HousingPanic, a particularly vitriolic BubbleBlog — which is saying something — asks:
Realistically, how overvalued are Phoenix home prices?
Obviously, I consider this a profoundly silly question, but to lurk among the BubbleBloggers and their seething commentariat is to acquire an education in a slice of America invisible from this side of the sewer gratings. Notwithstanding the idiotic economic analysis, which is really no worse than the static-market fallacies paraded as profundities in the pages of the Arizona Republic, these sites — and not just HousingPanic — are infested with a cult-like fever to inflict suffering — at second hand, to be sure — on people who are in fact guilty of nothing except failing to have drunk the BubbleBlogger KoolAde.
That’s all one. I don’t care. The whole of the last century was dominated by the bad behavior of viciously angry wretches, but look where it got them. The BubbleBloggers will someday bawl balefully in private, but they will never, ever admit that they have been very publicly very foolish. You will know and I will know and in the secret chambers of their hearts they will know they were wrong all along. But as long as you don’t hold your breath waiting for that contrite admission of error, you should be fine.
Here’s where I do start to care. Whenever the subject of Phoenix comes up in a BubbleBlog, the assembled Brown Shirts pile on, for whatever reason. This is their perfect right — even though I think they’re wrong. I love this place. I came here for three months in 1988, and I could not wait to get back. The first time I set foot here, on March 13, 1988, I knew I was home. We moved here for good on April 1, 1991, and I cannot imagine living happily anywhere else. Our relocation page is my extended love letter to the Phoenix area, warts and all. I’ve been writing lovingly about this place since the day I got here, and I’ll keep it up at least until the day before I die here.
Which brings me back to HousingPanic’s question. We keep our own home sales price statistics, so we have no doubt that values are down from their high in December. How much? Right now, about 4%. Could they go lower? Certainly. Will they drop by the huge amounts HousingPanic and his flying monkeys seem to yearn for? This seems very unlikely.
What seems much more likely is that Phoenix will recover from the hangover of last year’s buying binge and get back to a steady rate of growth — historically 6% a year. The reason this should happen is very simple: Population growth.
Metropolitan Phoenix is a unique real estate market. While other cities experience static — or even negative — population change, The Valley of the Sun routinely adds 100,000 new residents every year. There is no reason to think this will stop — not now and not soon. The carrying capacity of Greater Phoenix is eight million souls, about 266% our present population. We will hit that number — but not until 2040 or after.
A significant proportion of those people will want to live indoors, which evidently is such a flimsy idea that it cannot penetrate the skull of a BubbleBlogger. Ah, well, it takes all kinds — although the lord alone knows why it should.
In any case, here do I compile my list of 21 really good reasons to bank on the future of the Phoenix area real estate market:
- The migration from the Snow Belt states to Metropolitan Phoenix has been unabated for 60 years.
- A similar extended migration is now occurring from the Northwestern states and Western Canada.
- The “installed base” of all those migrants brings a steady stream of extended family members.
- Proposition 13 makes moving up difficult in California; many Golden State sellers buy in the Phoenix area.
- Californians in pursuit of other objectives — e.g., a friendlier business climate — migrate to the Valley of the Sun.
- Baby Boomers will retire in droves to warmer climes — the Atlantic coast, the Gulf states and the Southwest.
- Among those locales, Phoenix is by far the least prone to natural disasters.
- Because of this, people from disaster-afflicted regions have formed a new stream of in-migration.
- There is a steady migration of new residents from Spanish- and Portuguese-speaking countries south of the border.
- Phoenix is a destination of choice or the second-landing city for immigrants from all over the world.
- While higher oil prices will put a strain on our far-flung suburbs, the greatest pain will be felt in Northern states where fuel oil or natural gas are used as heat sources; even people who don’t hate the winter will move to the Phoenix area to escape high heating bills.
- The Phoenix Metropolitan area is a dynamic jobs creation machine, adding tens of thousand of new jobs every year.
- People who have or hope to have children move here as soon as they can manage it.
- Compared to the areas from which many of our in-migrants are drawn, our homes are still very affordable.
- We build thousands more new homes every year.
- The Greater Phoenix area has 60 years of sustained practice at managing extreme growth — this in contrast to thrashing cities like Las Vegas.
- Snowbirds, politely known as Our Winter Visitors, eventually move here year-around.
- Our first waves of massive migration occurred after WW II; mustered out soldiers who had been stationed here came back with their families; this pattern continues among people who are posted here temporarily for various reasons.
- People who stay at our resorts often fall in love with the Valley of the Sun and return as soon as they are able.
- A significant number of active and retired professional athletes maintain homes here, in no small part because the Phoenix/Scottsdale area has…
- Year-around golf.
It could be there’s too much sun here for congenital cellar-dwellers — but that’s a good thing!