In 2022, Zillow Predicts That Phoenix housing market will climb ANOTHER 20%?! (Tempe: rent, loan)

[waltcolorado]

During the winter we are in Lake Havasu and get the local Phoenix network TV. Seems a good percent of the TV ads are for someone wanting to buy homes. Companies like 72 sold, Doug buys homes etc. Some dangling huge $$ over asking price.

We are retired with the home thing settled, we benefited from a lifetime of real estate ownership and general growth of the population and business equity (stock market). But I sure do feel for younger people who are now faced with the current home ownership situation. Try a google search on something like "wage to home price ratio over the years"

https://www.realestatewitch.com/hous...n%20one%20year.

The cost of real estate to income really is higher than what most of us old folks experienced. One thing that could sustain the high prices is if there is significant income inflation. I have two son's in there 20's (both in high tech) so will be just fine with a housing downturn just to give the younger folks some opportunity. From what little info the kids are willing to share, there does seem to be significant wage inflation going on. We have both bought and sold recently, part of my motivation on buying was to get rid of cash anticipating inflation. Folks unloading cash because of inflation fear is maybe another reason for what is going on.

[john3232]

Originally Posted by MN-Born-n-Raised

Agreed!


I mentioned both of these companies because they are part of the ballooning price surge. Because if you have an irrational cash buyer (Zillow and Opendoor) who are overpaying in the spirit of who will win the market share game (analogous to many other new businesses like rideshare, and delivery services) it just takes one or two players to heavily screw with pricing.

In sales, a sense of urgency is a powerful motivator! Never underestimate that last sentence. When an irrational cash buyer is ready to pounce on a property (Zillow and Opendoor qualify), that can have a bubble-like impact all by itself.

Still, companies like Atlas Real Estate, DivcoWest, and many others are buying and holding THOUSANDS of area homes. And they are competing against the "flippers", mom and pop buyers, 2nd home AirBnB type buyers, etc. So the comps are easy to come by... There was a "sense of urgency" for the SFH owner-occupier when the cost of money was super cheap. Add in the other types of investors and the steam is still building up pressure.

The counter effect is when folks from CA and WA no longer see PHX as a value, that will slow down the growth. And when the runaway PHX housing inflation finally stops, it's going to get interesting. Now I don't see a "crash", but certainly (?)there has to be a pending correction. I'd rather hear my bag of popcorn pop out of interest versus hearing the bubble pop.

In the meantime, people with thick wallets are spending like mad! Pools, boats, new cars, golf memberships etc. Money is flowing. I run into a lot of people with FU $$'s. I always thought I did o.k... But I have come to learn there is a lot more money around me than I ever imagined. This is a new era and as I have said before, it's not good for most people. I digress.....

A 600k 2200 sq. ft. 4 bed/2bath with good schools and in a safe neighborhood is still a good deal for many from Cal. A 1bed/1bath apartment rental for 2k a month in downtown Phx or Tempe is also affordable.

So... when will prices no longer be seen a good buy? Not sure.

There's also a flood of people coming across the border. Where will they go? Don't know. However, I suspect a good number will end up in AZ with West Mesa being one of the more popular destinations. This population increase might help stabilize Mesa prices in the event of a downturn.

[asufan]

Originally Posted by Sno0909

You sound like the typical "it's everyone else's fault" type of person. This is America and people are free to do with their money as they please. Some people (like myself) choose to invest money in hard assets, such as real estate. Primarily for the cash flow. I invest in crypto a bit, but I don't even touch the stock market (world's largest casino). I want money coming in every month.

So you may want to look in the mirror before you start calling us idiots. We are doing great - how's your life?

We disagree 90% of the time but I can agree with this post. Although I consider crypto more gambling than the stock market (which is fine, I'm a gambler). I think the stock market is more stable and you can earn dividends, etc, but you're not going to get the 10,000% return in a year like you might in a crypto speculation.

[Sno0909]

Originally Posted by asufan

We disagree 90% of the time but I can agree with this post. Although I consider crypto more gambling than the stock market (which is fine, I'm a gambler). I think the stock market is more stable and you can earn dividends, etc, but you're not going to get the 10,000% return in a year like you might in a crypto speculation.

I think you and I probably agree more than you think. It's one of those things where I'm sure if we met in "real life" we would probably agree on a lot and be able to have civil conversations. Like all things social media, the minor variables of our life and beliefs get amplified x1000 and that is when civil discourse begins.

Anyway, to your point - I agree about crypto. I dabble in it and would never invest my life savings or anything like that. Although I wish I would have gotten in much earlier on some of these things!

[Ponderosa]

Mortgage interest rates hit 5% today and Deutsche Bank became the first bank to call a recession for the US in the coming months in response to Fed inflation fighting. It is getting harder to see how high home prices will be sustained in this environment.

[asufan]

Originally Posted by Ponderosa

Mortgage interest rates hit 5% today and Deutsche Bank became the first bank to call a recession for the US in the coming months in response to Fed inflation fighting. It is getting harder to see how high home prices will be sustained in this environment.

The higher rates definitely will impact the effective buying power of homebuyers and you would think that could impact the prices. I've read the same stuff you have about recession predictions as well. We definitely do seem ready for a pullback in prices. I'm starting to see TRACT houses in my area of Chandler closing in on $2M. It's getting to the point that you can throw whatever number you want out there and if it's a decent area someone will pay it. $2M for tract seems reasonable if there's an ocean view but not for a mere upscale family home in Chandler.

[MN-Born-n-Raised]

Originally Posted by asufan

The higher rates definitely will impact the effective buying power of homebuyers and you would think that could impact the prices. I've read the same stuff you have about recession predictions as well. We definitely do seem ready for a pullback in prices. I'm starting to see TRACT houses in my area of Chandler closing in on $2M.

For fun, could you point to a couple of homes that you were scratching your head over? I'd like to see what they are getting for $2M.

Originally Posted by asufan

It's getting to the point that you can throw whatever number you want out there and if it's a decent area someone will pay it.

Agreed. Someone with a big you-know-what might slap it on the table and they just don't care. They want what they want. We have a few developers in our hood. It costs $1.7M to $2.2M for a (well done) TRACT home with a view. And that might be on a 10,000 to 12,000 square foot lot. Some semi-custom Toll Brothers would go another $1M higher with a view (and a lot bigger lot). They are heavily tricked out. I've met some of the buyers. And another custom builder that takes it up another level. If these buyers didn't pay cash, they certainly could. Often in their 50's or early 60's, retired, and with an impressive resume. Almost always 2 home buyers (IL, WI, CA, MN, WA, and MI and the most popular states). Several have three homes.

I just checked my old place in Surprise. Zillow says it's worth $675K. If there is a pullback, neighborhoods that need mortgages will be stymied the most. And I bet nearly 100% of the Surprise, AZ buyers are in that category. I assume many buyers bought right to the edge.

Certainly 5% mortgage changes things. Maybe I should have sold my MN lake home. But it just started to take off in the last couple of years. Nothing like AZ. My AZ place is worth $200K more than my 4,000 square foot home on a top 30 sized lake sitting on 9 wooded acres with a 54x90' pole building!? Strange times....

[asufan]

Originally Posted by MN-Born-n-Raised

For fun, could you point to a couple of homes that you were scratching your head over? I'd like to see what they are getting for $2M.



Agreed. Someone with a big you-know-what might slap it on the table and they just don't care. They want what they want. We have a few developers in our hood. It costs $1.7M to $2.2M for a (well done) TRACT home with a view. And that might be on a 10,000 to 12,000 square foot lot. Some semi-custom Toll Brothers would go another $1M higher with a view (and a lot bigger lot). They are heavily tricked out. I've met some of the buyers. And another custom builder that takes it up another level. If these buyers didn't pay cash, they certainly could. Often in their 50's or early 60's, retired, and with an impressive resume. Almost always 2 home buyers (IL, WI, CA, MN, WA, and MI and the most popular states). Several have three homes.

I just checked my old place in Surprise. Zillow says it's worth $675K. If there is a pullback, neighborhoods that need mortgages will be stymied the most. And I bet nearly 100% of the Surprise, AZ buyers are in that category. I assume many buyers bought right to the edge.

Certainly 5% mortgage changes things. Maybe I should have sold my MN lake home. But it just started to take off in the last couple of years. Nothing like AZ. My AZ place is worth $200K more than my 4,000 square foot home on a top 30 sized lake sitting on 9 wooded acres with a 54x90' pole building!? Strange times....

APPROACHING $2M. Here's a few examples in South Chandler, all tract in subdivisions. If you look at larger lots and customs they're $2-$3m for the most part now and selling quickly.

651 W Tonto Dr, Chandler - $1.725M Fulton Homes 2012
3323 E Elmwood Pl -$1.885M TW Lewis 2007
1655 W Yellowstone - $1.80M TW Lewis 2003
2455 W Hawken - $2.10M VIP Homes new build
5125 S Sandstone - $1.7M TW Lewis 2007

[asufan]

Anecdotally speaking, I'm seeing a lot more "coming soon" properties on MLS this week, at least in my area. It seems people may think we are at a top with the cost of money going up and are ready to cash out. It will be interesting if over the next few weeks we start to see a big increase in supply and possibly less demand.

[Potential_Landlord]

Originally Posted by asufan

Anecdotally speaking, I'm seeing a lot more "coming soon" properties on MLS this week, at least in my area. It seems people may think we are at a top with the cost of money going up and are ready to cash out. It will be interesting if over the next few weeks we start to see a big increase in supply and possibly less demand.

I am wondering the same. Homebuilder stocks and similarly Home Depot & Lowe's topped early to mid 2005. Lumber futures topped in 2004. Treasury bond yields topped early 2007. The housing market topped ~2006 (if I remember all dates correctly - or thereabouts). Fast forward to date: lumber prices topped 2021, home builder stocks have recently topped and Treasury bond yields are still rising. I think we may see the top next year in the home prices, although I do not see a big slide like last time. More like the late 80s to early 90s type of downturn.