Buying & Selling Real Estate Discussion

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Water availability/sustainability long term

Posted Jul 24 2022, 13:56

Hello all I am considering getting a primary residence to house hack next year and I am trying to decide on what market I would like to be in. This would be a buy and hold SFH (Maybe 3 bed 3 bath?) and cash flow deal. Having moved to Phoenix in March I am really enjoying the city and considering staying. However I am wondering about if water shortages could be problematic and if there are shortages cause my houses value to drop substantially. This utility company for Phoenix seems confident they will have water for the foreseeable future (https://droughtfacts.com/risks...) but at the same time everyone knows the southwests water reservoirs are drying up. Just curious to hear peoples thoughts, especially people that live in the Southwest. Thanks for your time.

-Cody

Phoenix, Arizona

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Scott Trench
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Scott Trench
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Replied Jul 24 2022, 14:08

Interested to hear what others think about this. 

Personally, I wonder if the water shortage is a good thing for property values in areas like Phoenix or SoCal. Yes, the cost of that utility will rise, but perhaps more importantly, it may limit supply of new construction. Generally, new districts need to build reservoirs and water treatment facilities that cover the needs of the future residents, without coming at the cost of existing residents. People don't generally elect representatives who will allow them to run out of water. 

So, I think that water shortages in the Western United States are more likely to limit new construction in the next few decades, which will force prices and rents up. It's anybody's guess, but I bet that more than compensates for the cost of water as a utility for homeowners, and tenants often pay water anyways. 

If things get REALLY bad, then yes, things like rationing, inability to water lawns/gardens, etc. may cause demand problems in those markets. 

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Bruce Woodruff#2 All Forums Contributor
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Bruce Woodruff#2 All Forums Contributor
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Replied Jul 24 2022, 15:15

This is not a global warming issue as it is popular to think, this is about too many people. The droughts and dryspells go back to the beginning of time, but the real problem is this area was never expected to support these tens of millions of people. Southern Nevada, Arizona, Southern California, Northern Mexico were not expected to be what they are back in the 1930s when the Hoover Dam and accompanying infrastructure were conceived. I mean who the heck would want to live in the desert, right? :-)

It's already getting bad already and will only get worse until the population problem decreases. And as @Scott Trench projects, this could really affect housing, both existing and new, in the future..... Who wants to live in a nice house where you can't have a pool/water a lawn/take showers/wash clothes/Etc?

I could see a lot of people flooding back to East just because of water issues. Even with a few years of heavy rain and snowfall, this problem will not be solved...too many people living off too little available water....

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Mike Lambert
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Mike Lambert
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Replied Jul 25 2022, 05:05

@Cody L Cowart

@Scott Trench

@Bruce Woodruff

Interestingly, I saw a report on CNBC about that very issue. While there is currently a migration towards the Sun Belt, which is great for real estate there for the time being, they were mentioning that the future migration flow will be climate-induced and the best place in the US will be the Great Lakes Area and the city of Chicago as its main center is already preparing for that. By the way, I'm spending the summer in one of my home countries Canada and I can tell you that, while the US and Europe are suffering from the heat, we're having delicious summer days. Our grass is green, our vegetation is lush and our dams are full, so much so that our province of Quebec recently signed a mega contract to provide electricity to New York City.

I'm currently working on developments in Mexico's three main tourist areas. While we don't have that issue in the Riviera Maya or the Puerto Vallarta - Riviera Nayarit area, we're confronted with the same issue in the Cabo area, where construction permits are hard to get there because water permits are hard to get.

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Chad McMahan
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Chad McMahan
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Replied Jul 25 2022, 05:17
Quote from @Cody L Cowart:

Hello all I am considering getting a primary residence to house hack next year and I am trying to decide on what market I would like to be in. This would be a buy and hold SFH (Maybe 3 bed 3 bath?) and cash flow deal. Having moved to Phoenix in March I am really enjoying the city and considering staying. However I am wondering about if water shortages could be problematic and if there are shortages cause my houses value to drop substantially. This utility company for Phoenix seems confident they will have water for the foreseeable future (https://droughtfacts.com/risks...) but at the same time everyone knows the southwests water reservoirs are drying up. Just curious to hear peoples thoughts, especially people that live in the Southwest. Thanks for your time.

-Cody

Cody,
your question is rational and important to ask. I wish this issue was making larger waves across the nation, so that more media, government and/or politicians leaned toward solving it, ahead of the curve- instead of far behind.

The southwest, including Arizona has a water problem. I have been closely researching and monitoring this for many years and the problem gets noticeably worse, as time goes on. I predict that over the next 5 years, it will become part of 90% of conversations about real estate speculation in the SW. We desperately need to quickly and heavily invest in more conservation and recycling, as well as bringing additional water into the southwest/AZ.

However, when it comes to investing, I'm also seeing that regardless how bad the water issue gets, as a state(AZ), a region(SW), and a country, we just kind of push through it, with a combination of good and bad solutions, real estate values stay strong (aside from nation-wide or global downturns). Bottom line, water shortage (Phx) VS abundance (Sedona) is important and definitely an influential factor, but not an essential piece to stable investing- yet. The question, is whether it will begin to more noticeably help/hurt real estate appreciation. Honestly, I thought we would be feeling more of the impact by now. It's coming, but the train has not yet pulled into the station.

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Bruce Woodruff#2 All Forums Contributor
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Replied Jul 25 2022, 07:33
Quote from @Chad McMahan:
We desperately need to quickly and heavily invest in more conservation and recycling, as well as bringing additional water into the southwest/AZ.

Yes we do. If I were in charge (haha) I would have California start desalination and get them off the Colorado River system. That alone would fix the problem. But they won't.....


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Seth Borman
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Seth Borman
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Replied Jul 25 2022, 13:27
Quote from @Bruce Woodruff:
Quote from @Chad McMahan:
We desperately need to quickly and heavily invest in more conservation and recycling, as well as bringing additional water into the southwest/AZ.

Yes we do. If I were in charge (haha) I would have California start desalination and get them off the Colorado River system. That alone would fix the problem. But they won't....


Desalination is too expensive, it would be like solving a power shortage by hiring day laborers to generate power on stationary bicycles.

Toilet to tap is a lot cheaper. Rainwater capture is cheaper. Tearing out lawns, golf courses, cotton or hay fields... it's all cheaper.


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Seth Borman
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Seth Borman
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Replied Jul 25 2022, 13:30
Quote from @Chad McMahan:
We desperately need to quickly and heavily invest in more conservation and recycling, as well as bringing additional water into the southwest/AZ.

 Right now water isn't priced for conservation. I will know that people are serious about saving water when they start to price it like it is important.

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Replied Jul 25 2022, 13:59

Thanks for everyone's responses. If I find a good deal and the numbers work out the earliest I would be ready to get a property will be next year. So in the meantime just going to save and seek out more information. If I come across anything really valuable or helpful on this topic I will be sure to post it in here.

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Bruce Woodruff#2 All Forums Contributor
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Bruce Woodruff#2 All Forums Contributor
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Replied Jul 25 2022, 14:22
Quote from @Seth Borman:
Desalination is too expensive, it would be like solving a power shortage by hiring day laborers to generate power on stationary bicycles.

There are cheaper ways of doing it, do a quick search. And as your other post said, if we drive up the cost of water, the cost to desalinate might look awfully cheap after a while....


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Seth Borman
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Seth Borman
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Replied Jul 25 2022, 14:42
Quote from @Bruce Woodruff:
Quote from @Seth Borman:
Desalination is too expensive, it would be like solving a power shortage by hiring day laborers to generate power on stationary bicycles.

There are cheaper ways of doing it, do a quick search. And as your other post said, if we drive up the cost of water, the cost to desalinate might look awfully cheap after a while....



 No, it's never going to look cheap, because it never will be. It's 100x the price of surface water. Cutting water consumption is much cheaper than finding more water.