Unusually high prices for new homes (Phoenix: middle-class, real estate, rental)

[Potential_Landlord]

I came across this interesting facet of our housing market in this current cycle. Overall, new construction activity is still very low, probably because of the over-build in the housing bubble and the reluctance of first-time home buyer to dare the purchase. However, new homes are being sold at record price-to-median-income ratios across the country. Somehow, builders seem to have a lot of pricing power and build only where they see good margins. Compare, for example, with the 1990s cycle.
Do you see the same across the Phoenix metro area? It seems to me home-building here is mostly happening from the 400k range on. What are your experiences? -Thanks.

[grmi66]

Don't know about new homes, but know in my older historic neighborhood people are snapping up houses for $300-450,000. This is in a neighborhood that is still not completely gentrified, so people are risking a lot of money in hopes that the positive neighborhood trend continues.

[John7777]

I've been looking at real estate, including real estate in the Phoenix area. And what I see is just another bubble. Silly prices.

[Potential_Landlord]

Originally Posted by John7777

I've been looking at real estate, including real estate in the Phoenix area. And what I see is just another bubble. Silly prices.

To me it seems that builders only build for the well to-do right now. They don't even seem to target middle-class home buyers any more. Back to renting for the peons.

[Hschlick84]

It's not just Phoenix, Denver cost of living is sky high and you have to make at least $35 an hour or more to get by here. I think most major metropolitan areas are reaching pre-recession mortgage prices.

Renters need to make $35 an hour to afford housing in metro Denver - The Denver Post

Here's one for average rental prices in Denver metro. I'm sure Phoenix metro will reach levels rental prices like this.

http://www.bizjournals.com/denver/bl...n-vacancy.html

[Bungle]

Originally Posted by Potential_Landlord

To me it seems that builders only build for the well to-do right now. They don't even seem to target middle-class home buyers any more. Back to renting for the peons.

I've noticed this too. I live in South Phoenix and there's actually a lot of new construction going on around Baseline from 40th St to 24th. I've looked into the homes and most are starting at around $400k...and they're selling pretty quickly. Not much in the mid-range at all.

[Zippyman]

I think the demographic that can afford $400k+ homes is on a different playing field than those that can afford "median" homes. Those that can pay the higher price are at a completely different level of economic security, than those looking for the cheap seats. There was an economic crash here in high-end homes & they bounced back right near where they were, quicker than lower end homes. I think what we're seeing now is a stratification of economic "classes" - those that rent, those that can buy (anything), and an upper class that is largely unaffected by a wobbly economy.

[asufan]

Originally Posted by Bungle

I've noticed this too. I live in South Phoenix and there's actually a lot of new construction going on around Baseline from 40th St to 24th. I've looked into the homes and most are starting at around $400k...and they're selling pretty quickly. Not much in the mid-range at all.

Silva Mountain down there starts in the low 200's and it gets really affordable if you head West into the Laveen area. Laveen might be a good investment before the freeway comes in and makes it more desirable.

[Paige65]

According to Cromford Daily Report on Tuesday, February 2, builders are doing some smaller, lower priced homes.


Cromford Report Daily

[Ponderosa]

I see plenty of new homes going up in my area (SW Valley) and they are in the 200s mostly.

Also, when looking at price to income ratios consider that interest rates are at historical lows. For most of my life, interest on mortgages was -7-10% or more. At today's rate, the median income can buy much more house than it could in the 80s or 90s.