Effects to Phoenix of another housing bubble burst? (low income, real estate market)

[BjornT]

This came up deep in another thread, but I am curious to know the general opinion on things (preferably based on data, if possible):

The house-price-to-income ratio currently has a BIGGER gap than it did before the last bubble burst. Although this is a nationwide figure, Phoenix-area prices still seem a little high. IIRC, average prices are about 50% higher than before the housing boom. Is this just inflation?

That brings me to the question: does one buy now when interest rates are low, and then ride it out, or does one wait until the correction, but risk higher interest rates when the time comes?

[autism360]

Cost of Living Comparison Between Chicago, IL, United States And Phoenix, AZ, United States

There is no bubble, Phoenix rents and housing costs are low compared to many other states and we attract many from California and Illinois because the housing costs there are very costly. Check out the link above and see all the other costs that are also lower here in Arizona.

[JGMotorsport64]

Originally Posted by autism360

Cost of Living Comparison Between Chicago, IL, United States And Phoenix, AZ, United States

There is no bubble, Phoenix rents and housing costs are low compared to many other states and we attract many from California and Illinois because the housing costs there are very costly. Check out the link above and see all the other costs that are also lower here in Arizona.

That wasn't the question.

In the upcoming market correction we will see housing prices fall, but I don't see Phoenix being hit like other growing cities by virtue that our growth has been pretty tepid until recent. I'd imagine that housing costs are going to grow for the next year or so in Phoenix by virtue of the fact that we will have returned to pre recession economic levels, and that our economy doesn't rely on the sectors experiencing strife like Oil or Energy. Whereas the last recession focused on the Real Estate sector which is a large part of the Phoenix economy.

So like you said you can buy now while its lower than it probably will be, or wait for the correction. If you buy somewhere established, you'll have a better chance of holding equity in the house because of that ever important rules of Real Estate.

1. Location
2. Location
3. Location

[BjornT]

Thanks, both of you. Agreed as to the cost of living. Your gas costs about $.80 less than in CA, and even your groceries are more affordable. I saw thick USDA Choice New York Strip steaks going for 1/3 what I pay locally! Mind you, I am in an extremely affluent area. But still....wow.

[John7777]

I think you also have to consider the average wages in the area. Sure, there are expensive houses in the area, but even the average house seems overly expensive. When the market corrects, those houses should become cheaper. And I'm not so sure interest rates will rise much.

[SageCats]

I believe the bubble is coming soon. I just put my house on the market and will more or less break even after closing costs. I don't want to lose money when the bubble bursts. I think that what will happen in Denver / Boulder will happen in the Phoenix area again.

[breakingbad]

Originally Posted by autism360

Cost of Living Comparison Between Chicago, IL, United States And Phoenix, AZ, United States

There is no bubble, Phoenix rents and housing costs are low compared to many other states and we attract many from California and Illinois because the housing costs there are very costly. Check out the link above and see all the other costs that are also lower here in Arizona.

Housing is not that inexpensive in AZ. COL maybe but housing is still a little too high for a low income city.

[Ponderosa]

Phoenix housing is not even at a trend line constructed from historical norms. They are still down 10-30% from what they "ought" to be. We are at what, 2004-2005 pre-bust levels ten years later? Wage stagnation is the probable culprit here. Wage growth has just started up again, though the Fed seems determined to nip that in the bud. There is not a lot of hope for housing price appreciation. On the other hand, all the doom and gloom over the economy is misplaced. Absent a recession of significance, home prices are not going to collapse. And the odds are still against a recession in spite of all the hand-wringing over the markets.

[John7777]

Originally Posted by Ponderosa

Phoenix housing is not even at a trend line constructed from historical norms. They are still down 10-30% from what they "ought" to be. We are at what, 2004-2005 pre-bust levels ten years later? Wage stagnation is the probable culprit here. Wage growth has just started up again, though the Fed seems determined to nip that in the bud. There is not a lot of hope for housing price appreciation. On the other hand, all the doom and gloom over the economy is misplaced. Absent a recession of significance, home prices are not going to collapse. And the odds are still against a recession in spite of all the hand-wringing over the markets.

I hate to break the news, but the economy has been on life support for the last 8 years or so and now, the Fed has taken away that support. It remains to be seen if they'll backtrack, but as of now, welcome to the recession. And it's pretty much worldwide. Oil is going lower still, and China is in trouble. Europe is a joke, and Japan has its own set of problems. So, don't believe what the government is telling you. The statistics are fudged. Everything is not well.

Timing the markets, including the real estate market, is easier said than done, but I think that here, people would be well advised to put of any home purchase until more reasonable prices arrive.

[BjornT]

For anyone who wants to see where 2016 is going, look up zerohedge .com