Many thanks to M for our unofficial preview of Phoenix home sales. When ARMLS issues their report in a couple of weeks, the numbers will be slightly different. Our preview though, gives us a good indication of where the market is at.
The numbers look surprisingly better. Typically sales are not good this time of year. Not only that, mortgages are not as easy to get these days. Sales are way up, inventory is down:
Active 49,511
Under Contract 10,902
Sold 5,377 +60%
Sold(02-08) 3,348
This is the best February sales numbers since 2006. Listings are down YOY, but are still elevated by historical levels. [Chart does not include February's numbers. Inventory is up MOM.]
Sales have been doing well since the beginning of the year, and I asked M his thoughts on why. He said:
1. The rapid decline in interest rates in December pushed many buyers off the fence.
2. The "shock" of the market crash last fall is wearing off and people are moving on.
3. Price- it appears we finally have support at roughly 60-65% off peak.
The word is that a lot of the buyers are investors. The question remains, how will this affect the market? Many have undoubtedly jumped in too soon and we’ll be seeing a second round of foreclosures. However, M tells us that prices are low enough in some areas to be able to have positive cash flow on a rental. There are a lot of rentals on the market though, and keeping them occupied could be a challenge.
The other question I have about market improvement is the "stealth" inventory that is out there. Not all REOs are being listed by banks, and not all loans in default are being foreclosed on. In addition, many homeowners are waiting to sell a home. There’s still more than nine months worth of properties out there that we know of. Any sign of market improvement, we are liable to see the stealth inventory come out of the woodwork, continuing to put downward pressure on prices.
If you can get a nice affordable home or a cash flow positive property at the moment, congratulations. Just remember that there is still a lot of downside risk. Don’t forget to be careful out there.
until John Q Public buys houses there aint gonna be no recovery. Investors will only create more doom. Igor thinks that’s pretty sad
Watch Europe… We are about 4-5 years from bottom. When residential property bottoms in Europe and Asia… Buy, Buy, Buy.
50 times monthly rent should be a good target in Arizona.
Let these “early investors” do the heavy lifting for you… rehab, landscaping, etc.
The new and improved tax credit does not have to be repaid and it’s an $8k refundable credit. the other attractive aspect is that for a house bought in the first half of 2009, you can actually claim the credit on your 08 tax return. I’ve already seen a client do this. He’s set to close march 10. filing his tax return now and electing to take the credit for 08. on a 160K home that gives you either 5% of your down (which more than covers FHA loans) or about 10 months of your mortgage payments. or if you were already wanting off the fence but the homes you’re looking at require some TLC, then you’ve got 8K to get your small improvements done. i’m not biting, but i can see how some will.
AZSaluki-
I’m not biting yet either.
M and I were talking about the best time to buy. We both decided we’d rather wait until things started to recover slightly and risk buying a little past the bottom, rather than buy while the risk of decline was still high.
I’m sure there are investors out there making money at the moment, but I’m also sure there are people out there losing big money too. I’m going to be cowering on the sidelines for awhile.
Igor is “bitter”. I am “patient”.
The risk now seems to be unemployment.. this might turn out to be localized more than the subprime stuff, who knows? But for me, until people stop getting laid off left and right, there’s no way I’m buying – if low interest rates and tax credits pushed people into buying, losing a job and not finding a replacement will push them into foreclosing. I don’t see a bottom yet.
Well, after ~ 2+ years of following this blog, I’ve finally logged in Twist. In Florida, both the Jacksonville (northeast) and Daytona (east-central) areas saw sales up in January. No more info than that.
Could this brief surge in sales partially represent those that fear high inflation is coming… and have cash to park but don’t know what else to convert it to before it devalues (in their opinion)?
In their minds, perhaps..
- the stock market is a big risk
- holding cash when inflation hits could be dangerous
- they don’t like gold(?)
… so they hold their noses and put their money in real estate that they believe will more-or-less float along with inflation… and is already quite discounted from its peak?
MikeC
Brooks-
It’s about time! : )
I look forward to your posts- I’ve enjoyed your emails for the past couple of years.
There are so many seriously underwater house debtors in Arizona that the source of fresh REOs appears almost limitless. I doubt that inventory will decline much further in 2009.
Jim,
I agree with you that it is early investors. But with Arizona losing population and jobs, who is going to rent all these homes and actually pay the rent each month. Investors will soon walk away. I do not think the bottom is anywhere near 4 or 5 years.