R.L Brown, a local housing analyst, is not allowing a lack of evidence to deter him from declaring a probable "bottom" in the Phoenix new home market:
The Phoenix Housing Market Letter released Monday suggests that the worst might be over for new homebuilders in the region, but acknowledges that the subprime mortgage fallout and foreclosure epidemic will taint the overall housing market for months, if not years, to come.
As stated in the report authored by local housing consultant R.L. Brown, "We think that the evidence is building that we are seeing the bottom of the new home market right here in the metro Phoenix area as the first quarter of 2008 has come to a close."
To support that contention, Brown notes that there were nearly 1,900 new home closings in March 2008, well short of the nearly 3,700 recorded in March 2007, but somewhat of a healthy uptick nevertheless.
That’s a 49% drop year-over-year, but an unspecified month-to-month "healthy uptick". Of course, an uptick in March is to be expected, but why let that stand in the way of shoddy analysis?
Brown did have some concerning data:
In Pinal County nearly 50 percent of the resale activity involved bank-owned properties, commonly known as REO properties, returned to the lenders through the foreclosure process.
"That is a huge increase and a huge segment of the Pinal housing market and would seem to indicate that pricing of housing overall in the county is being set by REO prices," R.L. Brown stated.
In Maricopa County, about 22 percent of March resales involved REO properties. That’s a 17 increase since January.
Even as we discuss a bottom to the new home market, it is obvious that there is not yet a bottom to the overall Arizona or national or global economy … and therefore, the outlook for housing nationally and here in Phoenix is tempered by some very serious factors, many/most of which are now being blamed on lax oversight of the financial markets that rewarded the unsophisticated home speculators that were sought after in 2004-05.
"Tempered" is the wrong word. "Hammered" is better.
Just once, when the bulls are out there declaring a bottom, it would be nice if they would use a little more evidence than one data point increase that can be explained by seasonal variation. Otherwise- enough of the bottom talk already. This downturn still has a ways to run.