How much slower is our Phoenix RE market Right Now? (2014, rentals)

[Potential_Landlord]

Originally Posted by actinic

Actually it plays right into it. Price rose enough for the seller to list the home. The seller may not have broke even but considered it an acceptable loss. Certainly not at 50 sqft. Many other potential sellers out there crossing their fingers for continued improvement.

Would they not have opted for a foreclosure / short-sale in years past as they could avoid the tax penalty from forgiven debt? I think from this year on you will incur the tax on forgiven debt again.

[Potential_Landlord]

Originally Posted by sh9730

Just a quick antecdote on this topic down here in Casa Grande. My brother is a realtor and he has been busy down here. Yesterday listed a property and it went under contract the same day! It was just a decent (but nice condition) house with a small lot with a small pool in a standard clean neighborhood. Nothing super special about it...


So, my point is if it is priced right (this one was in the 170K range for 2100 SF on a less than 6K lot) it will sell....

That's good and encouraging to hear We want fast sales at good prices.

[Potential_Landlord]

Originally Posted by PhxMan500

2011 really felt like the bottom of the trough, or the anti-bubble in response to the bubble five years earlier. The mini-boom seemed like more of an adjustment from going too low. It really "feels" more like normal now with more realistic expectations from buyers and sellers, no crazy frenzies, etc. There are few other cities that experienced the extremes like we did, but I completely agree with your sentiment that we do seem to be ahead of the national trends and have been for at least the last decade.

I wonder how many of our neighborhoods went above the "critical" %age of rentals that is consistent with a general downturn of the area. Unfortunately our experience in Phoenix is when more and more homes in a neighborhood are rentals it turns it undesirable. I wonder how many more of our neighborhoods in Phoenix turned that way because of the flood of investment money coming in. Not saying that it's a bad thing investors bought the market up from its dismal lows but that could be a side-effect.

[actinic]

Originally Posted by Potential_Landlord

We want fast sales at good prices.

For both buyers and sellers.

[actinic]

Originally Posted by Potential_Landlord

I wonder how many of our neighborhoods went above the "critical" %age of rentals that is consistent with a general downturn of the area. Unfortunately our experience in Phoenix is when more and more homes in a neighborhood are rentals it turns it undesirable. I wonder how many more of our neighborhoods in Phoenix turned that way because of the flood of investment money coming in. Not saying that it's a bad thing investors bought the market up from its dismal lows but that could be a side-effect.

Good point. Having an overabundance of rentals in a neighborhood is never a good thing and could spell continued trouble for any meaningful and sustained price increases. In fact they could be the first segment of the housing market to turn negative again.

[MN-Born-n-Raised]

Originally Posted by actinic

Good point. Having an overabundance of rentals in a neighborhood is never a good thing and could spell continued trouble for any meaningful and sustained price increases. In fact they could be the first segment of the housing market to turn negative again.

Here in our Surprise neighborhood (the epicenter of foreclosures), rentals peaked slightly over 25%. Now rentals are at 15% and still falling. Investors are getting out.

[Potential_Landlord]

Originally Posted by MN-Born-n-Raised

Here in our Surprise neighborhood (the epicenter of foreclosures), rentals peaked slightly over 25%. Now rentals are at 15% and still falling. Investors are getting out.

That's a good thing that investor buys are only temporary and then moved on to "real" homeowners. I hope that that's possible everywhere here.

[Zippyman]

Originally Posted by Potential_Landlord

That's a good thing that investor buys are only temporary and then moved on to "real" homeowners. I hope that that's possible everywhere here.

I think you might be mis-interpreting that statistic - 25% of purchasers *were* landlords, and now perhaps 15% of *current* sales are to landlords.. it doesn't mean the landlords are selling anything, just buying less. There really isn't any compelling reason to sell off rentals right now - a million dollars in the bank might get you $20 a month in interest - if you can't beat $20 a month as a landlord with a million in holdings, you're a pretty sorry landlord..

[MN-Born-n-Raised]

Originally Posted by Zippyman

I think you might be mis-interpreting that statistic - 25% of purchasers *were* landlords, and now perhaps 15% of *current* sales are to landlords.. it doesn't mean the landlords are selling anything, just buying less. There really isn't any compelling reason to sell off rentals right now - a million dollars in the bank might get you $20 a month in interest - if you can't beat $20 a month as a landlord with a million in holdings, you're a pretty sorry landlord..

To be clear, I'm specifically speaking about my hood (Marley Park and 1000 or so homes). I'm talking about percentage of owners versus renters. I know several former neighbor owners that went though a foreclosure, rented while their credit healed, and now are back as home owners in the exact same hood. Also, several new homes have been sold which dilutes the percentages (no investors are buying new).

But certainly homes that were for rental investments have been spun. IMHO, the only way you can make money on a single family home is by renting it short term furnished or to college students where they split the rent 5 ways (and put as little as possible into them). Shy of those two models, buying single family homes can only make money by fast appreciation or flipping. At traditional inflation appreciation rates and in the long run, the best you can hope for is breaking even. It takes multi dwellings (>8 is ideal) resulting in economy of scale to turn a rental profit where you don't count on appreciation to make bank. Wear-and-tear and style changes will eat up your perceived gains. I don't know many people who calculate the real costs correctly.

So a 4% appreciating SFL is NOT making money. IF I looked at my place as an investment, I would have sold last year.

[AZPam]

Many of you may have heard of Michael Orr who is typically considered the real estate guru for the Phoenix area. Recently, he put out his take on the Phoenix housing market and I found it interesting enough to share with all of you. He had 9 bullet points:

1. Yes, the Phoenix housing market is in a bit of a slump

2. Both supply and demand are below normal rates, not something we normally see

3. Pricing is down in the past 3 months

4. Pricing is expected to continue to decline until the end of the year

5. Home ownership is the lowest it's been in the last 20 years

6. Builder traffic is at an all time high but sales are at an all time low

7. New home sales equals 11% of our current market but the normal rate is typically closer to 30%

8. Total sales are down 16% from a year ago

9. Our market is still expected to grow about 5% by the end of the year


All of this is being blamed on the lack luster interest in home ownership from the millennial generation (20 something's to early 30's). They seem to be very content to rent when typically this age range would be expected to be buying their first homes. This segment of our population has always played a big role in home demand. Student loan debt could also be playing a huge factor for this age group.

Another reason for the low demand is that there is still a lot of people sitting on the sidelines waiting for their short sales, foreclosures or bankruptcies to come off their credit records. 2016 thru 2018 are expected to bring a lot more buyers back into the market.