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Old 08-15-2012, 08:58 PM
 
2,803 posts, read 3,159,133 times
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Quote:
Originally Posted by MN-Born-n-Raised View Post
Things have been shaky since 2007 or 5.5 years. I won't be surprised to see things "shaky" in another 10 years (it's easy to be "shaky" with $14 TRILLION in debt). In the mean time, prices could creep up another 25% in the next couple of years and still be WAY below 2006 hyper inflated pricing. Who says employment will EVER stabilize to what it was? I predict it will be this way forever (or maybe even worse). Think outsourcing.

I know this much. If I buy a home for $185K, (by definition) I cannot lose more than $185K. Now if I buy a $700K, I'm in a much more risky position if the economy falls apart. That is why I've sold one fairly expensive home and have plans on selling my expensive lake home in northern MN in the months to come and buying something much smaller and less expensive.

The new building lottery is happening because there is a labor shortage and a marketing tool. There is nothing to be alarmed about. They are no longer giving out crappy loans to just anyone with a pulse and "investors" are using there own cash versus the banks. Those people who could not read the real estate tea leaves got scared and the market UNDER shot. People waited too long and missed the bottom. Now some people are too scared to realize that building inflation always had to happen in Phoenix.
I think the basic difference between pre-2005 and post-2005 is that the consumer no longer tries to compensate his falling real wages by going more into debt. This is an epic watershed, one we have last seen in 1926 when the then real estate bubble popped as well. It is now prerequisite for any lasting economic recovery that real wages rise. The disconnect between wage growth and GDP growth that started around 1979 has to be reversed. Both rose together happily from around 1947-1979 according to my data and I suspect this already started around 1934. There is no reason we cannot achieve the same again - this is America after all. We just have to re-learn the policies and individual behaviors again that started in the 1930s leading to sustained growth across the whole income spectrum for 30-40 years. And we have to abandon those policies and behavior patterns that restricted wage growth aside from the top 1% since 1979.
Obviously, this would be the biggest boon for the RE market in Phoenix possible. Go America, go Phoenix.
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Old 08-16-2012, 04:03 AM
 
9,682 posts, read 11,076,579 times
Reputation: 8429
Quote:
Originally Posted by Potential_Landlord View Post
I think the basic difference between pre-2005 and post-2005 is that the consumer no longer tries to compensate his falling real wages by going more into debt.
We agree that the culture of taking on consumer debt was out of control from 2000-2007. But the biggest change in my mind is intense global competition as well as the multi-trillion dollar run up of government debt. America needs a new invention like the internet in order to maintain 1st place and stop spending money we don't have. We no longer compete well in most manufacturing sectors. Additionally our intellectual property is stolen or voluntarily exported. Finally a large subset of graduating students are completely inferior to the aggressive young minds coming out of China and India. Therefore I don't necessarily predict great things for the USA as a whole. We are slowly turning into England or Russia. I've always taught my kids you don't want to be average. That's because I predict average people (and below) will be struggling for the rest of their American lives no matter how hard they wave their American flags with hope and patriotism. We live in a dog-eat-dog world right now and people are not seeing the obvious trends. The best-of the-best American minds are still kicking butt but 50% of the population decided to coast and want their free benefits. They will be voting to keep those freebies so the debt will keep on rising. Unfortunately I'm not as optimistic as you. I diverge and sorry for the rant...

Last edited by MN-Born-n-Raised; 08-16-2012 at 04:11 AM..
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Old 08-16-2012, 10:56 AM
 
Location: az
13,445 posts, read 7,809,439 times
Reputation: 9317
Quote:
Originally Posted by MN-Born-n-Raised View Post
... That's because I predict average people (and below) will be struggling for the rest of their American lives no matter how hard they wave their American flags with hope and patriotism. We live in a dog-eat-dog world right now and people are not seeing the obvious trends. The best-of the-best American minds are still kicking butt but 50% of the population decided to coast and want their free benefits. They will be voting to keep those freebies so the debt will keep on rising. Unfortunately I'm not as optimistic as you. I diverge and sorry for the rant...
I couldn't agree more.
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Old 08-16-2012, 12:00 PM
 
Location: Centennial, CO
2,254 posts, read 3,043,890 times
Reputation: 3750
Quote:
Originally Posted by Potential_Landlord View Post
I think the basic difference between pre-2005 and post-2005 is that the consumer no longer tries to compensate his falling real wages by going more into debt. This is an epic watershed, one we have last seen in 1926 when the then real estate bubble popped as well. It is now prerequisite for any lasting economic recovery that real wages rise. The disconnect between wage growth and GDP growth that started around 1979 has to be reversed. Both rose together happily from around 1947-1979 according to my data and I suspect this already started around 1934. There is no reason we cannot achieve the same again - this is America after all. We just have to re-learn the policies and individual behaviors again that started in the 1930s leading to sustained growth across the whole income spectrum for 30-40 years. And we have to abandon those policies and behavior patterns that restricted wage growth aside from the top 1% since 1979.
Obviously, this would be the biggest boon for the RE market in Phoenix possible. Go America, go Phoenix.
I concur, but of course it's much easier said than done. Those 1% that are in control of the rest of the 99% right now aren't going to relinquish their seat so easily, and they also happen to be the ones that have the most impact on policy, the media, and everything else that influences and affects the daily lives of most of the American people. I agree there has been a subtle shift overall in American's individual behaviors, but it's only because their hand has been forced. Once good times start rolling again I would expect history to repeat itself and consumers to go back to their old habits.

Quote:
Originally Posted by MN-Born-n-Raised View Post
We agree that the culture of taking on consumer debt was out of control from 2000-2007. But the biggest change in my mind is intense global competition as well as the multi-trillion dollar run up of government debt. America needs a new invention like the internet in order to maintain 1st place and stop spending money we don't have. We no longer compete well in most manufacturing sectors. Additionally our intellectual property is stolen or voluntarily exported. Finally a large subset of graduating students are completely inferior to the aggressive young minds coming out of China and India. Therefore I don't necessarily predict great things for the USA as a whole. We are slowly turning into England or Russia. I've always taught my kids you don't want to be average. That's because I predict average people (and below) will be struggling for the rest of their American lives no matter how hard they wave their American flags with hope and patriotism. We live in a dog-eat-dog world right now and people are not seeing the obvious trends. The best-of the-best American minds are still kicking butt but 50% of the population decided to coast and want their free benefits. They will be voting to keep those freebies so the debt will keep on rising. Unfortunately I'm not as optimistic as you. I diverge and sorry for the rant...
Sadly, both of our observations are on par. One need only look at the ratio of international students to American students in the classrooms of engineering schools, medical schools, and finance/economics programs and you'll get an idea of where things are going. The current generation of young Americans were mostly raised in a world of peace, where they have known hardly any personal or family struggle and have been handed everything to them and received a trophy simply for playing. Too many Americans relive the past glory days and revel in military might that has nothing to do with the fact that the good 'ole US of A has been getting it's rear end kicked economically for a couple decades now. But I digress...

Back to Phoenix housing prices... No, I don't think they will drop save some sort of black swan event.
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Old 08-16-2012, 03:53 PM
 
113 posts, read 101,102 times
Reputation: 50
Interest rates can't stay this low forever.
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Old 08-16-2012, 06:38 PM
 
255 posts, read 513,118 times
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Quote:
Originally Posted by majinkoola View Post
Interest rates can't stay this low forever.
A little more analysis need to go into this... Yes, interest rate cannot stay this low forever, but what does it mean when/if it starts to rise?

The fed can't raise interest rate now. If they even raise it to 0.125% (from near 0%), the public will see this as the beginning of better times ahead, and fed's confidence in the market / housing market. All those people on the fence will want to jump (to buy), but those who have the "get-one-before-they're-all-gone" mentality will want to buy as well. That could be a frenzy - and it could force the fed's hand to keep raising interest rate (and potentially overshoot the target rate) to cool this trend. Not ideal.

The fed has said that they won't raise interest rate until 2014. I believe they want to give time to the market to dissipate the negative sentiments, so that any rise in interest rate would not be a jolt to the system.
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Old 08-17-2012, 04:14 AM
 
2,879 posts, read 7,761,196 times
Reputation: 1183
You know how they are starting to use the term "real" more in the news. Like real inflation and real unemployment. Maybe a new one should be real interest rates. Try getting a loan on a condo (many perfectly good). Try getting a loan if you are self-employed....Look at what people doing OWC are charging...and getting plenty of takers, at that.

You may see dips in the Phoenix market, but replacement cost are just too high. Infill land is expensive and often worth more than the homes on it. Phoenix is growing, as is Arizona, as is the Sunbelt. I was looking for RE on Hermosillo Craigslist and guess where the deals were? Phoenix. They are actually looking down there for buyers of property in Phoenix because of its relative cheapness. Name on major International city anywhere in the World, and its prices for modern housing will be higher, even though wages are much lower (but so is unemployment).

And BTW, our national debt is rapidly approaching 16 trillion.
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Old 08-17-2012, 09:55 AM
 
Location: Ma
211 posts, read 542,853 times
Reputation: 112
Quote:
Originally Posted by khuntrevor View Post
You know how they are starting to use the term "real" more in the news. Like real inflation and real unemployment. Maybe a new one should be real interest rates. Try getting a loan on a condo (many perfectly good). Try getting a loan if you are self-employed....Look at what people doing OWC are charging...and getting plenty of takers, at that.



And BTW, our national debt is rapidly approaching 16 trillion.


i agree with that Im self employed, and its a Huge PIA to get a loan. I had a hard enough time refinacing my home loan to a lower rate. Pretty rediculous the banks give you a hard time to lower your mortgage payments. The fact remains if your paying a higher mortgage and you can refi lower , banks should be more than willing to do so.
Imo the way banks are not lending $, its going to be a while before people can start buying homes and given loans. Another reason for the rental market to stay strong.
Right now it takes cash buyer in this market
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Old 08-17-2012, 10:37 AM
 
188 posts, read 514,680 times
Reputation: 114
Supply and demand... it's as simple as that. As long as people want to own property here (whether it's a primary residence or a second/third/fourth home), prices will either hold strong or go up. The economy is improving (slowly but surely), but the real problem is Arizona's lack of economic diversity. Most of the driving economic force here is primarily sales and service. We have very little (% wise) of true manufacturing, engineering, and research. Intel is a big exception in Chandler, but there really aren't many other big players here when you compare this state to other more formidable states.

Tourism, sales, retirement, vacationing... that's what this state is mostly about. The politicians need to figure out how to attract other types of work here. Until they do that, this state won't be stable when the economy fluctuates.
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Old 08-17-2012, 10:53 AM
 
130 posts, read 164,987 times
Reputation: 98
Here are two reasons prices are obviously heading down further(Not just in Phoenix):

a). Too many people think the bottom is in. Any investor knows that movements in either direction tend to be the opposite of what the average Joe and the so-called experts expect. Back in the hey day of the housing bubble, every Tom, Dick and harry thought prices would keep on rising. We all know what happened since then.

b). Interest rates are so artificially low that in order to rise back up to their historical norms of 8-9%, they'd have to double. It doesn't take an MBA in Finance to figure out what the doubling of interest rates are likely to do to housing prices.
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