‘Resale Market Growing Weaker’ In Arizona
The June home sales numbers for Arizona are out. “Historically, June is one of the better months of the year for resale housing activity. However, the 5,460 recorded sales for June 2006 is truly one of the initial signs that the resale market is growing weaker.”
“This level of activity is down from the 6,870 sales of May 2006 and well below last year’s 11,545 sales year to date. For 2006, there have been a total of 36,290 sales, while it stood at 58,030 sales in 2005 year to date. This is the weakest June since 2000 when 5,020 sales were recorded.”
“Phoenix resales dropped by 1,325 sales over the year to 1,725. Scottsdale’s resale home market declined from 920 recorded sales a year ago to 465. The Mesa resale housing market fell by 755 sales to 585. Glendale decreased from 880 to 430 sales. Peoria’s resale market fell from 560 sales to 250 sales. The Sun City resale market fell from 200 to 75 sales.”
“Resale activity in Sun City West also fell from 90 to 45 sales. Gilbert’s resale count fell from 795 to 330 sales. Chandler’s resale market slowed from 760 recorded sales for a year ago to 380. The resale market in Tempe dropped from 270 to 160 sales. Avondale’s resale market fell from 265 to 120 sales. Goodyear declined from 215 to 90 sales. The Surprise resale market decreased from 535 recorded sales a year ago to 175 sales.”
“As the housing market slows, the entry-level sector basically disappears, while the move-up markets garner a larger share of the remaining activity. Thus, it is not unusual to see median prices to be stable or even increase as the move-up market works to be satisfied.”
“For June 2006, 14 percent of all recorded sales were for homes priced from $125,000 to $199,999, 44 percent for $200,000 to $299,999 and 39 percent for homes priced more than $300,000.”
“Over the last few years, the townhouse/condominium market has had increased popularity for owner-occupancy, especially for young and minority households, and investors. Sales activity followed a pattern similar to the single family market with a decrease from 1,470 sales for May 2006 to 1,035 sales for June, which is below last year’s 2,125 sales.”
“For 2006, there have been 8,125 sales recorded, while there were 10,920 sales a year ago.”
“‘When purchasing a home for investment or occupancy, the rapid growth in price that was so evident in much of 2005 is somewhat soothing to the uncertainty of the buying decision,’ said Jay Butler, at Arizona State University. ‘If home prices continue to be stable or even decline in some areas, potential buyers may be increasingly reluctant to make the purchasing decision, because future appreciation is much more uncertain.’”
These sales were set a couple of months ago. The situation is much worse now, as inventory is relentlessly piling up. I am sure we’ll see a slew of reports on this tomorrow. ‘Phoenix resales dropped by 1,325 sales over the year to 1,725′ That’s 43%.
The Dark Side of the Housing Market
Because of this, the competition in the credit business is intense. And like any good business, lenders have adapted their programs to meet the needs of borrowers everywhere. This has led to some potentially dreadful results.
Let me explain.
In their zeal to loan money to everybody and anybody, literally everybody and anybody can now qualify for the loan of their dreams. In fact it has now gotten so bad that practically any loan officer would tell you that they could qualify a ham sandwich if they had to.
I’m not kidding. As long as the ham sandwich had a social security number, it could be done.
Take for instance one such ham sandwich named Johnny Moon Sr. At the time of his death he left behind a watch, a flashlight, and wallet containing the grand sum of $1.00. In short, he was dirt poor and homeless.
But despite his untenable financial situation and his lifelong mire of poverty and drug addiction, Mr. Moon died with a startling secret: He had qualified for and received a total of six loans to purchase Florida real estate at a cost of over a half a million dollars.
Now how Mr. Moon was able to pull off this feat is murky at best. He certainly may have been an unwitting pawn in a flipping scheme, but the truth is he may have indeed been a legitimate real estate investor.
The records that exist, however, do make two things abundantly clear: Mr. Moon was able to attend all of his closings and he somehow managed to qualify for the loans. But regardless, how did he manage to pull it off? I mean, Mr. Moon clearly had no business borrowing money and buying homes. He was homeless!!!
But borrow money and buy homes he did. And as startling as his accomplishments were, Mr. Moon simply could not have pulled off this feat without the help of a lender with an insanely liberal loan program that was desperate to do some loans.
It is here where the competitive excesses in the lending business have created a slippery slope for borrowers everywhere, creating the speculative bubble in housing we find ourselves.
___________________________________________________________
IS THIS A TRUE STORY ?
A lot of Mister Johnny Moon Sr. out there ?
In Arizona, in California, in Florida, in the World ?
I checked public records, and there are quite a few John Moons in FL. Even a “Jr.” If I had more detailed info (city or street), I could try to verify.
I have a true personal story that is even more frightening- in large part, because there are a lot more people out there like my son than there are like Mr. Moon. My oldest son is living with his girlfriend near Atlanta. They are both great kids; hard-working, quiet, smart, etc.. He is a junior in college carrying a 4.0 (woo-hoo!). He also works at school and part time at a pizza joint and probably grosses about $16k annually. He and his girlfriend wanted to improve their living quarters and he ended up talking to a realtor. She told him that they were perfect candidates for a condo and that, based upon his income, he was pre-qualified for a mortgage up to $95,000. This is a 20 year-old man with a part time job who is looking at about 6 more years of school… I about shit myself when he called to tell us the ‘good news’…
Real reason it has gotten worse is because people are too afraid to go out and look for homes let alone live in Phoenix.
http://tinyurl.com/rqb3m
It’s actually worse than even this article points out. Currently Phoenix is dealing with three serial killers on the loose, at the same time. The Baseline Rapist, The West Side Shooter, and the Central something or another (the third one escapes me now).
These three have all been roaming around for the last year or two, it is only now, 50+ victims of one of the three later, that the press has started picking up on it.
As the housing market slows, the entry-level sector basically disappears, while the move-up markets garner a larger share of the remaining activity. Thus, it is not unusual to see median prices to be stable or even increase as the move-up market works to be satisfied.”
so if they are in a freefall, then it is all income levels…. right?
How long can this pattern hold? Those sale/purchase events are quickly eroding the lower-level move-up buyer pool. I would guess that re-sales at the midlevel are under serious pressure, and Ben’s note about the age of the current stats is very timely.
If I may..I think debating whether the housing market will crash or not at this point is a moot…because all the evidence points to the housing market slowing down significantly (and maybe even crashing).
Having said that…is it possible to move the conversation to how to exactly profit from others misery. Like I have mentioned before, I am in my late 20s…so I have not lived through a housing burst where I could afford to buy real estates.
Now that I have the means to purchase (I am currently a renter) I would love to hear from others on this blog who have lived through a real estate downturn on how to profit from it.
Learn patience. If your looking to purchase at 10%-20% below market top, then you won’t have that long to wait. If your looking for the market bottom, patience will be your friend because it’s going to take some time.
I lived through the 90’s downturn in So Cal, which is nothing compared to this monster of a bubble. When the bubble burst (which I would compare to where we are today) it took about 5 years to find it’s bottom. If you bought ‘90 or ‘91, it took until about ‘98 - ‘99 to get back to your original purchase price.
When I bought in NJ in 1987 it took until 1996-97 until prices returned to their original purchase prices. There is no quick fix ( I know, anti-American), especially if interest rates don’t co-operate.
Re: comment by nnvmtgbrkr. This current bubble is worse than the 90s, I agree. However you imply this bubble burst has reached the bottom. I disagree. LA prices have barely begun to drop. Same with Phoenix. But They will drop by at least 50% over the next 6 years.
In the 1990’s bust, I remember one guy that sold his property 4 times on personal notes, each event preceded by a foreclosure due to failure to meet the payment schedule. He would pocket the down and sell it again. Predatory.
Otherwise, you can wait 2-3 years and scour the hell out of repo’s for that one diamond.
I know I mentioned this some time ago on the blog but here is my story again:
I bought my 1/1/1carport condo in Chandler, AZ Aug89 for $23.5k thru HUD(only $500 out of pocket). Origional owner bought it new in 85′ paying $52k. What is interesting to note is that 6mo’s later I decided to go back to school full time and could not afford to stay there any longer. Hence, I rented it out. All I could get was $300/mo. My PITI + HOA was $286. I could barely cover my costs.
“I bought my 1/1/1carport condo in Chandler, AZ Aug89 for $23.5k thru HUD(only $500 out of pocket). Origional owner bought it new in 85′ paying $52k. What is interesting to note is that 6mo’s later I decided to go back to school full time and could not afford to stay there any longer. Hence, I rented it out. All I could get was $300/mo. My PITI + HOA was $286. I could barely cover my costs. ”
Laura,
Thanks for your cautionary tale. I wish we could further discuss your point that what appears to be an incredible deal could still leave you in pain within a declining market.
For people still waiting to get in on ownership, I fear that their patience will be tested in coming years like never before.
“is it possible to move the conversation to how to exactly profit from others misery”
I must say, for a blog that so freely casts scornful stones at the greedy, unscrupulous, conniving, sleazy, predatory RE agents, lenders, specuvestors, and their ilk (which I agree most are), I must pause and ask, why lower yourself to their level? Isn’t opportunistically exploiting and taking advantage of others one the chief causes of this RE mess? I hate to believe that both sides (the RE and the Bubble Believers) are cut from the same cloth.
I empathize with the frustration that people feel. We were fortunate to buy before the price run-ups and have used that to move up, like America USED to work. However, the market has become hostile and treaturous to first time buyers, and that must change.
I’d just be careful about preying on others misfortune, whether they deserved it or not. Karma can be a real b*tch.
I must say, for a blog that so freely casts scornful stones at the greedy, unscrupulous, conniving, sleazy, predatory RE agents, lenders, specuvestors, and their ilk (which I agree most are), I must pause and ask, why lower yourself to their level?
Honest profit. No one will be lying, cheating or stealing as what happened on the way up. Got a few quarterly statements in the mail today. Nice.
Anyway, right now it is time for preservation and preparation. There will be plenty of time for predation later. I consider it a moral imperative to correct through deed and word the current state of misadventure in the real estate market. It is not misfortune that left people with tax bills doubled because some equity locust from Bubbletown breezed in. If homeowners why not help out Enron executives? Beanie Baby collectors? They are perps not victims.
You are not much different than the liars who created this mess.
Interesting. Why? I’m not lying to get credit I don’t deserve. I’m not causing my neighbors taxes to jump. I’m paying a price that the market says is fair, indeed, by the time I reenter there will be several chacks of this. Look, somebody who even bought Oct ‘05 if they put 20% down and pay less than 1/3rd to housing and plan to live there for at least 5-7 years is not going to get hurt. Anybody who took a chance and stretched or got an exotic or >80% loan was TAKING A CHANCE.
Mr. Cirque de Soleil must be a clown with that assinine comment. Do you think he has big red shoes on?
I think he’s just insecure about the size of his “ARM” so he’s compensating by holding a really large mortgage.
After Soliel’s comments the other day defending Long Beach, I thought Soliel is the handle for the recently retired mayor of Long Beach (Beverly O’neill).
For the people familiar with Long Beach they will know the joke.
For those of you who are not, Beverly Oneill was credited with the turnaround in Long Beach and building the port of Long Beach up to compete with LA’s port.
She always saw the best in people and was/is Long Beach’s biggest cheerleader.
Overall, not a bad mayor but got a little too much credit for the housing bubble driving the gentrification in LBC.
Robert Cote-ROFL!
I oughta call you the Housing Bubble Jihadist, prognosticator of doom, zealot and patriot..”Give me Foreclosures or give me death”.
I don’t agree that similar M.O.s won’t be used on the way down. The problem is, I don’t think the equity locust, et al, will be the biggest losers. I think the loss of economic stability in the “average” household will have serious repercussions to the whole economy, and not just b/c people aren’t pulling gobs of hallucinated wealth out of HELOCs to buy more beanie babies and plasma TVs.
The housing bubble is just one of the maladies facing the country. I think there are much bigger problems we have yet to face, like a $ gazillion trade deficit, energy crises (rising oil, peak production, etc.), a clueless govt., etc. IMHO, the “average American” is losing ground economically, regardless of where RE goes. The housing bubble is just one of many symptoms of a more serious disease. Waddyathink?
Robert-
Sorry, I somehow missed your last response. I was responding to your previous response.
I totally agree that a lot of FBs got there out of greed/stupidity, and that they’re getting their just desserts. I’m like you, being prepared, looking before I leap, taking a conservative, traditional view. It’s gonna be a hard lesson for a lot of people.
“energy crises (rising oil, peak production, etc.) …”
The “peak production” you mention is going to have profound implications to all markets when it becomes so obvious that the MSM can’t spin it otherwise. Oil is the world’s lifeblood. The entire house of cards will be shaken as wall street and its ponzi scheme needs continual “economic growth” or it will become unglued. A housing bubble? its merely just one of the many bubbles we face….
Amen Willie
Stop feeding the trolls people.
” Isn’t opportunistically exploiting and taking advantage of others one the chief causes of this RE mess? “.
I’ve thought that buyers’ greed is the main reason of bubble.
It’s about taking a thoughtful measured calculated risk rather than pure senseless speculation where any minor economic pause or pullback would spell disaster.
Most bears are simply sensible investors that take the time to be cautious with $$$$$. It doesn’t mean they don’t like profits.
Defaults are published in your local legal paper. Go to a newstand near the courthouse and chances are you can buy a copy, or call the courthouse and ask them what paper publishes the defaults. About 18% of the defaults wind up at a trustee’s sale, where the 1st lein holder, usually a bank, gets the property back free and clear, and wipes out all other leins. Some of the sales are to 2nd leinholdrs, who still have to make current the 1st to keep the property. I am seeing bank getting houses back at 30% below current market. However, it doesn’t mean it is a good buy, if the market continues to go down 20%. It just might be too early to do anything, except learn all about foreclosures
The way to make a profit from this disaster is to provide information to people about it. Ben is already having considerable success with his version of this. There are a lot of different ways to communicate with people even if limited to blogs, and there are many interested audiences. Additionally, as Zillow shows, there is a great deal of relevant information available, but it is difficult for most people to easily get at and analyize. Because of the tremendous scale of this correction that is starting there is a great wealth of opportunities to communicate to and with people about the nature of the market shift in progress.
It’s all about Cap Rates and Cash flow. There used to be a saying in the real estaet market: You make money when you buy. Meaning, you had to buy right or below market values. I haven’t heard this in a while. It’s still true.
If you want to be a landlord it’s a tough biz. No kidding. Just make sure your rents cover your mortgage, maintenance, and down time. You should try to have a few hundred $$$’s cash flow from each property. Don’t assume rents will go up. Be conservative in your estimates of cash flow.
Don’t fall in love with a property, and if you worked the #’s and it makes sense don’t let anyone talk you out of it.
Best of luck.
I remember a time in Montreal, in the late 80’s, when you could buy a house or a an appartment complex at 5 times the rental revenues. I even saw an old property one at three times the rental revenues. These are the types of ratios you should wait for. In the US it would mean maybe you will have to wait a little bit. To really get in, it would mean a 40 to 50% price decrease ?
Kudos Ben….
Seems you may be benefiting much earlier ,living in AZ, than some of us who live in San Francisco Bay Area. Actually south of SF in SillyValley. LOL!
“As the housing market slows, the entry-level sector basically disappears, while the move-up markets garner a larger share of the remaining activity. Thus, it is not unusual to see median prices to be stable or even increase as the move-up market works to be satisfied.”
Only if you believe that people “move up” without selling their old house. It’s not possible for everyone to move up without some fresh blood entering the picture at the bottom end.
Exactly. Almost every single move-up buyer sells their prior property. The screwed ones that haven’t sold their existing home first hold both while the market tumbles and double their pain - riding both down.
Right now 50% of the sales in Vistancia are falling through because the buyers can’t sell their previous house.
O/T but did anyone see that Boat stock get hammered this morning? We need a discussion of stocks to short as a result of the housing slowdown/crash. Any thoughts? If we had all aggressively shorted the housing stocks last year we would be *rich beaotch* URR URR. (In the words of Dave Chappelle)
My opinion only, but I still think WCI is a great short.
WCI Communities sells new homes in DC and FL, and ‘luxury’ condo tower units in FL. Last month they announced the condo sales are down about 80%. The stock has gone from about 25 to 17.40 today, but given the deep doodoo they are in I think there is still a LONG way further for it to slide.
Puts are available, including LEAPS expiring in Jan08 for a defined risk way to play this.
Yesterday the company laid off a bunch of employees. They won’t say how many (!?), but messages on Yahoo are estimating around 400. BTW, don’t be scared off from shorting by the low PE…I’m thinking soon there won’t BE a P/E ratio.
In the face of vanishing sales, the management has been burning up cash buying back stock. That tells you a lot.
Always do your own research, but this could be worth a look. (disclosure: I am short this stock via put options)
What about William Lyon Homes (SoCal Builder) they report home sales down close to 50%, stock goes up $15/share today?
Going private. special circumstance.
Since all homebuilders are facing a vastly over-built market, rising interest rates and a deteriorating economy, just about any homebuilder(except Lyons) presents a shorting opportunity. Two that might be better than the rest are LEN and RYL. Both have serious issues with defects in the homes they built and the homeowners who bought them are causing them problems. WCI is also a better than average short prospect.
Don’t know if the FOMC has another hike on the platter. They’re scared most about deflation (moreso than inflation). Air out of the housing bubble is intensifying each day. A dangerous spiral could soon be in affect. Readers of this blog understand this. However, most Americans … do not.
I am sure that at the G-8 meetings, much time is spent on how to ensure that the US doesn’t have a financial catastrophe. With recent CBs of Europe and Canada passing on rate hikes, I think it is being coordinated to have the US pause. The BOJ raising by .25 bps won’t crush the dollar vs yen. If the other banks keep raising, it will force us to raise to keep the dollar from collapsing. We even have some cushion to come down and still stay above the EU rate. Whether we like it or not, the global economy is being centrally planned. They don’t call them central banks and Chairman so and so for nothing.
Any more rate hikes by the Fed, and the highly leveraged US consumer will collapse, if they haven’t already with the rate at a whopping 5.25%. Yikes.
5.25% is not whopping - unless, of course, we are talking about large nominal dollar values. Whoops!
Orange County, CA slowdown pretty much mirrors the Phoenix area:
June 10 to July 9
2006 –2,202 sales per MLS (down 43% compared to 2005)
2005 –3,860 sales per MLS
2003 –4,257 sales per MLS
2000 003,529 sales per MLS
1999 –3,812 sales per MLS
oh where oh where have the buyers gone????????
Gone to prior sales, everyone.
Down 48% from 2003! What was 2004?
Is this the mythical 2-YOY starting to rear its ugly head?
“oh where oh where have the buyers gone????????”
There wasn’t enough land in AZ, so they left.
“oh where oh where have the buyers gone????????”
3 month T-Bills and precious metals.
I just got back from visiting my father in Hilton Head S.C.. I guy he knows that sells condos, told him that his income was cut in half this year. Hilton Head tends to be in a world of it’s own(small area, expensive properties bought by people with a lot of money). I thought it was interesting that their sales mirror those in Pheonix. It should get really ugly next year. Between ARM resets and fear of falling prices, I see thing getting alot worse. The illiquid nature of real estate should scare people for years.
As an active trader I read the news and press releases on all the major home builders daily. Also, thanks to Ben, I’ve been able to read about housing markets across the country on this blog.
The number that keeps appearing over the last week or so is a 50% drop in sales, more or less, over the same period last year in many areas of the country, along with explosive increases in inventory.
This is huge, and as bad as all of us here have been anticipating, if not worse. I can’t see how prices will not be dropping very significantly in the coming months.
Soft landing?…NOT A CHANCE. This is gonna get ugly. Buyer psychology has turned around and now people are afraid to buy…a complete 180 degree shift from last summer when ‘if you don’t buy now you’ll NEVER be able to buy!’
I agree. Another thing people don’t realize and ESPECIALLY REALTORS, is that a 50% drop eliminated a 100% gain. Meaning if you had 100 then went to 200 that is a 100% gain, but if you revert to the previous price and lose 100 from that 200 to be back at 100, it is not a 100% drop but only a 50% drop.
Did anyone notice the lack of mentioning of months of inventory?
You beat me to it. I was thinking about this number:
‘For 2006, there have been a total of 36,290 sales’
With something around 50k homes for sale already, how do they square that with 6 months DOM, or whatever number they say. In N AZ, they say 79 DOM, but I see houses all over that have been for sale over a year.
I CONVINCED the numbers are being monkeyed with…I mean, what I see in real life, and what I see on the MLS are NOT jiving. What’s to stop a local MLS from doctoring numbers, really? Remember that the NAR is a trade group, dedicated to improving the bottom line for their members…realtors.
Yeah, for instance isn’t it interesting that Arizona home sale numbers are not aggregated by the state realtors assn, and publicized, as it is in almost every state? So ASU does it and only for the Phoenix area. I’ve seen inventory numbers on Flagstaff once the whole time I’ve blogged on this subject. I’ve never seen inventory numbers on Prescott.
Hmmm …. they lie continuously about the state of the market, but for some reason, they don’t lie about their numbers? … yeah, right.
I’ve been a member of the local MLS here in Connecticut for years. The Realtors manipulate the DOM (Days on Market) by letting a listing expire or they withdraw it from the market and relist the property. This way the property gets a new MLS number and the DOM start all over. I’ve kept track of this here on the shoreline in Connecitcut and let me tell you the DOM that the MLS and Connecticut Association of Reatlors is quoting is totally misleading. I’ve complained many times to the board of Realtors about this and they claim that the Realtors can do what they please with their listings. So, in order to a get a TRUE picture of how many days a property has been on the market you have to search the MLS by property address and not the MLS number to get the truth. A property tracking by address and not by MLS number is telling. Personally, I think this is fraud for it misleads potential buyers into believing a property has been on the market for a much shorter period time, when in reality its been on the market in some cases for more than a year and growing.
Lord, you’re right! Must be out to 2 or 3 years. Where’s the infinity key when you need it?
Look up to the sky at the Universe.
Humans are really a boring lot.
Obsessed and possessed by their possessions.
Bored with real estate?
Buy yourself a telescope, go on a mountain top far from the city and look.
The infinite key is there, not down there.
Sometimes I think, men in group, are even less intelligent than ants.
I use my telescopes every clear night I get. Unfortunately, the light pollution from urban sprawl is steadily creeping in.
What’s interesting about the inventory is that it is probably underestimated. There are about seven or eight homes in my neighborhood that are not on Zip Realty’s site but do have signs in the yard.
Zip realty still shows my 1998 assessed value of $98k. My neighbor sold 2 months ago for $210. You’d think they’d get up to date.
I would love to hear from others on this blog who have lived through a real estate downturn on how to profit from it.
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Wait until at least fall of 2007 and then contract out to a good CPA (not a Realtor, Broker, Appraiser, family friend, etc) to scour the distressed property lists for you. You’ll be looking for someone who purchased before 2003 with a good equity cushion to absorb your lowball offer.
In 1989 at the age of 24 I bought my first house and “experienced” the downturn in the OC area that started in 1990 and “stabilized” in 1995.
I don’t want to regurgitate my own personal experience, it’s just too painful. But here’s an excellent site that chronicles the fall. I don’t know who put this together but I can say it is spot on with what I personally experienced and what I believe the OC area is going through now … but today we’re only about 8 months into the down cycle … 5 years of falling volume and prices to go.
http://www.rntl.net/history_of_a_housing_bubble.htm
it’s different this time- price of oil ,commodities and rates are rising ,not gently falling like 90’s
People, can you feel it? I mean really. Can you feel the change in the air?
I’d say around March was the point where there were enough articles in the mainstream press about ‘prices moderating’ and ‘the buyer’s market’ (cough) or ‘the soft landing’.
The headlines now are getting ominous. There is more tembling lip to them.
I think the recession began in the last week or two of June. Now, let’s see how long it takes to be acknowledged by the “economists” and business “leaders”.
August housing figures will show The dot.com crash of Real Estate started in July. In this heat, what desperate buyer will give up a Sunday at the beach or the mountains, to look at another overpriced listing. What lazy realtor will sit an open house on Sunday, when he could be partying with his kids. The Crash is here, but unlike the stock market, the numbers won’t be released for another 30 days. It’s time to sweep up the floor and lock the door
I feel the change in the air. By Christmas panic will be in the market.
“By Christmas panic will be in the market.”
Nah ahh! The Winter Holiday Selling Season will save us.
Yes. Be prepared for the worst Christmas shopping season in years, potentially decades, IMHO. From there, it goes downhill. Hold on to your seats, folks. Rough times ahead, IMHO.
Stay liquid and be ready to move, financially. We might see tremendous volatility in all markets in the near future.
I know I am not doing my typical splurgeand I am ok with my situation.
I am scared because of a possible D in our futures. SAVE YOUR $$$$$…..
“I know I am not doing my typical splurgeand I am ok with my situation.
I am scared because of a possible D in our futures. SAVE YOUR $$$$$….. ”
Try “inflationary” depression. Some prices will fall, others will go up high. House prices will fall, oil prices will rise. Peak oil. So interest rates should continue to climb over the years. Japan is about to raise its rates for the first time in 5 years. Central banks don’t care if they are popping the bubble in R.E. They are concerned about rapidly rising commodity prices. We got China and India modernizing the last few years. Money Market funds are great to be in, 3 month T-bills too. Precious metals are great to be in. when short term rates go above 7.75 (and I think they will in the next 2 years) I will shift from T-bills to 10 year notes.
If there were 5460 resales in all of AZ in June ‘06 and there are conservatively 50k used houses for sale in the Phoenix area alone. Doesn’t that mean that there is about a year’s worth of inventory right now? These numbers are great for the lucky few who were able to sell. I think Cap’n Quint may have said it best: You know that was the time I was most frightened? Waitin’ for my turn. I’ll never put on a lifejacket again. So, eleven hundred men went in the water, three hundred and sixteen men come out, the sharks took the rest, June 29, 1945.
even worse than 12 months inventory, since june is supposed to be the best month for sales. we’d have a year of inventory at june’s pace. i am sure (no data) that other months are much lower. so maybe there is more like 18-24 months worth of inventory.
Good point! I bet there is at least two years inventory if everything was counted and averaged and everything. AZ speculators is going to get “a whoopin’”
Here’s a report on the biggest debt bubble the world has ever seen……..
http://biz.yahoo.com/ap/060712/economy.html?.v=13
Same 8 houses in my Chandler AZ subdivision have been on the market for 4 months now. 5 of them have no furniture in them. Down the street there is a house that has been on the market for almost a year, I noticeds a ‘reduced’ sign a couple months ago, now I see a ‘for rent’ sign hanging below the ‘for sale’ sign. Some of these homes were purchased for $290,000 four years ago and they’re asking $700,000+ now. Seems we’ve finally run out of idiots.
51,200 for sale in phoenix area.
http://tinyurl.com/l2vjg
meaning it would take 4.3 years previewing 8 hours a day each home and only spending 15 minutes driving to each home and going through it.
I don’t have that kind of time.
Have you all seen this? This could get funny:
http://www.pietown.tv/shows/myHouseIsWorthWhat.html
Ha! I’m imagining this will turn out to be NOT what the producers envisioned…”My house is worth WHAT? $65,000 LESS than what I paid????”
I love these shows….I especially loved the one where a woman who rented her primary residence in LA, BOUGHT a vacation condo (overlooking a parking lot) for about 500K in Honolulu.
She was so very giddy about the “built-in equity”.
I love TV.
After one season this show will be re-titled:
What do you mean my house isn’t worth 3x’s what I paid for it 2 years ago!
Should be “My House ISN’T Worth What?”
Rated “FSSO” For Shocked Sellers Only
“My House is Worth What? is a new series for HGTV that tells homeowners across the country…or just how much equity is available to fulfill a life long dream (child’s college, wedding, trip around the world etc).”
Heh heh heh! Go to the housing ATM just one more time for TV.
Jeez, I just spent a fair amount of money buying a round for the San Diego flipper table on the other post but what the heck. Waitress! A big round of painful ass-poundings for my Phoenix flipper friends sobbing at the corner table!
I live in N Scottsdale, and I can honestly say I do not see prices falling a great deal here. The homes are sitting for months and months and they ARE reducing (from ridiculous high prices), however, in my area code the homes are pretty much selling for just a bit more than they were last spring and summer.
In my old neighborhood, two homes have recently closed for 610k and 595k. The high last spring and summer were 534k to 579k. It only takes one or two closings to keep sellers in that “I’ll hold out for my price” mentality. However, in that same neighborhood there are several homes on the market and they are ranging anywhere from 539k to 589k. No takers. It boggles my mind that these same homes were going for 350k, about 2 years ago.
Our rental in that neighborhood was owned by a “flipper”. She kicked us out in April and the house in still on the market with a 65k reduction. She paid 510k for it April 2005. Original asking was 700k one year later. I hope it sits all summer. My guess is she will end up renting it out again if it does not sell by October.
Greedy, greedy
Waaait aaaa minute…
On one hand you said this… “I do not see prices falling a great deal here.”
But… in the next sentence, you said this… “they ARE reducing (from ridiculous high prices)”
So, how does reducing from RIDICULOUS (or rediculous, as some here like to spell it… and I think it fits) high prices not result in ridiculous drops in price?
We’re still early in the game… you’ll get your price drops, don’t ya worry about that.
…however, in my area code the homes are pretty much selling for just a bit more than they were last spring and summer.
Hmmm….it must me different where you live.
Hmmmmm…… I’m a complete housing bear and a complete bubble believer, just stating the facts.
I believe your observations are accurate. Just because the house prices are in serious trouble doesn’t mean everyone knows it. Even with the declining sales figures, THOUSANDS of people are still buying houses every month. Many sellers aren’t dropping prices by much because they believe the market will rebound soon, and many buyers must believe the same thing or they don’t care what they value of their house will be after they buy it.
Be patient. This thing is happening in slow motion. You do however have hard data right before your eyes: inventory. It doesn’t matter how long it takes for prices to fall if inventory is high, just know they will eventually have to.
Ponder this. Let’s say house sold last summer in the Valley for 530,000, with 1-2 months of inventory on the market. Now a comprable house is for sale this summer, with 12+ months of inventory on the market. How much is that house now worth? Someone may have even payed more for it this summer, but was it really worth more? I say the value of the house has now dropped significantly, even if the price hasn’t reflected this yet. Price does not immediatley reflect a change in value. And even though the summer season is apparently keeping inventory somewhat stable in Phoenix, I see the potential for even more inventory to come onto the market in the near future.
In general, older more desirable neighborhoods hold their value better in a downturn. Usually these neighborhoods have a couple things going for them: closer to a town’s main ammenities, and older families that intend to stay in their homes a while (i.e. fewer sellers). At least that’s been my observation through the two real estate downturn’s that I’ve seen. Those two would be Austin, TX post dot.com, and Albuquerque right now.
Of course Phoenix is so messed up that I suspect Scottsdale prices will be flat at best for the next few years. Queen Creek, Ocotillo, etc. are going to be hurting.
Unfortunately for me, you’re 100% correct.
I would *love* to buy in where my folks live… but I couldn’t afford to right now.
Its estabilished… nice view, and full of retires (read, they’ll move out when the ambulance carries them out). However, there are *two* homes on the most desirable street being held onto by flippers… I’ve given up hope they’ll hold until the market truely tanks… But can’t a guy hope? 
Neil
Note: one home seems to have lead paint… I won’t touch that with a 10 foot pole $1.55 mill or not! (The neighborhood was built post lead paint, but it looks like an owner remodel, maybe with old paint?)
Scottsdale will follow the rest of Phoenix down. Just a hunch, but trust me on this one.
Based on my homebuilder contacts, the spec house inventory in PHX is really building up. Backlog is vaporizing pretty quick. Once the backlog disappears in another 3-6 months, the incentive game stops and the price reductions will begin. Then it starts getting interesting. Builder will go wholesale while everyone is still at retail.
I am wondering whether then it will be the time to check the building cost on my blueprints for the lot north of Shea. During the plan development, the sqft price went from $150 to $240 :-((
I’ve made this comment in the past but my husband used to be in residential constuction. It is his opintion that you don’t want to buy a home built in a downturn–when inspectors look the other way because builders and other related trades need the income, or when the builders are existing on such thin margins the temptation to short on quality was greater. In the 80s his crew was often called in to do “correction” work. He has some unbelievable stories about some short cuts. Scary!
Locally we’ve had some stories where neighbors yards have washed out to the point where decks were hanging over their new crevasse. Or more and more of the yard falls in with every major storm. One home had the land wash out from under them and their home collapsed into it. My husband usually gives this knowing chuckle when the ages of these homes are mentioned in the article. The lots were approved as satisfactory by their respective towns during a building slowdown.
Heh, on another post there was a comment to the effect that it’s bad to buy houses built during an upturn, because there’s not enough good tradesmen, materials, etc., to go around. Someone will be cutting corners. Actually, what it sounds like is that no matter what, someone will be cutting corners.
I think when the wife and I are ready to buy again, we’re going to be favoring the pre-WWII houses.
We’re in a downturn now… and I wouldn’t want to be buying any houses being built as I type this. Because the same shoddy workmanship used during the good times is getting worse during the bad times as the builders rush for the exit.
Wouldn’t buying a house built during a stagnant time be the best? Any houses built then were built by the builders that were still in business, and being in business during bad times means you must have good word of mouth (and hence build quality houses.)
Queen Creek AZ is destined to become a Pottersville with a huge population of illegals squatting in abandoned homes. No way to kick them out, it’s out in the middle of nowhere - who’s going to do it? The ACLU will sue you if you try and the local gangs belive that the entire American SW really belongs to Mexico and they’re here to take it back.
gone is probably right, but the homes aren’t selling for more than 6 months ago, just YOY.
“As the housing market slows, the entry-level sector basically disappears, while the move-up markets garner a larger share of the remaining activity. Thus, it is not unusual to see median prices to be stable or even increase as the move-up market works to be satisfied.”
This demonstrates at least one good explanation why median prices show some home prices which seem to be rising in a falling market.
This too will change…
thanks for responses regarding how to profit from the Real Estate downturn. I do believe in Karma and I do feel causing intentional harm to others in bad both morally and from a religious perspective. However, that I just my opinion.
However, I did nothing to cause people to overextend themselves into property they could not afford…simply to have them turn around and try to sell it to be at a much inflated price. The practice to doing so or “flipping” is what people should be outraged about…not trying to make money of people’s greed and stupidity.
In anycase…last time we I checked…we still live in a capitalist society and I am a BIG proponent of the free market..where a buyers and sellers determine the price of all asset classes (real estate being one of many).
So…having said that..I just happen to be a buyer who is offering a lower price in the market…..a seller does not have to sell to me in they choose not to.
I live in Ahwatukee. Last June there were 100 homes for sale. Now 800+. On some blocks there are 10 homes for sale, in one case 4 houses in a row on one side of the street and 2 more directly across, plus 4 others scattered around. There are friggin signs everwhere you look.
It’s like having 800 guys lined-up at County General waiting to get heart transplant operations. Right now they are all breathing, with many on life support. But wait, there are only 300 donors and a picky bunch at that. What is going to happen to the other 500? Can someone get a priest in here on the double!
“This level of activity is down from the 6,870 sales of May 2006 and well below last year’s 11,545 sales year to date. For 2006, there have been a total of 36,290 sales, while it stood at 58,030 sales in 2005 year to date. This is the weakest June since 2000 when 5,020 sales were recorded.”
Yet many dumbass apartment owners are still planning on conversions. I hope they lose their fortunes.