Who’d have thought?
Speculators and prospective home owners came out in droves to buy homes in the Phoenix area. M did an early check of the sales numbers, and here’s the unofficial sales for April:
Listings 39,547
Under Contract 16,779
Sold 8,419
These numbers are only preliminary- agents have several days to update their listings, so ARMLS will likely report a higher number.
Listings have dropped to a level we haven’t seen since April 2006. Sales are at a level we haven’t seen since October 2005.
I will undoubtedly be accused of being a perma-bear, but I don’t believe, even with sales at record levels [Only 14 months have been busier] that this indicates "recovery". Only the lower half the market has recovered.
Check out this chart from last week’s post:
Higher end properties are going to have to drop their prices significantly to adjust to this market. That will tend to put downward pressure on all prices. High speculator participation and a cooling economy are also risk factors for the market.
It’s nice to see that there are affordable homes for those who want them, but there are still risks involved when purchasing Phoenix real estate.
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i agree it’s still risky. i do think though, that if you’re in the market for a home in the 75K to 150K it has become pretty reasonable. even if the prices dip 10-20% more, it’s not the end of the world if you’re buyin the home to live in and stay for a number of years. for the first timers, it’s hard to pass on the 8K credit. you get your first year’s payments completely paid for on a $125K home. i also look around periodically and can’t beleive what i see today for under 200K, as compared to a couple years ago.
I still have several friends looking for a job. The ones that have one are worried about upcoming layoffs. It’s not the bottom until that changes.
It’ll be interesting to see the spin – will they call bottom without mentioning the prices of the homes involved?
A different way of illustrating the same point:
In most industries when they are reporting sales figures, they do so in dollars rather than in units sold. Normally # of houses sold works just fine in the real estate industry, but there has been a dramatic shift in the mix of houses sold.
For March 2009, despite # of sales being almost 80% higher than March 2008, the sales volume in dollars is almost 20% below the March 08 figure which was considered a dismal month.
There may be a lot of houses selling in Phoenix, but there isn’t much money flowing into real estate yet.
Twist,
Good observation on your part.
These folks aren’t buying $75K homes, they are buying $125K to $150K homes for $75K to $100K. Anyone who doesn’t think so can attempt to develop the land and build the same house for $75 without someone taking a haircut.
This is a classic recovery phase, one person’s loss is another persons gain and it always starts from the bottom up ( ascending price levels).
The pivotal point in each phase is inventory depletion at which time costs return to the actual cost of construction. And, at that point sales drop like a rock.
So Twist’s point is well taken and not a perma- bear position at all…but a nice study in solid math.
FWIW:
I was at the AZ School of RE & Biz in Scottsdale the other day for a class, and they were having a Buying Distressed Properties panel type event.
I don’t know how many people that room holds, but it was jammed full. When I walked by the window, I didn’t see an empty seat.
I’m guessing a mix of investors, distressed homeowners and realtors that need to know how to deal with them as well as the banks & auctions.
Strong numbers for April. Still … much inventory entering the REO pipeline.
Will be interesting to see the cross currents this summer.
Outside of an unusual event, perhaps the lower end is in sight of a bottom? (Agree with above 15%’sh guess.) I’ll be really curious to see how the higher end stuff sells (or doesn’t). It has a ways to go. Equity performance ought to be a factor.
Can interest rates remain this low (and for how long?) while monetizing debt?
Stay tuned!
Offtopic, but I thought this was an interesting story out of the Chicago Tribune:
“Trashed townhouses: New homes in Oswego develop into trash heaps after developer vanishes
Seasons at Southbury development is left partially finished, without landscaping and trash-filled”
http://www.chicagotribune.com/news/local/chi-trashed-townhouses-w-zone-01may01,0,3224239.story
I would like to see if this trend is converging with data regarding delinquencies
Are we:
1. seeing a reflex pop due to the surge in reos that came online after the moratoriums?
2. The inventories being eaten up in a manner that is sustainable with projections based on delinquency data?
People are certainly getting more house for the $$ these days but the myopic focus of the activity leads me to believe there’s a saturation point or a leveling off that will occur. Is this area of pricing the only envelope of price that could make a rental profitable? how deep is the pool of first timers making the move into this fire sale?
Are there really that many bankrolled retirees booking their last days in the sun? …and what does that mean for the market in ~10y when they start shedding their mortal coils?
so many questions.
To give some more support to Twist’s position:
Currently there are around 45,000 homes in the foreclosure process in Maricopa county (phoenix) this is up over 3000 in the past month, 7000 in the past two months. In fact, preliminary count for April
9120 NTR (notice of trustee sales) 90 days late, 90 days before foreclosure.
2470 Canceled trustee sales.
3400 Foreclosures
So, if even half of these homes foreclose, that would add 22,000 new REO homes to the inventory.
Yes, there are a lot more buyers, prices are firming up in the sub 100K range, even increasing… But are there more buyers than delayed inventory? only time will tell!
Interesting. Of course, if you want to look at trends, perhaps factoring in the projected 167,800 jobs that will be lost in Arizona in the next two years.
http://www.bizjournals.com/phoenix/stories/2009/04/27/daily57.html
Arizona housing prices have a loong way to go, to bottom out.
I’ve been following the sub 100k market closely in north phoenix lately – anything in move-in condition in a non-gangland area moves in just a few days. The problem is, there aren’t many sub 100k reo’s that come back in that condition. Lots of properties that have been stripped, busted windows, termite-eaten houses, and crunchy green pools. Your chart explains what I’ve been seeing in person – banks with unrealistic expectations, and first-time-buyers too eager to blow their Obama-cash on dumps.
I’m surprised they still let speculators purchase homes for flipping, it makes no sense. We just had a developer auction 60 properties yesterday and I wonder how many were purchased by ordinary homeowner types.
Del #8
My two cents worth; pricing is absolutely the only factor that can make a rental profitable. The old saw of, “Don’t wait to buy real estate, buy real estate and wait,” has lost most of its suggestive glamor in the past few years.
The pool of qualified first timers is certainly limited by the continual job losses as Yossarian #10 states.
Building is no longer an industry that provides the necessary positive feedback to grow on itself; further errodeing potential buyers.
The pool of retiring folks are taking huge hits on their current home values and 401-K values, forcing many to continue working for the foreseeable future.
Inventory depletion is the only possible event that will restore values to coincide with actual new construction costs. Stable employment growth is the only possible means of providing qualified buyers.
Considering the above…my best guess for Phoenix to recover to a quasi-normal state…10 years.
I’m one of those fence sitters jumping in on a house now. its in north phoenix, and not gutted or in a gangland area. anyhow 82k, i get the 8k tax credit. this may not be the bottom, but with 8k in downside insurance i could not wait any longer. this house sold in 1995 at this price and i would have never thought that would happen. they rent for 1k a month easily so investors can make close to 10% now and wait for a rebound. i have been following the bubble since 2002-2003 and the blogs in 2005! but, everyone has to decide the right time. i believe californians who have cash are seeing these prices now and planning their retirement. buy for cash in phoenix now, then sell the house in california in 5 years. you can bank on that!