Phoenix and Las Vegas. Bubble or not?

[wit-nit]

It's a new cycle, RE values are rising all across the country. Be aware it's a cycle, it's like poker, you need to know when to hold'em, when to fold'em.

[WSPHXPELON]

A real estate "cycle" and a real estate "bubble" are two different words that are used to represent the same concept.

[MN-Born-n-Raised]

Originally Posted by vince3vince

Are they ****ing dreaming!? Are people really that willing to fork over $100k extra on a 2 month flip with mediocre renovation? Would and appraisal come back that high?

You don't know all of the facts. Let's say they did absolutely nothing to the home and flipped it for $100K more. All that means is they somehow bought it for $100K under market or someone overpaid (or the combo). In your example, I am guessing that they bought it below market, fixed the eyesores and now are trying to profit. But the key word here is "try". Until it actually sells for $100K more, it's a moot point.

I also agree with what Zippy said. There are risks when you buy a distressed property so you are not going to pay "retail". So it isn't like that person paid retail, put in new carpet and is now trying to spin it for $100K more. That's not going to happen.

[ARV423]

There can't be a bubble, I'm on of the thousands of brokers who were working for companies that were letting low-income buyers lie about their income, what's happening is the market is slowing down to a steady normal healthy pace, what happened is those low income buyers couldn't afford a mortgage on a half-million dolls home, so they foreclosed. There are laws in place to stop this now. I'm being laid off in two months because the boom is slowing, thank god there can't be another bubble, its just increasing and decreasing, we'll see a market like we did in the early 2000's not a slow market not a boom, just business as usual. So the economy will steadily increase

[Discovery1]

If you look at the whole world , as well as big US cities at current real estate prices then Phoenix is still relatively cheap in comparison and i do think we are just abit over half way in recovery at 6 from a scale 0-10.
Now look at a smaller picture into Phoenix metro and ask what city is best to buy interm of growth and price appreciation,,etc ?
I know most of folks will say from central Phoenix then north, and cities on the east side. Well, downtown make sense but if i have to go suburb then i will go west and the city i think will outperform all will be
Goodyear.
Perhaps, we will come back and re assess all these in the next 5 years.

[jimj]

Originally Posted by Zippyman

I just gotta say as someone who has bought a few short sales/bank-owned homes - the difference in expectations between a "retail" buyer and a buyer like myself is *huge*. Basically, the contracts for reo's and short-sales give the buyer the middle-finger in legalese. As a buyer, you're forced to sign both the standard ARMLS contract, and an addendum from the bank/seller that may be *longer* than the ARMLS contract, which basically guts *every* protection (for the buyer) in that ARMLS contract.

What you're getting from the bank or short seller is *not* the same as what you're getting from a retail seller - they very idea that a short or REO can even be considered in any way as a "comparable" to a normal sale for valuation purposes is just nuts.

Aside from that - when you consider the condition of most shorts/reos, they aren't staged, they aren't "broom clean", they often stink (literally!), need repairs & have lots of purple bedrooms and awful yards.

You can say what you want about a "marginal" rehab, but frankly, many new homes and resales up to a million bucks have kinda cheesy fixtures and $.79 sq/foot tile on the floors. I put better fixtures in my $1k a month rentals just so I don't get calls from my tenants about drippy faucets, $1.99 towel bars & cabinet drawers falling off the tracks.

If you think about it from a seller's perspective, that $500k short-sale/reo may have taken six months to close, another month of solid work to clean/paint & rehab & then you're dealing with buyers who want to nit-pick about your choice of crown moldings, appliances & doorknobs.

And if there's a problem with the house a month, three months, or a year later - the flipper is viewed as a big-bag-o-money waiting to be tapped for "failing to disclose" whether or not they even knew a problem was possible. There are many *many* threads in the "house" forum where the standard advice for a buyer who finds *any* problem with a used house is advised to sue the seller, from spiders, to mold, to cracked slabs found *under* finished flooring.

Personally, I wouldn't wire $500k off to XYZ bank in the hopes of getting $650k back (before expenses)months later, after fixing a house up for a retail buyer & offering warranties that I wasn't given myself & hoping there weren't problems with the house. There are *always* problems with used houses, and retail buyers are generally stuck in the mode of " but *I* shouldn't have to pay for that" and " I can't be expected to spend $1 in parts or ten minutes in labor on a house I just spent $XXX on!".

To be honest - if you read the posts in the "house" forum for a few days, you'll never want to sell a house again - there are soooo many posts from poor, "victimized" buyers that personally I'd rather torch my house & sell the bare lot when I'm done with it than to deal with retail buyers.

Very good points Zippy! As a REO buyer who signed one of those contracts that pretty much absolved the bank from any liability for anything, even if I found nuclear waste buried in the yard I know what you mean.
Yes, I paid less than I would had I purchased a new house or even a conventional sale used house BUT I took on all liability from the date I signed until someone else purchases it from me and we then get past the point they could possibly hope to recover from suing if they find an out of place thread in in the closet carpet.

[ShampooBanana]

Originally Posted by Galaxie Girl

People who have been investing in real estate for a long time (20+ years) know that this is not a bubble. We are simply coming off the bottom of the market cycle. Here's how the cycle works:

- Prices crash. Lending standards tighten.
- Prices reach bottom.
- Economy starts to improve. Investors pick up profitable deals, reducing available inventory or low-priced real estate.
- Low inventory prompts some to buy, thinking they will get left behind. Lenders have started to loosen standards (just a little). The investors and these buyers start bidding up prices a little because they want in, causing a ~15% jump in prices.
- More people start to list their properties for sale, increasing inventory. This causes prices to stabilize.
- Prices increase at a slow, healthy rate as the economy continues to improve.
- Lenders loosen standards more and more, and unqualified people start buying real estate (because they finally "qualify"). This increased demand drives prices further higher.
- Prices climb quickly as more unqualified people buy, and speculators buy, thinking it's going to last forever and they will be able to sell it for more in 6 months or a year.
- Smart people realize THIS is a bubble, and step back. Demand for real estate drops, the economy falters, the unqualified buyers get foreclosed upon, and you have the next crash.

It's been happening for decades. Cycles are unavoidable.

THIS. In Phoenix we are currently in between the "Low Inventory Prompts some to buy" and "More people start listing properties for sale causing prices to stabilize" parts of the cycle. Inventory is still very low but thanks in part to the recent interest rate rise prices are just starting to slow their uphill climb. Between now and a year from now we'll have some stabilization but when lenders loosen standards a bit more in response, then maybe two years from now we'll have another price spike as more people qualify again, peaking in about another 3-4 years from now. I think that's about when I'll plan to sell.

[jdahunt]

I think any comparison between Vegas and Phoenix is apples to oranges other than the values dropped significantly in bothplaces.

Phoenix processed foreclosures in a way to allow for getting houses back on the market....Vegas on the other hand has passed laws that slowed to a trickle the foreclosure process....there are many more homes there coming onto the market at some point.

I read a report stating that something like 45,000 homes in vegas weren't even set up on utilities....according to the utilities companies....that can't be good.

[NOYUCK]

When the prices mirror those of 2004, I think we'll be back to square one and doing just fine. Bubble in Phoenix, naw, not yet.

[MN-Born-n-Raised]

Click on this link Show Me the Data – Altos Research to see the Phoenix market. The values are based off of ASKING prices. So it is forward looking. Now look at the inventory on the market. It's gone up about 20% pretty fast. IMHO it's not a bubble but I think we are done with double digit annual appreciation.

Now look at Vegas see Show Me the Data – Altos Research . Vegas is on the rise with much higher future inventory pressure. They are two totally separate markets.