This was written about the California real estate market. The Arizona real estate market is similar.
“We don’t have a lot further to go (down in price),” said Delores Conway, director of the Casden Real Estate Economic Forecast at USC. “Unless there’s a major shock in the economy or the capital markets seize up even further, we would expect these (housing) markets to return. … In the next 12 to 18 to 24 months, prices should level off, and move at more normal rates.”
One promising indicator, she said: Housing prices have already fallen to the point where monthly ownership costs are getting closer to the cost of renting. During the big real estate run-up, monthly house payments (which include taxes) spiked sharply above average rents. It’s extremely rare for homeownership costs to fall below rental costs, she said. [emphasis mine]
{ 9 comments… read them below or add one }
yelanda 06.28.08 at 6:33 am
John, I believe the theory of rent/mortgage relationship will determine prices. That’s the basic. But I also believe in the law of demand and supply as well as impact of foreign investment. SF is a good example. Unlike Phoenix, land supply is fixed - surrounded by water or mountain. So if more folks want to live there, demand will outrun supply and price goes up anyway no matter what’s your ROI is. Once you factor in foreign investment, it can completely change the rule. I used to live in California and have seen Asian people, especially Chinese, snap up properties with cash$$ without blinking their eyes. I think that definately pulls the price up.
Cbass 06.29.08 at 8:51 am
“”People were over their heads,” Scottsdale real estate agent John Wake said.”
tribunehomefinder.com/story/119539
redriver 06.30.08 at 1:39 pm
I think the author drinks too much of her own beer.
With every passing day Alt.A’s get statistically moved over into the sub prime category and every day primes get to look more and more like Alt.A’s. CA holds 68% of all primes in the nation (yes!) and this gal is telling us right now that it all looks just fine. hmmmmmm, beer, or is it kool-aid?
Thinking that once the pricing gets down to rent levels all will be good (just because that’s the way it happened in the past) is wishful thinking. Inflation and the tightening of the credit market (read mortgage rates north of 8.5% by 2010) will be the determining factors. Combine this with the age old problem of the down payment and its going to be a long haul.
This train went off the track in 2001, we were just too busy chasing rainbows to see the writing on the wall. We’ll get back to balance when the median home price of the PhxMesaScot MSA is 2.7x the annual household income ($51,863). Not until then and for no other reason. Phoenix has always been about the affordability. We are vanilla ice cream, try to add sprinkles and we collapse. The rest of the nation will hit its buy points for all their own reasons and in their own time.
Cbass 06.30.08 at 9:20 pm
Well I think Mrs. Sonders has been reading your blog John
“…flush the system out…”
finance.yahoo.com/tech-ticker/article/31337/Bottomless-Home-Prices-to-Fall-Another-10-15-Percent-Says-Schwab%27s-Sonders?tickers=LEN,KBH,XHB,SCHW
yelanda 07.01.08 at 6:14 am
Well you can never catch the bottom. When you look at the world market, even if you bought your home at peak, the cycle will always bring you back to the same point within a decade. BTW, I was talking about the city of SF and not Phoenix, a city boundary of 5 miles by 5 miles with 3 sides surrounded by water. You cannot extend it anyhow. When you have a fixed supply, price is driven completely by demand. Look at today’s gas price, it is another good example.
Cbass 07.01.08 at 7:14 pm
So Yelanda you premise is that it is always a good time to buy because in 10 years inflation will take care of things???
I think a better approach would be to at least try and understand the market. I was told by a coworker to buy at the middle to end of 06 because it was a buyers market. Had I taken that advice I most certainly would be in worse financial shape than I am today.
I will wait till the bottom is in for sure then make my move.
Yelanda 07.02.08 at 8:39 am
Everyone, I am not suggesting this is a good moment to buy. What I have been saying is to respond to this article regarding SAN FRANCISCO in particular. (Not PHOENIX) And the 10 yr cycle is historic fact. Price driven by demand & supply is also fact. Sorry if that bothers you folks. I’ll keep my month shut.
David 07.04.08 at 5:48 am
This is a open place. All mouths keep wide open!!!!!! We all have a say.
Cbass 07.06.08 at 2:35 pm
Not telling anyone to shut up. Just stating that I do not agree with the premise yelanda. Just because eventually something will be worth more does not mean you should not try to get the best deal at the right time.
My mother is currently trying to sell her home but it is now worth 100k less than she bought it for. Now, will she be “ok” in a decade or so? Probably, but that is a long time to be stuck with no options. Also she could have been better off by waiting a couple years to make the purchase.
Again all I am saying is it is not always a good time to buy and I don’t care if your talking about SF, PHX, Paris, or where ever, period.