Pool is one of our wants in a home ............. (Surprise: best neighborhoods, short sale)
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When we bought our house a pool was not a requirement. We have always had pools at homes in Phoenix but wasn't using the last one so much. Then we found a house that we liked so much that we overlooked its "shortcoming". Now we find ourselves using it nearly every day. Everybody's mileage varies I guess.
I disagree with this wholeheartedly. History has shown when there is a boom, the prices that increase the most are the starter homes, when there is a bust, those are the home prices that crash hardest. I watched as values skyrocketed at a certain lower price point for a few years while the luxury market only went up moderately. It was only recently that the luxury market got very hot, but it has still not matched the huge gains (percentage wise) of the entry level home. It used to be you could haggle more with an $800K+ home because there was less traffic compared to lower price points, now there's multiple offers in many cases.
The higher end buyer is less impacted by interest rates as well. If the cost of money goes up, you can bet many entry level buyers will be squeezed out, driving prices down to meet the effective demand. People in the higher end market typically have more savings and income and won't be as impacted, keeping the prices more stable than the lower end. Just my educated opinion.
This is not to say I agree with a major correction at all. I am holding onto my rentals and don't plan to liquidate soon unless prices go out of this world.
There is always a reason(s) why one portion of housing market does better than others. So unless the variables are the same on each recession, how much the housing market will decline will be different this last recession versus the next. But make no mistake, the PHX market is overvalued like most of the country https://www.bizjournals.com/phoenix/...onsidered.html
One thing that is normally always true especially in this day and age is that there are a lot of people that are leveraged. When the economy is hurting, it's ALWAYS tougher to sell more expensive items. Housing is no exception. Every $100K more in home value knocks out a lot of people. While it is better now than a decade ago, the PHX area economy is centered around housing and tourism. When growth stops, the PHX area gets sicker than more diversified economies like MPLS or Boston. My way of thinking is if I waltz in with cash on a current valued spendy home, I won't be surprised if I get a 20%+ discount. Just like last round, cash was king. Personally, I would be nervous if my wealth was all tied into RE. I want to be diversified. I don't want to own a lot of property in peak markets. Last round, I sold most of my properties in 2005. I'm getting out of my expensive home while I can. I enjoyed a nice run-up but it is time to jump off the ride. What's the saying; pigs get fat, hogs get slaughtered. YMMV.
. My way of thinking is if I waltz in with cash on a current valued spendy home, I won't be surprised if I get a 20%+ discount. Just like last round, cash was king.
This just does not happen, especially on the luxury end. Cash deals are not that uncommon and if there is a better deal to be had in a normal transaction buying with cash it's typically 2-3% or less (usually right at market value). It's really easy to see these if you have MLS access.
I do agree about not having all of your eggs in the real estate basket. In my case I use real estate as diversification away from my other investments, and real estate has performed the best. With the rental market the way it is, even if prices drop 25% it will be just fine.
This just does not happen, especially on the luxury end. Cash deals are not that uncommon and if there is a better deal to be had in a normal transaction buying with cash it's typically 2-3% or less (usually right at market value). It's really easy to see these if you have MLS access.
I do agree about not having all of your eggs in the real estate basket. In my case I use real estate as diversification away from my other investments, and real estate has performed the best. With the rental market the way it is, even if prices drop 25% it will be just fine.
I wasn't very clear. We agree, cash deals are semi-meaningless in today's market. As you mentioned, you don't get much of a discount with cash other than you get the deal while the guy who finances loses out (again and again). My point about cash only assumed I get the deal over someone who doesn't have cash who is trying to get the deal PLUS and extra couple percent off.
Because I have cash and am not financing, I'll spend more than someone who is now staring at a smaller, less expensive home. Last go around if you wanted to spend $800K on a property, you could have bought a formally $1.8M (yea, I pulled a number out of my butt) home. My broader point was the top end got KILLED. Therefore I'll be shocked if a $900K home in Chandler doesn't drop by 20%. even more on a $1.xM home in Chandler. That was my only point. The bigger they are the harder they fall.
The guys who get hurt beyond repair are always the leveraged ones (and often the banks).
"The bigger they are, the harder they fall" is true in fistfights not real estate. The lower end/subprime low income individuals shoe horned into a mortgage are those that have historically fallen the hardest. A lot of people in luxury homes have cash to pay off their homes several times over but use a low cost of money mortgage as a tool to build more wealth, because they're good at math
My way of thinking is if I waltz in with cash on a current valued spendy home, I won't be surprised if I get a 20%+ discount. Just like last round, cash was king.
If I could get a 20%+ discount just because I was paying in cash I'd own a lot more than I do now, or not because that is a nice profit for a no work flip. Cash or mortgage isn't going to mean much in a good market like what we are in now at all price points. When things are on a steep downturn then cash means something but even then it is going to be hard to get a 20%+ discount, exceptions being situatuons like the years around 2010.
If I could get a 20%+ discount just because I was paying in cash I'd own a lot more than I do now, or not because that is a nice profit for a no work flip. Cash or mortgage isn't going to mean much in a good market like what we are in now at all price points. When things are on a steep downturn then cash means something but even then it is going to be hard to get a 20%+ discount, exceptions being situatuons like the years around 2010.
"The bigger they are, the harder they fall" is true in fistfights not real estate. The lower end/subprime low income individuals shoe horned into a mortgage are those that have historically fallen the hardest. A lot of people in luxury homes have cash to pay off their homes several times over but use a low cost of money mortgage as a tool to build more wealth, because they're good at math
After the last crash, I know more than a dozen broke RE "experts". I have to admit, they were good at building wealth by leveraging during the run-up. They were the envy of their friends as it seemed so easy.
But very few were smart enough to know when to get out so in fact they were economic dimwits. That makes sense: someone comfortable with leveraging themselves has a way of feeling overconfident. I'm not one to leverage my money when I see my path to easy street. As I said, pigs get fat, hogs get slaughtered. And in 2008, there were a lot of slaughtered RE experts. If I was leveraged right now, I'd be solidifying a portion my gains and counting my lucky $$'s. The upside could be less in a mild recession but the downside could be all but mitigated especially if you bought at the right price. But I'm conservative. I like the feeling of going home at night knowing that I don't have to work and the economy cannot drag me down. Not the stock market nor RE. Others feel the rush of the risk. To each their own and plenty of times the risk pays off. But why risk it when you have it???
Re: the percentage of drop and the price of the home. As always, there are too many people in every neighborhood in America that doesn't save enough. Statistically speaking, only the top 1% are strong savers. At the top 10% of wage earners save a mere 10% of their income. See https://www.financialsamurai.com/the...-wealth-class/ That means there are a lot of top wage earners that spend everything that they make. Worse yet, they spend more than they make. So rest assured there will be p-l-e-n-t-y of leveraged higher income earners that are forced to sell next go around. I will be circling them like a vulture. That's why boats, RV's, and other luxury items were selling for CHEAP last go around.
I'll give you an example. I'm sitting on a lake home where nearly all of the buyers are doing extremely well in life. They are buying a 2nd home as a toy and it's not uncommon for them to spend $700K to $1.5M. Sure. Some stroke a check and they are the smart people that really can afford it! Yet others put a mere 20% down. Then they buy their new $175K+ Malibu boat. In fact, wake boards are littered on the lake. So I pull in that dealership with my used, 13 year old $20K boat for service. I asked the local retailer owner how many people pay cash. Answer: under 10%. He explained 90% finance them for 20 years. So now you know why I feel a storm coming. There are a lot of people that are doing well income wise and have no back-up.
Rest assured there are a lot of home buyers in your fine town that are also living large and living on the edge. So just as you paid below market on every home, I plan to do the same. As an example, I don't need for the entire market to drop by 20% to get a 20% discount. It's no different than last round where I got a 60% discount when AZ peak to trough was 50% https://www.corelogic.com/downloadab...nal-030118.pdf . I was at the top of the local sub-market (a more expensive home in a more expensive neighborhood for my sub-market. the nicer properties always drops more inside of the sub-market). That was my point.
I'm off topic so I'm done philosophizing. But I've enjoyed the conversation.
After the last crash, I know more than a dozen broke RE "experts". I have to admit, they were good at building wealth by leveraging during the run-up. They were the envy of their friends as it seemed so easy.
But very few were smart enough to know when to get out so in fact they were economic dimwits. That makes sense: someone comfortable with leveraging themselves has a way of feeling overconfident. I'm not one to leverage my money when I see my path to easy street. As I said, pigs get fat, hogs get slaughtered. And in 2008, there were a lot of slaughtered RE experts. If I was leveraged right now, I'd be solidifying a portion my gains and counting my lucky $$'s. The upside could be less in a mild recession but the downside could be all but mitigated especially if you bought at the right price. But I'm conservative. I like the feeling of going home at night knowing that I don't have to work and the economy cannot drag me down. Not the stock market nor RE. Others feel the rush of the risk. To each their own and plenty of times the risk pays off. But why risk it when you have it???
Re: the percentage of drop and the price of the home. As always, there are too many people in every neighborhood in America that doesn't save enough. Statistically speaking, only the top 1% are strong savers. At the top 10% of wage earners save a mere 10% of their income. See https://www.financialsamurai.com/the...-wealth-class/ That means there are a lot of top wage earners that spend everything that they make. Worse yet, they spend more than they make. So rest assured there will be p-l-e-n-t-y of leveraged higher income earners that are forced to sell next go around. I will be circling them like a vulture. That's why boats, RV's, and other luxury items were selling for CHEAP last go around.
I'll give you an example. I'm sitting on a lake home where nearly all of the buyers are doing extremely well in life. They are buying a 2nd home as a toy and it's not uncommon for them to spend $700K to $1.5M. Sure. Some stroke a check and they are the smart people that really can afford it! Yet others put a mere 20% down. Then they buy their new $175K+ Malibu boat. In fact, wake boards are littered on the lake. So I pull in that dealership with my used, 13 year old $20K boat for service. I asked the local retailer owner how many people pay cash. Answer: under 10%. He explained 90% finance them for 20 years. So now you know why I feel a storm coming. There are a lot of people that are doing well income wise and have no back-up.
Rest assured there are a lot of home buyers in your fine town that are also living large and living on the edge. So just as you paid below market on every home, I plan to do the same. As an example, I don't need for the entire market to drop by 20% to get a 20% discount. It's no different than last round where I got a 60% discount when AZ peak to trough was 50% https://www.corelogic.com/downloadab...nal-030118.pdf . I was at the top of the local sub-market (a more expensive home in a more expensive neighborhood for my sub-market. the nicer properties always drops more inside of the sub-market). That was my point.
I'm off topic so I'm done philosophizing. But I've enjoyed the conversation.
Ugh, why all of the extremely wordy posts? You know people don't have time to dedicate to reading all that right?
Ugh, why all of the extremely wordy posts? You know people don't have time to dedicate to reading all that right?
It was wordy to explain myself. Without the explanation, you won't get my POV. People nowadays only have the concentration to read something the size of a text. I didn't realize 30 seconds of reading would trip you up.
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The bigger they are the harder they fall. 
The upside could be less in a mild recession but the downside could be all but mitigated especially if you bought at the right price. But I'm conservative. I like the feeling of going home at night knowing that I don't have to work and the economy cannot drag me down. Not the stock market nor RE. Others feel the rush of the risk. To each their own and plenty of times the risk pays off. But why risk it when you have it???
That's why boats, RV's, and other luxury items were selling for CHEAP last go around.
