patrick.net

Regular Sales Will Rise.

Hi Roberto. How are the acquisitions going? I'm closing on another place Tuesday - but not Arizona. Good inventory is hard to come by.

In other markets I am seeing a resurgence of regular sales.

As prices rise there are owners who were underwater but not willing to do a short sale flooding the market. Many are overpriced as owners put their houses on the market for what they owe - not the current market value (list and pray).

I haven't seen this in the PHX market yet as the price decline was more severe and most who bought at the peak are still underwater. If prices keep rising you will see some - people who put down a lot or people who bought before 2001.

Where I am now the flood of regular sales have dampened demand for distressed sales. Hence I am picking up a few bargains here and there.

I do think there is still a lot of inventory underwater in Phoenix. So I see foreclosures / shorts continuing for at least 3 or 4 years. Their impact on prices will be less as there are many more 'investors' than there were in '09 or '10 willing to buy anything that looks remotely like a bargain.

Barring a fiscal cliff tragedy, I think prices will continue to itch up close to replacement cost.

War says

RobbertoRealtor.... you're deleting posts to supress the truth about housing. Why?

Indulging in your usual deleting routine, I see.

War says

Yeah. It seems roberto wants to surpress the truth about housing by deleting.

I have to say it's rather strange of Patrick to allow him to delete your posts. I guess it's his next step seeing as you always circumvent his bans.

War says

Rather strange? It's one of the benefits of paid membership. Maybe we should become paid members so we can delete your posts. hmmmm?

Oh, but Roberto doesn't have one of those lovely gold stars under his name. Clearly he's been given special dispensation to remove every single one of your posts after other people have already quoted and responded to them. Power indeed.

You are underestimating CA sales taxes a bit there. They've recently raised them.

This state only knows how to take all our money and hand them over to the greedy unions.

War says

Uh huh.... And you can ask $50k for your used honda civic too.

I'll take it! 50K today when it could be worth 100k in 500 years at today's asset appreciation rates. My grandson's grandson's grandson's grandson will be rich I tell yah. I can't wait.

Robert Shiller: We might see a housing bubble in some cities. Notably...we already, looks like there's already in Phoenix and San Francisco...

http://www.youtube.com/embed/v8Rrrs9zEM0

Even though this is the Press Release, not the report, I like reading about the info from the source of the info.

http://www.standardandpoors.com/indices/articles/en/us/?articleType=PDF&assetID=1245343891446

Personally, I have NO fears about the fiscal cliff in 2013. The can will get a big old kick at 11:59:59. I can't believe that anyone actually thinks that our inept government would pursue any course of action other than this. The republicans are retarded, but they are not so stupid as to disrupt the status quo in any meaningful way. Same goes for the democrats. They can both feign disagreement on various fiscal talking points and then get uncle Ben to make some power moves to avert the reckoning for another year or two. Then the circus comes back to town for a repeat performance. I agree that at SOME point we may finally go off the cliff as it looks like an inevitability, but I think that the status quo will be maintained this time around. All the huffing and puffing by our "leaders" is for show, I think.

Out of curiosity, what will drive the "inevitable" house price appreciation? I agree that it is inevitable if inventories stay way below historical norms like they have been. Are we in a new paradigm where housing will be dominated almost solely by yield-chasers and the individual owner-occupier no longer participates in a meaningful way?

1. I happen to work in high-volume consumer electronics development/manufacturing. Automation won't bring jobs back here. The entire supply chain is in Asia and it is not moving here. I'd prefer it stay there. Anyone that has actually been to industrial China would. As much as Steve Jobs was a big asshole, he was dead-on when he explained to Obama why we will never produce iPhones in the USA. Supply chain. Automation could cut the production cost in half, but consumers would still pay twice as much because of the logistical problems that stem from getting all of the raw materials there to factories here.

2. Possibly. If Asia is willing to pay more for the energy than America, it will all be sold to Asia. It will go where there is the most profit, without regard for what is "good" for America.

3. Where will these "displaced workers" find employment? If you are educated in something useful you have a shot at a "better" job. Maybe if energy takes off like you say there will be job growth there. Outside of FIRE and service sector jobs that produce little-to-nothing, I am not sure where job growth will come from.

4. Convenience is, and will continue to increase. No argument here. It's all trinkety crap and no meaningful innovation. New applications of mostly existing technology. Maybe working in the industry has made me jaded, but I don't see any real human "progress" in the perfection of disposable consumer goods and the proliferation of web-advertising (*ahem* social media). Keep buying it though, it puts food on my table!

As far as I can see, the bulk of our economy is fueled by consumption which is easily outpacing production. I don't see how it is sustainable. Maybe I am totally wrong and will realize it in 5 years, I don't know. Everyone thinks that their generation is at the helm of a ship that is about to sink. Maybe the idiocy that I see rampant in every corner of our nation has always been there and is just more visible thanks to the internet, I don't know.

Phoenix market sure turned on a dime. I guess a 20k condo is not a sustainable price when a CD pays 1%. Pretty simple looking back...

Will never trust a businessman when he uses the word "honest" in a sentence.

E-man says

Has it never been a housing bubble in the Bay Area?

This is the latest one.

U6 is 15%. We have a japan style ZIRP in place with trillions in money being QEinfinity keeping the joke afloat.

This place is a mess. This is the end of the middle class. If housing pops again, it will break the back of the pack mule carrying all the freight.

Denver didn't get whacked like Phoenix did, so we can't expect the same kind of increases, but prices are up, inventory is down, and correctly priced houses are gone in a few weeks (if not during the first weekend). My Redfin notifications (on my iPhone app) have been going absolutely insane over the past 2-3 weeks. Lots of activity. I got lucky to buy when I did (just 1 month ago).

Denver's prices make no fucking sense right now.

Phoenix is a place that will never ever be worth it. Doesn't mean few people won't make their money doing rentals or investors won't flip stuff to each other back and forth until someone is left with the empty bag, but overall it's a has been kind of like Detroit.

FortWayne says

Phoenix is a place that will never ever be worth it. Doesn't mean few people won't make their money doing rentals or investors won't flip stuff to each other back and forth until someone is left with the empty bag, but overall it's a has been kind of like Detroit.

People flip houses and do rental investment at about everywhere on earth but it is hard to see the similarity between Detroit and Phoenix.

What happens when water wars change the price of water in desert areas? Let's say there's a long term drought, 10+ years, where the price per month of water goes up to say...$300/month in desert areas?
If landlords try to pass the high water price on to renters, the renter will just move away. For owner occupied, they are more likely to stay because it will be harder for them to sell into a crashing market.
After 10+ years of drought and high water prices, the outlying areas of Pheonix will look like ghost towns. With fewer people in the Phoenix area, the price per houshold of water will probably decrease, allowing the remaining people in the city center to stay. But they probably will pay $100 or more per month for water.
I'm sure you have alot of arguments against this happening and why nothing bad like this could ever happen to Phoenix (or you).
Good luck with that.

Water wars sounds like a great movie!

The RE bears are now inventing fiction since no facts support future price drops.

I waited too long to buy back in. Was lucky to buy last year. When i sell my house for 1.2m i will be sure to logon here with the news. Then retire to AZ where i can carry a gun everywhere like the old west.

It's happened before, it most likely will happen again.
http://www.thedaily.com/page/2011/02/19/021911-opinions-history-hooverdam-farrington-1-3/

I'll take real estate advice from a realtor when I take diet advice from Willy Wonka.

PockyClipsNow says

The RE bears are now inventing fiction since no facts support future price drops.

As much as sales data may mean something to a buyer, those aren't the facts. It's the principle of the greater fool, and we just saw that in 2006, and 2007.

I don't really know what perma bear means, but I do know there has been a long term strategy of Real Estate market timing. You buy when people are selling, and sell when people are buying.

That market timing has, in the past, been based on a decade long cycle such as between 1976, 1986, 1996, and 2006. Those were good times to buy except that 2006 thing.

Between 1998, and 2003 the Real Estate market changed radically, and globally. It wasn't just here in the good old USofA, it was Europe, Asia, and Africa. After the crash in 2008 South America then took off as the emerging Real Estate markets.

While people here blame our government for the change in Real Estate it doesn't explain what happened in the other markets until you look at banking.

Real Estate is always a good investment. Owning rentals is a good investment, but the strategy has changed. The Housing Industry has changed.

The economy has changed.

Banks are in control of large blocks of property. They are selling today for a premium, have cleared the books of dead wood, and they may well be done. I think banks will pull out of Real Estate next year 2014, from what Bernanke has said about the Fed.

Some properties will always be good, some other will adjust according to what the market will bear.

Because of that volitility I would rather have my money elsewhere right now.

So, I don't know if that is a perma bear position, because I own property. I just also know that we will sell another place this year rather than rent it out, but keep the commercial property, and land.

While I was writing this the Dow broke through the 2007 record high. How about that Dow? In terms of short terms gain, what about those that bought in 2008? or even last year?

I understand about the leverage, but still something has changed in terms of investment.

PockyClipsNow says

Water wars sounds like a great movie!

The RE bears are now inventing fiction since no facts support future price drops.

I waited too long to buy back in. Was lucky to buy last year. When i sell my house for 1.2m i will be sure to logon here with the news. Then retire to AZ where i can carry a gun everywhere like the old west.

Sounds like a plan. Fortunately or unfortunately, I cannot find any house selling 1.2 M in the future at where I live. May need to find some other ways to get some money to retire in AZ.

David Losh says

As much as sales data may mean something to a buyer, those aren't the facts.
It's the principle of the greater fool, and we just saw that in 2006, and
2007.

Like it or not, this IS the game nowadays. You can choose not to play the game but it does not necassarily mean people will all lose shirts by playing it.

Mobi says

this IS the game nowadays

That's exactly what I said, but sales data isn't the game. Real Estate is a long term hold.

robertoaribas says

6 million people who bought in 2006 can tell you that,

It depends on the deal, doesn't it?

Just because a house sold for $300K doesn't make it worth that, it may well be worth only $80K. Then to tell me a person will rent that $80K investment for $1100, doesn't sound like a good thing either.

In your own scenarios you make it attractive to buy rather than rent, so that is also a contradiction. Why would some one pay you $1100 going forward?

It depends on the deal. You are talking blanket mathmatical formulas, that don't seem like sound advice.

Actually we will see soon enough, because like you, I'm usually right.

Anyone who is still a RE bear and thinks prices are about to crash huge are not capable of rational thought. They literally are refuting math with a math teacher! Really amazing to watch people deny reality. Its magical thinking.

We all wanted cheap housing for all but thats not allowed by the feds.

robertoaribas says

a year?

You must be kidding. A year, in Real estate is nothing, as we saw in 2006.

I don't dispute your rents today, because it is a tight rental market. What I also know is that three of my former clients two with short sales, and one a foreclosure are now eligible for mortgages.

How's that possible?

My objection was when you took your mathmatical formula from Phoenix Arizona, and wanted to say Chino California was the same. It's not the same demographic, or economy, so that didn't play for me.

You might as well be saying the price of Real Estate never goes down, but we know that isn't true, don't we?

We also know that banks are still tight on credit, but if the price of property were to drop, and the amount of interest income were to rise a little bit they would be back at it.

In the mean time the economy has catered to the rental markets, and over all I don't see housing being a tight commoditiy in the future.

I've been doing this a long time, and timed several Real Estate markets. This time is different.

You are in Phoenix Arizona, and have done a great job there, but continue to make blanket statements based on your own experience which doesn't need to translate universally.

robertoaribas says

are you claiming my renters don't exist?

There is some suggestion a few might disappear when they qualify for a mortgage. I don't know numbers but I'm having an experience similar to Losh where I suddenly know a list of people who have short-sold homes and are now waiting for their credit to recover so they can buy again. If you're making a premium off them for a year or two, though, you're making money. It doesn't sound like you're concerned that you spend a lot of time making that money, so sounds like Roberto's cleaning up right now.(literally and figuratively)

PockyClipsNow says

thats not allowed by the feds.

The Fed is what is driving this market, but they have a limit. Bernanke has said so on many occasions.

I don't understand this fascination with another crash. That isn't what happens. It's a slide backwards.

Housing is a part of the over all economy that isn't growing without cheap credit, and speculation.

We saw a slide in the 1970s, and 1980s, especially the 1980s when interest rates spiked. Even in the early to mid 1990s there were some awesome deals in Real Estate, globally even.

So tell me what's going to continue to prop up this pricing?

Zirp and 2% mortages will prop it up. Ez lending. 5 year foreclosure timelines, workouts, loan mods - money doesnt exist its zeros and ones so there is no limit or end in sight to the manipulations.

robertoaribas says

I sold several investment homes

I sold in 2005, 2006, and 2007.

robertoaribas says

the math works the same unless for some reason paying 1500 in rent versus 1000 on mortgage feels better in Chico...

No, the math only works in a rising market. Rising rents, or property values. Buying for the sake of saving on rent isn't sound business, unless that is the place you will stay the rest of your life, but Chico? California? Come on.

robertoaribas says

I predicted the crash.

We all predicted the crash.

robertoaribas says

I expect a much better economy in the 2014

You're forgetting the debt from those wars, and ignoring banking as a driver of the Real Estate markets.

PockyClipsNow says

Zirp and 2% mortages will prop it up. Ez lending

There will be easy lending on property values that are in line with what the market will bear with higher interest rates.

Like I've said we have been here before. The economy has shifted. Housing will become less of a driver in the economy, kind of like we are seeing now. We have a recovery in spite of the Housing sector.

Rising prices aren't always a good thing, in today's case it's choking the consumer with higher debt that will need to be paid off over a longer, and longer period.

In the past inflation ate the mortage debt up, you could sell for a profit. When you pay a high price today, and prices fall your ability to move is greatly reduced.

It isn't a matter of if prices will recede, it's when. I think it will be in 2014 which will be the end of a seven year cycle started in 2007.

robertoaribas says

you were completely wrong

I'm very rarely wrong.

I highly doubt we will ever see high intrest rates again. Why why why would the fed ever raise them? It would cause catastrophy thus not allowed. Inflation has been beat by chindia plus automation.

David Losh says

It isn't a matter of if prices will recede, it's when. I think it will be in 2014 which will be the end of a seven year cycle started in 2007.

I happen to agree and anticipate the end of the 2014 RE season will hold the top price for this round. Todays prices will no doubt be hard tested during the off season 2014-2015.
The real test for future home price (2015 and beyond) will be how todays prices hold up.

PockyClipsNow says

I highly doubt we will ever see high intrest rates again.

2015 is absolutely looking to be the time int rates do come back with fiery and a true bottom in RE will be established. Perhaps below the already so called established lows... Undoubtedly price will let us know, it will speak for itself.

chanakya4773 says

The only thing that is scientific and reliable is case shiller housing index.

FWIW, shiller proved that RE prices can be influenced by irrational exuberance... hence the name of his book.

PockyClipsNow says

Zirp and 2% mortages will prop it up. Ez lending. 5 year foreclosure timelines, workouts, loan mods - money doesnt exist its zeros and ones so there is no limit or end in sight to the manipulations.

LOL, you may very well be correct.

PockyClipsNow says

I highly doubt we will ever see high intrest rates again

Could be...depends on how old you are. But I think your scenario is pretty unimaginative and improbable, because, among other things, it assumes that the American economy will never stand on its hind legs ever again.