Caution! Home buyers! Possible price correction coming to Phoenix! (Glendale: loans, how much)
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I used to live near Dr. Doom, Marc Faber. Smart billionaire, but the joke going around was that Marc correctly predicted the last recession...six times. A broken clock displays the correct time, twice per day.
I used to live near Dr. Doom, Marc Faber. Smart billionaire, but the joke going around was that Marc correctly predicted the last recession...six times. A broken clock displays the correct time, twice per day.
When you give probabilities that an event is going to happen versus a guarantee, then the broken clock analogy doesn't apply. But people want to be right so they place their bet and say it more forcefully. More often than not, they have egg on their face.
About a year to a year and a half ago (and if I was you), I would have sold a couple of properties under the spirit of "hogs get fat, pigs get slaughtered". I smelt the economy getting sick. But I wasn't studying the data this go around so my gut feeling wasn't relevant. Knowing his vocation and pedigree, I absorbed ShampooBanana's posted words (and a PM) which suggest my concerns were not rational. Then, a quick read of Cromford report suggested there was still a lack of housing stock and a lot of demand. Then, it was simply a pause that the rates went up and irrational bidding stopped for a while. People didn't realize what was going on so they inaccurately felt home prices could come down. The bold word is an emotion which has nothing to do with the data. I think our beloved op falls in that same category. It's as if he wants to say "I told you so" based off his feeling and has googled bad news and found it (you can always find a bear in a bull market). I digress..
So for at least another year plus, I'd ride the housing market if I had investment properties. The economy would have to get severely sick in order to have a large PHX drop. It could. But the catalyst won't be a PHX housing bubble. By definition, ShampooBanana's POV which was obviously influenced in part by the Cromford report and could be wrong. But if someone was in Vegas, bet on the PHX housing market to go up over the next couple of years, not down.
Mike Orr once accurately said that the great thing about the housing market is you have a solid 6 months to read that there is a turn around. In the stock market, it could drop fast in a week.
I'm with Mike from back east too. Homes have ballooned in value partially because it has become one vehicle for investments. Cheap mortgage rates supposedly was designed to help out people buy homes but all its done is increase the home prices and create another "market". And as he said, the tax breaks for interest incentivises people to act irresponsible and "mortgage-up". Financial idiots! And the tax breaks for rental owners (which I was a pro at when I flipped homes and rented out in the short term; I paid squat in taxes for my gains).
But that's the game and I'm forced to play it. I suppose it helps my net worth as I own my homes free and clear. The cheaper the interest rates, the higher my homes climb. But it doesn't help my 28 daughter and 25 year old son who will eventually get to get all leveraged in mortgage debt in order to buy a home. I can sleep at night knowing they picked semi-recession proof jobs and at the high end of the pay scale. But there are a lot of people that are going to be screwed in the next recession. Thanks to the system that is in place. Especially the people just starting out and the people on the lower income quartile.
The housing market is like overpriced college tuition. FAFSA pays too much for higher education and student loans help inflate college tuition as a whole. That's because financial dimwits (students) can "afford" the expensive educational experience which is all backed by Uncle Sam. Nobody seems to care about this or inflated housing prices.
I remember Feb. of 2006 thinking should I get out? I still had time. People were buying in 2006.
But I never expected more than a 10-15% correction.
I also never expected home prices to rebound as fast as they did either.
2010 plenty of people were talking about the "shadow inventory" Don't buy. Another round of price slashing is coming.
However, the sharks. The same people who bought early and sold by 2007 were out in full force.
From this source I find just over 1M family households in the Phoenix area thus if 13% are rentals then we're in the ballpark of 100,000 to 130,000 rental homes. If just ten thousand of these were put into the market for owner-occupants it would exert downward pressure on prices and allow more younger people to become owner-occupants.
Not sure where that source is getting their data from but it's way off (I can't even find anything that lists a source which is a) copyright infringement, and b) a sign it's probably not any good).
For one, it states only 2 people per household. It's actually 2.7- 2.8 per census estimates (big difference) and while likely a bit lower thanks to younger generations delaying having families and having fewer kids overall, I doubt the 2020 census will show much lower than 2.5-2.6 per HH.
It also states there have been only 70,000 households added since 2010. Uhhh no. We added over 30,000 in the past year alone and nearly 200,000 total since 2010.
It states that a total of just over 1.6 million households. The actual census number (higher now since their most recent data was from 2017) is closer to 1.7 million.
It says there are 1.86 million total housing units. It's actually very close to 2 million.
Finally it states median HH income at about $54,500. That's pretty close to the 2014-15 number suggesting to me their data might be that old. Most recent numbers from Moody's Analytics shows median HH income at a little over $65,000.
However, you're point still stands that if a good chunk of those were put on the market it would exert downward price pressure. That is true, sure. It's fair to assume that a good number of those properties are already turned over regularly as investors seek to profit from sales, refocus into other investment vehicles, try to seek better returns, and some of those may already be flip properties so they will look for their next flip opportunity.
But do note that there are roughly over 100,000 resale closings in a given year plus over 30,000 new housing units added in a given year in the Phoenix metro. Also, a big share of those investor owned properties are at the low end of the price spectrum and concentrated in certain areas. It would have a disproportionate impact in those areas with the most lower income rental housing but many areas would likely be little impacted.
Thanks again for the better figures. Good to have those insights; forums run best on good data.
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LOL, right?! This guy has done nothing but spout off anecdotal nonsense with zero to back up his claims. Let’s see some data, or let’s drop this nonsense.
The frequent denials by the real estate industry prior to, and during, the implosion didn't help their credibility. In early 2008, I recall an analyst from now defunct Washington Mutual saying it was a small sliver of the sub prime market, specifically, 10% of 7%, and there would not be a crash. How many used baseball inning analogies over and over. We are in the bottom of the eighth.. seemed like they were at a completely different game. Not trying to politicize this, but if Warren or Sanders are elected, there will be huge waves through the financial markets.. The Dow going below 20,000 in 2020 is a real possibility.
I remember Feb. of 2006 thinking should I get out? I still had time. People were buying in 2006.
Yep. Those who got out had a line at the door for people ready to buy. I posted the op words back in 2007. Then, he was asking for another helping of debt in the epicenter of the PHX foreclosure crisis (Surprise). But he told us so!
Quote:
Originally Posted by john3232
But I never expected more than a 10-15% correction.
I also never expected home prices to rebound as fast as they did either.
No one did. ZERO, nada.
Quote:
Originally Posted by john3232
2010 plenty of people were talking about the "shadow inventory" Don't buy. Another round of price slashing is coming.
In hindsight, the government pooched things so badly. A solid WTF type screw-ups! Here are a few: Waiting for 1-4 year before they kicked people out of their homes (people moved and stopped paying their mortgage. Some extracted the rent while never paying their mortgage for years. Or allowing any state to offer a non-recourse mortgage which still includes AZ https://www.creditsesame.com/blog/lo...ecourse-loans/ etc
Something as simple as immediately restructuring EVERY (idiotic) balloon payment loan much faster. Basically push out every balloon interest rate increase and apply the accumulating interest that they would have paid on the mortgage. They eventually did some of that in the 4th quarter of the game after the incentivised people to not pay their mortgage in order to get help. The government is as nimble as a turning around an aircraft carrier. Their mismanagement help exacerbate the downturn by dragging the whole country into a deeper recession. Never underestimate the stupidity of our policies. It's partially what Mike was discussing. it would be nice if the government would get out of the subsidy business and let the home values fall to their natural equibruim. Even offering a 30 years of a fixed rate mortgage is insane (the US is an outlier compared to the rest of the world).
I'm not saying that the housing market is going to crash again, but here we go again https://www.marketwatch.com/story/us...sis-2019-06-19 Most people in the US are a bunch of financial idiots as they are all leveraging up again. People love to live above their means and are a deep recession away from becoming a financial wreck.
Yep. Those who got out had a line at the door for people ready to buy. I posted the op words back in 2007. Then, he was asking for another helping of debt in the epicenter of the PHX foreclosure crisis (Surprise). But he told us so!
In hindsight, the government pooched things so badly. A solid WTF type screw-ups! Here are a few: Waiting for 1-4 year before they kicked people out of their homes (people moved and stopped paying their mortgage. Some extracted the rent while never paying their mortgage for years. Or allowing any state to offer a non-recourse mortgage which still includes AZ https://www.creditsesame.com/blog/lo...ecourse-loans/ etc
Something as simple as immediately restructuring EVERY (idiotic) balloon payment loan much faster. Basically push out every balloon interest rate increase and apply the accumulating interest that they would have paid on the mortgage. They eventually did some of that in the 4th quarter of the game after the incentivised people to not pay their mortgage in order to get help. The government is as nimble as a turning around an aircraft carrier. Their mismanagement help exacerbate the downturn by dragging the whole country into a deeper recession. Never underestimate the stupidity of our policies. It's partially what Mike was discussing. it would be nice if the government would get out of the subsidy business and let the home values fall to their natural equibruim. Even offering a 30 years of a fixed rate mortgage is insane (the US is an outlier compared to the rest of the world).
I'm not saying that the housing market is going to crash again, but here we go again https://www.marketwatch.com/story/us...sis-2019-06-19 Most people in the US are a bunch of financial idiots as they are all leveraging up again. People love to live above their means and are a deep recession away from becoming a financial wreck.
The idiocy is in the almost nothing down. Remember Romney stating that the government should have "let it go" and it would have healed much quicker? Many called for his crusifixion, all the lefty candidates were quoting him, saying how crazy and irresponsible that was. Quite a few of the loan modification borrowers do not understand what they signed to this day, and their whole premise was that they didn't understand it the first time. And let's not forget, when every con artist resurfaced as a loan modification specialist. I found out after buying in Summerlin, the foreclosee had been soliciting loan modifications to the neighbors..he paid 135k in 2005...I paid 35,400 in late 2009.
The idiocy is in the almost nothing down. Remember Romney stating that the government should have "let it go" and it would have healed much quicker? Many called for his crusifixion, all the lefty candidates were quoting him, saying how crazy and irresponsible that was. Quite a few of the loan modification borrowers do not understand what they signed to this day, and their whole premise was that they didn't understand it the first time. And let's not forget, when every con artist resurfaced as a loan modification specialist. I found out after buying in Summerlin, the foreclosee had been soliciting loan modifications to the neighbors..he paid 135k in 2005...I paid 35,400 in late 2009.
That's just one more example why it happened. Arguably the most important reason why the pendulum swung too far in over correction territory. The over correction caused the FAST bounce back with over 50 pair of shoes in the entryway of an open house.
The crusifixion wasn't without merit. We would have been plowing new fields and could expose a further spiral down of our economy. That COULD have happened. We will never know. I'm all about consequences.
As in when someone who is all leveraged up needs help, I say tough. So the free market system has to start out free versus being manipulated by our subsidized complex policies that still exist today.
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Here is the link from 2012 if you want to go down memory lane. 
