‘Empty Houses And Killer Deals’ In Phoenix
The Arizona Republic reports on the bursting housing bubble. “The frenzy is gone, and home builders are trying to entice buyers with freebies and price cuts in ‘let’s make a deal’ sales pitches. It is another clear sign that the Valley’s home-building market is slowing from the pace that made it No. 1 in the country just last year.”
“It is not just home building cooling off in the Valley. The number of existing homes for sale has shot up from a year ago. Home prices are flat or down slightly in most areas. And in January, used-home sales were half of what they were in August, a record month.”
“‘Most of the investors are gone, and traffic is down in home builders’ sales trailers,’ said Jay Butler at Arizona State University. ‘Just look at all the ads. Builders are trying to move homes fast.’”
“Builders nationwide regularly construct a few spec homes for buyers who need a house quickly. But several Valley builders have more spec homes now because even as the market slowed late last year, they continued to speculate that demand would be high, so they kept putting up houses.”
“There are about 2,800 more empty new homes Valley-wide than a year ago. ‘It’s been years since we have seen any unsold inventory like this in Phoenix’s new-home market,’ said John Burns, a national real estate consultant. ‘Too many builders went too far out and built houses that were too expensive.’”
“Too many empty spec homes could hurt builders’ profits and pull down all home prices throughout the Valley as other sellers adjust their prices to remain competitive. Phoenix’s new-home market runs on a formula where builders move farther out, stretching the city’s fringes, where cheap land and low city fees keep prices in check. But builders now are pushing the threshold of how much buyers will pay and how far they will commute.”
“The result? Empty houses and killer deals. ‘There’s no question the overall marketplace has changed,’ said analyst RL Brown. ‘The consumer is saying, ‘Excuse me. The prices are too high.’”
“Some houses are empty because most of the investors, who snatched up three or four new homes at time a year ago, have moved on or see the market slowing and are willing to walk away from deposits. Others are empty because buyers who signed deals that were contingent on them selling other houses are unable to sell now that the market has slowed.”
“But for many builders, there is pressure to improve, especially for the public companies. For them, just keeping pace with what they did last year is not enough. ‘It’s all about numbers,’ said Doug Fulton. ‘They have to keep the building profit machine moving. But division presidents have a hard act to follow after. ‘We were all fishing with dynamite last year.’ Fulton sees a market for spec homes because other builders are dumping their spec inventory and will be reluctant to build as they wait to see how much the market slows. His company recently started about 300 spec homes. ‘I couldn’t be in a better position to take this risk,’ he said.”
This is my favorite market to follow since there are so many dumbasses from California “invested” in it. Keep the Phoenix stories coming, Ben, they make my day.
I talked to three people from that area in the past few weeks about possibly renting their places in Scottsdale and Auwatkee. All three were very very, shall we say, “motivated” (read, desperate) to get money coming in to staunch the bleeding but all three were still unrealistic on both rental amount and possible sale option price. One wouldn’t give me any option! Idiot.
You are probably being too cocky, and not everyone bought recently and wants to sell. What exactly do expect to pay for rent ? My lowest is $1020 for a 4 bedroom in Avondale.
I can afford to be. There’s one of me and a million of them. And from the looks of things, there’s a lot of huting fools there.
I would pay up to 3K a month for something really fantastic but I’m not bailing out some Clownifornian. My aim is to rent something until the neg cash flow swamps the mullet and then buy it from his lender (if the price is right then, that is)
That has to be the most bizarre plan I’ve heard and highly unlikey to occur. Being obnoxious isn’t going to get you anywhere and I certainly wouldn’t rent to someone with your lousy attitude. You aren’t the only game in town either.
LOL. Did I do your bankruptcy in 1990? If I didn’t, one of my friends did.
I can understand that some of you think the way he is acting is over the top. But I disagree. I live in San Diego and sellers (especially condo sales people) treated buyers horribly. They acted like House Nazis….one slip up and no house for you. One of the condo places that I walked into told me I couldn’t even look at their model because I wasn’t on the “list” and had not been offered an appointment by them. The model was in the next room, but I still wasn’t allowed to see it. Funny thing recently, that condo building is now getting close to completion and I keep getting emails to come down and check out what they have. No appointment necessary.
“They acted like House Nazis….one slip up and no house for you.”
Doug,
At least you are keeping a good sense of humor. You don’t have to live too long to know what comes around goes around. Only trouble is sometimes we don’t get to see it. Unbelievable story and hopefully with some patience, you’ll get the condo you want for a good price.
You really do sound obnoxious, txchick57.
Keep that inventory a’cummin!
Head ‘em up, move ‘em out, rawhide!!
There are thousands more being built.
Have been watching gilbert market for awile and exhisting home sales are slowing for sure. Sellers are reducing prices very slowly. a home two doors down was listed at 265. First drop to 259, second drop to 254. Homes less than 250k seem to me moving faster than higher priced homes. Some new builders are still raising prices around here.
Anyone reading this familiar with Tucson? Drop me an email if you don’t mind. gymnastgal32@yahoo.com
“especially for the public companies. For them, just keeping pace with what they did last year is not enough. ‘It’s all about numbers,”
Thus the reason for record housing starts this week…….warm weather- yeah right!
We just moved to the Phoenix area 10 days ago and it is interesting to see the incredible number of houses being built. It seems like a lot more than Western Washington, where we come from, but maybe it is because the land is so flat here you can see everything for miles around, plus there are no trees to obscure the new developements. When I drive by these sites where so many home are being built I wonder how many of them are going to remain empty…
I can’t believe the prices they are asking for land. 300k for a building lot? Crazy. There are plently of lots with houses already on them for that price around here, why would someone spend that much on a lot?
This is off topic, but others have posted in other threads how far they think the market will drop and I wanted to put in my 2 cents worth. I expect to see a 50-80% in most areas before the bottom is reached. The reason I think the drop will be so great is that with a country wide, extreme bubble there will be a spiral effect, with the ecomomy going down the tube to some extent as jobs are lost. The estimates that people are making of 20-30% are assuming what would be a reasonable price in today’s economy, and a drop of 30% would still not make the prices reasonable compared with today’s income in many areas.
Kim, I agree with your estimate. I just finished raeding a news report by an AP writer that quoted someone from Challenger, Gray and Christmas, a Chicago-based outplacement firm, that said more than 103,000 job cuts were announced in January, the second consecutive nonth with more than 100,000. For all of 2005, the total exceeded 1 million.
And the ball has barely started to roll. As it picks up speed you’ll see job cuts in construction and real estate services, followed by cuts in service industries, followed by cuts in all retail areas, followed by ….
On a post yesterday, Robert Campbell, a construction supervisor for a large northern California contractor, said he was having more people trolling for work around his jobsites. I had the same experience yesterday. A contractor told me after years of not ever being able to get enough help, he’s having people trolling his jobs, too. He’s finally able to pick from the top-not the bottom.
Watch the conspiracy theorists leap on this trend. (Armed forces recruiters always do well in bad times.)
I’m starting to see some reductions in my area of the country also. An ad in the newspaper today is offering $3,000 cash back on homes in a subdivision I’ve been watching. Several used homes have new “price reduced” ads, and I’m seeing more of those expensive box-type newspaper ads for apartments and houses for rent-a sure sign of desperation.
Phoenix now tops the chart with the most percentage of reduced listings.
Total listing reached over 35,000 yesterday. It was only 1 month ago when it passed the landmark 30,000 homes.
I see… 5,000 additional resale homes in one month and 10,693 reduced listings are signs that this is a better than normal market. that’s reassuring.
I think this is a very useful indicator. could this indicate the “bubbliness” of the market?
And that’s a net gain of 5,000 new listings, after new pendings are taken out. The number of new listings was probably 6,000-8,000 if you figure 1,000 to 3,000 went pending in the last month.
8,000 divided by 30 days is 266 new listings PER DAY.
How does a buyer decide which one to buy when there is so many to pick from? They pick the one with the lowest price, if they pick at all. Most will be overwhelmed and decide it’s better to wait, then make a mistake.
I’d love for a realtor in Phoenix to monitor the number of new pendings, because they’re going to dry up to zero unless there is a big drop in prices. How many pendings in the last 30 days?
Acutally, in Jan ‘06 over 16,00 new listings were added to the MLS for metro PHX. In Dec ‘05 it was only 8,653.
5000 MORE IN ONE MONTH?
Can someone please reconcile these numbers with those from the Housing Tracker that indicate prices have not moved, up or down, in the last 2 months. what gives?
i hope phoenix’ ugly stepchild, tucson, gets wacked too.
nothing personal, just business.
Tucson will get wacked, no need to get mean about it!
And who you callin’ ugly, ugly? My barrio in Tucson has 100 times more character than any POS boring subdivision you’ll find anywhere in Phoenix, and this month’s Sunset magazine agrees! Eat that, cornflake!
Kim, at least in the Phx area I think your call for the drop is on the money. While there is significant in-migration to the area, they’ve built like drunken sailors on shore leave. If you haven’t already, make sure you check out craigslist. I always love to skim thru & find the rentals that are ‘new, never lived in’. Saw one yesterday for a 5br, 2000+sq, for a grand a month! Can’t possibly cover the nut. Kinda scary when the rent is below the monthly a/c cost!.
http://phoenix.craigslist.org/apa/134822970.html
Also worth noting– infamous anecdotal evidence. Seems like about 3 months ago when I started looking at them, the new 4br SFR rentals were running around $1250. Now there are 2
OMG. And willing to accept Section 8. A sign of true desperation.
there’s 3 other homes on the same street trying to sell for between $260,000 to $325,000. now that we know section 8 is moving in, can we say another price reduction by $100,000 each?
btw, this Buckeye is in the middle of nowhere
Actually Buckeye is within commute distance to a few correctional facilities.
oh good, so there are jobs for our section 8 friends. they’ll be close enough to visit their relatives too.
Can you spell California s#@!head investor? They list a 650 area code. That is South SF bay area. So they probably pulled cash out of their house and wisely invested it in a speculative house(s) in what can’t even be considered a suburb of Phoenix. Thes natural selection process is underway in the housing market.
BTW - what is a section 8?
Subsidized housing
Just exactly who gets killed in these deals? (Hint: I think it starts with an ‘F’.)
Section 8 actully pays higher rent than your normal renter so it’s a good way to go
Yeah, if you want to have crack dealers living in your house, six boyfriends for each woman nad grafitti on the walls when they move out. No thanks.
You really are an bigoted insufferable little ass aren’t you ?
My section 8 is a woman who had a deformed baby that requires constant and expensive medical attention. Daddy couldn’t handle the sight of the kid and skipped down leaving her to take care of the baby alone. Not only does she take care of the baby she also works a full time job to pay part of the rent. Section 8 pays the rest. The rest goes to medical costs. She’s a nice woman who fell on hard times. Be thankfull it isn’t you.
Well, thankfully, being a self-employed stock trader, I don’t pay into the Social Security system to support this, and also utilize every tax avoidance method I can come up with.
I hope you’re joking. This is too mean to be legit.
If it isn’t a joke, you might want to buy a book on Karma, or with all of your money, perhaps, an entire New Age bookstore.
Each to their own.
Don’t try to argue that the exeception disproves the rule. When I was a young enlisted man, I lived in an apartment complex that allowed Section 8s, and they caused all kinds of trouble — kids out of control, drug dealing, cars coming and going at all hours of the night, cops there all the time. Many of the apartment complexes wouldn’t allow Section 8 for exactly this reason.
Don’t stress out over txchick57. She’s clearly charm-free. Don’t waste your energy on her.
Geez I thought only upper & middle class people did that. Used to see that a lot when I was selling foreclosures. Graffitti on the walls, bongs , crack pipes, hypo needles in the bathrooms. A lot obviously lacked the funds for toilet paper they used to use their carpet to wipe their ass. Very rarely saw that in low income areas glad to know they do that too.
Graffitti on the walls and dirt is usually seen in the upper-middle class white homes that have teenagers. I remember my friends houses in rich white neighborhoods full of filth, like they’ve never heard about vacuum cleaners. Everything - dirty underwear, soda cans, McDonald’s wraps was there.
Section 8 is especially beneficial to landlords who quietly rent out Section 8 units to non-Section 8 tenants
What?!?! How does that happen
Don’t ask — don’t tell, I think…
I especially enjoyed the sanctimony of the heartwrenching Section 8 tenant while also bragging that he can charge more for that type of tenant, instead of being a good guy and charging a market rent (less to the poor blighted person) minus the Section 8 giveaway.
His company recently started about 300 spec homes.
There are 2,800 more empty homes now than last year.
*********************************************************************************************************************
What we need to know is how many total empty homes are in this market. We need to know how many last year to understand the statement that there are 2,800 more this year. Is that double last year? If so then one could conclude that there are 5,600 empty homes now and one company is building 300 more. What are the other companies doing? Are they all building spec homes?
This is madness.
Is Arizona the new ‘ground zero’ of the housing bubble? Signs are certainly pointing that way.
I move to Phoenix in Aug 2004 for an excellent job offer which paid me same wages a CA. I bought a house in Ah-wah-tu-kee area for 316K in Nov 2004. Got laid off in July 2005 and seeing no other opportunity in AZ, decided to move back to CA. Listed my house for $459K at the height of the high market prices. No offers for 2 months until I lowered price by $20K. Even at that, it sold at $430K, after 3 months. I was one of the lucky ones I guess to get the money and be able to get out.
How about Tucson? There are many threads here on PHX & never one on Tucson. Is it just a southern extension of PHX? I have a pal flying down to TUC in a week to spend a couple of weeks looking around & would like to help him with some information from this excellant blog if possible.
Have you ever been to Tucson I doubt if their is a bubble their and if there is it’s still priced far less than PHX I’m sure
No, never been. Based on your comment, it’s a different market totally than PHX. I am trying to get an idea as to what % bubble TUC has had compared to PHX area.
Yea comparing Tucson to Phoenix is like comparing Los Angeles to Riverside. Totally different everything. Housing is all over the spectrum there. I haven’t looked lately but I’m sure you can find housing for less than 200k there and be in a good area. Been awhile since I looked though. Doubt if there is a bubble there I could be wrong. It’s way too transient. Although they have done a great deal of building up the past few yrs.
I’ve lived in tucson for last 14 y.
Today prices are twice of what they were in 2002.
This jump caused mostly by out of town/state @%heads.
When they start dumping it will return to normal in 2-3 y.
I’ve read that in Tucson peope live in the same house ~ 6y compare to average 12 in country.
Yes there is a bubble in Tucson.
It’s an echo of the Phoenix bubble. Come down here, you’ll recognize it when you see 1) the number of for sale signs out there, and 2) the ridiculously high but just-starting-to-decline asking prices.
Tucson is more arts-oriented, and much smaller, but has zillions of Canadians gobbling up the landscape.
I’m living in tucson since 92. Prices till 2002
were OK.
Since 2002 prices 200-250% up mostly because of out town/state @$% heads.
Listings today are 70% then in Sept.
And rent very low
Locals will not by on these prices.
I’m in tucson for 14 y.
Prices twice what they were in 2002 mostly
because of out of town/state $@#heads.
There are ~70% more listing then in Sep.
Find Tucson sales statistics here:
http://www.tucsonrealtors.org/media/ressalesstats.html
The main thing last month is that inventory is up, up.
Good figures, thanks for posting. Another “double in the bubble” about to go down?!?!
Phoenix now tops the chart with the most percentage of reduced listings.
Total listing reached over 35,000 yesterday. It was only 1 month ago when it passed the landmark 30,000 homes.
- Can someone please reconcile the above development with the Housing Tracker numbers for Phoenix that indicate prices have not moved, up or down, for the last 2 months. What gives?
prices are sticky on the way down. people think of paper gain as real gain, therefore price reductions are basically taking money directly out of their wallet.
with price increases, buyers are adviced and encouraged to think of the increase as few extra dollars per month. each subsequent buyer counts the extra dollars from the difference from the most recent buyer, thus the “extra dollars” are never that much, there’s an emphasis to miss the big picture. that’s why the price run up can occur so quickly.
Phoenix
7/20/2005 10748
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Thanks as always for the numbers, flip
“‘Most of the investors are gone, and traffic is down in home builders’ sales trailers,’ said Jay Butler at Arizona State University. ‘Just look at all the ads. Builders are trying to move homes fast.’”
It looks to me as though most of the investors are still trying to leave town.
Outstanding! We were looking at new homes last summer primarily in Maricopa, Queen Creek and Surprise areas. The arrogance and patronizing tones of the builders made us sick! I am glad this is happening (we predicticted this to many of our Phoenix friends and were laughed at) and hope these people choke hard!
You know you are in a bubble when the frickin’ oil change guy has an opinion on the real estate market and sells mortgages on the side. I am looking forward to this crash!