Greater Phoenix Prices Fall ‘For First Time In Ten Years’
Arizona State University has the September numbers out for the Phoenia area. “In September 2005, the local resale home market began to slow down with 9,815 recorded sales leading to 4,875 recorded sales in September 2006. This is the lowest monthly level since 4,090 sales were reported in February 2003, and the lowest September since 2000, with 4,134 sales.”
“So far in 2006, there have been a total of 52,390 sales, while it stood at 88,750 sales in 2005 year to date.”
“For the first time in the last 10 years, the year-to-year median home price has declined from last year’s $263,000 to $256,900, while it was $264,900 in July 2006. The record to date was June 2006 at $267,000.”
“Although the median home price showed a decrease from a year ago, mortgage interest rates are higher than a year ago, 5.5 percent versus 6.0 percent for September 2006. Thus, affordability continues to be an issue. Based on an 85 percent loan-to-value, the monthly mortgage payment for the median price home increased from $1,270 to $1,325.”
“‘Even though mortgage interest rates have been declining for the last few months, limited home appreciation and household income continues to raise concern about the ability of some homeowners to maintain their homes,’ said Jay Q. Butler, director of the Arizona Real Estate Center at ASU. ‘This may be especially evident for those that have used some of the more creative financing instruments, such as option payment plans and initially low interest rate adjustable mortgages.’”
“Townhouse/condominium sales activity showed a decrease from 1,100 sales for August 2006 to 930 sales for September, which was below last year’s 1,770 sales. So far in 2006, there have been 11,280 sales, while there were 16,575 sales a year ago.”
“For September 2006, 14 percent of all recorded sales were for homes priced from $125,000 to $199,999, 46 percent for $200,000 to $299,999 and 37 percent for homes priced over $300,000. Last year, the distribution of all recorded sales was 29 percent for homes priced from $125,000 to $199,999, 34 percent for $200,000 to $299,999 and 32 percent for homes priced over $300,000.”
The Arizona Daily Star. “An investment partnership is planning to spend more than $112 million to buy 11 Tucson-area apartment complexes. Jerry Finney, one of Bascom’s partners and a manager with Multifamily Advisors, said apartment complexes in Arizona have become a better investment as home prices have soared.”
“‘Two years ago, people could buy a house for less than they could rent an apartment. Well, those days are gone,’ Finney said.”
“Such large apartment deals are rare for Tucson, said Omar Mireles, executive vice president of HSL Properties, Tucson’s largest apartment complex owner. With thousands of apartment units converted to condominiums in the past two years and few new complexes slated for construction, rents should continue to rise, he said.”
“At the end of the second quarter this year, the average Tucson rent was $591, according to David Wesson’s calculations. A year before, it was $573.”
The Arizona Republic has this update. “Mesa single family home resales dropped 14 percent last month, compared to August. The month was down 57 percent from September 2005.”
From Commercial Property News. “Multi-family developer Wood Partners shifted its new Phoenix residential development from condos to luxury apartments with the opening and leasing of the project starting this month.”
“As the housing explosion that occurred during the last few years in the Phoenix metro begins to slow, apartment owners find themselves in a very favorable position, according to the Marcus and Millichap. As new residents move to the Phoenix metro, they are finding a widening gap between mortgage payments and asking rents, making renting an attractive option.”
rate of tanking increasing
this was one of LIErah’s other 2 markets “tale of 2 markets”
the worst of times……….
I sometimes look at the data on “housingtracker.net”, which lists the MLS inventory and asking prices for major markets around the country. The trends are easy to see and the data are updated weekly. In the last month, the median list price in Phoenix was $319K, which compares to the median sales price in this article of $256K. The 25 th percentile of list prices was $245K. This shows that the lower priced houses are selling better than the higher priced houses—that the houses that are actually selling are biased toward lower priced ones. Probably this is a combination of reduced priced houses selling better and a stronger market toward the lower end of the price range.
‘For September 2006, 14 percent of all recorded sales were for homes priced from $125,000 to $199,999, 46 percent for $200,000 to $299,999 and 37 percent for homes priced over $300,000. Last year, the distribution of all recorded sales was 29 percent for homes priced from $125,000 to $199,999, 34 percent for $200,000 to $299,999 and 32 percent for homes priced over $300,000.’
Bill, this data seems to show that the median, while falling, is still over-stating what the real market prices are, IMO.
Ack! Banging me head on the table over this! Median, in a falling market, is far less indicative of goings-on then in a rising one! Don’t get sucked in by median - it does not reflect what is being bought or sold - buyers get more house, in a better neighborhood, in a falling market, for last year’s price. The median will never fully reveal what is going on….
Good catch, Ben. It’s like in the auto industry when they talk about “product mix” in terms of auto sales.
If the press puts out anything on this, I’ll update this post. Lots of details at the ASU link for you locals. Also:
‘Pinal County resident Etta Estes wrote ‘I hate my Beazer. Ask me why’ on her truck. Citing her opinion of her Beazer Homes USA house isn’t limited to her vehicle — it’s also displayed on her Beazer-built home, her son’s car and her 3-year-old’s Big Wheel.’
‘Estes, who lives among homes under construction in the Morning Suns Farm development just outside Queen Creek, said she wanted to warn recent and potential buyers to look closely at their homes or think twice before they buy one. ‘I wanted to give them a clear understanding of how fed up and frustrated I was,’ she said. ‘I really enjoyed the fact that every day they were out there, they had to look at how I hated the home they built for me.’ Estes said she is achieving her goal with people knocking on her door and sharing their stories.’
I saw two houses in Queen Creek on Craigslist being marketed to Section 8. It was just a matter of time I guess. Prediction: QC will be a low rent ghetto in less than 10 years.
Wow! I have one new subdivision nearby that is probably going to go the same way. They are just too ugly and are 80% vacant.
Did’nt the gov’t use bulldozers in the 80’s to clear fictional demand?
I think it wasn’t so overt, they came up with “poor building standards” or something like that. It was mostly apartment complexes back then — built in the middle of nowhere (and some built as shells fradulently just to churn mortgages). In the 80s the bubble was also in commercial real estate including apartments and spec general office space — the cabdriver/waitress public wasn’t half as involved as in the mega-ultra-super bubble of today.
…or at the very least, with little hope for any appreciation. QC is so far away from any sort of job centers, and so overbuilt considering the demand and current prices out there, I can’t imagine who thought it would be a good idea to build so much in the first place.
I saw a guy on the AZ Republic blog who called himself “Tattoo” (OMG, the vision that conjured up) who “owned” 2-3 houses in QC and was quite swaggeringly convinced that he’s “still up 100%” on all of them. This was about a month ago.
You can’t fully comprehend how awful it is there unless you drive the roads (that’s another whole rotten infrastructure story in itself!)…it’s been some time ago, but it conjures up visions of the West Bank.
Queen Creek was meant to be desert, succeeded somewhat in becoming farmland for many years and now has spectacularly failed as residential land. Pinal County just recently announced stepped up efforts to attract a manufacturing and retail base to support people already living there. Really, the only support base I’ve seen are Chili’s and a couple of supermarkets. And tanning salons.
clarification….I was just in Queen Creek, but it’s been awhile since I was in the West Bank. I’m assuming the infrastructure is about the same.
Like you need a tanning salon in the Arizona desert!
clarification….I was just in Queen Creek, but it’s been awhile since I was in the West Bank.
When were you in the West Bank? Maybe I saw you there?
I’ll tell you, but then I’d have to kill you.
lol
I grew up in Phoenix….half the new subdivisions built on the outskirts will be like that in a few years. I blame local government (poor planning) for a good part of it - opening up parcels of land 50 miles away from work centers while “downtown” Phoenix has acres of open land or abandoned, condemned housing. Welcome to LA in an oven.
Latest Greenspan speak …
I think the old man flipped….the wall fell nearly 20 years back
“Greenspan said the fall of communism, not sharp interest rate cuts by the Fed, was behind the housing boom in the early part of the decade. Cheap labor flooding into the West after the fall of the Berlin Wall had a disinflationary effect, causing bond yields to fall and house values to rise, he said.”
No, he actually meant what he said and understood it, too. Interest rates have been on a steady downtrend since Volcker stamped out inflation in 1982, and part of the story is indeed the liberation of the Cold War’s captive labor pool into the global labor market.
I read an interesting section in last month’s Economist that talked about the disinflationary pressures brought on by a huge increase in skilled labor in China and India, dragging down the costs of manufactured goods and even supposedly skilled labor (software engineering, technical writing), and decreasing effective wages of the middle class in developed countries. The only way to combat these deflationary pressures has been interest rate cuts by central banks. We all know this has led to asset speculation (property, of course, but also metals, and petroleum). I think the eastern european labor issue would only add to the macro-pattern. If there is any truth to it, relatively low interest rates may be with us for a while.
Reading between the lines I think Greenie is trying to say the bubble’s not my fault, blame the end of the Cold War, or Volcker, or…
Fester is correct, not Getstucco. The former Soviet block is still for the most part a low-productivity basket case, and the low wages mean nothing. And ex-Soviet block workers moving to the EU, or the EU’s expansion into Poland etc, have not exactly been making the EU’s industries ultra-competitive.
When was the last time you bought something made in an ex-Soviet block country anyway?
It is the economic liberalization in China and India that has had the real impact.
“Estes said she is achieving her goal with people knocking on her door and sharing their stories.”
FBs should get their own blog in order to get the word out!!!
I really enjoyed the fact that every day they were out there, they had to look at how I hated the home they built for me.
Um…
It would seem to me that the illegales who built her home, and are likely out there “fixing” things couldn’t really care less about Beazer’s track record. They’re subs, and probably can barely read English to begin with. Explain again why they would care? Only articles like this are what brings the attention to corporate homebuilders.
Phoenix, not Phoenia?
(Maybe this was a Freudian slip reference to the dead civilization of Phoenicia?
http://en.wikipedia.org/wiki/Phoenicia )
Makes me think of Charles Keating of S&L scandal fame, who built that white elephant the Phoenician.
“For the first time in the last 10 years, the year-to-year median home price has declined from last year’s $263,000 to $256,900, while it was $264,900 in July 2006. The record to date was June 2006 at $267,000.”
As Nobelist Phelps might point out, expectations for lower future home prices in Phoenix make buyers more reluctant to buy now, resulting in a drop in current demand and lower current prices — a self-fulfilling prophesy effect known as home price deflation.
AKA market momentum
I beg to disagree with this part of the original post:
“Such large apartment deals are rare for Tucson, said Omar Mireles, executive vice president of HSL Properties, Tucson’s largest apartment complex owner. With thousands of apartment units converted to condominiums in the past two years and few new complexes slated for construction, rents should continue to rise, he said.”
My disagreement stems from the sentence referencing the condo conversions. The bad news is that, like elsewhere in the U.S., condo conversions are proving to be quite unsuccessful here in Tucson. In fact, a well-respected University of Arizona economist (Dr. Marshall Vest) noted the emergence of “re-partments,” which are condos that are reverting back to rental units.
When the “re-partments” start flooding the local rental market, and they soon will, this will exert a strong downward pressure on rents.
It could get real interesting should owners of these condos (whether builder, buyer or bank) attempt to pass on the HOA fees to the renters.
I agree, condos are a flop here in Arizona. Big surprise.
And how about Mister ‘those days are gone’ Finney and his big dollar rental increases:
‘At the end of the second quarter this year, the average Tucson rent was $591, according to David Wesson’s calculations. A year before, it was $573.’
I’ve seen people get their dander up and move over an $18/mo. rent increase. And that points out a big problem with being a landlord in Tucson, and in a lot of other places, for that matter:
You’re dealing with a market that doesn’t have a lot of money to spend on housing. But if you raise their rent, they can certainly find the money to move.
$591 versus $573 is 3.14%. Almost exactly pi, but more importantly, LESS than the rate of inflation.
And this is the rent increase over last year. What happens and defunct realtors and mortgage brokers move back in with folks?
This is just starting. By 2Q2007 this will be interesting.
Neil
My calculator says that’s about +3%. Inflation. Sure hate to buy inflated rental properties today expecting to pay for them by 3% a year increases.
I was wondering about this — thanks for the anti-spin.
…on her 3-year-old’s Big Wheel. LOL!
“‘Two years ago, people could buy a house for less than they could rent an apartment. Well, those days are gone,’ Finney said.”
Um, then why buy?
Oh, that’s right, because RE never goes down. Wait, it went down 10 years ago, and it’s going down now. And Lereah said it never goes down! I’m all confused.
You’re thinking too much. Just stop thinking and buy. Look how well it’s working for Mr. and Mrs. Bought-at-the-absolute-peak-in-2005-in-Phoenix.
“‘Two years ago, people could buy a house for less than they could rent an apartment. Well, those days are gone,’ Finney said.”
so far, so good…so what.
…people could buy a house for less than they could rent an apartment.
Good God. In what alternate universe was such an idea spawned?
Ok, someone explain to me why I’m seeing houses (that aren’t selling) piling up in the classifieds each Sunday offering to discount or negoiate the rent? Doesn’t it figure the more desperate the speculators with empty houses, no buyers, and de-esalating equity become - rents will go down. This isn’t jiving with…”With thousands of apartment units converted to condominiums in the past two years and few new complexes slated for construction, rents should continue to rise, he said.”
I seem to remember from Econ 101 that when supply exceeds demand…….something about price goes down? Or do I need to revisit that class?
I seem to remember from Econ 101 that when supply exceeds demand…….something about price goes down? Or do I need to revisit that class?
Someone does, but it ain’t you.
It’s not Econ 101, it’s ENRON 101.
I can think of three “for sale and for rent” houses on my street. All are within a half a mile of my house.
It’s no longer the case, but there used to be a house on the other block the would put out for sale signs during the weekend, and for lease signs during the week. You could even see the sign large realtor signs piled beside the house — this was no easy task — the signs included the full wooden pole and they’d swap out the whole thing.
The Arizona Republic has this update. “Mesa single family home resales dropped 14 percent last month, compared to August. The month was down 57 percent from September 2005.”
From Commercial Property News. “Multi-family developer Wood Partners shifted its new Phoenix residential development from condos to luxury apartments with the opening and leasing of the project starting this month.”
“As the housing explosion that occurred during the last few years in the Phoenix metro begins to slow, apartment owners find themselves in a very favorable position, according to the Marcus and Millichap. As new residents move to the Phoenix metro, they are finding a widening gap between mortgage payments and asking rents, making renting an attractive option.”
Okay, who’s going to break the news to these “new residents moving to Phoenix” that the jobs don’t pay that well. As in, not well enough to cover the rent on a luxury apartment. And did I mention that Phoenix’s #1 employer is Wal-Mart?
Walmart is the largest employer for the entire state.
As of 2004 the top Arizona employers were:
1. Wal-Mart
2. Honeywell
3. Banner Health
4. Raytheon
5. Intel
6. Albertson’s
7. Basha’s
8. Wells Fargo
9. Kroger
10. Target
11. America West Airlines
12. Safeway
13. Qwest
14. American Express
15. Bank One
16. Pinnacle West
17. Bank of America
18. Motorola
19. Home Depot
20. Walgreens
But all of those 20 employers combined account for only 177,678 jobs in Arizona (as of 2004), and there are millions of jobs here (and almost 6 million people living here). There are about 155,000 jobs in health care alone, which is almost as many as the jobs at the top 20 employers combined (one of which is a health care provider). Likewise, there were 161,166 Arizonans in the IT field in 2001; I suspect that number is at least that high today.
In IT, some growing local employers are GoDaddy, Google, eBay/Paypal, and eFunds.
I suspect the majority of jobs are with small employers.
How many jobs in construction, realty, mortgages?
Good question. Found it at acinet.org:
1. Retail salespeople (67,560)
2. Cashiers, except gaming (63,550)
3. Food prep and service, including fast food (48,950)
4. Customer service reps (45,870)
5. Office clerks, general (43,060)
6. Waiters and waitresses (39,870) (not sure why this isn’t part of #3)
7. Laborers and freight, stock, and material movers, hand (37,610)
8. Registered nurses (34,190)
9. Carpenters (33,870)
10. Janitors and cleaners, not counting housekeeping cleaners and maids (31,620)
11. Bookkeeping, accounting, and auditing clerks (31,350)
12. Landscaping and groundskeeping workers (30,700)
13. General and operations managers (30,080)
14. Postsecondary teachers (29,790)
15. Executive secretaries and admin assistants (29,500)
16. First line supervisors/managers of retail sales workers (28,280)
17. Secretaries, except legal, medical, and executive (27,150)
18. Truck drivers, heavy or tractor-trailer (26,670)
19. First-line supervisors/managers of office and administrative support workers (26,350)
20. Elementary school teachers, except special ed (25,800)
21. Stock clerks and order fillers (24,990)
22. Maids and housekeeping cleaners (23,880)
23. Sales representatives, wholesale and manufacturing, except technical and scientific products (23,800)
24. Construction laborers (22,900)
25. Teacher assistants (21,580)
26. Maintenance and repair workers, general (20,080)
27. Receptionists and information clerks (19,650)
28. Security guards (19,630)
29. Team assemblers (19,610)
30. Accountants and auditors (19,270)
31. Nursing aides, orderlies, and attendants (18,390)
32. Packers and packagers, hand (18,000)
33. Farmworkers and laborers, crop, nursery, and greenhouse (17,890)
34. Automotive service technicians and mechanics (16,530)
35. Truck drivers, light or delivery services (16,300)
36. First-line supervisors/managers of construction trades and extraction workers (16,240)
37. Food preparation workers (15,840)
38. Management analysts (14,110)
39. Sales representatives, wholesale and manufacturing, scientific and technical products (13,480)
40. Secondary school teachers, except vocational and special ed (13,450)
41. First-line supervisors/managers of food prep and serving workers (13,170)
42. Computer support specialists (13,160)
43. Bill and account collectors (12,670)
44. Shipping, receiving, and traffic clerks (12,040)
45. Cooks, restaurant (12,030)
46. Police and sheriff’s patrol officers (11,950)
47. Telemarketers (11,910)
48. Food service managers (11,810)
49. Lawyers (11,790)
50. First-line supervisors/managers of non-retail sales workers (11,650)
51. Financial managers (11,440)
52. Child care workers (11,390)
53. Electricians (11,130)
54. Cooks, fast food (11,110)
55. Medical assistants (10,950)
56. Dishwashers (10,940)
57. Chief executives (10,780)
and it goes on and on–right about here is where it starts getting really heavy into construction jobs like cement masons and concrete finishers, pipefitters and plumbers, etc., though there were already some above (carpenters, electricians).
Real estate agents are at #79 (6,970).
Construction managers are at #96 (5,280).
Loan officers are at #111 (4,660).
Roofers are at #128 (4,180).
Real estate brokers are at #207 (2,430).
Appraisers and assessors of real estate are at #285 (1,300).
Tied for last place with 50 people are sociologists, agricultural engineers, fashion designers (really? that many?), arbitrators/mediators/conciliators, and pump operators (except wellhead pumpers). I must have missed mortgage brokers.
I belive what you mean is the top 20 private employers.
I think the top 5 are probably the State of Arizona, the City of Phoenix, the City of Tucson, the Mega[insert non-profit church denomination]Hospital of Phoenix, and the Mega [insert non-profit church denomination]Hospital of Tucson.
My sister here in Phoenix makes about $72,000 annually. I’m no longer working overtime but stand to make well over double (nearly triple) that amount contracting at a small company in Phoenix.
First off, I’m seeing brand new single family homes renting for less than apartment complex stuff. That rental market will have to burn off first before all these new apartment geniuses make their zillions.
My buddy was talking about a house in Maricopa Meadows, 4 bedrooms and a pool, renting for $800/mo….and that there were 4 hot girls all chipping in for it….so they are paying $200/mo each plus expenses….that has to be affecting the apt markets no?
I have been reading this blog for quite sometime now since my fiancee insisted on buying a home in Scottsdale. I agree with most of what has been said here reguarding the Phoenix area. Prices are out of control in relation to incomes. I earn what i consider to be a better than average for a recent college grad, but I too have been effectively priced out of most homes that I would consider living in. I do not have outrageous expectations, but I do think that 1700 sqf home is something at I realistically should be able to afford considering the locale and my income. I can rent for almost half of what a traditional mortgage would cost me. Renting by far is much more intelligent and cost effective option for most right now.
I have read alot about consumerism on this blog and I believe that I have great insight into that attitude. My fiancee was married to a multi-millionaire and she believes that she deserves anything that she wants. Shopping is not an activity, but it is a past time that her mother, two sisters and herself participate in every Saturday at the trendy mall and boutique stores in and around Scottsdale. BTW- for those who don’t know, Scottsdale is a poor man’s Beverly Hills or La Jolla. If they don’t spend at least $500 during the day… their trip is not complete. This attitude of entitlement is not limited to just this family. Most youths and young adults only purchase the trendy brands of everything from basic food purchase to clothing to kitchen ware to vechiles. Moreover it is not an attitude.. it is a sickness.
My last comment is about the condo craze here in Phoenix. My fiancee lives in a 2bed/2bath maybe 1200 sqf with the stairs included condo conversion on a golf course. The place maybe rented for $1800/month before conversion. With a 60k down from her ex husband she house a 1500 monthly payment due plus 300 in hoa fees. She does this all on 3000/mon in alimony from her ex husband- and no she does not have a job yet. I know that her situation is not isolated. There has to be many more of this entitlement generation that is spend more the 50% of their income on housing. How ludacrious.
Me? I live in my parents house that is paid for while they are living abroad working for an NGO.
“My fiancee was married to a multi-millionaire and she believes that she deserves anything that she wants.”
And you’re still engaged? That sounds like an impending disaster.
Ditto.
One of the guys at work was dating a women that sounds like your fiancee. It was a total disaster and he finally broke up with her after she took him for a ton of money. Same deal. Living off of child support and alimony from her ex. She had a job in the mall that paid $10 a hour at some leather store. Was living well above her means and headed for financial disaster.
The Maricopa Meadows next door homes might be able to raise the rent next summer, assuming the four hot girls are still there.
http://tinyurl.com/g826v
Some are still paying high prices for homes in Phoenix. Zillow estimates this home at less than what it just sold for in Sept 2006. Buyers still not getting it as this one has instant negitive equity.