, maybe in Phoenix... I can't say I remember exactly and there's probably no data on that, but in Tucson I still don't think they used to rent for more than $600-700. Could be wrong, though. Anybody not suffering from amnesia?

I rented a 90,000 1410sqft 3 bedroom house for 1010.00 including tax in a subdivision called Boulder Creek in East Mesa from Jan 2000-July 2002

[mortimer]

sierraAZ mentioned:

> ... don't think I've ever seen a 200K house renting for 2K...

If you can't rent it for that, then you don't want to buy it.

So, if you have a $200k and you have a choice:

(1) buy 90-day Treasuries yielding a (tax-advantaged) 4.53%
for an average monthly income of about $750 with no risk
and 100% chance of getting your $200k back in 3 months
or 12 months - whatever.

(2) buy a house and rent it out for, what? $1,100 or $900 or ...
and incur expenses for taxes, repairs, and whatever damage
your worthless tenants might cause **and** risk the value
of your property going down to $190k or $180k, etc

As an investor, for the time being, I'll take the T-bills.

As a potential home buyer (for living in and getting all the tax
benefits), if you have 10% to put down, your mortgage might be
a little over $1,300 - after taxes about $1,000. You still run the
risk of a drop in price and have maintenance, insurance, etc.

As a potential renter, your only risk is that you miss out on a
rise in the price of houses. If my time horizon is less than 5-10
years, I'll take the rental.