In spite of repeated assurances by David Lereah that "the worst is behind us," the Phoenix housing market continues it’s downward slide. One of our favorite agents gave us an unofficial "sneak peak" at January’s numbers:
ALL MLS- January 2007
Sold- 3,895
Active- 44,912
Under Contract- 7,027
According to historical MLS data provided by our friend- realtor Jonathan Dalton, this is the slowest January since 2001, and the first month since that time that sales fell below 4,000. Inventory however, has started to pick up again. 44,912 listings is slightly above December’s 44,247.
In November the NAR’s chief economist stated:
"It’s the hot boom cities [i.e. Phoenix] – that is where the problem is," Lereah said. "But these were the boom markets because they had good economic fundamentals, and for the most part that is still true. This is a temporary correction in these hot markets — but how you define temporary I just don’t know."
With an 11.5 month supply of homes on the market, this could be a long "temporary."
[Thank you to our source for this early look at the numbers!]
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Looks like Phoenix has hit a new bottom.
NVMike-
January is generally the slowest month of the year, so it wouldn’t surprise me to see sales move up from here.
A lot of agents like to say how sales are “normal” now, as we are back to about 2002 levels. (LV is about the same.) However, suppose you have a company with 50 stores and you have X dollars in sales. 5 years later you have double your stores, but you still have X dollars in sales. Those sales figures that looked so hot five years ago wouldn’t be looking that good today.
That’s why the inventory numbers are important. With a lot of product to move, the sales numbers aren’t high enough to do the job, and that puts downward pressure on prices.
Watch for the numbers to be up a bit next month, and for Lereah & Co. to be shouting “recovery” from the housetops. It won’t be a big enough increase to move this inventory any time soon though.
Better question, Mr. Lereah, is:
How do YOU define temporary?
Hi Twist,
I sold my new home in Phoenix in Sept 2005 and made a 90K profit. Amazing right? Wrong. Of course I bought another one here in PHX and even bought a second home in LV in Feb 2006 (Centex lured me in with 55K off). Now the Vegas house can’t sell, and the builder is offering 100K off base!!! I am completely hosed. I love your site and read it daily, but have to ask…when do you think the housing market will turn back to positive??? 2008…2010…or never!!! I guess there are alot of factors to consider while I watch my investments dry up like a riverless lake. Any advice? I would have been a much happier homeowner with the standard 5-6% appreciation from years past. Oh well. Any advice what I should do?
Maverick77-
I have to tell you that generally, housing downturns take awhile to play out. We didn’t get to where we are overnight- it’s not going to go away overnight. The last big one in Phoenix in the 1980s saw prices decline for 4 years, and it took another two years for prices to come back in nominal terms.
Did you see the Review Journal RE article yesterday? There is a 44% vacancy rate in LV, 20% of the market is still investors, and builders keep building- so you can’t expect things to come back very quickly.
It is really hard to put a projected date on the bottom- there are so many unknowns that can affect it. Will the Fed raise rates? How much more inventory will the builders continue to put on the market? Will we have a housing led recession? Regional downturns in the US can and have run 8-10 years in recent memory.
The answer that a lot of people are turning to who can’t sell is to rent their property out. There are a lot of rentals on the market though, if you are looking at dealing with negative cash flow- that may not be a viable option for you.
If you still need to sell- I would definitely contact my lender. Lenders hate having to foreclose, so they are anxious to work with you, especially if you contact them before you are in any trouble.
One option your lender can probably offer you is a “short sale,” where you sell it for less than the mortgage. If you can’t sell it for what you owe- they can’t either, so taking the best price you can get is in their own best interest. Lenders are also known to adjust payments, interest rates, etc. They really don’t want you defaulting, so they should have suggestions for you.
The two biggest dont’s are- don’t fail to talk to the lender before you have problems- they will be more accomodating with a borrower who has worked to stay current. The other is to consider the implications carefully before you consider increasing other debt to make the payments. There are those people who max out their credit cards, etc. to make the payments. So what happens if you max out the cards, empty your savings, borrow from the relatives, and still can’t sell?
Do talk to a RE attorney if you can’t work something out with the lender- they may have some suggestions for you. Remember- I’M A RESEARCHER AND NUMBER CRUNCHER- I AM ONLY FAMILIAR WITH GENERAL GUIDELINES. The lender, or a GOOD agent (Make sure you’ve got one who knows what they are doing!)or A GOOD attorney should have better answers for you than I would.
Best of luck to you- let us know how it turns out.
Thanks Twist. Your insight is very informative as always. I’ll let you know how it plays out in the future. Thanks!