Arizona Real Estate Notebook

20 responses so far ↓

• 1 Jay Thompson // Oct 28, 2007 at 9:56 pm

  “New home builders in Arizona have a 2 year supply of homes. That is, if construction stopped today, it would take 2 years to sell all of their current inventory of homes. (This seems crazy high… perhaps I miss understood him.)”

  Given the rate that they are still throwing them up in Gilbert, I’m not surprised.

• 2 Mark // Oct 29, 2007 at 9:09 am

  There’s a two year supply and prices are just starting to adjust (will free fall for a year at least) so obviously THIS IS THE BEST TIME EVER. That’s like saying it’s raining outside, there’s thunder and lightning, there’s flooding, winds are at 130 mph, there’s tornadoes spotted so it’s the best time EVER to go golf 18 holes. John, did you add that last bullet or is this “guru” that off of his rocker?

• 3 John Wake - Realtor // Oct 29, 2007 at 9:41 am

  That’s what he said.

  When the stock market is down does that mean there are no stocks worth buying?

  Or does that mean you can find some good values?

  You aren’t buying the Dow Jones Industrial Average. You are buying an individual stock which may or may not be priced well.

  Value investors have more opportunities in down markets.

  BTW, Pollack said he just bought a condo (luxury) in the Scottsdale Waterfront.

• 4 Mark // Oct 29, 2007 at 10:12 am

  John, of course there’s always exceptions. I still like the Central Park neighborhood downtown. We have three there now. However, most buyers are not savy real estate investors and most realtors just want to broker a deal. Ok, so my question is…when is not the “best time to buy real estate”. I mean, how can every day be the best time. It’s absurd. The fact is that now, John, is the time to wait because the “deep discount” today will be “a little pricey” in 6 months to a year. Show me properties that you can rent out and cash flow for 10% down and than I’ll agree. Post some of these “deals”.

  The builders can stop building but homes are still too expensive. Prices were artificially inflated. For your business to pick up we need this correction to get over with. “Normal” market coniditions is what I want. Are you not worried about the looming recession?

• 5 KG // Oct 29, 2007 at 10:34 am

  You can’t time the market…prices are low and it is a good time to buy and to sit on the property. If you want to buy a home to rent out and make some money, you are in the wrong city. Try Dallas or San Anotnio. Prices are still low and rents are good.

• 6 KG // Oct 29, 2007 at 10:36 am

  Mark, What do you consider “normal market conditions”? And what do you think prices will be under “normal market conditions” here in the valley?

• 7 Mark // Oct 29, 2007 at 11:00 am

  I agree, you can’t “time” the market. So why are there so many NOW IS THE TIME articles….ALWAYS. Last week it was the time for Canadians. This week it’s the time for everyone who doesn’t want to wait 20 more years. I can’t tell you what month or what quarter is “the time”. But I can say that now is NOT that time. I’m not the one timing the market. I’m just speaking common sense. I consider “Normal” market conditions to be the conditions where the supply and demand are not influenced by an artificial or fraudulant force. Namely the mortgage industry money pump that has now collapsed.

• 8 Mark // Oct 29, 2007 at 11:06 am

  KG, I think prices will retract 20% to 40% from their peak depending on the area.

• 9 John Wake - Realtor // Oct 29, 2007 at 12:11 pm

  Mark,

  Of course there will eventually be a recession but is it in one year or 10? I’m not expecting a recession in the next few years… but you never know.

  “… when is not the ‘best time to buy real estate’”

  Good question.

  First you are coming from an investors point of view which is very different from someone looking for a primary residence. The investor market which normally runs around 10% to 15% of sales (and may have reached above 30% in the boom), is probably less than 10% now.

  They say you can’t time the market but that doesn’t mean you don’t have expectations for prices… it just means your expectations are often wrong.

  Right now I expect the MEDIAN price for the Valley to bottom out in December 2008 - January 2009. After that we’ll see 2, maybe 3, years of little appreciation. The inflation adjusted price will actually drift lower. After that we’re back to 5% appreciation per year. I also expect rents to increase over the next several years. FYI: I can change any of all of my expectations after lunch.

  From an investors point of view, it’s always a good time to buy if you can find a property at the right price… unfortunately, right now very few homes are at the right price.

  Mark, you know California. When was the last time you could buy a place in California with 10% down and have it cash flow? Was that the last time it was a good idea to buy real estate in California?

  The prospects for appreciation are very low for the next few years. And it’s tough to find a property that will cash flow with even 30% down. So it’s real tough for investors to find good properties… but isn’t that normal?

  One thing that I’m starting to see is the prices are falling and the some “good deals” (not cash flow with 10% down deals) are starting to appear.

  Bankers in particular are starting to get real. I’ve run across 3 homes in the last 2 weeks that sold at surprising prices. 2 were bank owned and 1 was a short sale. 2 were under contract within a week of hitting the market. 6 months ago, banks were still in denial and were starting at a comp price and coming down slow, and they weren’t selling. Now some bankers are motivated and they don’t want to chase the market down.

  This is not a good market for investors who want to cash flow at 20% down. Most aren’t. But if you can get a 2003 or 2004 price today, why not?

  Oh yeah, and be careful about investing in Texas, their property taxes can eat you up.

• 10 RE Investor // Oct 29, 2007 at 2:27 pm

  I would have to agree with John on the Texas property tax front. I was looking at purchasing some property in Plano and San Antonio in 2003, and I thought, the cash flow looked good, then I looked at the property taxes. Wow. That totally took away the cash flow. Unfortunately as a Real Estate investor, the 20% down argument could have been made here up to about 2003, then that was gone. The good news is that rent increases will be coming. All the folks that have been foreclosed still have their jobs, so they will need to rent. Most of the time in the same general area. Think about it, if you just lost your house, but your kids are still in the same school, and you have the same job, chances are you would want to just stay in the same general area. Probably not the same neighborhood as the embarrassment would not sit well, but the same area would be preferrable. You would not be able to get a mortgage for another 3 -5 years. I don’t think most would go from a house to an apartment if they can get a house for the same comparable rent. A “luxury” apartment is still just a box with stairs, just in nicer wrapping. Most folks that bought 20% and some even 10% down in 2004 or before would probably be able to get some cash flow next year from that scenario. I say this because insurance rates (replacement per sqft) and property taxes (1.00 per 100.00 value roughly) will both go down due to the market plummet. It actually is a decent time to be a landlord IF you bought early and right. I would advise any landlord to have a “come to Jesus” with your insurance agent (trust me they are hungry) and also make sure and contest your property valuation in April. I already have saved a nice amount on my property insurance with better coverages (same agent even) and should save a tidy sum on next years property tax (although it blew this year). Also, on the property tax front, if you own anything in Pinal, I would suggest a good grenade. Those people in government will do nothing but make things worse for everyone. Trust me on this, I have seen nothing but garbage out of that County. They still think that cars should take a back seat to buggies, and the NIMBY’s are out of control there.

• 11 Mark // Oct 29, 2007 at 2:32 pm

  You said it yourself, another year of decline. Some bankers are just now starting to get realistic. Basicly, if you are renting now then keep renting because you are saving money, lots of it. A few reasonable deals may just be starting to appear but in general the numbers all point to rent for now.

  Southern California, that’s a whole different beast. (Last I read it was only 8% of San Diegans who could afford to own SD real estate.) I think anyone who moves to San Diego without a big trust fund or huge income is not too concerned about their future. The population in San Diego is shrinking for that reason. Anyone who invested in SoCal real estate during the last few years thinking appreciation is going to make it worth while is in a world of hurt.

  I’m in Portland now. This city is great but also currently overpriced. Prices are falling here as well.

  I live in the “Pearl” here in Porltand and lived in “East Village” a few blocks from the “Gas Lamp” in San Diego. It’s nice to experience these successful areas that Phoenix has studied and learned from while Phoenix developes its own “downtown”. This time I think Phoenix has got it right. I’m excited for the years to come.

• 12 dan // Oct 29, 2007 at 6:52 pm

  why the 20% reduction in “inflow”? I figure with the cheapness of the US Dollar and the aging population, I find it hard to believe it won’t grow….

• 13 Paul Mosur // Oct 29, 2007 at 7:16 pm

  I recently moved from the NE to PHX and was very disappointed about not “settling in” and having to rent a house.

  However, having gotten my hands burned in the stock market bubble burst I have learnt never to try catching a falling knife (prices). Although painful. I have resigned myself to rent for at least a year. Based on how things are going I might extend the lease when it comes up next year and consider buying in 2009. Yep, you might not get the great deal or selection but better to buy on the way up then trying to time the market - too risky for individuals.

  I am in the camp where I want this supply-demand to stabilize (Even at the current rate) so I can buy and “settle down”. I infact came close to buying earlier this year based mostly on my own bias and a “BUY” reccomendation from this websiet but after seeing 10 house with ~7 of them empty I was able to make what I hope is a better decision. The market is way too risky and “best time to buy” is at best a very dubious reccomendation.

• 14 John Wake - Realtor // Oct 29, 2007 at 9:24 pm

  dan, about the 20% reduction in inflow of population, he is estimating that some people in other states will have difficulty selling their homes so they can’t move to Phoenix, and that the economy will slow down. There is a pretty strong relationship between the strength of the economy and the number of people who move to Phoenix.

• 15 Mark // Oct 30, 2007 at 9:02 am

  Home prices falling at record pace in August Down 4.4% over the past year in 20 major cities, Case-Shiller says By Rex Nutting, MarketWatch Last Update: 11:29 AM ET Oct 30, 2007Print E-mail Subscribe to RSS Disable Live Quotes WASHINGTON (MarketWatch) - The 13-month-long decline in home prices in 20 major U.S. cities accelerated in August, with prices dropping a record 0.7% in the month, according to the Case-Shiller price index released Tuesday by Standard & Poor’s Corp. Prices were down 4.4% in the past year, the fastest decline in the seven-year history of the 20-city index. In the original 10-city index, prices have fallen 5% in the past year, the biggest decline since 1991. “The fall in home prices is showing no real signs of a slowdown or turnaround,” said Robert Shiller, co-creator of the index and chief economist for MacroMarkets, in a release. Read more. “With supply overhang growing and mortgage financing tougher to obtain, home prices are going to soften considerably further in the quarters ahead,” wrote Joshua Shapiro, chief U.S. economist for MFR Inc. The last time prices fell so much, it took more than eight years for home prices to return to their peak level. In a separate report, the Conference Board said consumer confidence fell to its lowest level in two years in October, with consumers more pessimistic about job growth and less inclined to buy homes or major appliances. See full story. The Case-Shiller index, which tracks multiple sales of the same homes, is considered by many observers to be the best gauge of national and metropolitan-area real-estate values. Falling prices make it more difficult for homeowners to tap the equity in their homes or refinance their mortgages. Millions of homeowners who took out adjustable-rate loans in 2005 and 2006 face sharply higher mortgage payments this year and next, with foreclosures having already soared as the result of payment resets. The biggest declines are the Rust Belt and in the former boom towns along the coasts. Prices are up in the Pacific Northwest and in areas of the South, but they’re rising at a slower pace. Prices could fall much further. In a separate report, analysts at Goldman Sachs figured that prices in California are about 35% to 40% overvalued, compared with past relationships between home prices and income growth. The median sales price of a home in California was $589,000 in August, Goldman said, but should be around $375,000, they said. In the Case-Shiller index, fifteen of the 20 cities tracked in the index have seen prices fall in the past year, led by Tampa, Fla., with a 10.1% decline, followed by Detroit with a 9.3% loss. Indeed, eight of the 20 cities recorded their largest-ever year-over-year price declines in August. Detroit had held the top spot for price declines among the 20 cities in previous months. A year ago, prices in Tampa had been rising at an annual rate of 14.3%. Prices were up in five cities, led by Seattle with a 5.7% increase and Charlotte, N.C., with 5.6%. After adjusting for inflation of 2.4% in the past year, real prices were up in just three of 20 cities. Here are the year-over-year nominal price changes for the 20 cities covered by the index: Tampa, down 10.1%; Detroit, down 9.3%: San Diego, down 8.3%; Phoenix, down 8%; Miami, down 7.8%; Las Vegas, down 7.6%; Washington, D.C., down 7.2%; Los Angeles, down 5.7%; San Francisco, down 4.2%; Cleveland, down 4.1%; Minneapolis, down 4%; New York, down 3.8%; Boston, down 3.6%; Chicago, down 1.3%; Denver, down 0.4%; Dallas, up 0.5%; Atlanta, up 0.8%; Portland, Ore., up 2.8%; Charlotte, up 5.6%; and Seattle, up 5.7%. Rex Nutting is Washington bureau chief of MarketWatch.

• 16 Mark // Oct 30, 2007 at 9:05 am

  Especially interesting is this: Goldman Sachs figured that prices in California are about 35% to 40% overvalued, compared with past relationships between home prices and income growth.

  It could say California and Arizona.

• 17 John Wake - Realtor // Oct 30, 2007 at 9:46 am

  Clearly it’s a tough time to be a real estate investor and there are far fewer investors out there than 2 years ago.

  The market now is dominated even more than usual by people who buy homes to live in them not to rent them out.

• 18 Mark // Oct 30, 2007 at 11:01 am

  Cleary it’s a tough time to be a Mortgage Broker, Real Estate Agent, Construction Worker, Furniture Sales, Contractor, Builder, Home Depot, Walmart, BestBuy, Jewlers, LandScaper, Restaurant owner, etc and the dominoes will fall.

  Think about it. We already have both mom and dad working 40 plus hours a week for what? A wide screen tv, the 2000 sq ft house, 2 cars and the gas it takes to commute to work. That was fine and dandy. Wealth (false wealth) was being built in the form of equity. The student loans would be payed off in 12 more years. Given no big unplanned expenses the credit cards would be payed off too. They could downsize after the kids leave the nest. Until then the meager 401K accounts and their home’s equity could be the saftey net should one of them loose their job temporarily.

  Welp, that rug is being pulled out from underneath them. The equity ATM ran out of cash and is not being refilled. Job cuts are coming next year. Pay has barely increased all decade (unless you’re the rich). Gas is more expensive. Food is more expenisve. Health service costs have sky rocketed. The goverment is strapped. Iraq was obviously not a good investment. Tatooed high school drop outs making 6 figures selling home loans is already a story for the grand children. Real estate agents are now waitresses and bar tenders. (This is a high paying job now compared to what you can get paid with most 4 year degrees.) I’d say that we’re going to have a depression but I think the effect of the weakening dollar and global economy will prevent that.

  The near future: Retailers will not have a good xmas.

• 19 Mark // Oct 30, 2007 at 11:13 am

  All of this and it’s the best time to buy in 20 years. What is my point to all of this? Realtors always say it’s the best time to buy, even when it is the WORST time in American History to buy real estate.

  When you point to reality they argue “for someone it is the best time to buy and there is a great deal out there somewhere”. Yeah who cares, that doesn’t equal “It’s the best time to buy” for anyone else.

  Basicly, I’m saying quit being such a spinster!!!!!

• 20 Greg-Portland Or // Oct 30, 2007 at 9:38 pm

  I just retrurned to Portland from a trip to Phoenix to look for a Winter home/condo. The prices are still far to high and most builders are discounting about 20% off published prices. Many also hinted that there was extra money for additional discounts if a purchase could be made by the end of the year. Looks like a free-fall in prices to me! I will wait till September of next year to get serious again. By that time, I hope the falling knife has stuck in the floor and I can pick it up reasonably. Also, I’m sure that it will be “The best time to buy”, as it always is. Feels kinda like buying a used car. I don’t want to get stuck with a lemon.

  BTW- Loved the weather and am looking forward to moving down there as I work from home.

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