Housing Bubble? (health insurance, credit score, lenders)

[life_explorer]

Originally Posted by Prickly Pear

As a lifelong resident of Arizona, I'd love to be able to buy a place one day. I have moved nearly every year since I graduated high school (sometimes even two to three times a year) and I would die to be in something more permanent. Preferably a condo or townhouse in a central location. Right now I'm renting a SFH here in north Tempe (near ASU campus) and I don't see rents going down in my vicinity. I see way too many ads for houses with 0% down or 3.5% down, not even necessarily first time buyers. Most of these are for SFHs out in the boonies like San Tan Valley/Florence and Maricopa, Buckeye, something I personally would never consider due to their location. Would rather be in something smaller and more central, and less land because frankly I have no interest in yard work. But these ads do concern me, what do they mean? I can't see how selling SFHs to buyers with a minimum of 500 credit score with 0% down is a good idea in the long run.

Despite having a good credit, and a bit of savings, I don't think I'd qualify for a decent condo right now on the FHA (I've been working for less than two years, so I think I need more savings). I'd love to stay in the ASU campus area, as Tempe has grown on me quite a bit, but I will have to wait til some kind of housing bubble pop in order to get in. As a public sector employee, I think my job is fairly stable too, but housing prices seem absurd to me when I look online. I have a couple coworkers in the same boat as me, yet they are looking at buying right now, but I plan on waiting a couple more years. Most people I know are waiting for the inevitable pop.

I think you are better off buying further away from Tempe. Traffic near ASU is crazy, it took me 30 minutes to go 2 miles during rush hour near University one time...a mistake I won't make again.

I love the Tempe area but only to visit, not to live as the cost is much higher, and traffic is a major concern.

If you wait for a pop it may never come, and you will get priced out even more. Rates are low still right now, it will go up in the long run as well.

I have a friend who waited to buy since 2004. Prices escalated too much to 2006 so he waited. Then the bust came, and he was gun shy about buying because the economy didn't look good in 2008 - 2012 (he even gleefully pointed out to me back in 2012 / 2013 "I'm glad I didn't listen to you about buying, that $200k house I looked at in 2005 is now only $120k"). Then prices started rising again and he said it was too much. There was always an excuse as to why not buy. Still renting as of today.

So he's been renting for 20+ years, and the landlord just raised his rent by $100 recently. He finally said "maybe I should buy..." I feel very sad for him, he's been paying his landlord's mortgage for 20 years instead of his own mortgage.

Even if he had bought at the height of market in 2006, he would still have 13 years of mortgage payments (tax deduction + principal payments) to apply towards the house, and would only have 17 years left on the mortgage with no rent increases. Instead he rented for 20 years and threw away 20 years of payments for nothing. So instead of a house with a lot of equity and almost 1/2 way paid off, he is still on the sidelines waiting to buy.

IMHO - trying to time real estate is even worse than trying to time the stock market. You've still got to live somewhere, so you might as well apply those rent payments towards your house, whereas if you sit out the stock market you're still not throwing money away on a necessary cost of living.

Time in market is better than timing the market, for both real estate and stock market. The only argument in favor of not buying is if you foresee moving in less than 2-3 years to a new location soon. If you're going to live in the area greater than 3+ years, you should consider buying, regardless of real estate bubble (and again, there won't be a bubble like 2006 any time soon).

If you wait for a pop as an excuse to buy, I think you will miss out. No one can time a pop, and most people don't see it happening in the Phoenix area for a very very long time, if at all. As widely traveled as I am, seeing how much hyper growth there have been in other west coast cities vs Phoenix...it's shockingly clear to me how people outside of the Phoenix area see how cheap Phoenix is, and people in the valley don't really get it. The tsunami is coming... real estate prices will go up, not down.

[49erfan916]

Originally Posted by KO Stradivarius

Did anyone see Janet Yellen's (Former Fed Chairman) explanation of the current bond yields?


https://www.cnbc.com/2019/03/25/jane...-downturn.html

I guess it's possible...

[DetroitN8V]

Originally Posted by phx1205

I was curious to see what that house ended up selling for. Looks like it didn’t take long for the potential buyers to get smart and back out.
https://www.redfin.com/AZ/Phoenix/46...m_content=link

Update: that trash pile sold for $550k

https://www.redfin.com/AZ/Phoenix/46.../home/28203915

[DukeSilverPaid]

From what I have seen, the bubble was so bad in 2008 in Phoenix because it is mostly a retirement community for LA. When the economy went down, people put off retirement but builders kept building as they always do. So there was a glut. Same thing happened in florida but there it was people from the NE moving to the warmer weather.


Just wait for the economy to go down and it will happen again. The best time to buy a home is when construction workers are voicing their worry about there being no work. Any number of things can cause that but I think it will happen around when the government tightens up regulations again.

Right now is an awful time to buy because there is such a shortage of labor.

[phx1205]

Originally Posted by DukeSilverPaid

From what I have seen, the bubble was so bad in 2008 in Phoenix because it is mostly a retirement community for LA. When the economy went down, people put off retirement but builders kept building as they always do. So there was a glut. Same thing happened in florida but there it was people from the NE moving to the warmer weather.


Just wait for the economy to go down and it will happen again. The best time to buy a home is when construction workers are voicing their worry about there being no work. Any number of things can cause that but I think it will happen around when the government tightens up regulations again.

Right now is an awful time to buy because there is such a shortage of labor.

Would love to know what you have "seen" to make this statement.

[usernameAZ]

Originally Posted by phx1205

Would love to know what you have "seen" to make this statement.

LOL right? That is one of the most uninformed and incorrect posts I have seen in a very very long time.

DukeSilverPaid is so far off from reality I'm not sure if it's intentional or not.

[yukon]

Originally Posted by Prickly Pear

I can't see how selling SFHs to buyers with a minimum of 500 credit score with 0% down is a good idea in the long run.

I used to work for a mortgage company that specialized in lending to buyers like you describe. They were good risks, as the house/rent and car are the two things paid first usually when money is tight. The key isn't the credit score, it's the amount of the purchase. A buyer with a 500 score is as likely to pay their mortgage as a 850 score buyer IF the monthly payment is affordable. It wasn't credit score that got us in the mess in 2008 - it was approving buyers at any score for mortgages that were higher than the buyer could afford. IMO.

[Skerzz]

People with good credit scores don’t typically purchase homes with mortgages they cannot afford (hence the good credit score)

[Potential_Landlord]

Originally Posted by yukon

I used to work for a mortgage company that specialized in lending to buyers like you describe. They were good risks, as the house/rent and car are the two things paid first usually when money is tight. The key isn't the credit score, it's the amount of the purchase. A buyer with a 500 score is as likely to pay their mortgage as a 850 score buyer IF the monthly payment is affordable. It wasn't credit score that got us in the mess in 2008 - it was approving buyers at any score for mortgages that were higher than the buyer could afford. IMO.

This is a very good point, Mr Yukon! In addition what made the situation get truly out of control was to approve specuvestors for multiple home loans as "owner occupied" with no down payment. If only this one restriction had stayed in place - that you need 20%ish downpayment for investment real estate, the situation would not have gotten out of control the way it did.
The reason being - if you live in your home you will make do even when it's tight or the prices tanked, but if you have say 10 investment properties and no skin in the game / zero down you let go immediately when prices go down... and that's 10 distressed properties instead of one if you bought in over your head on your own place. This one restriction alone still in place and we would not have had 20% of the problems we had 2008.
Aside from all the woulda, coulda, shoulda... the mortage vintages 2000-2006 were probably the worst, the ones from 2008-2013 were probably the best ever with the smallest default rate ever.

[Burning Madolf]

Originally Posted by Skerzz

People with good credit scores don’t typically purchase homes with mortgages they cannot afford (hence the good credit score)

But what if scores a being artificially inflated?
https://www.bloomberg.com/news/artic...-on-real-risks