Caution! Home buyers! Possible price correction coming to Phoenix! (new home, unemployment)
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Not disagreeing ^^. A lot of people are living off borrowed time. 39M Americans are unemployed and according to the FED, we are headed to around 25% unemployment! Read https://apnews.com/900aa1955a82b7bbe2e028a8bc1a4be7 Currently, people are still getting paid by way of generous unemployment. Many will get called back for a while at least. The biggest reason is that companies took forgiveness loans. I'll bet 10%+ unemployment rate when the dust settles. So there are going to be a lot of belts that need to be tightened. Basically, millions of people are living off of the government credit card. So long as we don't have to pay it back, it's like a free vacation. But that tune might change in a few months.
Personally, I would be mitigating my risks if I was a home buyer. My bet the eventual economy recovery speed will be tied to a pending vaccine in combo if there is a bigger 2nd wave outbreak. Those last two points are where we should place our bets on the economy. It could turn really ugly fast. Or maybe not so bad. Either way, we just tacked on a lot more debt in combo with state and local governments in shambles.
So if I was in the market for my 1st home, I'd be sitting on the sidelines. My wife has said 5 times she would sell our AZ 2nd home and sit on the sidelines too. As you said, no price erosions in our hood.... Yet. In fact, some are selling for a surprising amount because of the limited supply. Anyways, I'm not taking her advice even though it is probably sound. If it drops and if I sold, I would probably pick up a much more expensive property when someone had to move. It's going to be interesting to see how it plays out.
Actually it's the high cost cities that may and most likely will see a huge drop. My son works for a large software company in Seattle area and they are working from home for the foreseeable future and many companies are offering their employees to work from home indefinitely. Even with that, 2 houses down from my son's house, a 1400 square foot house just sold for $749K. He is considering selling and buying something in Scottsdale.
In the event you turn out to be correct and we see a significant drop in prices in Phoenix, we would probably sell our winter home there and upgrade to a better house and location in the area.
Actually it's the high cost cities that may and most likely will see a huge drop. My son works for a large software company in Seattle area and they are working from home for the foreseeable future and many companies are offering their employees to work from home indefinitely. Even with that, 2 houses down from my son's house, a 1400 square foot house just sold for $749K. He is considering selling and buying something in Scottsdale.
In the event you turn out to be correct and we see a significant drop in prices in Phoenix, we would probably sell our winter home there and upgrade to a better house and location in the area.
I'm not predicting it will go way down. I am predicting not a lot of chance for things to go UP, and mixed scenarios that it might go down. Because I don't know about a "2nd wave" nor do I know when a vaccine will be developed. Either one of these that has bad news will kill a lot of businesses and make unemployment at 25% hang on for another couple fo quarters, Economically speaking, that's ETERNITY and a MASSIVE blow to the world economy.
For me, I just don't want to hassle with storing my belongings and hedging bets. My wife would because she would get her location. I'm in a position in life where even a massive drop cannot take me down. And by me picking up a couple of hundred Grand gain by playing the game of selling just in case sounds like too much work.
Now if I was going to buy my 1st home?? No way would I be buying now. I would play the waiting game. So that's my personal take.
I'm not predicting it will go way down. I am predicting not a lot of chance for things to go UP, and mixed scenarios that it might go down. Because I don't know about a "2nd wave" nor do I know when a vaccine will be developed. Either one of these that has bad news will kill a lot of businesses and make unemployment at 25% hang on for another couple fo quarters, Economically speaking, that's ETERNITY and a MASSIVE blow to the world economy.
For me, I just don't want to hassle with storing my belongings and hedging bets. My wife would because she would get her location. I'm in a position in life where even a massive drop cannot take me down. And by me picking up a couple of hundred Grand gain by playing the game of selling just in case sounds like too much work.
Now if I was going to buy my 1st home?? No way would I be buying now. I would play the waiting game. So that's my personal take.
I'm curious to see what the market will play out. I am in a position to buy a small 1 bed condo which I have considered doing if rents continued on the exponential trend they were before this (which is why I have been aggressively saving). Now I don't know. I'm in big support of freezing rent and mortgage payments for the time being given the high unemployment numbers so no one gets screwed over. That may change things around here. Phoenix has always and probably will always be in the future have too many people buying housing just as investment vehicles, and not a lot of people actually living here. The housing market here has always been one of our biggest economic contributors. I don't think we will have a 2008 but depending on how things go, things could drop.
Rents are ridiculous though. Rental market needs a correction more than anything.
I mean everything looks very bullish for Phoenix and even more rural areas in the US:
Out: public transportation, communal living (room mates etc.), tolerating large crowds of homeless people everywhere, working in a designated office space
In: living by yourself/your own family, owning better than renting, own a car (SUV/truck!), WFH (need for extra personal space), have wide open spaces, nice yard around your home with perimeter walls / fences. Rural > suburb > inner city / downtown.
Epic shift from the previous trend towards big city living, truly epic!!! Phoenix will be a net winner, IMO big time. The Onion will be proved right that half the earth' land mass will be a suburb of Phoenix by 2050.
I'm curious to see what the market will play out. I am in a position to buy a small 1 bed condo which I have considered doing if rents continued on the exponential trend they were before this (which is why I have been aggressively saving). Now I don't know. I'm in big support of freezing rent and mortgage payments for the time being given the high unemployment numbers so no one gets screwed over. That may change things around here. Phoenix has always and probably will always be in the future have too many people buying housing just as investment vehicles, and not a lot of people actually living here. The housing market here has always been one of our biggest economic contributors. I don't think we will have a 2008 but depending on how things go, things could drop.
Rents are ridiculous though. Rental market needs a correction more than anything.
Condo prices go up when rents go up. So there is pressure to keep the values higher. Also, pricing correction on lower-priced homes doesn't have the same amount of downward pressure unless people start to default. Next, when money gets cheaper, people buy "payments" not the cost of a home. They would pay more if the "payment" is less. A lot of words to say I'm not so sure the price will drop all that much. And yes, investors will be working the same math that you have been doing all along. Investors don't buy much when the prices are going down (they smell blood). Rather, they are opportunists. In other words if I was in your shoes, I would probably buy when the math works (a little softening and cheap borrowing money). Trying to time it IF the price dropped a lot makes the competition for the same home explode.
That's how I would roll. Now in my situation, the parameters are a little different. Every $100K more in a specific town really thins out the herd. I'd be staring at higher-priced homes for the area that someone "has" to sell like relocation or someone who got over their head (layoff or white-collar wage concessions etc). The rent calculation is not involved in your situation. Plus, your price it more affordable to most people which increases the competition.
I mean everything looks very bullish for Phoenix and even more rural areas in the US:
Out: public transportation, communal living (room mates etc.), tolerating large crowds of homeless people everywhere, working in a designated office space
In: living by yourself/your own family, owning better than renting, own a car (SUV/truck!), WFH (need for extra personal space), have wide open spaces, nice yard around your home with perimeter walls / fences. Rural > suburb > inner city / downtown.
Epic shift from the previous trend towards big city living, truly epic!!! Phoenix will be a net winner, IMO big time. The Onion will be proved right that half the earth' land mass will be a suburb of Phoenix by 2050.
Too many generalizations here. If & when COVID 19 blows over, it will be pretty much business as usual (with some changes of course, which were long overdue). I much prefer living by myself or with family, but we have to get real here because that kind of thing doesn't work for everybody. I also prefer my own house with my own car & yard, but again, this isn't for everybody.
I don't get your rationale at all as to why you believe Phoenix is a winner if the trend moves away from big city living. Maybe you aren't aware that Phoenix IS a big city, and there has been increased demand for more centralized, urban living. If this wasn't the case, there wouldn't be construction of multi story apartments & condos in places like downtown Phoenix, Tempe, and even Kierland.
Cities will always have a purpose, just as suburbs do, and rural environments. Again, it depends on the person. If you think rural living is better than suburban or urban living, then by all means you should be living in a rural area. I can tell you that from my perspective, there are many many downsides to living away from the masses, such as substandard medical care, limited shopping, fewer restaurants (and fewer healthy food choices for that matter). Rural areas also have greater exposure to natural disasters. As much as I like to get away to the AZ high country during the summer, I wouldn't really want to have a home up there from now through much of the summer with the high risk of wildfires.
Cities will always have a purpose, just as suburbs do, and rural environments. Again, it depends on the person. If you think rural living is better than suburban or urban living, then by all means you should be living in a rural area. I can tell you that from my perspective, there are many many downsides to living away from the masses, such as substandard medical care, limited shopping, fewer restaurants (and fewer healthy food choices for that matter). Rural areas also have greater exposure to natural disasters. As much as I like to get away to the AZ high country during the summer, I wouldn't really want to have a home up there from now through much of the summer with the high risk of wildfires.
I agree with your assessment specifically highlighted in bold. I'm speaking from experience and those trade-offs are real.
I'm also a firm believer that people have short memories. So whatever trend that might develop where people could want to live farther out, that's short term. A couple of years post COVID, they will go back to default.
I will say, that a trend of wanting to be close to work will change for a lot of people. Multiple businesses are having a "come to the office" paradigm shift as we speak. Working at home will unleash a certain percentage of people needing to live closer in. The only thing to debate is how many people will take the trade-offs in the coming years.
I will say, that a trend of wanting to be close to work will change for a lot of people. Multiple businesses are having a "come to the office" paradigm shift as we speak. Working at home will unleash a certain percentage of people needing to live closer in. The only thing to debate is how many people will take the trade-offs in the coming years.
Working from home is a viable option that should be available, but here again, it doesn't work for everybody. I have been working from home since my office mandated it. For me, there are positives & negatives. The major downside to working remotely is the system issues. When I was at my office, we had video conferencing with the home based employees, and it turned out to be a technical mess with the system freezing, and individual computers (and internet access) not exactly being up to par. I also prefer being at the office and interacting person to person in a working environment, instead of this "virtual" communication. I hope more companies will offer working from home, but not by force. It should be based on individual needs & preferences.
Working from home is a viable option that should be available, but here again, it doesn't work for everybody. I have been working from home since my office mandated it. For me, there are positives & negatives. The major downside to working remotely is the system issues. When I was at my office, we had video conferencing with the home based employees, and it turned out to be a technical mess with the system freezing, and individual computers (and internet access) not exactly being up to par. I also prefer being at the office and interacting person to person in a working environment, instead of this "virtual" communication. I hope more companies will offer working from home, but not by force. It should be based on individual needs & preferences.
I suspect the final verdict will come down to economics. In higher rent districts like NYC, the Bay Area there will be more open to it. So instead of 100,000 square feet, maybe they will rent/buy 50,000? If that prediction comes true, landlords are commercial real estate values will take a hit. I'd love it if we could reduce the rush hour congestion. I hate designing my runs around dodging traffic.
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I'm in a position in life where even a massive drop cannot take me down. And by me picking up a couple of hundred Grand gain by playing the game of selling just in case sounds like too much work.
