Housing shortages coming to a city near you (Phoenix, Mesa: appointed, foreclose)

[jimj]

Originally Posted by maverick974

My niece and her husband make well into the 100's and they just bought an 1100 sf home in San Diego. That was a requirement for them to be in San Diego so they are on the far east side of town. Still in San Diego but just barely. It's kind of like buying in a shady part of Scottsdale just so you can say you live in Scottsdale.
They paid well over 350K for an 1100 sf home with a shared common wall with the house next door. Tiny, TINY back yard. All that and their HOA dues are like $350.00 per month. I'd hate to guess what the property taxes are.
They live month to month, no cable TV, no eating out or enjoying life. They work, they drive their two brand new cars and they work.
I'll take my poor lifestyle over that any day of the week.
They used to look down on me until they came to visit last year. I own my home, my cars and have very little debt and I go fishing, I can entertain relatives when they come by, I ride my motorcycle on day trips when I feel like it and I make a living. They thought I was the black sheep compared to them until they saw my lifestyle. Then, in many ways, they were actually a bit envious.
Ahhhhhh, the good life. HA!

Sounds a lot like a guy I knew back in the '70's. He had a 'vette,hot rod,motorcycle,flashy clothes,boat etc. When I asked him how in the heck he'd amassed all this nice stuff and if he had a rich uncle or something he said " No, I'm in debt up to my eyeballs (and probably beyond) but I've got everything I want right now, who knows when it's your last day".
Gee, what happens if you live past tomorrow?
I used to be like that until I got married and had a kid. It took my wife and her depression era grandmother about 5 years to set me straight that it's family before fun and stuff.
Almost debt free except for the house which we owe about $100k which we "could" pay off but cash is hard to come by and I know I don't have the discipline to just pay it back into savings.
On the flip side my brother lives in CA and has to refi his house every other year taking out equity each time just to survive. He paid $225 for it years ago and at it's peak it could have sold for around $600k. I tried and tried to convince him to sell it, take the cash and move to where he could pay cash for a house and have tons left over but he couldn't leave that CA lifestyle. What a pity, he could be sitting on a great nest egg right now not to mention no house payments.

[autism360]

In 2005 the area had some 400 different homebuilders and about 1,250 subdivisions. “That is far in excess of what would be considered normal,” he says, summing up the entire boom in 11 dispassionate words. “We think 700 to 750 subdivisons is normal if employment and population growth is normal.” There are other ways Belfiore measures normalcy: permits to build homes. Normal is between 35,000 and 40,000 permits a year, he says. Last year, 12,100 permits were issued. This year he expects the number to reach 19,500.
Last year, from March through July, prime selling season in Phoenix, home prices rose 6.6 percent. More than one-third of the subdivisions limited the number of lots they sold. Labor was a constraint. Many subcontractors had gone out of business, and many workers left the state because of its harsh immigration policies. There was another reason: “Homebuilders wanted to push prices up,” says Belfiore. “They recognized the opportunity.”


The builders see no reason to solve the housing shortage problem since shortages bring higher prices and they alone control new home inventory. They are only projected to build 1/2 the homes needed for normal growth this year. so for the 5th year in a row they are projected to build well below what is needed for normal growth.



Folks this housing shortage is going to be severe.





http://www.businessweek.com/articles...ot-recovery#p4

[Potential_Landlord]

Originally Posted by jimj

It never ceases to amaze me how overvalued CA real estate still is. Makes you wonder what kind of jobs those people they showed have to be able to afford just the taxes alone, forget the mortgage.

The amazing thing is that RE not only holds up in expensive coastal California, but keeps going up. One of our friends moved to San Diego, just north of La Jolla. They could only afford a tiny condo, will never have more than one child and both will have to work (she part-time I guess). The condo fees alone are crazy. I love San Diego, awesome temperate climate year-round etc., but there would be way too much stress about making ends meet. It was most important for us that my wife can stay home with the kids and we can still live comfortably. Nevertheless, there are enough buyers at 700k while you still have to be in traffic for hours every day. I also wonder how it works in Flagstaff. There may be some high-paying jobs at NAU, but aside from that who out of the 60k or so people there can afford the crazy home prices?!? I don't get it.

[Tall Traveler]

I think house prices are still stifling more development in the Phoenix area along with lending restriction. I did a quick search on Zillow on median house prices in Phoenix area :

Phoenix - $129K
Glendale - $132K
Chandler - $204K
Gilbert - $216K
Scottsdale - $347K
Mesa - $174K
Maricopa - $132K

If I were a builder looking at thse prices, I might figure to make a profit in Chandler, Gilbert, and Scottsdale but pretty lean in the other areas and even Gilbert & Chandler are a bit low considering the number of newer houses you'll be competing against.

For comparison, I compared a few areas in Seattle area:

Seattle - $397K
Bellevue - $489K
Kent - $209K

[youthinkso]

Originally Posted by Tall Traveler

I think house prices are still stifling more development in the Phoenix area along with lending restriction. I did a quick search on Zillow on median house prices in Phoenix area :

Phoenix - $129K
Glendale - $132K
Chandler - $204K
Gilbert - $216K
Scottsdale - $347K
Mesa - $174K
Maricopa - $132K

If I were a builder looking at thse prices, I might figure to make a profit in Chandler, Gilbert, and Scottsdale but pretty lean in the other areas and even Gilbert & Chandler are a bit low considering the number of newer houses you'll be competing against.

For comparison, I compared a few areas in Seattle area:

Seattle - $397K
Bellevue - $489K
Kent - $209K

Zillow? lol come on. 129k in Phoenix won't get you much to speak of. Least not something a builder would even want to compete with. A new home buyer isn't looking for a shack.

[sh9730]

Tall -

It doesnt matter at all how much the end sales price of a home is to the builder (using Zillow or any other metric) - all that matters is the cost to build it, market it, and warranty it vs the amount of sale. Your comparison to the Seattle area (in strictly a profit sense) doesnt matter because land, and just about every other cost to build a home is higher in Seattle than in Phoenix.

Builders make plenty of profit on homes here in Phoenix...

[Tall Traveler]

Originally Posted by sh9730

Tall -

It doesnt matter at all how much the end sales price of a home is to the builder (using Zillow or any other metric) - all that matters is the cost to build it, market it, and warranty it vs the amount of sale. Your comparison to the Seattle area (in strictly a profit sense) doesnt matter because land, and just about every other cost to build a home is higher in Seattle than in Phoenix.

Builders make plenty of profit on homes here in Phoenix...

Understand but the prices today in the Phoenix metro area, despite recent upswing, are still well below the prices back in 2004-2006. Until the prices improve significantly, you're not going to have enough houses being built to cover the demand...which according to several linked articles in this thread, they're still building well below demand. Therefore, barring some type of major calamity, the prices will be climbing significanly until the price gets high enough to get more builders going to meet the demand.

[autism360]

Therefore, barring some type of major calamity, the prices will be climbing significanly until the price gets high enough to get more builders going to meet the demand.

Keep in mind many builders went bankcrupt or simply folded over the last 7 years and many construction workers found other ca

[kremit]

Originally Posted by youthinkso

Zillow? lol come on. 129k in Phoenix won't get you much to speak of. Least not something a builder would even want to compete with. A new home buyer isn't looking for a shack.

Thank you. Took the words right out of my mouth. Anything in the 100K range in Chandler is foreclosed, fixup, or rare. Most of the 15+ year old homes in my area are at least 200K.

There is still too many homes in the market. All cities have this problem. New home shortage yes, used no.

[MN-Born-n-Raised]

Originally Posted by Tall Traveler

Understand but the prices today in the Phoenix metro area, despite recent upswing, are still well below the prices back in 2004-2006. Until the prices improve significantly, you're not going to have enough houses being built to cover the demand...which according to several linked articles in this thread, they're still building well below demand. Therefore, barring some type of major calamity, the prices will be climbing significanly until the price gets high enough to get more builders going to meet the demand.

Tall. You are not understanding the cost structure. For starters builders picked up land for a steal a couple years back. Land prices in the outer burbs are a fraction of what it costs in many northern cities.

Next, there are a lot of cost cutting going on in Phoenix that does not happen in other parts of the USA.

Here are a few:

1.) The windows are sliders type. They are JUNK. I doubt the builders pay $150 a window on average. The windows alone is a $10K-$15K savings over a Washington home. It's rationalized that the temperature differential (from cold to hot) isn't nearly as severe as in the north.

2.) A typical track home doesn't use sheathing on the whole house (less than 1/2). The sheathing is only to handle the weight / stress of the stucco and bolting together the corner walls. It's rationalized that the winds are not that strong enough to need full sheathing.

3.) Most homes are built with 2x4 construction not 2x6.

4.) The track homes use sheet rock under the porch soffits. I'm not kidding, "Outdoor" sheetrock! I just spent $3K to remove that and replaced it with tong and groove wood. As a side note, it rained on my pile of "outdoor sheetrock" and it fell apart and absorbed a lot of water.

5.) Building labor costs of the track homes are a 1/3 of what they are in Washington State or MN. I would guess the average wage is $9 an hour for labors.

6.) The baseboards are not wood, they are more or less pressed cardboard that are painted white. No need to pay attention to nice mitered corners. They simply caulk in a bunch or DAP and wipe smooth. You don't see wood work around windows either. At the end of the day it does look great.

7.) The electrical codes are relaxed here. You get one outlet in the garage. You will have 1 GFI to run 3 key bathroom outlets.

8.) The stucco is placed on top of foam insulation. So if you are following, if you punch the wall you will be at the interior sheet rock with little force.

9.) The sheetrock uses knockdown texturing on every wall and every ceiling. It's the lowest cost approach.

I can go one for another 20 items. Non-custom cupboards, small lots, inexpensive ceramics, etc. That said, the homes look great. But rest assured builder are in full swing and profitable in every area of the Valley.