Why It's So Expensive (Phoenix: mortgages, buying a home, buying)

[CCS414]

Originally Posted by MN-Born-n-Raised

Well, someone is buying these homes. Including the new builds that are adding more inventory to the market. There are the haves and have-nots. Sadly, that gap is widening. Rest assured, young professionals are buying homes.

With mortgage rates around 6.5%, the minimum amount of income to afford a $500K home (assuming 20% down) is $91K a year. Here is the math https://www.bankrate.com/real-estate...for-500k-home/ Sure, that's pushing it. But I can rattle off dozens of young people I know that blow past $91K a year. And in about 40 years, a $500K home will be a nothing burger. Then, a young person is going to pontificate on your explanation of how "new people have little chance of ever owning a home and will struggle much more to pay for their house than the previous generations did."

Solution: work smarter, save more, pay attention in K-12 and college, and outperform the competition. We are officially in a global economy. People around the world want what we have. Outperform others or expect to rent for the rest of your life. It's dog-eat-dog out there.

A lot of those are Californians. They sell their CA home and step down to a less expensive market in the Valley. The average individual income in AZ is around $50k/yr last time I checked, a bit lower than the national average.

[Sno0909]

Originally Posted by MN-Born-n-Raised

Well, someone is buying these homes. Including the new builds that are adding more inventory to the market. There are the haves and have-nots. Sadly, that gap is widening. Rest assured, young professionals are buying homes.

With mortgage rates around 6.5%, the minimum amount of income to afford a $500K home (assuming 20% down) is $91K a year. Here is the math https://www.bankrate.com/real-estate...for-500k-home/ Sure, that's pushing it. But I can rattle off dozens of young people I know that blow past $91K a year. And in about 40 years, a $500K home will be a nothing burger. Then, a young person is going to pontificate on your explanation of how "new people have little chance of ever owning a home and will struggle much more to pay for their house than the previous generations did."

Solution: work smarter, save more, pay attention in K-12 and college, and outperform the competition. We are officially in a global economy. People around the world want what we have. Outperform others or expect to rent for the rest of your life. It's dog-eat-dog out there.

Someone making $91k a year should not be taking out a $400k note. Especially if they have children/child. They will be struggling mightily.

[Ponderosa]

Originally Posted by Texas100

This assumes that the person has 100k in cash to put down? I agree that many people in Arizona make 91k+ even though incomes are lower than the national average. But how many have 100k cash to put down?

FHA is 3% down. New home builders will do FHA these days and also have interest buy downs and lower down payments for conventional. There are plenty of new homes going up.

[MN-Born-n-Raised]

Originally Posted by Texas100

This assumes that the person has 100k in cash to put down? I agree that many people in Arizona make 91k+ even though incomes are lower than the national average. But how many have 100k cash to put down?

People who know how to save.

[MN-Born-n-Raised]

Originally Posted by CCS414

A lot of those are Californians. They sell their CA home and step down to a less expensive market in the Valley. The average individual income in AZ is around $50k/yr last time I checked, a bit lower than the national average.

In 2022, Estimated median household income in 2022: $75,969. Because of wage inflation, add at least 10% on top of that 2022 amount.
Read more: https://www.city-data.com/city/Phoenix-Arizona.html
https://www.city-data.com/city/Phoenix-Arizona.html

Forgetting median income for a moment, the question was posed who can afford a home that is just starting out? And the answer is a lot of people median people who know how to save $.

[MN-Born-n-Raised]

Originally Posted by Sno0909

Someone making $91k a year should not be taking out a $400k note. Especially if they have children/child. They will be struggling mightily.

I'm not disagreeing. But, if they are working harder and smarter than the person next to them, then, they can plan on making more $$ in the following years. If they fall short, then, work even harder and smarter. Never underestimate a can/will-do attitude. When I was starting my career in life, I assumed my income was going to grow (and it did).

[KurtAZ]

Originally Posted by Ponderosa

FHA is 3% down. New home builders will do FHA these days and also have interest buy downs and lower down payments for conventional. There are plenty of new homes going up.

VA Guaranteed is 0% with no PMI. Interest rate and price will kill you though. If you are trying to stay under a $2k mortgage, 100% financing at today's rates puts you in a $275k house. 2020 you could have bought a $450k house for the same payment (assuming 2% vs 7%).

[waltcolorado]

This is an article from 2022 but discusses Phoenix real-estate in particular

https://www.forbes.com/sites/johnwak...h=6143aac65da4

The supply of houses for sale is so low today because investors bought up so many houses that they pulled down the supply of houses for sale. Mathematically, when investors buy more houses, fewer houses are for sale.

In the hottest real estate market in the country, Phoenix, the supply of single-family houses for sale would have been back to pre-Covid levels by the end of 2021–except that investors bought a lot more houses in 2021 than they did before.

Investors bought more than twice as many houses than in 2019. Live-in buyers, however, actually bought fewer homes in 2021 than in 2019.

Why did landlords buy so many more houses in 2021? There are a lot of reasons, including the rise of short-term rentals which has taken thousands of houses out of the Phoenix housing supply and put them into the Phoenix lodging supply.

One national, long-term, systemic cause is that real estate investors get huge tax breaks that live-in owners don't get. Landlords naturally buy a lot more houses because of those tax breaks.

In 2017, there was a significant tax law change made that did affect real estate investing. Im not sure of any tax law change this significant since then, could be wrong.
https://www.americanbar.org/groups/g...nd-investment/

However, one beneficiary of the reduced corporate rate is the real estate investment trust (REIT). REITs are vehicles that investors use in the real estate industry.

The TCJA made a substantial change in the taxation of real estate but none more than in the area of investors and developers. The above discussion is not a complete, comprehensive study of all the provisions affecting the industry, but it gives a good picture of how investors and developers can use it to their advantage.

It seems as if the TCJA’s intended purpose was to give investors and developers a leg up to do long-term business in the real estate market, an advantage single-family homeowners can only dream of receiving. The intention was to uplift the real estate business, not the individual homeowner, something the TCJA delivers.

[MN-Born-n-Raised]

Originally Posted by waltcolorado

In 2017, there was a significant tax law change made that did affect real estate investing. Im not sure of any tax law change this significant since then, could be wrong.
https://www.americanbar.org/groups/g...nd-investment/

I'm NOT surprise.
1. At least 238 federal lawmakers are also landlords.
2. More than 200 senior congressional staffers also own properties and land they rent across the US.

See https://www.businessinsider.com/cong...te-law-2021-12 Here is another article https://truthout.org/articles/congre...stimulus-bill/ There are many, many more.

[Sno0909]

Originally Posted by MN-Born-n-Raised

Well, someone is buying these homes. Including the new builds that are adding more inventory to the market. There are the haves and have-nots. Sadly, that gap is widening. Rest assured, young professionals are buying homes.

With mortgage rates around 6.5%, the minimum amount of income to afford a $500K home (assuming 20% down) is $91K a year. Here is the math https://www.bankrate.com/real-estate...for-500k-home/ Sure, that's pushing it. But I can rattle off dozens of young people I know that blow past $91K a year. And in about 40 years, a $500K home will be a nothing burger. Then, a young person is going to pontificate on your explanation of how "new people have little chance of ever owning a home and will struggle much more to pay for their house than the previous generations did."

Solution: work smarter, save more, pay attention in K-12 and college, and outperform the competition. We are officially in a global economy. People around the world want what we have. Outperform others or expect to rent for the rest of your life. It's dog-eat-dog out there.

Bankrate just released new information that contradicts the link you posted. https://www.azfamily.com/2024/04/01/...says/?tbref=hp