Phoenix Area Housing Market Updates - 2007
Market Update - December 2007
Inventory is holding steady just above 56,000. We have seen an slight uptick in properties under contract in the past few weeks which is welcome. At the national level, the financial markets appear to expect the Federal Reserve to announce another rate cut of .25 in December which should indirectly help the industry over time. Also, the Treasury Department is working on a plan to temporarily freeze sub-prime mortgages at their lower rates. In addition, I’ve heard vague rumblings that a separate federal banking bailout is already underway.
Locally and from a foreclosure perspective, we are seeing the impact that foreclosed properties have in the community. They draw attention and buyers away from other resale properties and force prices down when there is a number of them available in an area. Right now, the system shows 3,054 available foreclosure-related properties. However, this is not the full picture as some properties will not be marketed this way or have yet to been resolved as to the next course of action by the lender.. An estimate puts the total closer to 5,500-6,000 currently. Some forecasters expect 10,000 next year.
Taking a contrarian view, the foreclosure situation may be the catalyst to accelerate pricing reductions that could in turn work to entice buyers back into the market.
Quick Stats
- 56,532 available properties
- 4,315 under contract
- 51,179 sold YTD
- Uptick in homes under contract.
Market Update - November 2007
Slowing down for the holidays. Not much change in the market since last month though buyer traffic has slowed. The Federal Reserve made an expected move to lower interest rates further by a 1/4 point which should indirectly help the industry over time. However, the full extent of the impact will be debatable. Other positive news is that some lenders are working to offer new financing options for homeowners having difficulty paying their ARM mortgages.
Overall, the holidays shouldn’t change things much though buyer activity may slow.
Quick Stats
- 57,314 available properties
- 4,337 under contract
- 47,915 sold YTD
Opportunities going forward.
I have been reporting on the challenges of the market for quite some time here. Going forward into 2008, I believe we are going to see opportunities for buyers and investors in this market. This doesn’t mean a wholesale recovery of the market. But, what it does mean is that there are going to be sporadic opportunities for buyers to get a property at a superior value. Lenders and very motivated sellers will be open to sell at prices we haven’t seen in a very long time.
So, my suggestion is that if you know of someone who is likely going to purchase a home either for residence or investment this coming year, get them in touch with me so I can educate them as to what I am seeing and watch for great opportunities.
Market Update—Intensified Uncertainty – October 2007
There have been a lot of recent, positive developments of late that have been designed to help troubled homeowners and indirectly the overall housing market. The strongest move has been by the Federal Reserve to lower the rates charged for inter-bank lending. Eventually, it is likely these rate cuts will trickle indirectly into the housing market and we will see reduced mortgage rates.
President Bush also came out with proposed changes to the Federal Housing Administration (FHA) to assist homeowners who may be facing expensive, adjusting ARM loans. As well, lenders like Countrywide have reportedly been active in converting over existing ARM customers to fixed products. My expectation is that the Federal Reserve will further be forced to act to stave off negative aspects of the housing market from spilling into broader markets.
Will this help to correct the Valley market? I believe the problems this market face are more fundamental and that the Fed’s and President’s actions will have a muted impact here.
The Valley has roughly 57,400 existing properties listed for sale and only 4,400 under contract (this number has been easing downward recently). That represents the lowest absorption seen at 7.1%. We have a growing foreclosure risk that will work to reduce prices in communities as they occur. Supply and demand will dictate continued pricing declines as homeowners rationalize their positioning and price even more aggressively to sell their homes.
As a result, challenges and risks remain in the market for both sellers and buyers. For sellers, it means that you probably won’t be happy with the price you sell your home for. For buyers, there are opportunities to buy with more to come. However, this declining market presents buyers with risks as well.
Yes, there will be homeowners in a position to take advantage of new, lower rate mortgages as well as existing homeowners (must have significant equity), but many will not be able to take advantage of them given higher credit standards, appraisal problems, and overall affordability issues.
Market Update—Where Are We Headed? – June 2007
Inventory has been holding steady at a record 54,000 properties. The number of homes actually under contract sits at a low 11% of properties. Closings are off compared to last year as well. In sum, the market has a ways longer to go to heal itself and we clearly see any sustainable market improvement.
Anecdotally, it seems that the buyers are largely out-of-state folks moving the area. This is good news for the Valley in general as more people are coming here than leaving. Investor buying activity remains low for obvious reasons.
From a different vantage point, interest rates have moved upward and may affect some buyers’ plans.
What have we learned from this market so far in 2007? That its continued development and improvement is very unpredictable. At a lower level, it is clear that those sellers that are committed to sell can succeed in selling their homes. For buyers, there are reasons to be cautious but also opportunities to get good deals.
Overall, we have a ways to go here before we reach a stronger market equilibrium and we will keep watching for changes that take place and point us in a different direction.
New build effect on the resale market
New builds definitely have an impact on the resale market where there is a considerable amount of new build activity. Given the builders’ ability to cut prices or offer incentives to customers at a much greater level than that of existing homeowners, the impact can be substantial.
In one area, of the 30 homes that sold since the January 1...21 were new builds vs. 8 resale!
There were plenty of resale homes for sale to choose from which doesn’t explain the difference. What does explain it is that the builders were cutting prices by large amounts to attract buyers. Buyers in the area looking for deals found them in a new home As for existing homesellers in the area, they are faced with reducing their prices by large margins to compete or going off the market. In this case, there is little power that the existing homeowner has unless they are committed and willing to position and lower their price to a point that it is competitive with the builders’ product.
On a macro scale, the builders add to another problem—that of increasing existing inventories in the market. For every new home sold, an existing one is not, and a potential resale buyer is no longer in the market.
Market Update—Where Are We Headed? – May 2007
We have seen some unexpected developments very recently. First, inventory has moved upwards again and stands at a record 52,000 active listings. Secondly, closings for the year are down from last year by over 25%. Buyer activity has held pretty consistently since rising in the earlier part of the year.
The market appears to really be a small core of properties within the pool of available properties. This market consists of buyers who will match up with sellers whose homes have the right balance of curb appeal, interior upgrades and decorator choices, a lack of any buyer resistance issues, and reasonable pricing. This may sound obvious, but the real effect is that 8,000 buyers in the market will match up with 8,000 sellers whose homes meet these criteria and the rest will not sell.
We will be watching for further price reductions over time and also for any increase in new build incentives as indicators for where we are headed.
Market Update—In The Numbers…- February 2007
The sense that buyers are reentering the market and getting more serious about making a move continues. Buyer activity is inching upward and more homes are falling into an under-contract status than we have seen of late. We did see an rise in listings with the start of the year, but this seems to have stabilized around 46,000 listings.
Market Update—Are Buyers Getting Serious? – January 2007
There is a growing sense that buyers are reentering the market and getting more serious about making a move. We have talked about a possible change in tone in the market for some time now and we may now be seeing the beginnings of that tonal change. However, this is anecdotal only and evidence in the numbers shouldn’t show whether this is the case or not for several more weeks (buyers are out just starting to search again). We did see an increase in listings with the start of the year, but these only eroded a fifth of the reduction overall we have seen since November 1 and represent a good development.
It has been a Buyer’s Market for some time now but there has been a lot of risk associated with it. We may be moving now into a true Buyer’s Market where there are opportunities with much less risk. Time will tell.
As we go forward. we will be watching for an increased level of properties under contract for an extended period and a gradual drawdown in inventory.
What can we expect to see next? In January, we can probably expect a jagged inventory pattern whereby many sellers who have been waiting to get into the market finally do so. January and February will be revealing months to watch for any change in tone of the market.
