Phoenix MLS Predicting Lowest Median September Price in Nine Years (buying a house, unemployment)

[EnicAZ]

Originally Posted by twiggy

If we ever settle down I could see buying a home and investing long term but it wouldn't be in a suburb of Phoenix because I know I wouldn't want to be living in the same neighborhood for more than 30 years here. I would be afraid it would turn bad. We are still sprawling down here, we are too new. I would do it up in Northern AZ, or in an Eastern state where homes are easily 50 to 100 years old with the same families in them. That way I could somehow predict the area staying reasonable for the long term seeing that would be 1/2 of what I was investing my money and my well being in.
I look back at homes here my family owned 20 years ago and the areas have changed a lot, and have depreciated a lot as well. Would probably make it a wash but I still wouldn't want to live there. That's how most commoners turn into landlords, they won't live there anymore so they rent it out to the less fortunate. Then you live in a old rental suburb with renting neighbors who don't care about there home and live next door to you. Yuck, no thanks. I learned my lesson from this last bubble, lost my butt, now I am super cautious.

This has become a really big problem because of the job struggles in the area. Jobs have been getting less and less stable, and trying to settle down in one spot can be a very big risk. When you think about how buying and selling takes more than 6% of the cost of the house, the desire to buy becomes less and less attractive. It takes more than 5 years just to break even, if prices do not decline. I believe our workforce is on a permanent trend towards transience.

Southwest Valley residents I speak with really struggle with the long commutes. I offer them good ideas though, such as biking and trying to work Saturday through Wednesday. I wish birds could pick people up and fly them to places. It would be so much easier.

[twiggy]

Originally Posted by EnicAZ

This has become a really big problem because of the job struggles in the area. Jobs have been getting less and less stable, and trying to settle down in one spot can be a very big risk. When you think about how buying and selling takes more than 6% of the cost of the house, the desire to buy becomes less and less attractive. It takes more than 5 years just to break even, if prices do not decline. I believe our workforce is on a permanent trend towards transience.

Southwest Valley residents I speak with really struggle with the long commutes. I offer them good ideas though, such as biking and trying to work Saturday through Wednesday. I wish birds could pick people up and fly them to places. It would be so much easier.

Yes, thats exactly what I mean. It would be nice if your job was as stationary as the home you bought but it isn't and with no job security anymore, or really not for quite a long time you can't just buy one home, stay in it for 30 years and reap the benefits because unless your lucky your job won't be there for 30 years. You have to be willing to move around now for a decent job, and we change jobs frequently. Every time you sell your home to relocate you loose money, or you end up commuting far distances and you loose money and time for your personal life. It just seems worth the rent to me right now, I've owned but renting has the perks I need to stay available for good job opportunities and options that I just wouldn't have other wise. I don't know anyone actually who has stayed in their home longer than 15 years, most shorter times. My Grandmother is the only one I know of and she lives in MA and the house is 100 years old and still worth a good sum of money, but they do that back there. Out west is more difficult unless you are in a small town I guess. Seems like it to me anyway, I'm no real estate expert though. lol

[EnicAZ]

Originally Posted by gtbguy

Wow, I didn't think the market was that bad to where you need to encourage your sellers to continue to lower thier prices 5% per month.

Yes, I really wish it wasn't the case, but aggressive price cutting seems to be the only way to get buyer's attention right now. With the expiration of the tax credit, the housing market has taken a strong downturn for the worse. I'm hoping something is going to stop the bleeding coming up, but I don't know what that will be.

[sh9730]

Well- you wont be able to cut 5% per month per long....unless you believe things are going to ZERO?!

I dont.

[Howard Roark]

Bingo! This describes me. I've been living with very few possessions for ten years. Got a lot of stuff in storage. But I move around the country a lot for work, even though keeping a Phoenix address - lucrative tax benefits. Phoenix rentals are cheap. Taxes are lower than California and I pay income taxes to Arizona even though I usually don't work in AZ. I get tax credits.

I'm saying that this recession is forcing people into a non-ownership society. If you don't own, if you don't have a spouse, if you don't have kids, you are free to move about the country to better pay. My older sister worked thousands of miles away from her normal place to work for over a year. Now she's back to her native state. If she had a house, she would be in dire straits.

Five more years of this for me and I can downsize my job/salary and still have high income from my investments and live in one spot.

nice if your job was as stationary as the home you bought but it isn't and with no job security anymore, or really not for quite a long time you can't just buy one home, stay in it for 30 years and reap the benefits because unless your lucky your job won't be there for 30 years. You have to be willing to move around now for a decent job, and we change jobs frequently.

[Howard Roark]

I saw the video and comments.

I agree partially. But I think the USA is going to be forced by the IMF or trade agreements between nations and creditors to go on an austerity plan. That will mean raising taxes and steep cuts in spending across the board - nothing will be spared.

How this will affect the Phoenix market, I don't know. Prices have come down so much, but I am still seeing prices fall in my Phoenix neighborhood. Some people are getting desperate.

There are boomers in Phoenix who haven't saved anything for retirement and their house is their nest egg. They considered their house their retirement plan - big mistake.

I'm a boomer and I recall even when I was a kid thinking certain events we were doing were like drones - doing things without question because everyone else was doing them. Whether in kindergarten in 1964, or standing in a line stretching for a mile around a block at orientation in college in 1977 I was wondering why are we all doing this? I did not follow suit in 2001 and buy RE. I saw everyone figuring it was how to become a Donald Trump.

Now I'm thinking many boomers will be forced to continue work. Downsizing houses will occur, but at a painfully slow trickle. I think house prices will be flat for ten to fifteen years. Better off in Savings Bonds.

Originally Posted by Pirate0202

Ouch! That Gerald Celente video really is some serious gloom & doom... but sadly, I can't say that he's wrong. I just don't see where an economic upturn might come from at this point, with all markers pointing in the downward direction. If even a small portion of what Celente believes will come to pass, it sure seems like a great time to hold on tight to your money, good real estate deal or not. Renters may get the last laugh on this one after all.

And, speaking of that, there have been some people on this forum saying that this recession is far from the norm, that owning a home from 1950-2000 has historically been such a good investment. That may be true, but for those of us who have only been in a financial point in our lives to be in the housing market since the mid-1990's or later, this boom and subsequent recession is all we know firsthand. In our world, it's a much muddier picture of buy vs. rent.

I have a friend who's my age who has never owned a home, and he has made A LOT of money on the stock market and other investments over the years -- using money that would've gone into monthly PITI that would've been much pricier than his rent payments, and that's not including upkeep and repairs on a home. My point is that at the end of 30 years, he doesn't end up with just a box full of receipts -- he ends up quite wealthy, but from investing in other things besides a home.

[rjrcm]

Originally Posted by EnicAZ

...My MLS information indicates we could fall another 25-30% by next summer.

And what MLS information is indicating such a drop so far out? The only forecast of future value put out by ARMLS is the pending price index that at best gives a 3 month outlook based on pending sales. I assume you are making your own prediction?

[MN-Born-n-Raised]

Originally Posted by Ponderosa

You are not comparing apples. Rents can't be less than buying a comparable house. The landlord has PITI plus maintenance plus profit that are passed on to you. The landlord pays even higher taxes actually. So, yes, renting a small apartment or an older home is cheaper than buying a large newer home. If that is the way you want to live you can provide your shelter more cheaply.

.

I disagree. There are THOUSANDS of "investors" that are being hood-winked by Realtors showing them faulty math. The agents explain the ROI after the down payment and ignore the selling costs, accounting costs, driving expenses to take care of the place, real costs of maintenance especially if you hire the work down, etc. Don't forget about examples when "investors" get stiffed and tenants live in the home for free without legally being able to evict them and times of vacancy, costs to do background checks etc. I can go on and on.

I have two "investor" friends that own and have been losing money for the past 15 years in Duluth MN. I've told them to dump those headaches for years and they are finally getting it while they are playing in THOUSANDS to repair siding, roofs, heating and air, tenent damage etc.

In Phoenix, buying to rent out a house is all about betting that the price will go back up while you hopefully break even. That is a risky bet in the foreseeable future IMHO.

I know people who own rental properties that make money. They say stay WAY clear of single family homes. You need at least an 8 plex that has,an economy of scale.


In summary, if the landlord doesn't know how to calculate the real expenses, then they assume they are making money. When you own, you pour in lots of dollars into the decor and later "buyer preferences" that you later never get out. Those costs are never referenced in the "profit" when people brag how their home went up in value.

As I have said, I own because I want to own and I have two spots on water that I own outright and rent. I do barely break even. But let's look at the THOUSANDS of snowbirds that are buying in Phoenix right now. They will be living in those homes for 2-6 months. Are they better off renting??? YES! There are thousands of landlords that lose money when they buy and rent out their place for an "investment", look at Phoenix Vacation Rentals - VRBO® Vacation Rentals Phoenix - Phoenix Lodging (http://www.vrbo.com/vacation-rentals/usa/arizona/phoenix-area - broken link) and all of those empty calandars. There are some hungry people willing to rent for a lot cheaper than those posted rates.

[azjack]

"Your payment is $850 for PITI. So in 5 years, you paid the bank, insurance company, and the county about $50K! But you do reduce the principal A LITTLE and you will save some on the taxes (for the time being)."

And basically any drop in 2010 value would make purchasing a far worse decision. Better outcome than 2004-2009 purchases? Sure, but that would be like comparing apples and rancid oranges.

As far as the alleged below replacement cost argument, the answer is land, material, and wage deflation changing the replacement cost. And there is plenty of unwanted stuff that sells for well below replacement cost all of the time.

[actinic]

Year over year drop in existing home sales: Calculated Risk: Lawler: Existing Home Sales: “Consensus” vs. Likely