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Great source - housingdoom.com. Just what we needed on the forum, another housing gloom-and-doomer. And this one from Minnesota no less!
I don't consider myself a gloom-and-doomer; I consider myself a realist. If 40% of the homes that sold in March were below $100K, that is a significant data point in my mind. What it tells me is that the below $100K market could be at the bottom. Consider that statement as the opposite of "gloom-and-doom"; it's a positive statement for that segment.
The thread is entitled "Where are the new foreclosures". A person could optimistically guess that they are being sold before they even get listed and the entire market is close to hitting bottom. That was my initial thought before I dug further. That was a possiblility and certainly some agents will try to spin it that way. But with some more digging, it recently seems clear to me that the Phoenix area is not out of the woods yet.
I don't need to buy something at rock bottom. But I also don't want to buy something in an area where 80% of neighborhood eventually turns into rentals or buy when there is another 20%+ to go in home depreciation; I'd like to time it better than that.
Ponderosa, forgive me for posting data on the forum that is designed to discuss "City-Data" and quoting that 40% of all March 2009 home sales were below $100K. Sorry. 40% of sales below $100K deserves a "", don't you think?? Everyone has a right to dig their head in the sand and just buy off of emotion. I like to be smarter than that even "if I am from MN no less".
...This clearly states that people are buying steals and deals under $200K. I'd guess if you have a home on the market for $400K, it (statistically) will be sitting and further depreciating until the economy somehow heals or the perception is that the your home is not going to fall in price.
The article has some farily accurate and positive stats. However, by it's title "...Housing Doom" it's meant to be a negative article.
I've watched the inventory decline over the past year, and the sales increase, and we know that as that continues, prices will eventually turn around.
The vast majority of the sales are in the <200k range and these are mostly sales to first time home buyers and investors because the prices have reached the affordability of these buyers, and the investors find they can get positive cash flow. As the article mentioned, and I've observed as a participant, many of these properties end up with multiple offers.
Sales are slower in the <300-400k range, but out in the field, I'm seeing increased activity. I won't be checking the statistics until May 1, when I'll see a better picture.
However, in the last few days, while searching for some houses in the 300-350k range I've found that some of them that we chose to view, went pending before we had a chance to see them. One short sale had an accepted contract that fell through with a back up offer in the wings. So I'm seeing increased activity there, and am anxious to see the May 1 stats.
While there are homes available in these price ranges, when one sets their criteria and the area, it quickly becomes evident that not all of the homes in that price range will match the criteria. It isn't like there is a plethora of homes matching ones criteria to choose from.
As I understand it, the higher priced homes are slower to recover because of the lenders not wanting to release the funding, but I believe there is pressure to get that changed. There are plenty of people who have money to buy these homes who are also just not confident enough in the economy to make the purchase.
Also, I believe that as prices decline, there will be an increase in the activity in the higher ranges as the prices become more attractive.
There was one statement in the article that I disagree with:
[QUOTE]=quote from the article:a lot of sales are going to investors who intend to resell in a few years. I believe this is merely "inventory delayed", and is likely to hold prices down for some time.[/quote]
The author has no way of knowing what the investors plan to do with the homes they buy. So he cannot claim with any type of authority that these homes are "inventory delayed" that will hold prices down for some time.
If that were the case, then it would be safe to say that anyone buying a house is also "inventory delayed" because they may also resell in a "few years".
As an investor myself, I have a lot of investor friends and investors that I network with, and I know what they're doing. The "landlord" type investors that I know are buying for the long term. One friend is buying 2 homes per year and his goal is to hold them for at least 10 years. By buying 2 per year he is dollar cost averaging, and producing a passive income. The others are also buying to hold and rent for a long time to have passive income.
Ten houses with just a $400 net cash flow is $4,000 per month income, plus the increase in value over a period of 10 years. A good cash flow is easily attainable in this market. I have two rentals so far and my average between the two is $450/mo.
There are also the rehabbers, which I do, that take the trashed properties, fix them up, thereby improving the community, making the home saleable and getting them off the market by selling them quickly to buyers wanting a move in ready home.
I'm not advocating that people become landlords, I'm just pointing out the error in the author's statement. He is taking a positive (investors are buying) and making it into a negative (it's "delayed inventory").
But it is a good way (however innacurate) to place a negative twist on some positive information. (By the way, the author's name was shown as "Twist")
Please do not take my statements as advice. I am not advising anyone to buy or not buy. I'm simply stating my opinions and posting facts. Only the individual can make a buy/not buy decision based on their personal needs.
Last edited by Captain Bill; 04-16-2009 at 09:38 AM..
Captain Bill. I completely agree with all of your points. I thought the same when I read the authors name as "Twist". Too funny...
The shocking point for me (which did deserve a massive ) was that 40% of the sales were below $100K!!
I think we agree that there are a lot of people on the side lines with money. Several of them like me are not going to buy unless they know the market has gotten close to stabilizing.
I could read a rosy article that talks up the Phoenix market and pull out a data point that is still valid. I don't have to agree with the overall view of the author to recognize that 40% of the sales in the sub $100K pricing is major.
Re: pending sales and short sales. That data is normally worthless. Maybe it is better in Phoenix but in FL where short sales have become common place, they distort what the real market is really selling for (as well as what is really selling versus "pending").
I own a business that sells luxury items. The trends are hard to predict. One week it feels positive and the next week everything shuts off around the country. Right now, it feels MUCH better than in mid March. That tracks for many industries. I am not fooling myself that it won't be off and on for the next several months. I'd expect this to follow in the 2nd home market which (at least part of the sales) are related to the $400K housing market. You of course are a lot closer to this than I am but it's my gut feeling.
Last edited by MN-Born-n-Raised; 04-16-2009 at 09:13 AM..
Here's a tidbit that anyone can take and tear apart or use as you see fit.
Let's say I'm looking for a home in Gilbert in the $300-350k range
Today there are 151 homes listed in that price range.
........53 are short sale or bank owned
Now let's narrow down the criteria:
2900 sf minimum
4 bedrooms
3 bath
3 car garage
pool
Using that criteria there are 18 homes in that price range in Gilbert.
........12 are short sale or bank owned
Let's say that the Gilbert High district is first choice.
There are six (6) homes to choose from
........4 of these are short sale or bank owned
Now suppose I also want to consider the Highland School District
There is one (1) home in that district.
........The 1 is a short sale
How many of the short sale/bank owned properties are in move-in condition?
How many are trashed?
How does that narrow the available selection?
What will happen to the selection as sales increase?
How will new foreclosed additions affect the choices?
This information will mean different things to different people, so use it in any manner you wish.
One picture that it does clearly show is that while there are 151 total properties in that price range in Gilbert, there will not be 151 that will meet a specific criteria for someone. Of course everyone will have different criteria, but the results should be approximately the same.
Here are some more questions:
Assume prices will decline another 20% from todays price, as some predict.
Assume further (hypothetically) that the comps show the current average market value of those houses above to be around $100 per square foot.
Assume that one can negotiate a price of one of those properties meeting the criteria to $80 per square foot.
Would it be better to buy that house now, or would it be better to wait until the entire market declined the 20%, and then try to negotiate a further 20% discount?
Would the same selection be there?
Would you be facing multiple offers?
There will be a lot of different answers to each of the questions, depending on one's perspective. The only right answers are your personal answers.
Disclaimer: I am not providing advice to anyone, and am not advising anyone to buy or sell. I'm simply providing factual information and asking questions to provoke thought and intelligent discussion. No one on the forum, including myself, is qualified to offer advice on whether to buy or sell because no one knows your individual needs and desires.
Re: pending sales and short sales. That data is normally worthless.
Here is one way that the information can be used.
The pending sales is used as a forward indicator. Not all of them will close escrow. However, as the pending sales in a given monthy increases it is an indicator that the closed sales will increase the following month. So we watch that number along with a host of other statistics.
If we total the short sales and bank owned sales, we do get an indication of what is driving the market. If there is a preponderance of those distressed sales, then we know that they will drive the market price down.
On the other hand if the percentage distressed homes declines and becomes a minority, then the regular home sales may become the market driver because many people do not want to deal with the uncertainty of buying a short sale, and many of the bank owned homes are less than desirable.
I own a business that sells luxury items. The trends are hard to predict. One week it feels positive and the next week everything shuts off around the country. Right now, it feels MUCH better than in mid March. That tracks for many industries. I am not fooling myself that it won't be off and on for the next several months. I'd expect this to follow in the 2nd home market which (at least part of the sales) are related to the $400K housing market. You of course are a lot closer to this than I am but it's my gut feeling.
Right, it's difficult to predict. We just have to keep tracking the stats monthly, as well as getting a feel from what's happening daily in the field.
I haven't tracked the 400k homes much recently, but it's time for me to begin tracking the entire ranges up to 400k because I believe the increased sales in the lower range is going to also move up to the 300 and 400 range. That is speculation at this point.
I ll add one more question - By waiting what will interest rates be doing. Yes it appears rates will be low for a little while, but many of the same housing doom and gloomers are also predicting hyper-inflation due to all the monetary stimulus in the economy. If this proves true, there is little question that interest rates will rise, possibly significantly.
In my mind its hard to have it both ways? Prices may go down further, but rates may negate any effect?
Im just pointing out these things are rarely as black and white as they seem. Thats why people should just do what feels right for them at the time based on their own personal situation.
Captain Bill. Re-work your data and exclude one parameter: a pool. The options increase by a lot. Plus, you can always add a pool (a lot tougher to add a bathroom).
I mention this because I want a pool and the selection plummets for bank owned properties. A pool might be the killing point. It's almost like the person who got themselves in trouble bought as much house they could and figured on putting in a pool later. I can find 20 homes in Goodyear that work for me but only onethat works with a pool. Most times zero properties will work. If you exclude a pool (reduce the price by $20K to buy a pool later) and saw 4 properties work, then you have multiplied your selection by 4. That is 4X gain in options.
But I do understand your point. If you are buying a home to live in year round it's a whole different situation. For me, I'm replacing a 3rd house. I don't want to leave my home sitting open during the summer that turns into a rental only neighborhood. Someone may want my stuff more than me. I think that the $60 per sq foot price is close enough to bottom; the remaining question for me is how many more will turn to ruin the potential neighborhood. I'd rather pay $30K more knowing I will live in the right neighborhood.
But I could see where a $400K home now drops $80K (20%) and in November it is on the market for $320K. That is where I predict the 20% is going to come from (the higher priced homes). But like everyone, I am only guessing.
"Ponderosa, forgive me for posting data on the forum that is designed to discuss "City-Data" and quoting that 40% of all March 2009 home sales were below $100K. Sorry. 40% of sales below $100K deserves a "", don't you think?? Everyone has a right to dig their head in the sand and just buy off of emotion. I like to be smarter than that even "if I am from MN no less"."
Funny stuff. MN B 'n R is practically drooling over the prospect of buying a West Valley house and yet he becomes a dreaded agent of gloom for daring to reference an excellent housing blog with an emphasis on the Phoenix area bubble/bust.
BTW, Housing Doom is the name of the blog itself, and it is a "tongue in cheek" name. The formerly Gilbert, Arizona-based blogger has been providing excellent content for years, including her graphs. Before she moved to Austin, she regularly appeared on local radio shows with her analyses. She debated ASU's Jay Butler and mortgage broker Stan Lund on the Phoenix NBC affiliate. She has been interviewed by the Republic and even respectable outfits like the Washington Post, Las Vegas Review-Journal, CNN Money, and has been referenced several times on the CNBC Realty Check blog.
I ll add one more question - By waiting what will interest rates be doing. Yes it appears rates will be low for a little while, but many of the same housing doom and gloomers are also predicting hyper-inflation due to all the monetary stimulus in the economy. If this proves true, there is little question that interest rates will rise, possibly significantly.
In my mind its hard to have it both ways? Prices may go down further, but rates may negate any effect?
Im just pointing out these things are rarely as black and white as they seem. Thats why people should just do what feels right for them at the time based on their own personal situation.
Your point on the low interest rates is a good on but there in more to it...
As a side note. People should educate themselves on buying the rate up. Meaning, if the rate is at 4.75% at zero points, consider buying the rate at 5% and have the lender pay YOU 3 points (as an example). Of course if you find a letter that doesn't charge the 1% origination fee that allows you to buy the rate up less (a better rate). This technique pays for all or part of the closing costs and not just rolling $$'s into the mortgage as most people think of it. If the rates then go down to 3% (for some incredibly strange reason) or you sell within 7 years, you are in GREAT shape because you win in both situations. I've done it this way 20 times on investment properties as well as homes I bought to keep. I've ALWAYS come-up ahead. In fact on one home, I re-financed 4 times in two years as the rate went down. In actuality, some of the fees were now prepaid in the following rounds. Trust me, the mortgage officer will like you. So why don't other people do it?? It's too confusing for most people to grasp as they are not too strong in personal finance. I took me 20 minutes to explain it to my brother and he had all kinds of reservations. Hence, mortgage people don't bother offering it. Just as rates vary for buying the rate down with points, it changes buying the rate UP with points.
In 2009, my advice would be to take out a loan with cheap money in case hyperinflation takes place even IF you have cash. Then take that cash you have and get it out of US dollars. Don't view hyper inflation as "doom-and-gloom". It's a possibility. In 2000, you could mark people down who talked this way as crazy. I know dozens of well off non-paranoid people who would NEVER consider such a thing years ago. Today I consider them ahead of the curve and trying to plan for their families. No matter how remote you think this is, smart people are hedging their bets. I pray that I am just being paranoid but if the worst happens, I won't be impoverished.
Back to your point on missing out on a better interest rate.
Let's assume a $300K mortgage at 4.5% for 30 years. The P&I is $1520. Now let's assume you wait and interest rates go up to 6.0% but that same $300K home drops to $250K (about 16%). Now your payment is $1499 per month. If you hang on to that home for 30 years, you are close to a break even. But if you keep the home for 8 years, you are thousands ahead by taking the higher rate. So for me, I'll take the lower price and higher interest rate (lower cost of the home) every single time. Don't forget. Nothing says that in two years the rate cannot go from the higher 6% back to say 5%. If that happens, you refinance and you are more money ahead.
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What it tells me is that the below $100K market could be at the bottom. Consider that statement as the opposite of "gloom-and-doom"; it's a positive statement for that segment.
Something to Ponder
I think that the $60 per sq foot price is close enough to bottom; the remaining question for me is how many more will turn to ruin the potential neighborhood. I'd rather pay $30K more knowing I will live in the right neighborhood.
