“A Much Needed Adjustment’ In Tucson
The Arizona Daily Star has this opinion piece on the recent housing market. “‘In all things, there is a law of cycles.’ The wise words of the Roman historian Tacitus from 1,900 years ago apply to this week’s news that more Tucson-area homes were on the market last month than at any point in the past nine years. This is a positive sign that the market is shifting from fast and furious to more realistic. It’s cyclical and a much-needed adjustment to avoid overpricing of property.”
“The Star reported that the Tucson Association of Realtors MLS listed 6,499 homes for sale last month, up 87.3 percent over January 2005. The January report also showed an increase of more than 1,000 houses listed over December.”
“In the last year or so, it was not uncommon to hear stories of houses being on the market for 20 minutes before several contracts, all trying to outbid one another, were on the table. That’s yesterday’s news.”
“More listings equate to more choices for buyers, said (realtor) Sherie Broekema, who’s been selling real estate for 30 years. Sellers who inflate the initial sale price of their home, say 10 percent to 15 percent more than the comparable sales in their area, and expect to be overwhelmed with offers, will be disappointed. The shift is a good thing for home buyers, Paul Olson said.”
“‘Remember, in January 2005, we were in the midst of a buying frenzy.,’ Olson said. The buying frenzy was partly fueled by a shortage of homes, Broekema said. Homes in a number of subdivisions developed in the last eight to nine years are appearing on the resale market. There still may be shortages in some areas and price ranges.”
“In addition, California investors purchased as many homes as they could, especially from new construction, she said. Tucson home prices have increased, the profit margin for rentals has dropped and many Golden State investors are buying in other states with lower housing prices.”
“We’re not saying that sellers shouldn’t make money, but a prosperous local economy depends on a buyers and sellers working together to place real value on property and remove unnecessary risk from the home buying experience.”
The Daily Star is trying to massage the situation. A thousand homes added to the inventory just last month? I understand some of these flippers are rushing to market with multiple homes, and in some cases asking 80% more than what they paid just a few months ago. By the time they figure out the cycle is over, it will be too late.
You’ve got to be kidding. Let them all burn.
“The wise words of the Roman historian Tacitus from 1,900 years ago apply to this week’s news that more Tucson-area homes were on the market last month than at any point in the past nine years.”
Too bad the RE industry was so taciturn about this fact until just recently
I learned a new word today. *taciturn* Whoo hoo! Thanks, GS.
BayQT~
For the lazy:
adj.
Habitually untalkative. See synonyms at silent.
Educators will educate
“Sellers who inflate the initial sale price of their home, say 10 percent to 15 percent more than the comparable sales in their area, and expect to be overwhelmed with offers, will be disappointed.”
What about deflating the ‘initial sale price’ say 10 to 15 percent less than comparable sales in their area? Will these sellers be able to find buyers? I suggest giving this a try.
There will be new inventory records set every month for a long time. We’re up more than 10% since Feb 1.
OT : Real Estate Riches Offset By Rising Debts
http://www.registerguard.com/news/2006/02/24/a1.wealth.0224.p1.php?section=nation_world
That article (and others like it) brought to mind some of the lyrics to an OLD song (I remember Tennessee Ernie Ford’s recording)…..”Sixteen Tons”:
You load sixteen tons and what do you get?
Another day older and deeper in debt.
Saint Peter, don’t you call me ’cause I can’t go,
l owe my soul to the company store.
BayQT~
Or, with apologies to BayQT and TEF:
Ya’ buy sixteen condos and what do you get?
Another day older and deeper in debt.
Saint Peter, don’t you call me ’cause I can’t go,
l owe my soul to the real estate ‘ho.
This article shows that the “strong” economy is a house-of-cards. It’s been driven largely by people borrowing against their home equity. Job creation has been driven by real estate: mortgage brokers, appraisers, realtors, home improvement, etc. While this may work in times of rising real estate values, it works against the economy when prices are falling. That’s why this time around a falling real estate market could trigger a recession, instead of the other way around.
Yep, you nailed. I’ve been telling people that for a few years and some people look at you like your nuts. Bush keeps touting how great the economy is but if you take away housing bubble were really screwed.
You got it. Look at this from the NYTimes….
The Fed’s latest survey of consumer finance showed that overall wealth increased very little for most American families from 2001 to 2004. For the typical American household, net worth — the sum of all assets less debts — barely increased, to $93,100 from $91,700. Their savings dropped by 23 percent while the value of their homes rose 22 percent.
There you go - savings dropped the same amount their home values rose. But what will they all do when home values fall?
Bob R -
The mild ‘91 national recession was preceded by a housing cycle peak like we are seeing presently (Northeast markets by ‘89 and California by ‘90).
Not the other way around.
“The last three years have been a period of impressive productivity growth and depressive changes in the living standards for most families,” Bernstein said.
Maybe we are just paying for the irrational exuberance of the mid to late 90s.
What about deflating the ‘initial sale price’ say 10 to 15 percent less
In my zip code where there are only 18 houses for sale, there is one “motivated” seller who has dropped his price more than 15% but still no one goes to the open houses. He’s reduced all the way back to March ‘05 prices (my estimate). We still have a ways to go.
what area are you in? I have seen similiar behavior in LA already. A Condo in Santa Monica that was listed at $470k was just dropped to $400k, citing ’seller just found another, motivated’. The only units that are selling have price reductions. The herd will eventually follow, and then we will have another round of price lowering.
The market is at a standstill out here. I have recently converted a few of my RE bull friends into bears. One is going to put his condo on the market.
Tucson
It’s good to know that the law of supply and demand no longer applies. I’m relieved. Here I thought a surge in supply of 80%+ to the highest level in almost a decade … at the same time demand is falling … would result in lower prices. But thankfully, this article has set me straight. We’ll just get flat prices — or single-digit appreciation.
Excuse me, but who passed out the cups of idiot juice here?
It’s true, inventory is way up here in PHX, but prices really aren’t going down. Over a 1/3 are reduced, but I’m amazed that many new listings are still overpriced. I see some ppl doing reductions of ony $500 on a $300-400k house. That’s just ridiculous.
I guess it takes a lot longer for prices to come down, then it took for them to go up.
Looks like prices are going down fast in Phoenix
People are getting ready for SPRING RALLY which in my opinion will disappoint the RE talking heads and will scare the sh*t outta flippers/investors.
People are getting ready for SPRING RALLY which in my opinion will disappoint the RE talking heads and will scare the sh*t outta flippers/investors.
MarkAZ -
Have some patience! Jeez. This thing (housing cycle change) is like a newborn right now.
Patience is good in theory but harder for some in practice. This is my first post, but I am an avid reader of this great site. In large part due to lessons learned from it, I cashed out of my Phoenix house in Late November and now am subletting in NY. I was thinking about looking at some areas outside the U.S. (Central America?) where I could get a nice place by the beach and kill a few years while waiting for the end. Oherwise, I am not going to have the cash to put into the down market. I ran a business out of my house that was too location specific to take with me- and I am ripping through more of my reserves than the ING direct account can help me with. Any suggestions (e.g. of warm countries with bargains)?
What “prices” are you referring to? It is possible that list prices for almost all homes on the market do not come down, but these houses will never sell, because the market price has already adjusted downwards by 25% to reflect new supply / demand balance. One can only assess the market price by looking at homes that are selling under current conditions. In my area of SD (92127 / Rancho Bernardo), I searched for recent comps on ziprealty, and saw nothing sold since before Christmas 2005. So I cannot tell you what the market price is around here, except that it is lower than the list prices on recent additions to used home inventory which is flooding the market (up over 20% so far this year for greater SD and still climbing).
Good luck at getting out with your shirt on, investors!
I just heard that a house I was watching received 5 offers. The madness continues apace here on the SF Peninsula.
Ha! They think they’re getting a deal. A bit of “deadcat” optimism before the cat is dead, perhaps.
That fits the Bay Area MO.
Think about the hole in their stomach lining when they start to figure out that after inflation they could begin to see equity gains in 2013.
Would anyone recommend buying rental property in Tucson right about now? I got a buddy who’s interested in some apartments. Says the owner is desperate. Or should they wait for a possible downturn. I think rentals will be in demand in AZ myself.
There’s a glut of houses for sale and a glut of houses for rent.
A $350K place will rent for $1000 or less.
A $250K condo will rent for around $850.
Give it until at least mid-2007!
Does the investment play out with positive cash flow or is your friend just counting on appreciation ? I suspect your friend is counting on appreciation, which would make him a speculator, not investor. You are not qualified to advise your friend, per your comment “I think rentals will be in demand in Arizona myself”…where? why? or maybe just cause it *feels* like they should be in demand. ? Geeeeezzzzz. (Have I just been tricked by a troll?)
I really would advise against buying in Tucson right now. We just moved back from Vegas, where we were renting for the past year. Thankfully we hung on to our house here in Tucson and rented it out. We had trouble getting a renter for this house as the Tucson market was already full of investor owned properties way back in Feb 05. We ended up reducing what we charged down to $995 a month for 3 bdr/ 2ba home in a good area/ school district and got a renter as we really wanted to hang on to the house for personal reasons (it is our hometown). This was a $100 short of our mortgage, not to mention property management fees but to us it was worth it to keep our home. We chose to rent during our time in Vegas because we weren’t sure if we would stay there long term and when we went home shopping there in Feb 2005 we seemed priced out of the areas we would have wanted to live and I refused to pay what they were asking for some of the crap our realtor was showing us.
Now, a year later, we have returned to to Tucson, leaving behind our shitty rental home in Las Vegas. When we left Vegas, the street we lived on had 6 empty houses that were either for rent or for sale, many haaving been this way for months. I saw one vegas realtor enter a home with a bucket and cleaning supplies he had brought over himself, that’s how desparate this guy was for the sale. Sadly, the street I live on in Tucson is no different. There are now 5 or 6 homes for sale on my street and a total of 26 in our subdivision. Here’s another interesting thing: last fall my HOA passed an ammendment stating that all future homebuyers in our subdivision are NOT allowed to rent out their properties (Homeowners on record as of the ammendment date were not affected or have “grandfather” status). By shutting out what few speculators are left, it seems homes are not selling at all in my subdivision. Only 2 of the 26 listing are under contract and it has been like this for over a month. I like my home and my hometown but I am sad about what has been left of it. Some of actually want to meet neighbors NOT realtors when we knock on the door next door.
QT…I found myself singing that song….But it is some old music…Not many people on the blog have ever heard it…It is however appropriate…
i think people are jumping the gun a bit here. it took many years to get to the present market prices. it will take just as long to get back down. people who are waiting to buy are understandably anxious, but this is only the second month into the down turn. give it another 24 months, then buy.
Dr. Thoronberg (did I get the name almost right?) of UCLA Anderson report fame, who have been warning about realestate price bubble for too long says time to BUY is when the calender says 2010! ( His explanation when asked about missing the timing of real estate decline by 2 years at least: When things behave crazy, it is CRAZY, and hence does not follow predictable path. Well, kind of true!).
On a recent news I think he adjusted the timeframe to buy to 2010 -2012!!
Just to wanted share what some who has deeper insight than most has to say…
There’s a lot that could happen that is unforseen, of course, but I would guess Thornburg’s prediction of 2010-2012 might not be too far off. Perhaps he might even be early again.
Think about reversion to the mean, how long that will take and what will happen, or when, prices go below the trendlines.
Many years out.
“We’re not saying that sellers shouldn’t make money, but a prosperous local economy depends on a buyers and sellers working together to place real value on property and remove unnecessary risk from the home buying experience.”
In other words: Speculators, you guys are screwed!
“The buying frenzy was partly fueled by a shortage of homes” , Broekema said.
I’m in Tucson since 92. There are NEVER was any shortage in ANY area untill
speculators/flippers/RE-$%W% come to the market.
I was planning to move from my very good TH to SFH.
But i’m NOT GOING to pay untill prices drop to 2002 level.
And they(prices) will drop like a rock… and very fast.
“Remember, in January 2005, we were in the midst of a buying frenzy. Homes were selling very quickly. Thus, at that time, the inventory of available resale listings was very low,” Olson said.
Olson wants us to think the market is now stabilizing. In fact, the January 2006 inventory figure is historically high and not just in comparison to 2005. The January 2006 inventory is a significant 42% above the average for January over the previous 8 years.
This is shown by Olson’s own figures, here:
http://www.tucsonrealtors.org/documents/stats/stat0106.pdf
We hear a lot suggesting that a soft landing will be good for buyers. Not so - a hard landing is necessary, which will shake out recent speculative price rises. And I think we may well get that, in Tucson.
Thanks, Ben, as ever, for your blog-tastic work! Rog.
wonder how many months of truly jaw-dropping inventory spikes will have to occur before the light dawns on the mushroom fields of speculators that that warm and fuzzy sensation was really a pile a manure?
Kinda off topic,
Does anyone know which of the online foreclosure listing services is the best, accurate, and most reliable. I am looking at a couple and when I entered my zip code, over 50 homes popped up. Can so many homes be in pre-foreclosure etc or is this just a bunch of BS which when you become a member will disappear.
I would appreciate any feedback.
Nick
most of the sites are scams, as they are trying to get leads to sell to real estate agents, etc. if you’re truly looking for foreclosure “deals”, you might be a little early to the party, as the real action starts when the lenders stop lending and start managing their reo. we are very early in the cycle, imho.
Does anyone know which of the online foreclosure listing services is the best, accurate, and most reliable.
Nick, You can browse county records…Do a search for county clerk…You can also purchase properties that are tax delinquent. Here is the a
URL for my county.
http://www.seminoleclerk.org/Foreclosures/
Not every county has as nice of a web site…You
can physically go down to the court house. Also,
some counties advertise in the local paper.