Archive for August, 2008
Ode to the Phoenix Monsoon
August 27th, 2008 categories: Local Color
The beauty, serenity and grandeur of the Phoenix monsoon almost makes the humidity and heat, a miserable combination, worth it.
Indeed, the sunsets, sunrises and the huge thunder clouds that often surround the valley are spectacular, especially during a sunrise. The best way to view these clouds is either in the open desert or on a small hill.
Hiking in the Phoenix Mountains and seeing the glowing warm sky and the shimmering lights of the city makes for one inspiring and grounding moment.
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Greater Phoenix Real Estate Market and a Forecast for the Near Future
August 24th, 2008 categories: Market Trends, Phoenix real estate
We have been getting a lot of questions about the current market and the forecast for 2009 and I bet this question is tops on many peoples minds.
The answer really depends on whom you ask because, it’s all a guess, an educated guess, but it still involves an abysmal jump into the crystal ball. Some say that we’re in for further corrections while others say that we are at or near the bottom.
The answer often depends on the property type, the location and your plans, so the answer is further complicated. The bottoming of the market is a long process and there is just so much to consider that is going on currently and things that are ahead. Just look at the big change that appeared a few weeks ago, namely the recent Housing Bill that was passed.
Then there are the continuing troubles at Freddie-Mac and Fannie-Mae: the high inflation rate; the slowing of money changing hands and a slowing global economy. What will the impact be? Plus other things that have yet to happen as a result of this correction.
Inventory is very important as an indicator of the market trends. While the lack of financing has hurt the market the total vicious circle created an influx of inventory which was exasperated by the lack of financing. Current inventory is down from the high of 58,334 experienced in October 2007.
This current number of 53,725 (8/21/08) represents 9 months of inventory. Months of inventory hit a peak at 21 months. Inventory has been dropping partially thanks to the more buoyant buyer market and the lower number of new listings to the market. In addition new home construction is at at 17 year low. This is all good since the worst that can happen is for more homes to be built while so many still stay vacant waiting for an owner occupant buyer. Take a look at the unit sales per month over the last several quarters. (Greater Phoenix Housing Market Data July 2008 ) Sales are by no means at the 2005 levels but we should really discard the last frantic peaks and consider the long term trend. For July sales are up close to 40% over the same period last year.
This increased interest from buyers is a result of the healthy correction in pricing. The hefty declines in housing prices means that homes are within reach of many more buyers. In fact the first time home buyer or the starter home market is very active indeed. It’s the segment driving the sales now. (Phoenix Starter Home Sales)
The median home price has dropped to $196,000 in the valley while it has dropped more in the outer cities like in -21% Goodyear, -16% in Surprise, -27% in Queen Creek, -15% Glendale, -17% Gilbert and -17% in Chandler. (Change annualized. The decline much higher on a month to month change) The peak for pricing was $360,000 in 5/2005.
While pricing in most areas continues to decline there are some areas which have seen recent and mid term increases. Lower prices, increased demand, lower inventory are all indicators of stability and following stability we’ll have growth in most cases.
All to often buyers and investors forget how crucial financing is, in real estate. I have always stressed this with my clients. Often the financing is more important than the property itself. One of the major benefits of real estate is leverage. This leverage is achieved with financing and if it’s the wrong type of financing or it can’t be obtained then the investment/purchase may not make sense. Even people who purchased at the peak but had good financing can often whether this corrections unlike so many that got the wrong loan. More so the individual elements of financing need to be considered, the terms along with timing the market.
Depending on your hold time and exist strategy taking advantage of the current interest rates may make more sense then waiting for additional declines if there is a high risk of interest rates increases. So, unless you’re buying with cash take into account all factors, more so if you’re building a real estate portfolio but also if you’re buying a home to live in.
No one knows where mortgage rates are heading but we have been in a multi year low and they will be heading higher for many reasons of which I won’t go in here.
The Phoenix real estate market is in the midst of a drastic change. Prices are very low. In some areas they have not been this low since the early years of this decade. Long term buyers are starting to see the opportunity for long term growth.
Take into consideration the inflation of building materials and the increasing global demand for them. Many of the homes that can be purchase now are well below the replacement cost. Other homes sit on land which itself is of very high value.
Big money is sitting on the sidelines.
There is a lot of big money sitting on the sidelines just waiting for the right moment and that moment is approaching. This money is coming from wealthy individuals to large hedge funds. Most won’t be buying individual homes except for maybe foreclosed homes in bulk but they will be buying up entire subdivisions, unfinished projects and other opportunities. There are individual groups as well who have pooled their money and are beginning the exploratory process. I know because I’m getting the multiple calls. Any sort of money that will roll through the real estate market is good.
Greater Phoenix is a very strong city with a bright future and sound fundamentals; Phoenix is in demand. This along with the lower prices, low interest rates, a decent rental market and increasing demand makes for a very sound opportunity that we may not see for a while. It may be prudent to wait but it may not.
It’s difficult to say but take into account all that I have covered above and maybe it’s right. Just don’t try to time the market. Remember that most people buy high and sell low. Most do it because of fear, but that is the worst emotion on which to base such a decision. This corrections will probably be a long one and it’s difficult to say at which stage of the cycle were in. Still, the fundamentals for Phoenix valley are very good so we should be in strong position as the cycle turns up again.
If you have specific questions please don’t hesitate to contact us. We love to hear from our reader and we’d love to have you as a client.
Original Post: PMT
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Phoenix Uptown, Midtown, Downtown Housing Market July 2008
August 18th, 2008 categories: Market Trends, Phoenix real estate
Sales or all property types in Phoenix Central are up to 63 in July from the very bleak 28 in December 2007 but they are still down from last year despite the fact that sales for Greater Phoenix were up 39% from last year. The reason sales in Central Phoenix are down is because the bulk of the market right now are sales up to $240,000 which represent 67% of all sales. There are very few homes in Central Phoenix in that price range. Even starter homes are more expensive.
The table above show all sales by zip code with the number of sales in each zip code, the average days on the market and the average sales price.
The table below is segregated by property style in the same zip codes above. The bulk of the sales were single family homes but there are a lot of condos, townhomes, lots and patio homes selling as well.
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Search for homes in Central Phoenix
Greater Phoenix Housing Market
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