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"The thing is however, if people don't panic and let the market heal and correct itself, they will be in the green again in a few years."
First, let me say that I appreciate that you take a polar opposite position from my own, but that you did not resort to bashing others.
That being said, long-term analysis of both Arizona and national house prices indicate that peak 2005 prices will not be returning for many years. In inflation-adjusted terms, those prices will likely never return. Perhaps they will in another lending mania 20 years or more down the road. Studying Professor Shiller's chart helps to understand how out of whack prices really became. http://www.financialsense.com/editor...chart10_lg.gif
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"Most of these foreclosures are investor/speculator losses and not the working folk. There are no massive layoffs in Phoenix that are causing the foreclosure rate to climb. What is happening is a correction and one that is sorely needed."
I agree that many foreclosures are from speculative purchasers. Many are also from people who simply borrowed too much money on their personal residence (at the purchase point or using the famous HELOC). The price correction applies to all houses, not just the ones being foreclosed on. There are layoffs in the housing/finance business, and there will likely be more in both the private and public sectors based on retail sales, etc.
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"Many older and more established neighborhoods are increasing in value ever so slightly or have held their own. Someone who bought a house in Surprise for 350,000 is now likely to be living in a house worth 266,000 (a loss of 84,000). "
Older neighborhoods will correct as well. Newer suburbs will decline even more. A house in Surprise bought at $350K at the peak in late 2005 would have to be in the low $200s to stand a chance of selling. I know of several Surprise houses owned by banks (REOs, not short sales) that would have sold for $370K-plus at the peak of the mania, that have been sitting for months on the MLS at around $200K.
And areas like Queen Creek-Pinal have even more severe issues.
Well, I typed this all out once and the site went down right in the middle of it!!
AZJACK,
All you have posted may be correct. But I believe strongly that MOST homebuying is done by those that are not PRIMARILLY concerned about the financial aspects of homeownership. The intangibles, including firm knowledge of your monthly housing obilgations (forever if need be!), the feeling of pride of ownership, community and other things for many would are so important that even after paying for 30 years the house was worth NOTHING (Highly unlikely!), it would still have been the right thing to do. I plan to be in my new house for a long time.
I wholeheartedly agree. It is, however, pretty darn important.
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"All you have posted may be correct. But I believe strongly that MOST homebuying is done by those that are not PRIMARILLY concerned about the financial aspects of homeownership. . . I plan to be in my new house for a long time."
I am going to go out on a limb and say that most people care a great deal if they own a six-figure item declining in value at a double-digit annual rate. While buying for the long term is fine, people often have to move for a host of reasons. Owing $100K or $200K more than a house is worth would be a big problem for someone who needs to move for job, family, or other reasons.
The way to protect oneself against overpaying for a house is to not overpay for a house. The house price paid by speculators (local or not) in late 2005 set the peak prices. Once every last cent of loose lending-based bubble values is removed from the equation, it will be safe to purchase Phoenix area houses again. And houses in remote areas must additionally be re-valued in light of $4.00/gallon (excuse me, $4.05, wait, $4.15) gasoline. Even if someone is fortunate enough to tele-commute or work in their exurb, the value must be calculated based on the cost to the average end user who must commute.
Location: Sunny Phoenix Arizona...wishing for a beach.
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Originally Posted by azriverfan
Congratulations on your home as well. Regardless of my concern regarding Maricopa, it sounds like you purchased a beautiful home. And I do hope Maricopa flourishes and does well as I do with any community in the valley. This is my home and so I consider the valley my home and not just Phoenix, Scottsdale, Tempe etc.
Thanks azriverfan....My new house is in Gilbert and I like it alot. I can't wait to move in I can't wait to get a dog and take it to that dog park.
Location: Sunny Phoenix Arizona...wishing for a beach.
4,300 posts, read 14,960,596 times
Reputation: 813
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Originally Posted by azjack
Of course, renting is throwing away money, the tired mantra of the NAR.
Who is better off, the person who bought a house for $300,000 in 2005/2006 that is now worth $200,000, or the person who recognized the bubble and rented a house for $900-$1100?
It is a bad time to purchase a house in Phoenix if not losing significant amounts of wealth is important to you. If you have money to burn, go for it.
Yes, anyone who recognizes the ongoing Arizona housing bust has psychological problems. What a mature comment. How underwater are you on your house? I guess that financial misery loves company, and so you are encouraging others to take on massive debt to purchase an asset with rapidly declining value.
I can't speak for others but I'll take the house I bought for a few hundred dollars more a month than I pay in rent. I don't think I would be happy in a 900-1000 house a month. I like to live my life and own my own home. Everything in life is a gamble. As far as I can see I will be in my house for awhile but anything can happen and if and when it does we will deal with it as it comes. I don't feel like sitting idol when I see a deal that's affordable and extremely nice for the money. I have been looking around out there and I still say the inventory stinks! If the house I bought drops 100,000 we will all be in serious trouble. It would drop below what it cost new 8 years ago.
"I don't think I would be happy in a 900-1000 house a month. I like to live my life and own my own home."
That sum provides a fine rental house in Surprise, Peoria, maybe a few hundred more for the same quality in Scottsdale, etc. As far as I know, most of us "like to live (our) life." I do not see the relationship between that and buying a house. But if paying $1,500/month for housing is one's desire, go for it. It would be much better to pay above-market rental rates than to overpay for a house and be financially underwater.
I have owned a house in metro Phoenix (well 20% of a house, Wells Fargo owned 80% of it). I sold it to a California specuvestor because the housing bubble offered me large sums of money for no rational reason. If anything, life is far more "liveable" with a significant amount in the bank. My old house is now worth $120K less than it sold for. But buying again now would be like trying to catch a falling knife.
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"If the house I bought drops 100,000 we will all be in serious trouble. It would drop below what it cost new 8 years ago."
Well, forgive me for stating the obvious, but those who put off buying depreciating Arizona houses would be in less serious trouble than those who jump in prematurely.
My goal here is to inform people that the remnants of this housing mania are still alive in Arizona, and that a bottom in house prices is not yet on the horizon. And taking on significant debts heading into a recession is a bad idea for so many different reasons. Be patient, Arizona.
I sense a clear resentment by those who rent vs. those who own homes or are considering buying. Renting and home purchases each have their own pros and cons.
If you want to rent, more power to you, if you want to buy a home now, this is the time to buy.
As far as the question: "Who is better off, the person who bought a house for $300,000 in 2005/2006 that is now worth $200,000, or the person who recognized the bubble and rented a house for $900-$1100?"
Nice LOADED QUESTION. The person who bought a home back in 2002 for $250K and sold it in 2005 for $500K is better off. They made $250K TAX FREE. Also, the person who bought a home 10 years ago and continues to make payments is better off also.
Your question: "How underwater are you on your house?"
I'm not. My home is 100% paid-off.
Look, if you want to rent for the rest of your life and make your landlord rich, more power to you. Actually, that's how some of my family made their money today & they are multi-millionaires. People like YOU, who rented and paid their mortgage. So, thank you for that and please continue to rent so you can pay other people's mortgages. They appreciate it.
"The person who bought a home back in 2002 for $250K and sold it in 2005 for $500K is better off."
Right, prices doubled in a few years. That means there was a bubble, and now we are in a bust. Buying that formerly $250K house for $300K just b/c someone paid $500K once is a monumentally unwise move. Even buying for $250K would be an error b/c these busts overshoot on the downside as well.
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"Look, if you want to rent for the rest of your life and make your landlord rich, more power to you. Actually, that's how some of my family made their money today & they are multi-millionaires. People like YOU, who rented and paid their mortgage. So, thank you for that and please continue to rent so you can pay other people's mortgages. They appreciate it."
I am glad that your family is full of multi-millionaires who made their millions from ME renting during the great Phoenix housing bust of 2006-20??. People like ME. That's it, you frightened me and now I must buy or I will have to live with a scarlet R. I'll ignore the likelihood that the house will drop in value another 20% this year.
You are right, I really should have kept my old house and "owned" something worth $120,000 less now. That would have been a smart move on my part. Actually, doing the opposite was the best move.
I sense a clear resentment by those who rent vs. those who own homes or are considering buying. Renting and home purchases each have their own pros and cons.
If you want to rent, more power to you, if you want to buy a home now, this is the time to buy.
As far as the question: "Who is better off, the person who bought a house for $300,000 in 2005/2006 that is now worth $200,000, or the person who recognized the bubble and rented a house for $900-$1100?"
Nice LOADED QUESTION. The person who bought a home back in 2002 for $250K and sold it in 2005 for $500K is better off. They made $250K TAX FREE. Also, the person who bought a home 10 years ago and continues to make payments is better off also.
Your question: "How underwater are you on your house?"
I'm not. My home is 100% paid-off.
Look, if you want to rent for the rest of your life and make your landlord rich, more power to you. Actually, that's how some of my family made their money today & they are multi-millionaires. People like YOU, who rented and paid their mortgage. So, thank you for that and please continue to rent so you can pay other people's mortgages. They appreciate it.
This is exactly why a lot of people got into a ARM loan. Because they wanted to own a house and not rent and waist their money.
On another note:
Just how did everyone know the houses were not worth the money appraisers appraised them at during the boom? How did you all know it wasn't a good time to buy? I have been confused by this being one of the "stupid ones". All houses around me were selling for this, the appraiser appraised it for this, everyone was saying it was going to level off but not go back down. Real estate agents were telling you to buy now before it gets higher and you can't qualify for it. How were you suppose to know? People get angry at people like me who bought in the boom. Like we knew? Or we are just so stupid it's our fault anyway. What is this about? I always try and figure this out. Was there a sign posted somewhere I didn't read? How did you "smart" home owners figure this out? Would really like to know this. It's really insult to injury, and I would like to know how people who did well knew I was buying a house I thought would stay or go up in value would not and would fall almost 50% in 2 years. Crystal ball I didn't receive or something?
This is exactly why a lot of people got into a ARM loan. Because they wanted to own a house and not rent and waist their money.
On another note:
Just how did everyone know the houses were not worth the money appraisers appraised them at during the boom? How did you all know it wasn't a good time to buy? I have been confused by this being one of the "stupid ones". All houses around me were selling for this, the appraiser appraised it for this, everyone was saying it was going to level off but not go back down. Real estate agents were telling you to buy now before it gets higher and you can't qualify for it. How were you suppose to know? People get angry at people like me who bought in the boom. Like we knew? Or we are just so stupid it's our fault anyway. What is this about? I always try and figure this out. Was there a sign posted somewhere I didn't read? How did you "smart" home owners figure this out? Would really like to know this. It's really insult to injury, and I would like to know how people who did well knew I was buying a house I thought would stay or go up in value would not and would fall almost 50% in 2 years. Crystal ball I didn't receive or something?
Hindsight is 20/20, they say. Lots of armchair experts out there who saw the bubble all along now. I am watching CNBC this AM and see the parade of experts all going on about how the oil price which has gone through the ceiling the past two days is due to supply and demand fundamentals, growth in Asia etc. etc. They said the same thing about homes - the demand is real, they are not making any more land and about the dot.com - the future is the internet. Wrong, wrong, and wrong again. It won't help your bottom line, but you're in good company in misjudging a speculative bubble from the pedigrees of some of these talking heads.
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I can't wait to get a dog and take it to that dog park.
The person who bought a home back in 2002 for $250K and sold it in 2005 for $500K is better off. They made $250K TAX FREE. Also, the person who bought a home 10 years ago and continues to make payments is better off also. 
