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Thread summary:

Risky US housing markets, MSN Real Estate list price risk for tip 50 US markets, Phoenix, Los Angeles, Chicago low on list, home buying tips, MLS listing for buying a house

Old 07-18-2007, 09:45 AM
Location: Scottsdale, AZ
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As a whole I think this list is pretty spot-on:

Price risk for the top 50 U.S. markets - Buy a House: MLS Listings & Home Buying Tips - MSN Real Estate


I'm a bit suprised that L.A. isn't higher on the list, I'd think that'd be the #1 housing market where a correction in imminent. The Phoenix market may have appreciated greatly within the past 5 years but it still isn't unaffordable like many other markets. For $300,000 you can get a fairly large home in a nice, middle-class neighborhood while the same $300,000 might get you a shoebox in L.A.
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Old 07-18-2007, 10:46 AM
Location: Phoenix metro
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Id have to say the list is spot-on, too. Im also surprised that LA is so low, IMO thats the worst around. Good to see Chicago low on the list, not a bad % drop either. Hold steady baby, hold steady.
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Old 07-18-2007, 10:57 AM
Location: The Big D
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Dallas-Plano-Irving, Texas

Fort Worth-Arlington, Texas

Are they meaning JUST Plano and Irving for the Dallas area? And JUST Arlington for the FTW area? Or Dallas AND Plano ANd Irving?

I don't see the Dallas market going down much at all. Now the areas they mentioned of Plano and Irving, hmmm. Both are pretty close to build out with the majority of the homes being older. There are a few areas that are seeing developments in those two but not much. For Irving it is out in the Valley Ranch/Las Colinas area and in Plano it is to the far east part of the city and then a bit by the borders of Frisco and Carrollton to the extreme northwest part.

Irving I could see losing value as it has become not very attractive to many in the area. The last bits of the new development areas are attracting the stay a year or two then sell and move on to another state/country. The upkeep is not being done so the appeal from the curbside is not there. For a long time when this area was first being developed it was nice and upscale but that has changed. More hurry up and build (throw up houses) type builders that are building on unstable land but not taking care to do what they should for future foundation problems. I can see this area sliding and it already has.

Plano - hmmmm. I see other suburbs to the north losing in the appreciation market moreso than Plano. Just look at the burb to the north, Frisco. It already has seen a huge decrease in value and the number of foreclosures. Investors did not help this area either. With Plano being near build out and if the city leaders keep city services up to top notch along w/ the older neighborhoods being careful to keep their appeal up I don't see it dropping off too much at all.

As for Arlington - YES! I've not keeped up w/ the real estate market in Arlington but if it has not already seen a drop in appreciation I'd be shocked. Even w/ the new football stadium and the new developments going in on the citys south side it does not have an appeal to the upper-middle or upper class. Again this has been a market of the builders that come in and throw'em up as fast as they can as cheap as possible and get everybody approved somehow. The upkeep is not there either. The best side of the city to live in is actually the north side but many don't realize that. This is where the hidden pockets of the upper end live in Arlington. It is a VERY transient city and always has been. The crime rate would be another reason to avoid this place along w/ not having a good school system.
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Old 07-18-2007, 01:38 PM
Location: Austin, TX
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I agree that the list makes a lot of sense. It's not surprising that Los Angeles "proper" isn't at the top. Some of the outlying areas are.

Remember that uniqueness of environment diminishes risk. West LA and all the other coastal, or mild and hilly, areas of LA are desired by people all over the world. Much as people on this forum love to bash LA, there are plenty of people who are happy to see folks leaving because they want a piece of that So Cal action. But the "inland empire" of San Bernardino-Riverside is not so nice or desirable. And it tops the list. No surprises.

When you get away from isolated unique places such as coastal California, it's much more difficult to predict what will happen. For example, Austin was the most risky city in the country around 1986, with a 50% vacancy rate in its new downtown highrises. But Dell and some other factors helped turn it around, and now there's a boom in Californians migrating here. In other words, Austin today isn't the same city, so how can you compare? Same with Dallas, Denver, any place that has high volatility due to corporate and economic luck or the patterns of migration that transform the image and character of a city. I wouldn't place any bets on that list being accurate all the way down, but I do think it's more accurate than not.
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Old 07-18-2007, 02:36 PM
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Something simple to note about pricey coastal markets: the very fact that those markets are on the coast (or, say Chicago that's located on Lake Michigan) means that there is a physical barrier of water (and for many California cities, mountains that are also on the other side) that will always keep supply relatively low. Housing prices in places such as LA and the Bay Area are prone to go through prolonged slumps due to the boom-and-bust nature of the California economy, but the flip side is that they also are the areas where prices rise the most in hot real estate conditions since supply is simply always going to be limited. Thus, while those markets might not be very good short-term investments, I would argue that in the long-term, they are far from being the riskiest markets.

On the other hand, it's not a surprise that the top 3 on the list (Inland Empire, Phoenix, and Las Vegas) are relatively expensive areas that still have plenty of space to grow for quite awhile. That indicates that the price increases in the early 2000s in those markets were due to a fast run-up in demand but prices are now stagnating since supply is now catching up to or surpassing that demand. Paying a high price for property in an area where the supply can still grow for the foreseeable future is much more of a risky atmosphere in my opinion.
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Old 07-19-2007, 05:57 PM
Location: Austin, TX
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Originally Posted by Frank the Tank View Post
...a physical barrier of water (and for many California cities, mountains that are also on the other side) that will always keep supply relatively low.

On the other hand, it's not a surprise that the top 3 on the list (Inland Empire, Phoenix, and Las Vegas) are relatively expensive areas that still have plenty of space to grow for quite awhile.
Exactly. While there are many other factors, I think the ones you pointed out are the ones that determine long-term reliability of markets. Supply and demand, pretty simple.

For example, in the late 1980s I saw the beginnings of the mass exodus from California that was coming, and I visited Bend, Oregon on vacation. I did the math, and it wasn't hard to figure out: Bend is surrounded by national forest, mountains, BLM land, has ski resorts, summer recreation opportunities, etc. Plus, the prices were low, the town was beautiful, the scenery was spectacular and it's close to California. I called a few people and we invested in 5 parcels of land (mostly around an acre each) at dirt-cheap prices (like $6,000 for a one-acre lot!), and in one year those prices tripled.

I wish all my investments had been that wise, as the small amount I made from tripling a small investment didn't even begin to cover the losses I'm incurring from having bought in a rural area of Texas. There is nothing but private, development-friendly land as far as you can drive in a day all around central Texas, so the only real supply-demand effect here is in the rare unique areas such as upscale urban areas or uniquely beautiful scenery that's close to a city. Other than that, Texas is a very high risk state.

The California coast is a no-lose location, with the one exception of earthquakes. A major quake could upset the housing market there for a while, but it would bounce back because quakes don't make coastal California any less appealing. Same thing applies to the Pacific Northwest. Say all you want about rain and cold, it's not going to stop the boom there. It's beautiful, mild, diverse, and summers are heavenly. The San Juan Islands (Puget Sound) are a sure bet and they have been for a couple decades. The only thing that will stop their escalating prices would be a natural disaster (earthquake, tsunami, or major volcanic eruption.) Until the next disaster, you can buy anything on any island and be fairly certain that it will hold its value or appreciate, even if the current prices seem high already.
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