Phoenix Real Estate Market Keeps Tanking (Gilbert, Surprise: new home, to buy, construction)

[Burning Madolf]

Originally Posted by MN-Born-n-Raised

My feeling is it's going to pop up another 10-15% (because it is still UNDER value) and stall because of the steady supply of foreclosures and the fact that the cost of new builds are so cheap (builders bought land REALLY cheap). The inexpensive new builds will put pressure on existing homes in areas where their is land to build on. That's why this is not another bubble developing.

The reason this won't be another huge bubble is mortgages, plain and simple.

[Captain Bill]

Originally Posted by Johnhw2

Why do homes in Arizona cost so much versus say Dallas Tx? I can see some higher cost of land preparation in unlevel areas but otherwise so little to no reason for a much higher avg cost per sf for homes. Any insights? I believe out higher property tax rates depress home prices in Tx as the cost of own must include both price and taxes but I fail to see a good rationale for the balance of the difference unless its zoning driven. Doubt its demand driven now as Tx home demand, especially in Houston is pretty strong. I recall in the 90s when home prices for comparable upper end homes were the same price per ft in Houston and Phoenix. Hard for me to rationalize the higher relative price now.

Dallas and Houston are more expensive than Phoenix:

• The Median home price in Houston TX is $163,692
• Source=....Houston Statistics - Home Values - Houston, TX

• The Median home price in Dallas, TX is $207,353
• Source=....Dallas Statistics - Home Values - Dallas, TX

• Median home price in Phoenix Metro is $127,750
• Source= The Cromford Report

Note: the Homeinsight had a higher (incorrect) median price for Phoenix metro, so it was not used here. The Cromford Report is the most accurate source for the Phoenix Metro area real estate.

[ReadyFreddy]

It's a matter of who has the cash and is "willing" to pay above current market value.

My point was I don't think cash buyers are paying above market value. I think that they are paying market value.

[Captain Bill]

Originally Posted by ReadyFreddy

My point was I don't think cash buyers are paying above market value. I think that they are paying market value.

I think you're both right. The market value is increasing as the supply declines and demand increases.

That's why it's important for appraisers to use the most current comps, and today, in the low price ranges, it is sales within the past few weeks.

[jimj]

Originally Posted by MN-Born-n-Raised

My feeling is it's going to pop up another 10-15% (because it is still UNDER value) and stall because of the steady supply of foreclosures and the fact that the cost of new builds are so cheap (builders bought land REALLY cheap). The inexpensive new builds will put pressure on existing homes in areas where their is land to build on. That's why this is not another bubble developing.

Out here the new builds are being constructed on land purchased long ago during the boom. When the bust came and construction ground to a halt there was a ton of empty lots that've sat idle. Sure, some of them have been bought from builders that went tango/uniform at a cheaper price but construction material has also risen a bit (copper,wood and any oil based products). Short term I think labor costs went down due to so many being out of work but that'll change as the market ramps up again.
We are currently seeing new builds "starting" in the $140's which in normal people's terms probably means ending somewhere around $155k> but these are for smaller single story houses.

[Johnhw2]

Originally Posted by Captain Bill

Dallas and Houston are more expensive than Phoenix:

• The Median home price in Houston TX is $163,692
• Source=....Houston Statistics - Home Values - Houston, TX

• The Median home price in Dallas, TX is $207,353
• Source=....Dallas Statistics - Home Values - Dallas, TX

• Median home price in Phoenix Metro is $127,750
• Source= The Cromford Report

Note: the Homeinsight had a higher (incorrect) median price for Phoenix metro, so it was not used here. The Cromford Report is the most accurate source for the Phoenix Metro area real estate.

I am speaking in price per sf which drives construction cost not avg or median prices which is like comparing apples to pears with different size homes in the mix. I am not surprised the higher median prices exists as we are not retirement cities as much as phoenix metro appears to be. With energy industry jobs and pro business climatwell have higher paying jobs in these two cities to support the higher median prices. But my point was construction cost per is best measured per sf imho.

If homeinsight is not accurate for Phoenix what makes you feel it is for Dallas and Houston? City data shows Dallas median in 2009 was $134k, HOuston was $128 and Phoenix was $182. So sounds hard to believe that large an error for pheonix but not Dallas or Houston

[MN-Born-n-Raised]

Originally Posted by Johnhw2

Why do homes in Arizona cost so much versus say Dallas Tx? I can see some higher cost of land preparation in unlevel areas but otherwise so little to no reason for a much higher avg cost per sf for homes. Any insights? I believe out higher property tax rates depress home prices in Tx as the cost of own must include both price and taxes but I fail to see a good rationale for the balance of the difference unless its zoning driven. Doubt its demand driven now as Tx home demand, especially in Houston is pretty strong. I recall in the 90s when home prices for comparable upper end homes were the same price per ft in Houston and Phoenix. Hard for me to rationalize the higher relative price now.

Here is my guess. The Dallas economy didn't get hurt anywhere near as hard as Phoenix (ESPECIALLY) the housing market. Therefore the labor rate is MUCH higher.

I had a handful of subs work on my home last year. I asked the question on how the heck can the builders built that cheap. They all complained that as best as they can tell, the subs are working for $3-$10 an hour. They were quoting crazy labor costs like $2 a sq foot to lay tile and flooring, etc. In MN, they charge $6 a sq foot.

I had a stone added to my fireplace. Cost $900 total or $6/sq foot WITH material $3.75 material! I went right to the stone factory in Phoenix to buy it. Good looking stuff. In MN< they would have pushed me to an installer but it was slow so I worked with the owner of the factory. In MN, that stone would be $16/sq foot installed. I had someone paint spray my 3700 sq foot home with areas that have 20 foot ceilings. Labor was $1600 ($1000 for great quality paint and materials). Quadruple the labor in MN.

Only some lots in our hood are now being built on. They are building in illogical spots. Meaning, they are not building where 50% of the homes were finished in 2006, they picked a completely new area. I suspect they are building where they "stole" the land or where the bank is motivating them to build. The end result is there it is only around 20% more money to build new. So if someone is buying a foreclosure, they better work the match correctly or their "deal" may bot be as good as they think.

[Johnhw2]

Originally Posted by MN-Born-n-Raised

Here is my guess. The Dallas economy didn't get hurt anywhere near as hard as Phoenix (ESPECIALLY) the housing market. Therefore the labor rate is MUCH higher.

I had a handful of subs work on my home last year. I asked the question on how the heck can the builders built that cheap. They all complained that as best as they can tell, the subs are working for $3-$10 an hour. They were quoting crazy labor costs like $2 a sq foot to lay tile and flooring, etc. In MN, they charge $6 a sq foot.

I had a stone added to my fireplace. Cost $900 total or $6/sq foot WITH material $3.75 material! I went right to the stone factory in Phoenix to buy it. Good looking stuff. In MN< they would have pushed me to an installer but it was slow so I worked with the owner of the factory. In MN, that stone would be $16/sq foot installed. I had someone paint spray my 3700 sq foot home with areas that have 20 foot ceilings. Labor was $1600 ($1000 for great quality paint and materials). Quadruple the labor in MN.

Only some lots in our hood are now being built on. They are building in illogical spots. Meaning, they are not building where 50% of the homes were finished in 2006, they picked a completely new area. I suspect they are building where they "stole" the land or where the bank is motivating them to build. The end result is there it is only around 20% more money to build new. So if someone is buying a foreclosure, they better work the match correctly or their "deal" may bot be as good as they think.

Thanks for your comments.

My contention is that Dallas and Houston homes are less per sf than Phoenix. You are correct Dallas and Houston didnt see as big a drop in home values as most cities for two reasons: 1) we didnt see a huge runup as most cities did to more restrictive home equity laws in Tx and 2) we lost fewer jobs in these cities than Phoenix.

I believe our labor cost is no higher than phoenix, we still have a lot of immigrant labor and with pro business philosophy we have few work rules to drive cost higher as heavy union labor states have.

So my question is why does a home cost more per sf in Pheonix than in Dallas or Houston. I was referring to CB's price per sf in Phenoix in this post of well over $100/sf when Houston and Dallas median prices per sf are well below 100/sf. Its not clear why Arizona home price per sf is higher than Tx

[Kimballette]

Folks, this is the Phoenix, Arizona forum. Discussion of the real estate market in Texas is off topic. Please move that discussion to another forum. Thanks.

[gtbguy]

Originally Posted by MotleyCrew

Not just labor, materials are going up every day. The price of oil does have a direct impact on the cost of transporting and making these products. We have inflation.

Yep, very good point. This may be part of the reason you see people buying in droves now, after all the Phoenix home prices are a helluva bargain today. Once the housing market "stabilizes" then I think we'll see the cost of construction stay up there (price per square foot build price) and even begin to increase.