This from my Arizona Republic real estate column (permanent link):
I was in a new-home sales office last weekend, and the sales rep was raving about how the real estate market has turned. It was hard to argue with her. That subdivision had a lot of traffic, and, besides, the newspapers have carried story after story bearing good real estate news. And who wants to rain on the parade?
There is good news out there, after all. We track bread-and-butter tract homes month-by-month, and, in some respects, March was a great month. Volume of sales was up 62% over February, for example, and this past month was the best March since 2005.
But both August and September of 2008 were better months. Still worse news, sales prices were down another 5.2% for the month. That’s 35.22% year-over-year and 54.13% from the peak in December 2005.
So, yes, people are buying homes. And, yes, for now inventories are declining. But FannieMae and FreddieMac had declared a moratorium on new foreclosures late last year. This was quietly ended on April Fool’s Day. There are 10,000 new foreclosures happening right now, half of which will hit the market as lender-owned homes in the next 60-90 days.
So what? Boom? Bust? Both?
If purchases exceed new listings, prices should stabilize or even go up. But if that’s a temporary phenomenon — a temporary “shortage” of newly-foreclosed homes — we could see an echo-bust: Stability for now followed by more price declines later.
And heads matter more than beds. If investors buy homes for which they can’t find tenants, this will depress prices, too.
On the other hand, interest rates are at unprecedented lows. Is it possible that you could save more by paying a higher purchase price now, at a lower interest rate? Or are you better off waiting for better prices, even if you end up paying a higher interest rate?
Here’s an easier question to answer: Is it time to put the champagne on ice, thus to celebrate the bottom of the real estate market? Possibly. Just don’t pop the cork yet.
