Phoenix Real Estate Predictions 2018 (Sun City, Surprise: rental car, renter, insurance)

[jimj]

Originally Posted by hikernut

Agreed. I'm a little bit older than you, but will be really surprised if I see another asset price collapse like that during my life, in real estate or in stocks.

I found some numbers on Investopedia showing the median U.S. home sale price going back to 1969. There were no declines nationally, going back to 1969, until the Great Recession.

Yes we've had regional declines. They tend to be tied to specific economic events. One of the worst during my life was due to the collapse of energy prices in the 1980s. Home prices in Texas, Oklahoma, etc, were crushed.

So one needs to ask what could happen in Phoenix?

Water issues,weather issues like hotter weather (if that's even possible) or a complete 180 weather turn (think snow) or a natural disaster as yet unseen in AZ like frequent Tornadic behavior.

[hikernut]

Originally Posted by Zippyman

We (the U.S.) could start something with North Korea, China or Russia, or have another major terrorist attack.

If you think back, we never had zero % financing for cars until after 9/11 - the economy tanked & old gm was trying to offload the last of the Oldsmobile brand, so they subsidized the interest rate to zero.

I can absolutely see the wheels falling off with our current leadership- we never fixed the problems with the big banks & now they're bigger (and more dangerous) than ever.

Even a minor kerfluffle in the middle-east could bring back $4 gas & that would immediately tank the far-flung suburbs here. Wasn't that long ago that people were walking away from their houses in QC & Casa Grande, cause they did the math & realized that they were spending $800 /mo just for gas to drive into civilization for jobs.. Seems like we've got just as many gas-guzzling lifted 4x4's as ever on the roads here.

We did manage to make it through Vietnam, Watergate, bell bottom jeans, the oil crises of the '70s and the ensuing energy bust of the '80s, the Black Monday stock crash, the dot-com collapse, 9/11, etc, all without a nationwide drop in median home price. Something will do it... someday... but I sure couldn't guess what it will be nor when it will happen, and I certainly wouldn't wait to buy a house because someday... for some reason... home prices will drop.

[hikernut]

Originally Posted by jimj

Water issues,weather issues like hotter weather (if that's even possible)

I'll be outta here eventually to escape the heat. But lots of folks seem fine with it.

[Tall Traveler]

Originally Posted by hikernut

I'll be outta here eventually to escape the heat. But lots of folks seem fine with it.

I get that but unless you are going to California close to the ocean, you either are going to have to deal with cold, humid, rainy, cloudy, hot, windy, etc. I look at it as how many days will you have weather that you want to be outside and Phoenix has more good days of weather over the course of the year than 90% of the US.

For sure Socal has a better climate but then you have to pay the good climate tax (housing cost).

[Burkmere]

Originally Posted by Tall Traveler

I get that but unless you are going to California close to the ocean, you either are going to have to deal with cold, humid, rainy, cloudy, hot, windy, etc. I look at it as how many days will you have weather that you want to be outside and Phoenix has more good days of weather over the course of the year than 90% of the US.

For sure Socal has a better climate but then you have to pay the good climate tax (housing cost).

And a much higher state income tax, and more for gasoline, and much of CA gets very hot, also...and more traffic, and ...well, hey, I moved from there after 35 years working there so I'm biased..

[Potential_Landlord]

Originally Posted by hikernut

We did manage to make it through Vietnam, Watergate, bell bottom jeans, the oil crises of the '70s and the ensuing energy bust of the '80s, the Black Monday stock crash, the dot-com collapse, 9/11, etc, all without a nationwide drop in median home price. Something will do it... someday... but I sure couldn't guess what it will be nor when it will happen, and I certainly wouldn't wait to buy a house because someday... for some reason... home prices will drop.

Imagining some remote catastrophic scenario compromises rational and calculated decision making. I know that's not cool, not Nassim Taleb "Black Swan" cool. I will never be able to say "told you so" after as many decades. - I'd rather follow Warren Buffet and develop a good investment strategy that works over the long term and regardless of current panic or euphoria moods.

[SOON2BNSURPRISE]

Originally Posted by Burkmere

That sounds good. Hopefully, I'll be joining you within a year or so. I take it you are in Surprise? A retirement community or somewhere else?

LOL, Our plan back in 2007 was to move to Surprise. My parents had moved there in 2003. We love the area. We had a home built in 2008 in Surprise. Dumbest thing I did was to not get a job in the area before having a home built. When the economy started to fall apart I was not able to find anything in the area. Then again I was accustomed to making more money than some places were offering and I mentally could not work for less. Maybe that was a bad on my part. Not entirely sure.

We never closed on the home. I was there every month or so to check on its progress. It was disappointing to not be able to complete the deal.

Then again we all know how things turned out after that. The market fell apart. I spent the next couple years watching the Phoenix area market. I was not keeping an eye on the market in my area, on the coast in California. Someone mentioned to me that prices had declined drastically in our area. We started checking things out and changed our focus. In 2010 we were able to close on a home in Oxnard, CA a city that both my wife and I grew up in. Our home in Oxnard had shot up in price to the high $600 low $700 range, at least within our neighborhood. By the end of 2010 prices had declined to the mid $350,000 range. Our home was on the market back then for $346,000 and we offered the bank $310,000. It was the best decision that we had made.

This year alone two homes on our street have sold for over $500,000. A close friend told us we could probably sell our home for $520,000 easy in today's market. It is funny. Now that we have a lot of equity, paper wealth in this home, we want to stay where we are at. The current plan will have this home paid off in just under 12 years. My wife though, she has talked about selling and paying cash somewhere else. She has Surprise, Las Vegas, and a city in Tennessee on her mind. All for different reasons.

[MyBad1]

Our story is much like SOON2BNSURPRISE. We had thoughts of moving here in 2002ish. I couldn't get transferred here at that time, next my son was starting high school so the plans were off again, next was the housing bubble burst, lost the house, a couple years, purchased a cheap short sale dumper, in the Bay Area. Spent about 6 years slowly remodeling. Always thinking of moving to AZ.

Finally prices boosted to almost 2005-6ish prices again, last year. This time, I'm retired, son is out of school, house is fully remodeled, owe very little, people are going crazy looking for homes in our area. It finally happened, and we are is a good place in life to boot.

Hard to say what may have happened, if I did get the transfer originally. Hard to predict the future, right?

[hikernut]

Just for reference, here's a 100-year chart of U.S. home prices, adjusted for inflation...

Case Shiller 100 Year Chart (2011 Update) - The Big Picture

One can see the huge run up and subsequent collapse since the beginning of this century. If you take out those few years it would be more of the same post-WW2 situation of prices basically tracking inflation, with a few small bumps here and there.

You can go on FRED and find charts for individual cities. Those are not inflation indexed so one has to keep that in mind. If we look at the Phoenix chart...

https://fred.stlouisfed.org/series/PHXRNSA

... and take out the run-up, collapse, and recovery... roughly 2004-2013, we have a pretty quiescent upward trend in prices. There's been no run-up at all today, not even the beginning of one.

[Potential_Landlord]

Originally Posted by hikernut

Just for reference, here's a 100-year chart of U.S. home prices, adjusted for inflation...

Case Shiller 100 Year Chart (2011 Update) - The Big Picture

One can see the huge run up and subsequent collapse since the beginning of this century. If you take out those few years it would be more of the same post-WW2 situation of prices basically tracking inflation, with a few small bumps here and there.

You can go on FRED and find charts for individual cities. Those are not inflation indexed so one has to keep that in mind. If we look at the Phoenix chart...

https://fred.stlouisfed.org/series/PHXRNSA

... and take out the run-up, collapse, and recovery... roughly 2004-2014, we have a pretty quiescent upward trend in prices. There's been no run-up at all today, not even the beginning of one.

Good charts. Just a couple of comments:
With homes, nominal price changes matter because they are usually heavily leveraged with loans. Debt is always nominal. Any move up nominally goes to your own pocket and also vice-versa. This can make a big difference. Just ask coastal California homeowners.
Homes are not good for wealth creation long-term compared to stocks, bonds and many commodities. But you have to have a plan how to avoid the significant draw-downs in the other asset classes. While buying stocks for the long term is advisable, I would not recommend to simply hold until you need the money. Too much volatility.