A big hat tip to M, who’s been warning about the impending fall of the Scottsdale market for a couple of years now. Others have not always concurred with him. Take for example this quote from ASU professor and real estate analyst Anthony Sanders from April 2008:
Alt-A loans, which are low-documentation and no-documentation loans, are almost exclusively concentrated in Scottsdale. The wealthiest part of the Phoenix metro holds the highest concentration of no-documentation loans, which is not really a problem because if that market goes south, these homeowners will be better able to hold onto the mortgages without default given their higher average household income.
Here’s what happening with Scottsdale now: [Emphasis is M's]
The moral of the lesson here? Rich people are not immune to market forces. For example, many of the former wealthy in Scottsdale made their money in real estate. They used wonky financing to get into a high end home thinking that prices would continue to rise. Now incomes are down and home values are down. It’s impossible to refi and difficult to sell. There are years worth of expensive homes on the market. Jumbos are expensive and difficult to obtain. Walking is often the only option.
The Phoenix metropolitan area as well as the rest of the nation continues to be a tale of two markets. Any sign of "stabilization" is only coming in the lower end- upper end real estate has a long way to fall.
Despite just buying a place, I totally agree with twist.
Our condo peaked around 840k in 2007, and we just closed on it for 640k. The word on the street here in DC is that many of the downtown condo units are going into default or are rented out but are in preforeclosure anyway. These properties typically are priced between 500k and 900k. Many of the condo associations’ balance sheets are in trouble, and building staffing, maintenance and capital improvements are taking a hit.
While prices have stabilized statistically, we expect another 10% drop in 2010, returning prices to the levels in 2002-03. Many of the owners have good jobs in DC, but are very much underwater and expected their condo buys to be a stepping stone to wealth…so many are walking away.
Rich people don’t have mortgages. Rich people don’t pay interest. Rich people collect interest. Scottsdale is full of poor people who had short term luck during the boom. Now they have to give back the toys that they could not afford. Remember the days when Scottsdale was full of Hummers? It’s difficult to find one there now.
sigh. i was told ad nauseum that scottsdale values would not fall to which my answer was always, of course they will.
it is interesting to note that in the az republic a couple weeks back, data showed that in 85255 (where i RENT), values are still 8% above those in 2004.
fasten your seatbelts sports fans.