Our timing on moving to Arizona has been a wild ride at every turn. We listed our house a month after the peak of the market and it took six months to sell and for about 175k less than what Zillow and Redfin estimated in early February of last year. I know they are often high, but that still stung. Current estimate on it shows it for about thirty over what we sold it for, so that also stings. Maybe those estimates are meaningless, I don't know, but they're what we're going by for this market here.

We first started looking last June. My wife's relocation package allowed for a scouting trip, which we took. We looked at forty houses and they were all duds. Anything that was something we liked was out of our budget. Part of the relocation thing was two months of temp housing in an apartment with our things in storage. We looked through all of July and August and it was more of the same: houses with stupid asking prices sitting for months, and everything that was neatly in our budget was run down. Time ran out, and my wife's impulse was to just buy something and move in. I pushed for us to rent a house. My argument was that we had no idea what the market was going to do, and it may continue to drop and we shouldn't be hasty. A six month or year lease somewhere would give us a chance to get our things out of storage, further sort and condense and decide what we needed for square footage, and see what the inventory here was actually like. It was a hard-fought battle, but she relented. Time was such that we went from looking at houses to buy in a panic, to houses to rent in a panic. We grabbed a place and signed a year lease with the option to extend on a monthly basis.

Now. Interests rates have gone up several times since, and now there's the May 1st rate hike punitive thing that will absolutely affect us, and prices are no longer going down. The market has dropped a bit since we started looking, but the picture now doesn't seem substantively different than it did late last summer, and it is also starting to look like the longer we wait, the bigger the financial hit we're going to take.

I hate to be the guy who asks for financial advice on the internet, but good grief, I feel like I have no idea what I'm doing here. This is going to be one of those "experience is something you can only have after you need it" scenarios. There's a couple places we saw recently that are still on the market that we could be ok with, should I just start putting offers in? We got the ball rolling on getting pre-approved again early this week, so there's that. Welcoming all input from anyone who has anything to do with finances, banking, mortgages, real estate, or just happens to live in Chandler/Gilbert/Queen Creek/Usury Mountain/Eastmark since that's where we're looking.

This message has been edited. Last edited by: P220 Smudge,

While rates are significantly higher than a year or so ago, they are historically reasonable. If you foresee living in that area for 5-7 years, rates would not stop me from buying. If you don't know if you'll be there that long, my advice is to rent. On a short term basis, housing prices are a crap shoot. If you move in 3-5 years you could have a gain or a loss. In the long run you'll get appreciation almost anywhere.

You said that many of the houses that you looked at were out of your price range. Stop doing that. It's easy to filter by price.

Don't be afraid to get something that needs some work. Even if you can't do any of the work yourself, simply contracting the work yourself can yield significant equity. Most people want shiny and new. But even the shiny and new won't be shiny and new forever. What doesn't change is the location and the bones of the house.

Location, location, location--is a truism. The best value will be to find a mature area that is up and coming. When neighborhoods age and houses get older, they either turn into poor run down neighborhoods, or people buy them to remodel, or even tear down to build a new house. Don't buy in a brand new neighborhood with shiny new houses.

Lastly, and this is no help to you now, but if you are selling a house and moving it probably would have been a good idea to buy sooner than later. Again, you might have good luck, but interest rates and market conditions should equally affect your sale and your purchase. By waiting you've taken a chance.

We’ve gone through 2 home purchases in the last 12 months (don’t ask) and in both instances we’re able to get our agent (who was a buyers agent) to deliver a hand written note to the seller explaining our circumstances and that we wanted to reach an equitable arrangement for the purchase of their home. We met both buyers face to face (to the astonishment of the agents) and hammered out an agreement in about 15 minutes.

You might try this technique if you can find a house that you like and has been on the market for a bit.

I've been in AZ for 15 yrs now. The market has been a wild ride. We rented for two years when we got here and bought near the bottom in 2010, refi'ed into a 15 yr at 2.75% and, well, we're stuck now. We didn't want to sell at the peak just to then overpay for the next house. We'd like to upgrade, but we're going to have to wait a while. We both make a lot more money now, but we're conservative with money and can't stomach the thought of doubling or tripling our mortgage payment for the next place.

BTW, rents in Phoenix are nuts. We have a pretty nice house with a pool and three car garage and our mortgage payment is less than the rents in some ghetto apt complexes I regularly work in.

We bought in April of 22'. I was worried about raising rates, the inflated market, would prices drop, etc.

One of my good friends who is a real estate attorney asked me, "Are you going to leave this house anytime soon?"

I responded, "No, it should be our forever home."

He said, "Then it doesn't matter what the market does next month, or next year, or even over the next 5 years. If you are staying put, then in 20-30 years, it will be worth more than you paid for it."

That helped me make the leap and realize that even if things took a 10-20% dip over the following few years, we would be ok in the long term.

1) Use an agent. Don't go by Zillow/Redfin estimates.

2) Never look at a house outside your budget. Logically, it makes no sense. If you can't afford it, aren't going to buy it, then what's the point in looking at something that is likely to be nicer than what you can afford? At best, it's a waste of time, but more likely, it's just going to make you unhappy with what you can afford.

My inclination based on your post is to wait it out. Rent a nice place and see what happens in the next 12-18 months. Then re access. In the mean time keep saving $.

Keep your loan app. updated and ready in case a gem pops in the mean time.

Good luck.

Tough questions to know an answer to these days.

1) Everything depends on exactly where you are and what that particular market is doing. In some places prices are still going up, others are dropping hugely. A good local agent should be able to tell you what their guess is for the next few years in your location.

Ignoring the above:

2) True what others have said, if you plan on staying for more than about 5 years it is probably better to buy. Rent is about the same as mortgage payments, and for the first few years you don't pay down much principal on your mortgage. Market ups and downs become less important over longer time periods. So you have less risk if you rent for a few years, but if you'll be there a long time the risk goes down and the joy of ownership goes up.

3) My guess is that the general market will go down. The economy will get worse and interest rates will go up a little more. So prices will come down later this year and stay down for a year or two after that. Just a guess but it is what I expect.

4) Long term, interest rates may come down some. I think this is a coin flip really, since 5% is a historically typical rate. The super low rates of the last decade may never return. But if they do come back down you can always refinance the home to those lower rates.

5) Generally, real estate over the long term is a really good store of value. If you're going to stay for decades, don't worry about what the prices and interest rates may do in the next year or two.

While slightly different I have a T-shirt from the 2009 Las Vegas housing purchasing market so I can relate.
For what it's worth I think prices, especially out West, will see a significant decline over the next few years. (frankly hoping so to facilitate my return). Having said that, in your situation if you plan to be there more than 5 years I wouldn't sweat where prices are and are going too much as over the long haul it really doesn't matter much. The longer you intend to stay the less it matters.

Glad I don't need to consider moving right now and don't have a mortgage to worry about.

Aside from all the usual variables in different markets, if you need to have a mortgage to move, that alone makes it a major challenge for most. Even trading like for like properties, a new mortgage will be a large payment difference for most.
That would also factor into what might look like a job opportunity being a sideways or backward move.

Otherwise, if your just trading one location for another, it really doesn't matter that much.

In addition, I cannot phantom being in your mid fifties or later and having a huge mortgage myself.

quote:

Originally posted by old rugged cross:
In addition, I cannot phantom being in your mid fifties or later and having a huge mortgage myself.

I dunno. My folks are mid-70s with a $250k mortgage. But the house is worth 8x that much and they could pay it off tomorrow. But their investments are getting a much higher rate of return than the interest on their mortgage. So they keep it. I don't like the idea of a large balance, but if the equity position is good and income is still strong, why not?

In reality they can't pay it off if their $ is tied up in investments. At least not without major tax ramifications.
If they really had the $ sitting in the bank they should or should of paid it off. The Monthly payment and interest has to be huge every month. What if they had that at their disposal to do with what they wish.

Most with that type of situation will say exactly what you said. It is not good fiscal policy imho and the fact that many have done it for years makes it that much worse.

They can't find enough ways to spend their minimum required distributions plus their SS income. They just don't live the lifestyle or have the bills.

[QUOTE]Originally posted by Rick Lee:
They can't find enough ways to spend their minimum required distributions plus their SS income. {quote}

Then they should or should of paid of that mortgage.

Smudge ... I read your post a few times and not sure if you are using an agent or not. I think an agent would be helpful finding a house for you that meets both your budget and quality.

I forgot to add to my post, when we bought in April 22' we had lots of people that said "Rent for a year, maybe two, see what happens with the market."

But in my eyes, rent was going to be $2,500 per month, maybe $3,000 per month. So in one year, I am in for at least $30K. Worst case, over two years, I am in for $72K.

To me it made more sense to slightly overpay at the then current market prices than to throw away that money on rent.

And that doesn't even include the hassle of moving. That was our first move from home to home. The others were apartment to apartment or apartment or to home. And after 18 years in our first home, that move was probably the most disruptive life event I have ever experienced. More so than births of children and death of parents.

quote:

Originally posted by old dino:
Smudge ... I read your post a few times and not sure if you are using an agent or not. I think an agent would be helpful finding a house for you that meets both your budget and quality.

Agreed. And if you need me to refer you to one I'd be happy to do so.

We moved to AZ in May 2021. We visited back in 2017 to confirm our choice but weren't able to move because our house didn't sell. Besides, our plan back then was to expat overseas for a couple of years first. Good thing that didn't happen or we would have been stuck where the Covid lockdowns were atrocious.

Anyways, we leased first for a year then extended to 11 months. We wanted to scout the place first and learn the different neighborhoods. We didn't want an agent to funnel us so we started in August 2022 off Zillow just doing drive bys and crossing off houses and neighborhoods for one reason or another. We worked on our financing first. Then found a terrific agent in one of the open houses we went to.

We were ready to negotiate the way we usually do but she was a hard driver. We made an offer which was countered and we were ready to go half way but she suggested we moved up just a little which was accepted. We got our house for $172 / sq ft when the going rate was $250 to $290 / sq ft. We closed Jan 5, 2023 and the sq foot price we paid for is still well below the current market rates.

If it were me in your position, I would also still lease at this time and I'll be banking on a recession to bring house prices and interest rates down.

I will comment from the point of view of someone that lives in Gilbert. Don't move to Gilbert unless the immediate area is built out and you are okay with it. Building is fast and furious in Gilbert with a lot of new apartment buildings and it sucks, too many people, too many cars. Eastmark (we have friends that live there) and it is no different, actually worse as it is all brand new and they just keep building and the roads are already overwhelmed and they are not done. Same applies to Queen Creek, father in law lives there, and it is much like Eastmark. All brand new and outpacing the inferstructure.

I would try the "older" neighborhoods of Chandler or Gilbert. There are also some nicer areas of Mesa that you may want to look into.

Good luck.