Will Phoenix Metro Real Estate Prices Take Another Dive???

[gtbguy]

Originally Posted by TiredOfyycCold

As I have said in a previous post, you can't build most homes in Phoenix for what they are currently selling for. Adding $65k to most home prices still wouldn't bring them up to the cost of replacement so those home prices have to go back up at some point, at least to the cost of replacement!

I hold that same opinion but it will still take some time before we see prices at replacement cost. If you are buying today you have to be in it for the long haul. I think no less than 5-7 years to see some reasonable gain and to make it worth the wait.

[Zippyman]

Originally Posted by TiredOfyycCold

I disagree.... just because a home-owner is underwater doesn't mean they will sell or be foreclosed on and the article you quote states that the rate of fore-closures is going down and that the average amount underwater is $60k.... if it were $160k - then that would be cause for concern.

If the home owners are still employed (or earning a stable pension) and happy with where they are living, then being underwater is meaningless UNLESS they want to sell. If they could afford the payments before and mortgage rates have come down, then they can afford them now.

You only lose money when you sell - I would think a lot of people will stay put and wait patiently for home prices to rise to where they should be (once again, if they can make the payments and have no real need to move).

As I have said in a previous post, you can't build most homes in Phoenix for what they are currently selling for. Adding $65k to most home prices still wouldn't bring them up to the cost of replacement so those home prices have to go back up at some point, at least to the cost of replacement!

The numbers here just don't pass a "real world" reality check - the "mean" and "average" amount underwater aren't the numbers you'll see if you look at the "typical" distressed sale in the area - someone who bought at the peak is way more than $60k underwater.

A "typical" underwater deal from 2005-2006 would be more like $150K+ underwater - and probably has an interest rate north of 6.5% - Almost every one of those deals will end up in foreclosure.

If you look at deals from 2008-2011, some of those buyers might be "underwater" - but the numbers are tiny, hence you get an "average" of $60k - with an interest rate that might only be 4.5%... Those buyers would end up with a higher rent payment than their current piti payment if they walked & rented. I don't see them bailing out.

[azjack]

The numbers here just don't pass a "real world" reality check - the "mean" and "average" amount underwater aren't the numbers you'll see if you look at the "typical" distressed sale in the area - someone who bought at the peak is way more than $60k underwater.

A "typical" underwater deal from 2005-2006 would be more like $150K+ underwater - and probably has an interest rate north of 6.5% - Almost every one of those deals will end up in foreclosure.

Yes, your numbers sound correct. I know of several people who fall into the $150K-plus underwater situation who have not gone the foreclosure route. I just do not see any realistic set of circumstances that will not end that way. These are people who have basically maintained an income, probably slightly lower, but still can pay and have chosen to do so. But with the social acceptability of AZ walkaways (forget acceptability, it has been fully embraced by many), I still do not see how they will justify servicing that loan next year and in the following few years. Add that to the reality that Metro Phoenix in 2011 is just not the sort of place where most people settle down in one house for twenty or thirty years.

Honestly, if I were them, I would not even consider some sort of windfall (inheritance, etc) as a reason to stay.

Some have concluded that most of the Phoenix area houses going back to lenders are already underway or happened a few years ago. I personally have concluded that there will be an ample supply in the future.

[SeaG]

Originally Posted by MN-Born-n-Raised

I agree. Good for them.

If they didn't buy, AZ and other overbuilt sunny destinations would have dropped much further. When we bought our new appliances (the old owner stole them), Best Buy said they were busy because of the snowbirds, investors etc. The flooring people and stone people said the same thing.

With the predicted 'correction' in real estate in most major centers in Canada (maybe not as bad as the US, but could be) we sold our Vancouver Island home, then moved to the Okanagan where we are renting.

Because home prices skyrocketed over the last few years (starter homes in Vancouver for nearly $ 1 million) renting is the new 'in' financial thing here.

With $ 600,000 luxury condos renting for $ 1400 a month or less, we will continue to rent until the prices fall 30-40% (and they will). In the meantime the proceeds from our home sale are sitting in secure, short-term liquid investments.

So to the point, when we come back to our winter home in the Valley of the Sun this October we plan to spend (help the Phoenix economy) nearly $ 40K during our six month stay.

Yes, flooring, kitchen and bath renos, appliances plus all the dollars we spend on food, entertainment, fuel, etc.

And don't forget we do pay all year long for taxes, utilities, gardening, security, HOA, etc.

It's all well-worth it for our six months of warmth and fun in the desert sun!!

SeaG

[Ponderosa]

Good points above about people spending money on their new homes. Whether they sell to Canadians, investors, flippers or occupiers, there is money that is spent on getting furniture, appliances and various services. The Phoenix economy is not just dependent on home sales but also all these ancillary expenses. They add to and fuel the local economy providing jobs and much-needed tax revenue. The high sales we are seeing the last couple months will have multiplicative benefits down the road.

[Captain Bill]

Originally Posted by Ponderosa

Good points above about people spending money on their new homes. Whether they sell to Canadians, investors, flippers or occupiers, there is money that is spent on getting furniture, appliances and various services. The Phoenix economy is not just dependent on home sales but also all these ancillary expenses. They add to and fuel the local economy providing jobs and much-needed tax revenue. The high sales we are seeing the last couple months will have multiplicative benefits down the road.

Agreed,

All of my snowbird clients who bought a home here have purchased furniture, cars and of course all the other necessities of life as they live here during parts of the year.

I've decided to turn one of my condo's into a seasonal rental and will be spending money on furnishing it.

[khuntrevor]

Originally Posted by Captain Bill

Agreed,

All of my snowbird clients who bought a home here have purchased furniture, cars and of course all the other necessities of life as they live here during parts of the year.

I've decided to turn one of my condo's into a seasonal rental and will be spending money on furnishing it.

Bill,

Are you going to use a company that specializes in seasonal rentals or just the standard mls?

[Captain Bill]

I'll start out with the mls and then see what else I need to do.