Phoenix Housing Market: The Rise of the Investor
Submitted by
CalculatedRisk on Sat, 03/20/2010 - 9:22pm (79 comments)
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Soon to be "The Rise and Fall of the Investor".
The year of the short sale? Which one is investor again? Flippers or landlords?
The Phoenix is the bird that dies in flames and then is born again from the ashes...
ShadowInventory wrote:
Repeatedly.
TJ and The Bear, those earlier "investors" have all perished in the flames.
These cash flow investors will probably do OK - they are paying all cash, but I bet they have to hold the properties longer than they expect.
best wishes
CalculatedRisk wrote:
Yes, a LOT longer. I have family there that has rented forever but recently purchased a nice place in Scottsdale. What's my point? Those that have jobs and want a home will have one, and those that don't won't be paying much rent for quite a while.
At least it isn't Vegas -- those "investing" in houses there might as well have gone straight to the casino.
All cash. And miss the cheap OPM and deductions? I don't think so. All cash last only long enough to close and process a maximum LTV new mortgage. Rinse repeat.
Where's AllenM when you need him?
All the great goings-on with AZ state & local finances ought to serve the future housing market well there.
Phoenix economy...
Phoenix: Economy - Major Industries and Commercial Activity
Seems to me the source of most of the money in the Phoenix economy is govt payments of one kind or another - everything from SS to the military....
This pretty much sums it up...
Largest employers Number of employees
State of Arizona 50,363
Wal-Mart 18,677
Banner Health Systems 13,756
Maricopa County 13,482
City of Phoenix 13,095
Honeywell International Inc. 12,000
U.S. Postal Service 11,406
Wells Fargo Company 11,000
Arizona State University 10,005
Albertson's-Osco 9,500
ShadowInventory wrote:
And don't forget that the largest employer is Wally World.
Private employer, that is.
my gparents bought a place in mesa last spring. they used to winter in mexico, it was their first winter in AZ. they spend november-april down there and the rest of the year at a lake in minnesota.
Shadow,
OUCH! Only 5 private companies on that list, and 3 of those are obvious beneficiaries of government largesse.
It's even uglier than I thought.
Too bad those "drop bids" are illegal under AZ law...
Wait till the lawyers figure that out...
There's a lot of room for "doubling up" in the Phoenix housing market.
1-person household
28.6%
2-person household
28.8%
3-person household
15.0%
4-or-more-person household
27.6%
That's really low.
Edit: Here's an example of crowded, Oxnard, CA:
1-person household
15.5%
2-person household
25.7%
3-person household
15.0%
4-or-more-person household
43.7%
I wonder how many of those homes were rented by construction workers, especially of the undocumented variety.
"It's even uglier than I thought. "
It;s even uglier when you consider some of those companies... Walmart? A health care company? defense contractor? a BANK? hahah, the great american service economy rolls on!
TJ and The Bear wrote:
And only one (Honeywell) actually makes anything. Everything else is pure overhead (health care, junk mail delivery, education).
bleh wrote:
Hey, not just a bank, a TBTF!
Apparently Phoenix does its own laundry and not much else.
I read an economic report done around 2005, about Phoenix's economy.. One of the investment banks had comissioned it... and found that over 30 percent of economic activity at that time was related to real estate and construction. If you'd seen the scale and number of those 'Taco-Moderne' developments at that time, you'd believe it.
Full disclosure: My family has owned property in Phoenix for about 100 years... but I hate the place so much, I live in Oregon.
yossarian wrote:
Not bad, but not quite Vegas territory.
yossarian wrote:
Betcha Bend probably had similar numbers for a short bit.
.. Also... to my chagrin, I will be there in a few days, visiting family and taking pictures of empty buildings. Two ex-Phoenicians I've met in Oregon tell me they have both bought (independently) properties at 80 percent discounts from the peak. Plus, about 1/3 of my friends and family that I warned about a coming Phoenix RE implosion.... have lost their jobs, or had their pay cut. My Honeywell cousin, her insurance broker husband, my banker college friend, my cousin's firefighter son, etc..
And there's still a lot more job losses to be had. Interesting place.
TJ and The Bear wrote:
What do you mean 'for a short bit?" Bend is rapidly returning to the days when the city motto, "Poverty With a View" was coined.
Greg Swann quote from July 21st, 2006, 12:45 am MST:
We keep our own home sales price statistics, so we have no doubt that values are down from their high in December. How much? Right now, about 4%. Could they go lower? Certainly. Will they drop by the huge amounts HousingPanic and his flying monkeys seem to yearn for? This seems very unlikely.
What seems much more likely is that Phoenix will recover from the hangover of last year’s buying binge and get back to a steady rate of growth — historically 6% a year.
Honeywell battles tough times
good article
Honeywell headcount in Phx down 30% in the last 10 years, all retirement eligible workers will have their healthcare cut come Sept 1 if still working, more layoffs/outsourcing expected
Rob Dawg Saturday, July 14, 2007:
Okay, here's a tenative list of regions ranked bubblewise. Anyone have a better ordering or wish to add a few?
California's Central Valley - In California and includes Bakersfield, Fresno and Sacramento
Las Vegas - Too close to SoCal, too fast growing/young and in for a COL shock
Phoenix/Scottsdale - vicitim of success
Gulf Florida - demographics, taxes, services, insurance
Orlando & Miami (tie)
Not too shabby.
yossarian wrote:
Go watch a Coyotes game if it's possible while you're there. They apparently have very cheap deals, including an option for a shuttle to/from Glendale, food, drink and game cheaper than a meal at a restaurant. They're also right near the top of the NHL right now, and on an 8 game win streak
Rob Dawg wrote:
You overlooked all the furriner bubbles
Rob Dawg wrote:
Excluding preindustrial societies, I think the occupation of most people most places is doing each others laundry. However one of my fundamentals is that every area needs to generate outside income somehow to be sustainable. Generally my impression was that Phoenix has some high end engineering and military spending that bring in outside dollars, but that most of it was in the form of retired peoples pensions and social security. (I could be wrong).
I think that is sustainable to an extent. However the housing bubble probably changed that a bit and not for the better. More people that need jobs and more retired people whose investments got hosed.
EvilHenryPaulson wrote:
Thanks, Henry... think I'll try that... if that's the stadium I think it is, that's built on the land my Godfather used to own... it was a tortilleria back then.... LOL .. I'm sure he sold it for almost nothing. ... Me, I still remember the Roadrunners hockey team.
Rob Dawg wrote:
What memories, Rob... saw his stuff when Keith still had his Housing Panic blog... Swann was SO typical of Phx realtors. Hope he likes dry dog food.
Comrade Gibbon wrote:
No one has successfully lived in the Salt River Valley. The last people who tried resorted to cannibalism.
Phoenix is the post child for a failed city, and the strip mall and golf courses are a cancer that will kill the patient.
I did a Art Show in Scottsdale a while back, and was horrified, and glad to get pull the rip cord.
I like Arizona, and find the landscape magnificent, and the culture interesting, but Phoenix is a distopian nightmare.
I was in a development south of Phoenix way back in 2001, Phase 3 (of how many? Seven?), a thousand homes each phase. One road in and out, one lane each way, until a mile down you reach the intersection of the two lane road that led to the freeway. The traffic flow was horrendous even then.
Edit: But I didn't see any signs of cannibalism.
Re Edit: But if you're ever in Phoenix, try Mrs Lovett's Meat Pie Shoppe. Her meat pies are very tasty. She says they're from an old English recipe, voted Best Meat Pies in London. But stay away from that barber who hangs out there, there's something strange about him.
sdtfs wrote:
You haven't been there in the middle of summer. It's not just rumors.
Learned something interesting from a bank director this evening.
REO properties that were originated by a failed bank or lender - think Country Wide - that was bought by another bank, gets 80% of the loan paid by the FDIC when the property is forclosed.
So that is why there are so few short sales, the bank gets paid only if they forclose. Short sale is a much bigger loss.
Best buy in town is an REO that was a failed bank, now owned by the new bank. The lender has been paid and isn't looking for a high sale price.
yossarian wrote:
I live in Phx, no one has eaten another person that I know of. Drink the blood when there is no water, sure.
I probably shouldn't admit this, but I will be touring Phoenix houses tomorrow afternoon with my broker. Most of the places I will be looking at are in central Phoenix and listed for under $50,000 on MLS. This seems to be a recent development. Prior to February you had to hang out at the court house to get something much under $50,000.
Shortly after I started seeing properties listed for less than $50,000, I discovered that it is very difficult to get a mortgage for a property under $50,000. The standard bank fees apparently violate some federal ratio of fees to principal if you borrow less than $50,000. So I guess that's one of the reasons why everyone is paying cash for these places.
If you can buy the place for $30,000, there's a decent chance you can slap some paint on it and sell it to some idiot for $50,000. But I agree with CR, the better assumption is that you will be trying to rent it out for a while. It should be possible to cash flow a house at that price, but it won't be glamorous work.
In case anyone thinks that looking at houses means I'm bullish about the Phoenix market, I'm not. I think we have at least two more years of REO dominated sales, and prices will probably drop further in most categories. But right now there are some houses in working class neighborhoods that will cash flow with a generous margin for improvements and repairs, so it's time to start looking around.
And in other news, John Lipsky of the IMF says countries formerly understood to be rich, basically have a sh!tpile of trouble coming on the sovereign debt front:
Lipsky Says Debt Challenges Face Advanced Economies (Update1) - Bloomberg.com
Guess that multilateral surveillance function didn't turn out so well.
Hoocoodanode!???
C
He said fiscal consolidation would be appropriate in the U.S., where a higher public savings rate will be required to ensure long-term fiscal sustainability.
Ummm, the US Congress is unfamiliar with the idea of public savings.
Rob Dawg wrote:
Sounds like he needs a Bermanism: Gregg "Black" Swann...
Ever take a look at the population of places in our country before air conditioning came along?
There weren't many people in Arizona, and we'll get there again...
screens were helpful too.
for an sdtfs comment yestereve,
Made a comment on his six year old giving him spelling hints...was listening to our five year old on the phone with her eight year old cousin, "R as in ravioli, e as in elephant, d as in ..." to see if they were talking about the same word...gonna have our hands full...
Meanwhile, on the eastern front...
China warns US against sanctions over currency - Yahoo! News
Dateline: the near future
"We repeatedly asked China to stop valuing their currency so low but they wouldn't listen and the trade sanctions they have imposed leave us no choice but to devalue the dollar to remain competitive as an exporting nation."
Juvenal Delinquent wrote:
Ever have pomme frites, deep fried in
fat?
Juvenal Delinquent wrote:
I'm guessing that would have mayonnaise as a condiment - but no, not in that style...
So what would we name the four ponies of the apocalypse?
Leverage, Capture, Malfeasance and Denial?
Would our
express all be the same breed?
'Collidesdale'
p.s.
Once you get over the idea that your french fries might be tasty on account of the nag that came in dead last @ Longchamp in the 5th race last week, they taste great.
Look, nobody told me about the
-fat.
Edit:
Anyways, isn't it the four horsemen?
That's a horse of a different flavor.
Money magazine's projections of home prices in 2010 - by city:
Real Estate 2010 Biggest price gains - Money Magazine on CNNMoney.com
NervousRex wrote:
Just add a little more ketchup (or mayo, depending on tastes) - fix ya right up
We've got heedless whoremen, that'll do.
More investors at a St. Petersburg condo tower auction.
St. Petersburg's Signature Place exceeds expectations with condo auction - St. Petersburg Times
Here's the building.
SkyscraperCity - View Single Post - ST. PETE | Signature | 36 stories | 366 feet | 244 units | recently complete
Sorry if this was already posted.
Minister: China likely to see trade deficit - CNN.com
"China is likely to see a trade deficit in March, the country's commerce minister said in Beijing Sunday."
Couple of months in the red could soften debate on Yuan?
REBear wrote:
Found that quote as credible as this:
Why were they buying those Treasury thingies again...?
On a Chinese trade deficit...if volumes shipped to US/Europe were both deteriorating and there was a significant ramp in commodity imports, you could get there...
The USA's position is like that of one that owes the loanshark a bunch of money, and threatens to break the loanshark's knee-caps if he doesn't stop lending more money...
4
s of the . . . . 
Like any game of risk the question is not even collecting rents. Will there be enough butts for the seats. Buying some thing and sitting on it is one thing. RE requires maintenance, taxes, management, and security. The test of time looks like it may be long and some of these folks will lose. Recycled foreclosures.
Devaluing the dollar should do wonders to the price of electronic gizmos imported from China. Could Foxconn move manufacturing to somewhere less contentious ?
Based on the number of out-of-state license plates I've seen for the last week, they may have picked the perfect time to market those to investors. Lots and lots of Ontario visitors on the roads this week.
The blame game goes down much easier when you utilize a boogeyman far far away as being the reason prices have gone up so much...
lawyerliz wrote:
Good morning to you as well.
Disneyland today for economic forecasting. I expect sunny economic conditions with scattered denial.
As to my predictions, That was three years ago. It has taken the US consumer an incredibly long time to change some consumptive habits like Disney. Contrarywise it hasn't taken long to permanently change other behaviors like treating debt repayment as optional.
On the Fed FOIA decision:
The Court did not "tell the Fed to go to Congress to get the law changed", as CNBC and Zero Hedge seem to spin it.
When judges reject a party's argument to ignore a law, informing the party that its remedy is to petition Congress is standard "boilerplate". The Fed's claim for secrecy has no constitutional basis-- quite the opposite-- and the Fed is still subject to the rule of law, not above it (or "independent" of it, as Cinco suggested the other day).
*burnside wrote:
St. Petersburg's Signature Place exceeds expectations with condo auction - St. Petersburg Times*
Buyer's remorse sets in a week. I wonder if one gender is likely to behave more irrationally in auctions?
Nathan's Economic Edge: THE Most Important Chart of the CENTURY
you got that too, jd
When listening to the various apparatchiks, whether Wall*Street majordomos or Larry, Curly & Moe in charge of dough in the White House lately, they never fail to mention how we averted another Great Depression by taking the actions we did etc., as if to cushion the inevitable blow mentally for the hoi ploy, when it comes in totality.
tg wrote:
Layman's summary: Don't drink seawater.
SNAFU wrote:
Bet you're right.
These new towers aren't sharing similar fates. A more or less comparable Novare project in Tampa went rental late last year. I saw a one-week-only promotion pushing junior ones at just under a thousand a month a few days ago. Evidently not a popular floor plan.
The building is "Element" and is fairly well situated - adjacent to the new Tampa Museum of Art, a new riverfront park, the central library and the city's performing arts center.
Element | It Becomes You
Rob Dawg wrote:
ok ancient mariner