Now price reductions even in C class MFH in Phoenix

12 Replies

I thought this is interesting....

Price in my neighborhood has been dropping the last 3-6 months, but yes, those are $2M homes...

Today, I was on Zillow, and saw MANY C class MFH in Phoenix are having price reductions...

Is the entire market turning the corner now? 

That's because some were grossly overpriced.

Just as an example, there are 4 plex buildings immediately across the street from mine for sale for $350,000. The highest most recent comp actually sold for $286,000 in July.

Originally posted by @Anthony Gayden:

That's because some were grossly overpriced.

Just as an example, there are 4 plex buildings immediately across the street from mine for sale for $350,000. The highest most recent comp actually sold for $286,000 in July.

 Disregard  my last. Three 4 plex buildings a block over from mine and nearly identical sold on 8/28/18 for $395k, $350k and $350k. Looks like I just got richer.

When the cost of money rise (higher interest rates) cap rates increase. 

its simple investment fundamentals.  

in some areas the price reduction would not be great, maybe 0.5%-1% increase in cap rate, because the market fundamentals are string. Ie.  Job and population growths. 

some new builds A type buildings that were over price will reduce in value the most.

When you say "prices are dropping" is that listing or selling prices? Other than being competition for an existing listing, listing prices are not that sanificant. Selling prices are the important number, but the Phoenix market also has seasonal cycles, so you need to compare yearly numbers. Example August 2018 to August 2017. 

@matt shield - I meant selling price are dropping in my neighborhood... Something sold for $2.5M in Feb 2018 would be listed at $2.2M on the market now... and sitting without an offer....

I used to think it is just high priced area that is seeing price reduction...

What I saw in Phoenix today seems surprising to me...

I don't know many people, or investors, that would buy a $2.5M dollar home and list it for $2.2 7 months later. I imagine in Phoenix it was over-priced to start with and now the listing prices are dropping closer to what they should have been. I've seen many times where realtors don't even know what something is worth so they guess high. The longer it sits on the market, the more it could cost the owner monthly such as a debt coming due or vacancy. Ask the realtor or seller why they dropped the price. They might be honest.

@Branden Van Matre I hear you. I live in north Scottsdale and some of the asking prices here are just insane for 4 Bed 3500 sq ft homes, especially considering there are hundreds and hundreds of acres of land available for development. Even sleepy Cave Creek to the west of us is seeing million $ plus homes listed on the market and those are right on busy roads! A couple homes on my street have come up for sale on my street and sitting for 8 months or so before selling.

 Hello, I live in Cavecreek. I have a thermal mass home that I’ve been trying to sell by owner for a while. I think it’s definitely a buyers market. Without being disrespectful, I don’t have the highest opinion the most real estate “professionals“. I don’t think they know the market very well at all generally.

@Anthony Gayden I bought one for $285,000. I’m renting the units $1000 per unit So if the numbers work I’m willing to pay premium for it. Previous sellers were renting them at $670 per unit so you see there could be a reason as to why someone would pay a higher premium for the properties. That’s one of the reasons people are buying expensive properties.
Originally posted by @Carlos Gonzalez :
@Anthony Gayden

I bought one for $285,000. I’m renting the units $1000 per unit So if the numbers work I’m willing to pay premium for it. Previous sellers were renting them at $670 per unit so you see there could be a reason as to why someone would pay a higher premium for the properties. That’s one of the reasons people are buying expensive properties.

 Definitely, and I am glad you are getting good cash flow. I'm just not seeing rents like that in my neighborhood, even for those properties that sold for $350K+. That is why I thought prices were too high. 

I have no problem being wrong though. I also strongly believe that in the long term we will continue to see appreciation and rent gains as people exit California.

Originally posted by @Anthony Gayden :
Originally posted by @Carlos Gonzalez:
@Anthony Gayden

I bought one for $285,000. I’m renting the units $1000 per unit So if the numbers work I’m willing to pay premium for it. Previous sellers were renting them at $670 per unit so you see there could be a reason as to why someone would pay a higher premium for the properties. That’s one of the reasons people are buying expensive properties.

 Definitely, and I am glad you are getting good cash flow. I'm just not seeing rents like that in my neighborhood, even for those properties that sold for $350K+. That is why I thought prices were too high. 

I don't know I would call a .7% property (if its a duplex) great but out west that's about average. If you got it for 285 and its more than 2 units then heck ya! I agree, my Vegas house keeps going up like crazy. SoCal is so expensive again people are leaving. Plus Vegas is getting the Raiders so that will bring jobs and revenue.

@Diane G. ,

Real estate pricing is very localized and while Santa Clara County is seeing pricing lower than expectations, homes in the peninsula and SF are still rising. In CA, I think Prop 10 repeal has some impact on perceived pricing of rental properties and the results from November voting will give us more clarity on whether prices will start going up again or drop further.