patrick.net

Interesting and relatable thread to me, especially as a person who lives in the "hot topic" Phoenix area. We transferred out here 1 1/2 years ago in the middle of the bursting bubble. We chose to rent for that reason. After a year, for many reasons, we chose to buy. We bought, at what we were thinking was pretty close to a bottom. Then the craziness took off and starting running out here. I have never seen anything like it. I liken it to a combination of a Vegas/western gold rush mentality. Our home value started going up, and thinking, we need to sell now...while we can get our money back...and we did. That is how crazy the market is. We sold...got all our monies back that we had put in, plus paid the ridiculous realtor fees,and closing costs. We are back to renting--and renting a nicer/bigger place even cheaper that we rented a year ago. ANd we are definitely renting much cheaper than our mortgage. For now we are happy with our choice to rent. Not sure what the future holds...

I left my great CA rental house with below-market rent when I relocated to AZ and rented an apartment for the first time in over 20 years. My company opened a new office here and offered heavy incentives to those they handpicked to move and establish the office culture. My apartment is beautiful but there is a distinct disadvantage to being just another tenant in the complex, where my landlord is used to vacancies by nature of their property type. They have less incentive to work with you and are not as appreciative of a good tenant.

I have a chunk for down payment but will only purchase when it’s smart to do so, not because I want to get my catbox out of my laundry room and into my attached garage! So for now, I’m sitting and watching the madness that is the PHX housing market and saving money every month for a purchase, whenever in tarnation that may be. I am appalled at the government interference in a market that was so out of control and in need of correction. Seeing that so many of the PHX housing purchases are by investors, together with all the detrimental government intrusion, I know this is not a stable market and one way or another, changes are coming. No thanks, I’ll wait for a bit of stability to enter the picture before I take that kind of risk.

Not sure I want a mistress, too high-maintenance, but I’ve always said I would love a wife to do all the things that my ex-husbands felt entitled to demand out of me simply due to differences in our genders :-) But since I won’t enter into marital fiasco again, I guess I’ll just have to keep doing my own laundry!

exflirt says

I have a chunk for down payment but will only purchase when it’s smart to do so, not because I want to get my catbox out of my laundry room and into my attached garage! So for now, I’m sitting and watching the madness that is the PHX housing market and saving money every month for a purchase, whenever in tarnation that may be.

SMART

Used to rent in Fremont from early 2006 till april 2011 in a relatively new complex. It was only 4 yrs old when I moved in. Purchased a new construction in Dublin - closed in april 2011. In my opinion, Dublin has the best new developments at the best price in Bay Area and I have really enjoyed living there. In Fremont, most new developments were right next to graveyards and feature for feature, they were more expensive most likely cause Fremont is built out and the commute to san jose is closer. The latter point was irrelevant for me since my commute is in the opposite direction.

I think we will see some inflation, though nothing of zimbabwe or post soviet union variety. They have tools to "cool it off" if they need to. In Bay Area, I believe that housing will resume its normal price increases of 3.1% per year over the next 20 years or so.

The feds policy is to deflate 33% over then next 20yrs.

We have stagflation already.

0.25% interest rate rise = $1 TRILLION in extra debt.

Another Phoenix res here. I was positioned to buy a decent place for cash but missed the wagon by about 4 months. I am now in a pricey rental near ASU's campus, pricey due to the location. I survive on one car, cut my gas bills a ton, don't have to pay for parking at work and get all the benefits of being able to walk to campus (library, wifi, eateries, gym, etc.). Do I wish I owned? yeah I do but now have that bad feeling again like I did when I first moved here in 2005. I actually feel better paying more rent in a place I could never afford to buy than paying slightly less rent to an investor in some suburb.

Long-time lurker of patrick.net, finally decided to make a profile and dip my toes in hoping I don't get them bitten off.

I bought a condo in the Atlanta metro in mid-2009 thinking I was getting a deal. Needless to say, I didn't and instead the current market value is 50% of what I paid. My plan was to purchase conservatively (not a large loan) and I paid it off in full quickly because I am very debt adverse despite having a professional job and an MBA. It's how I was raised and it's what I believe in. I consider myself fortunate that I didn't follow the advice of my agent to buy a higher-priced property; the effect of losing 50% would have been much more severe (ex: 6-figure loss). The loss on the condo was a good lesson on real estate that I feel better prepared me on my next purchase - notably not to trust real estate agents if for no other reason than the fact that their commission-based-compensation (incentive to close a deal at the highest price possible) is directly opposed to your interests.

Anyway, I then bought a 1966 single family home mid-2012 (with a different agent I might add - the experience was more positive and I was smarter on how to manage the relationship). This purchase was made all-cash. Although there were a number of minor-to-moderate repairs and upgrades that I needed to do over the past few months, I've been happy with the purchase, I've learned how to fix things, and planting fruit trees and berry bushes in my backyard has given me a lot of joy. It's also nice to know that the price I paid for the home is the same my neighbor paid for her home when she bought it 30 years ago. Current market value has been slowly trending up. I think I did well.

As for my condo? I have a stable renter and I've got a very good cash flow (no mortgage, low HOA, low taxes, low insurance). There is no point in me selling it and realistically I'll probably have to rent it out for a few years to break-even on the equity loss.

My strategy of not paying interest and not paying rent may not make sense in the short term but I think in the long term it's a winner because you minimize your costs (you save hundreds of dollars each month by avoiding interest and rent). If you're forced to flip in a down market for whatever reason... ouch. But if you can buy (cash) and hold and rent out... you benefit from low costs and you've got good cash flow. Can you do more with leverage? Sure... but it comes with risk and lots of people got burned doing just that. I'd rather have slow and steady than fast and volatile.

SkyPirate says

It's also nice to know that the price I paid for the home is the same my neighbor paid for her home when she bought it 30 years ago.

That is a good sign. Jeez, 1982 prices in Atlanta? Seriously?

Yeah. When I heard that from my neighbor I felt happy about it - just looking at inflation, I probably got a good price. Contrast that with my condo which was a 2003/4 conversion from apartments. There's no telling what the true value was - the only real sales data were from people buying in an inflating bubble. As we all know, you shouldn't compare a discount from bubble prices to justify a purchase... it can fall much further.

Anyway, the home wasn't a foreclosure or a short sale - it was a corporate relocation sale. I'm not sure how it works exactly but the relo company was selling the house on behalf of an executive for a corporation they were hired by. Do they take the home on their own books? I don't know. But they were the ones signing all the paper work and working through their listing agent. They had been chasing the market down for over a year and finally got low enough that when I came in with my low-ball offer, they played ball. I closed on the home at 16% below their asking price. I bought the home for 53% less than what the executive paid for it in early 2010, which was the highest price on record in terms of the home's sales history. She was only there for a year, seemingly didn't do any maintenance or upkeep, and then her company relocated her. There were some things I needed/wanted to do to the home (ex: attic insulation and walkway, moderate duct work, replacing porch beams, hardwood floor installation, clearing the backyard-turned-jungle, new bathroom tiling, power washing, etc). But now it's done and it feels like home. :)

I should add that both areas in the Atlanta metro are considered good - actually, the area that my condo is in is considered very good (hip area with lots of restaurants and a lot of corporate offices). If you buy in some of the rough neighborhoods in south Atlanta, prices there are ridiculously low... essentially the same price as a used-car. Prices in such areas have shed 80-90% of their value but they'll be torn up and I certainly wouldn't want to live there. But they can represent a bargain for the slum-lord investor.

One of my colleagues, an Atlanta native, says that there are a couple private venture capital firms that are buying up hundreds and hundreds of SFHs around the city to rent out. Supposedly they believe the future US society will be renters and their mass purchases at the bottom-of-the-barrel has been part of the reason for prices starting to tick up.

My assessment is that the market has some bargains out there for those who are patient and do their due-diligence. But I think there are also homes that are overpriced too. It's like a checkerboard. I'm not a bear but I'm not a bull either - caution is the name of the game. Look at homes individually and try not to get confused with the macroeconomics which are beyond our control. If you're buying because you want equity appreciation, you're taking a risk. If you're buying because you want to save rent money, that's a better play but it's one that requires a long time frame to bear fruit - and be careful not to let interest payments offset your rent savings. It's better to start small and save.

I have some inclination to buy a house in the near future. I have been watching patiently for the past few years after moving to Denver in 2009. In hindsight 2011 was probably a better time to buy than now or the near future.

I remain concerned that the housing market hasn't found a durable bottom, but I think that fear is mostly about what "should" happen and not what is likely. Private and public debts are both big, so low rates and inflation seem likely to be in our future.

As far as guarding against inflation, most of my non-cash is in equities. I am tending toward blue chip / stable /dividend companies right now, but I'm no expert on investing. Chasing higher returns, I have moved about 10% of my retirement money into a Lending Club account where I am being very selective (but aggressive) with my loan choices. I'd love to get double digit returns, but realistically I'll be OK if I get 5% or more. Not exactly a risk free investment, though, as a new wave of job losses could really upset the applecart here. If a loan goes sour you can't hold it long enough to recover (defaults are forever, baby!) The vast majority of my supposed worth is tied up in company stock which I can do nothing with for the time being (private, closely held)

I would see buying a house as an inflation hedge to some extent as well, or at least a way to diversify. I'm not sure how sane of an idea that is.

I don't see deflation in the future, or at least an awful lot of contortions to avoid it.

atst1138 says

I could never afford to buy than paying slightly less rent to an investor in some suburb.

I would only rent in a professionally managed development. Renting from an investor will be a nightmare. They're on a shoestring budget, are cheap, ignorant, greedy and unprofessional.

ELC says

atst1138 says

I could never afford to buy than paying slightly less rent to an investor in some suburb.

I would only rent in a professionally managed development. Renting from an investor will be a nightmare. They're on a shoestring budget, are cheap, ignorant, greedy and unprofessional.

That is one thing I am seeing as a positive with all these big money investors getting into the landlord business. They will have to contract professional property managers rather than depend on their kids and in-laws to take care of the place.

Did you buy a house recently? No.

Did you sell recently on the bounce because you believe home prices will continue to decline? No.

Are you happy with your recent buying/selling decision? Yes.

If you haven't bought or sold, are you planning on doing it in the near future? No.

Anything new in your life? No.

Like having a mistress? No.

Do you believe we will experience inflation or the near future? Yes. But not really. Rising prices which will feel like inflation except that wages will not rise with the prices.

Do you believe we will experience deflation? Yes.

Or do you believe we will experience stagflation? Yes.

What measures have you taken or will you take to protect your assets under the scenario that you believe would likely happen? Be conservative.

If you're going to retire soon, are you planning on staying put or relocating to another state? Stay put.

Which state would that be? The Bay Area.

Are you relocating mainly to pay less in taxes and/or to reduce the cost of living? Not relocating.

OK, E-man....what are your answers to the questions?

Just bought more stocks not too long ago. But that's about it.

Economy does worry me. Too much national debt is a frightening thing if we can't get it under control.

Thanks for all the responses. I've been busy with work, and my brain was completely fried for the last several days.

@happycamper, congrats on making some money on the property. It's always a good feeling to come out on the right side of the trade regardless of intentionally or not.

@exflirt, interesting post. It must be a really nice house that you're renting.

@dublin hillz, glad you like where you bought and live.

@skyprivate, I guess you can consider it as a blessing in disguise. Your latter purchase made up for your former purchase. This is the reason why paying all cash for a property is never a good move. Your property goes up or down in value regardless of how much equity you have in it. Imagine you bought it it 3.5% and the value dropped in 1/2. You can use the cash and purchase 2 properties then instead of owning only one.

@BACAH, pretty directly answers. Wish you would elaborate on some questions a little more.

@FortWayne, I bought 400 shares of SDRL, 200 shares of DO and 100 shares of RIG on Wednesday. I bought 400 shares of NLY yesterday. Still have about 25% of the portfolio in cash. I still believe we might get a good run till the election and then everything will likely be downhill from there.

E-man says

Still working on having a second baby. It's just wrong to have a mistress because wife treats me like a king and has been sticking with me through thick and thin. Just couldn't ask for a better wife.

I'm with you there pal!