July 21, 2006

HousingPanic Stupid Question of the Day


Realistically, how overvalued are Phoenix home prices?

5%?
10%?
20%?
50%?

42 comments:

Anonymous said...

I think it is reasonable to purchase a house and have a small negative cash flow against 100% financing on real rent income.

foreclose_me said...

High crime, high temperatures, and high inventory?

It will be down 70%. The first 50% is automatic based on the bubble gains.

What I wonder about is what happens if credit is withdrawn: 20% downpayments, a Fannie crash, or 15% interest rates.

In that case, the question will be how much a house is worth if you hire a team of Mexicans to strip it for materials? Add a few dollars, and that will be the sales price.

Anonymous said...

A realtor buddy of mine showed me a condo he's handling. It's in a tower across the street from Biltmore Fashion Park in Phoenix. About 1400 sf. Brand new, granite, low-end stainless, rooftop pool and hotub. Great views and location, but not worth the $750K they're asking. I'd say it needs a 50% chop.

Anonymous said...

http://tinyurl.com/krndz

Good to see phoenix on the same list as DC, Detroit, Balitmore and Dallas.

CRIMETASTIC

Anonymous said...

50% for starters, but don't forget that the phoenix economy is going to hard land because of all the jobs tied to housing

price bubble + rampant oversupply + job losses = epic disaster in the making

Anonymous said...

who cares

keith said...

i'd say people who bought a home in phoenix last year care

i'd say anyone who owns a home in phoenix cares, a lot

i'd say all the illegal mexican roofers in phoenix care, a whole bunch

i'd say all the renters and would be homeowners in phoenix care very much

and i'd say the government of phoenix and arizona care a whole big bunch

that's who cares

Anonymous said...

OC:

Rent Multiplier says 50%.

Incomes say 50%.

Trendline says 50%

skytrekker said...

Keith

I e mailed a message to Paul Nolte CFA
Who posts on a regular basis at Financial Sense Online
http://www.financialsense.com/
and Market Watch.
Here is what he said about housing on July 19th-

And what are the numbers saying? Fresh data this morning point to a still weakening housing market as the home builders association numbers are now at lows not seen since the ’90-’92 recession. If we use that period as a guide, we can see housing weaker still and not fully recovered until sometime in 2008.

I found this to very interesting and overly optimistic. He was kind enough to get back to me- but still supplied little 'logical' reasoning for what I feel is an extremely overly optimistic prediction.

After one of the greatest run ups for housing in history, with vast amounts of excess, speculation, overbuilding, and high inventory we get a slight pause, then we are fully recovered by 2008?

In the future I would not base my future economic decisions on Mr. Nolte's views.

Metroplexual said...

I am with OC. The rents back that up.

Anonymous said...

OT: Keith, you're gonna love this one--sick em!!!!:

from the LA Times:

"Leslie Appleton-Young is at a loss for words.

The chief economist of the California Assn. of Realtors has stopped using the term "soft landing" to describe the state's real estate market, saying she no longer feels comfortable with that mild label.

"Maybe we need something new. That's all I'm prepared to say," Appleton-Young said Thursday.

The shift in language comes as debate over the real estate market is intensifying. The long-awaited drop-off is happening, but there's little agreement about how brutal the landing will be.

The Realtors association last month lowered its 2006 sales prediction from a 2% slip to a 16.8% drop. That was when Appleton-Young first told the San Diego Union-Tribune that she didn't feel comfortable any longer using "soft landing."

"I'm sorry I ever made that comment," she said Thursday. "When I get my new term, I'll let you know."

http://tinyurl.com/j72pw

Meow said...

Keith - that's a nice pussy!

Anonymous said...

Oh What A Relief It Is

Q What feels better than taking a long shit?

A Selling my overprided stucco I-10 Phoenix shitbox to some SUCKER.

OH WHAT A RELIEF IT IS

Editor said...

For grins and giggles, how about posting some Phoenix properties and with what Zillow says they are worth?

Anonymous said...

50% in the next few years... then another 10 -15% for the next three years due to the glut...

BubbleShanker said...

60% minimum, 1997 pricing where this will bottom.

geeski said...

Median prices went up 40% last year, so I say they'll drop 30-40% this year, to be closer to a normal Y-O-Y appeciation. If you bought last year and need to sell, then you're screwed. It will take at least 3 years to siphon off the glut of inventory, and to return to a normal market. In the meantime, investors will have trashed other "emerging" markets like Dallas or Austin.

Editor said...

http://www.don-iannone.com/
edfutures/2006/07/latest-phoenix
-hiring-outlook.html

Latest Phoenix Hiring Outlook

According to the latest Employment Outlook Survey by Manpower, Inc., 25 percent of Greater Phoenix employers are planning to expand their workforce. The area's employers are expecting less hiring activity than in the first quarter, but are continuing at a healthy hiring pace. For the coming quarter, job prospects appear best in Construction, Finance/Insurance/Real Estate, Education, and Public Administration. Wholesale/Retail Trade employers plan reduce staffing levels. Hiring in Durable and Non-Durable Goods Manufacturing is expected to remain unchanged in Greater Phoenix. Transportation/Public Utilities and Service employers are showing mixed hiring intensions.

Anonymous said...

To all u Arizona residents...

Considering McCain was at he heart of the S&L Scandal (he took money directly from Keating if I'm not mistaken!?!) How do you think Arizona residents are gonna view him during his next Presidential/Senatorial election. As a top Senator in the majority party I'd think he'd be closely scrutinized. not to mention his stance on Amnesty for Illegals...

Anonymous said...

To all u Arizona residents...

Considering McCain was at he heart of the S&L Scandal (he took money directly from Keating if I'm not mistaken!?!) How do you think Arizona residents are gonna view him during his next Presidential/Senatorial election. As a top Senator in the majority party I'd think he'd be closely scrutinized. not to mention his stance on Amnesty for Illegals...

Anonymous said...

Shit! We're going back about 15 years in pricing once this thing picks up steam! You have to remember, there are a lot of jobs that are going to be lost in areas outside of housing.
There will be people who have not played into the refi trend, who have owned their homes for 20 years, and who will loose them because of loosing their jobs.
I think this thing will be so bad, that in a few years, people won't want to buy unless they can pay cash.
By the time this is over, all those Gen Ex kids will be sucking the marrow out od their chicken bones, just like some of our grand dads do to this day.
In the end, it will do the country good!

autofx in Phx said...

50%

autofx in Phx said...

OK, 70%

I mean 80%.

Maybe 85%.

Perhaps 88%.

It's gonna fall a long way down...the s**t is hittin' the fan now.

Anonymous said...

I think there is a lot of exaggeration in here this morning.

Sure Phoenix is going to get nailed … no doubt about that, but for the medium price to drop “70%” … that’s not going to happen.

However, I do believe there will be foreclosures that will be purchased for .30 cents on today’s dollar, but those kinds of deals are going to be few and far between. Anyone that’s been in that business knows that.

My prediction is the Phoenix medium home price will likely drop somewhere between 25-45%.

autofx in Phx said...

i'd say people who bought a home in phoenix last year care
~
Yeah, like the guy I'm renting from. Talk about buying at the top, ouch.

boomer/bubblesitter/etc said...

http://tinyurl.com/zo82d

I reckon home prices will drop 20% of the amount of run up on this chart, respective to each city.

Now we wait and watch.

Disgorge! said...

I've just finished a book about the future of water by Fred Pearce called "When the Rivers Run Dry" (brilliant) that points out how rainfall is predicted to decrease in the SouthWest(it already has), and that the snow run-off from the Rockies that feeds the Colorado River is shrinking, leaving Lakes Powell and Meade in a bad state. PHOENIX uses a 300 mile pipeline of water from the Colorado that will inevitably have to be shut down, completely crushing Phoenix as an investment. G-E-T O-U-T.

Anonymous said...

I predict a 50% drop in all bubble markets: Florida, California, and Arizona. I think some areas where it's ridiculous, it might drop as much as 60%.

Anonymous said...

i'm currently renting a very nice house for 1400 in south Scottsdale.

sold in 2002 for 135k
sold in 2005 for 340k

even if rents rise due to inflation, this house is worth 170k max based on affordability and historical rent ratios.

So it's a 50-60% drop just to get to even. I feel bad for my california landlord, she's going to get slaughtered.

John Hyman said...

20%, based on 23 years experience in the Phoenix market.

John Hyman said...

P&E lots are falling from 50K to 30k in the past 30 days. I expect them to drop into the 20's by Sept.
This would bring the adjustments back to 2004 pricing, thus reducing the new home pricing accordingly.

Anonymous said...

P&E lots are falling, but its the Fin FF price that's interesting to watch as that keeps fluctuating with gas prices. I remember we were using $350 FF for improvements, now that figure is up to in some cases $675!

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