I wrote this earlier today as a response to a comment, but I think it warrants a post of its own.
Here’s the Cliff’s Notes: After a huge run-up in home values, so far the Phoenix-area residential resale real estate market has given back four percent from the peak in December of 2005. We have a surfeit of inventory, but I suspect that many sellers are loosely-motivated. We have a completely normal number of buyers buying a completely normal number of homes in a completely normal number of days on market at a completely normal level of discounting on price. The idiot newspapers cannot stop comparing current conditions to the middle of the boom, but if the current market is compared to 2003, it becomes clear that, except for the surplus inventory, we are in a relatively normal market.
Whatever might happen in the future in the Phoenix real estate market, it is clear that, after more than two years’ worth of predictions of imminent doom, our oft foretold Armageddon has not yet come to pass. These facts are documented here. The blockquoted matter is snipped from the remarks of my interlocutor.
What makes you so certain that the majority of individuals who are re-selling at the moment are “loosely motivated” as you say?
First-hand experience and peering into the MLS. The surge in inventory started about September of 2005, and, from the beginning, I had the strong impression that many of the sellers were owner-occupants looking to cash out at the top of the market. When I show, I see a lot of homes that are not market-ready. A significant number of homes aren’t even available to be shown.
It seems that this housing run-up has featured a lot of speculation from “flippers” who bought as an investment and plan on selling for a profit.
I do not have this impression. Certainly most of the homes I’m showing (and most of those I represent) are owner-occupied. I have investors with homes for sale right now, but none at fire-sale prices. To the contrary, my investors are doing very well.
For what it’s worth, most mainstream media reports on the Phoenix real estate market are factually dubious, at best. A big chunk of my effort in this weblog consists of debunking the real estate pages of the Republic.
Do you want to see the wave in real numbers? Our May Market Basket report documents how completely normal our market is on the buyer’s side. June’s sales: 7209 properties sold in 67 days on average. June 2003: 7409 properties in 67 days on average. Many of the people who have swooped in here are badly behaved (how utterly awful of me to point this out, having seen it all over the place), but, much worse, they’re badly informed.
You acknowledge that there has been an “anomaly” of growth during the past 15 months. However, many homes have nearly doubled in price during the past 15 months to arrive at their current price. If these past 15 months have been anomalous and we are seeing a correction of the market, wouldn’t this correction, be, err, rather severe with some homes losing nearly half their value?
Hide and watch. You’re timing is wrong. The boom was from 06/04 to 09/05, with the peak in values coming (from our numbers) in 12/05. Through 06/06, the homes we track have given back 4% from that peak. Values were up marginally in June for Market Basket homes. Will they go down from here? Possibly. Will they go down much? I doubt it. If you subtract the loosely-motivated sellers — the ones who will stay put if they don’t get their price — the Metropolitan Phoenix resale market may be close to being balanced. Certainly the days on market for the homes that sell argues that it is.
How long will it take for this correction to finish correcting itself?
Ask me after it ends. No one can predict the future, no matter how loudly they they shout, how much they swear or how big a crowd they run in. I have what I consider to be sound reasons for believing the long-run future of the Phoenix real estate market to be bright.