This from my Arizona Republic real estate column (permanent link):
If you’re going to call a bottom for the Phoenix real estate market, be prepared to do it more than once.
When the real estate market was booming, there were people declaring that the market had reached its peak 18 months before it actually did.
I was on the other side of that error. While prices for bread and butter suburban homes reached their high water mark in December of 2005, I was convinced at the time that the boom would run for another eight months.
This week new construction analyst R.L. Brown announced that he may be seeing an incipient stability in the median sales prices for new builds.
That’s a prediction with the tensile strength of a willow frond, but that hasn’t stopped pundits from speculating that Phoenix may be nearing the bottom of the market.
Not to rain on anyone’s parade, but prices for those bread and butter suburban homes — the ones that told us when the boom had ended — fell 5.79% last month.
That’s a big drop. Year over year, those homes, on average, are down 31.31%. They’re down 53.32% from the peak.
We have to hit bottom sometime, surely, but new home sales won’t tell us anything about the bottom of this market. Why? Because resale homes are selling for substantially less than their replacement cost.
How can that be?
The ponderous, pontificating answer is that buyers are radically underbidding our home values.
The plain-spoken answer is much simpler: We’re overbuilt. We have more bedrooms than people wanting to sleep in them, more kitchens than people looking for a place to cook dinner.
So when will the market in the Phoenix area finally turn around? When the population increases to match the quantity of available homes.
This won’t take long — particularly since the new-home builders cannot compete against the prices of resale homes. But it won’t happen overnight — and our current economic troubles aren’t helping.
Even so, Phoenix has it a lot better than other markets. Our climate will attract the people we need to fill our excess housing. Just give it time.
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