Arizona “Struggling To Shake Housing Hangover”
The Arizona numbers are out for October. “The local single-family resale market had a slight upturn in October 2006, as recorded sales rose to 4,985 transactions from 4,875 sales in September, but still well below the 8,420 recorded sales of last year. This is the lowest monthly level for October since 4,860 sales were reported in 2001.”
“So far in 2006, there have been a total of 57,375 sales, while it stood at 97,165 sales in 2005 year to date. Although the median home price improved slightly from $256,900 in September to $257,000, it was again below last year’s $259,900. The record to date was June 2006 at $267,000.”
“‘Limited home appreciation and household income continues to raise concern about the ability of some homeowners to maintain their homes,’ said Jay Butler, director of the Arizona Real Estate Center at Arizona State University’s Polytechnic campus. ‘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.’”
The Arizona Republic. “The Valley’s single-family home sales are well off from last year’s frenzy, down nearly 41 percent from October of last year, according to ASU.”
“Last year’s resale market was driven by a buying spree fueled by investors that pushed prices and sales to records. ASUs’ Jay Butler said the market is struggling to shake a hangover from last year, trying to find its footing at a more reasonable pace.”
The East Valley Tribune. “In September, the year-to-date median home price dropped for the first time in more than 10 years.”
“Last month, 15 percent of all recorded sales were for homes priced from $125,000 to $199,999, while 46 percent were from $200,000 to $299,999 and 35 percent were more than $300,000. In October 2005, 21 percent of all recorded sales were priced from $125,000 to $199,999.”
“‘The overall trend is we seem to be bouncing along the bottom here. We’re probably a little bit below our historical norms for these months, but the market is within its range of historical normalcy,’ said Butler.”
The Arizona Daily Star. “Tucson’s median home price in October reached $211,500, a 5.5 percent decrease from $224,000 last year. The number of new homes listed for sale reached 2,886, a 16.7 percent increase from 2,474 homes listed last October.”
“Last month, 9,336 homes were listed for sale, an increase of 75 percent over 5,330 homes listed in October 2005. The market ’seems to be stabilizing,’ said Paul Olson, MLS president.”
“Scottsdale’s median home price fell in October to $548,500, down 2 percent from a year ago and 5 percent from September. Sales of existing homes were off 27 percent from a year earlier when 575 homes were sold.”
“The median price of an existing home in south Scottsdale was $300,000 in October, down $20,000 from September and $10,000 from a year earlier.”
“North Scottsdale’s median price in October was $635,000, a decline of $43,000 from the previous month and off $20,000 from a year earlier. Sales of Scottsdale condominiums and townhouses last month were off 41 percent from a year earlier.”
For the last few months, in the ASU release Butler has warned about ‘Limited home appreciation and household income continues to raise concern about the ability of some homeowners to maintain their homes’ and mentioned exotic loans. Maybe he sees something in the numbers that he doesn’t elaborate on?
From the ASU link:
‘The median resale home price is $635,000 ($678,000 in September) in North Scottsdale and $300,000 ($320,000 in September) in South Scottsdale.’
‘The Mesa resale housing market declined from 1,015 to 555 sales, while the median price fell from $245,000 to $235,000 ($240,000 in September). The townhouse/condominium sector also fell from 260 to 100 sales, while the median home price decreased from $154,100 to $153,000.’
‘For the city of Peoria, the resale market fell from 405 sales to 195 sales, with the median price dropping from $265,000 last October to $257,500 ($265,000 in September).’
‘the Sun City resale market fell from 145 to 80 sales, the median sales price decreased to $209,950 from $220,000. As resale activity in Sun City West fell from 65 to 35 sales, the median sales price decreased from $245,000 to $234,450.’
‘Avondale fell from 190 to 140 sales with the median price moving from $256,000 to $247,000. El Mirage decreased from 155 to 70 sales, while the median home price went from $222,500 to $205,000 ($209,500 in September 2006). Goodyear declined from 165 to 80 sales, while the median price decreased from $285,000 to $275,000 ($273,000 in September 2006). Surprise decreased from 305 sales ($259,900) to 190 sales ($237,000), while it was $239,000 in September.’
An update on the tower lawsuit:
‘Developer Jeff Cline says he did not know of the foreclosure lawsuit filed by a subcontractor that worked on the idle Elevation Chandler. The suit was filed last week in Maricopa County Superior Court by Suncoast Post-Tension of Houston in an attempt to force the sale of the property so that Suncoast can get paid.’
Also:
‘Avatar Holdings Inc today reported the number of housing contracts signed, net of cancellations, during the three months ended September 30, 2006 declined by 77% to 67, compared to 291 for the three months ended September 30, 2005. The dollar volume of contracts signed declined by 78% compared to the three months ended September 30, 2005.’
‘Our sales results continue to reflect the soft market for new single- family and multi-family residences in our markets. We are experiencing a further increase in the rate of cancellations of home sales. Residential builders including Avatar are increasingly utilizing various sales incentives in our markets. Additionally, there remains for sale an excess of investor and speculator-owned units. Avatar Holdings Inc. is primarily engaged in real estate operations in Florida and Arizona. Its principal real estate operations are conducted at Poinciana, Solivita and Bellalago in central Florida near Orlando, Cory Lake Isles in Tampa, Florida, and at Rio Rico, south of Tucson, AZ.’
Ben isnt sun city an over 55 community?
Don’t know.
Yes, if it is out towards Glendale, then I believe this is a senior community. Not sure about the age though. It is and older development. I think it was built in the 1960s. Hard to believe prices were a quarter of a million.
checked zip and some nice built 60s homes there.well 7 more years and i can buy in the over 55 areas.
Sun City, Sun City West and Sun City Grand are all over age 55. They where built in that order starting in the 60’s. Sun City Grand is in Surprise and they just finished building it out. My finance folks are snow birds out there.
I’ve said it before and will say it again: It appears that FL is really bearing the brunt of this downturn. Orders aren’t just bad, they’re downright awful. BZH net orders in FL down 90% in the most recent quarter … OHB goes from 100 net orders in its FL communities a year ago to 2 … WCI has net NEGATIVE orders for towers condos (most of which are in FL). And now this from a company with several Central FL communities? What an ugly, ugly situation.
http://interestrateroundup.blogspot.com/
Hangover? They haven’t even stopped drinking.
Exactly. It is awfully hard to shake a hangover when the punchbowl is still spiked and you are still drinking punch.
Phoenix will eat itself.
And it’s young.
The new numbers match what I’ve been observing. Prices in metro Phoenix, outside of Pinal County, are not coming down very much or very quickly. I agree with most observations here about fundamental pricing relative to wages being askew but it has been sticky on the way down. New builds are still overpriced with built in increases to cover the incentives, and they are still selling. I am currently renting a new house in what is going to become a rental ghetto until all the specuvestors can no longer feed the gator. I will keep renting until it makes sense to buy. Current rent 1250 for brand new 1900 sq ft. landlord paid 330k.
New AZ, where did you rent? I want something there, but scottsdale condo prices are still way too high.
Gilbert has a ton of rentals that are vacant and reasonable. Check rentclicks.com
Renting in Gilbert a 2800 s.f. home for $1550 includes landscaping. Neighbors down the street are trying to sell same model for $440k (reduced from $460k)
There is a house across the street from me for rent (Chandler). They are asking $1350/month. It has 5 bedromms and a 3 car garage (2950sf).
Where in Chandler? I just renewed my lease on a 5/3, 2650 sq ft with a pool (service included), built in 1995 for $1750/month. We looked around before renewing and didn’t really find anything that would make moving out of our current place worthwhile. Thanks.
Sun Groves. There are lots of good deals now. Rents are going down here. I am not sure if this place has a pool. The school is just down the street which we like. The homes here were built around 2002.
Try looking in Surprise. I know someone with a newer 1,400 sq ft SFH, 3 bed, 2 bath, 2 car garage for $950.
I’m in a similiar situation. I live in a 2003 house in North Phoenix. rent $1200, includes landscaping. Some exact model houses are asking $350,000 plus. Hmm.. Should I buy one?
Not till it hits $250k
Well, from a math stanpoint, if you borrow 100% at 6.5%, your mortgage PLUS 1% property taxes is roughly $2,200 per month–tax effected at approx 40% maximum state PLUS fed rate, your cost would be $1,300 per month. Not to mention maintenence, etc.
I’m assuming that your highest marginal tax rate isn’t that high, so the analysis gets worse to buy vs. rent. Unless you feel that there is risk of prices going back up again in the near term, I’d say sit tight, save the money, and let the sellers sweat it out a bit more.
Thing about itemizing is, once you get over the threshold beating out std deduction (that’s not easy to do without a mort deduction), there are a lot of other convenient deductible expenses that can get throw in. You may want to pad the deduction by a couple of grand. At least that’s my experience.
I talked last night to an old friend (ex-Marin County mortagage broker of 20+ years who sold his place in summer ‘05 and moved to Phoenix). He tried to tell me everything is fine there, at least in his area (Squaw Peak, N 51 or something? Anyone know where that is?) and selling.
Older homes…Upper middle class(lawyers, doctors, etc.)
“…Upper middle class(lawyers, doctors, etc.)”
Uhhh, you forgot flippers.
It depends which side of the mountain. The neighborhood where I used to live immediately to the west is working class at best, ranch houses built in the 60s and 70s.
>>>Squaw Peak
That is Piestewa Peak. Our lady governor had it renamed for a Hopi female soldier killed in Iraq (who drove the Humvee during the Jessica Lynch episode).
It was a nice thought, but she violated most of the laws involved in choosing geographic names and threatened the jobs of state employees who were on the naming board when they balked.
“Last month, 9,336 homes were listed for sale, an increase of 75 percent over 5,330 homes listed in October 2005. The market ’seems to be stabilizing,’ said Paul Olson, MLS president.”
There are almost twice as many homes for sale and the market is “stabilizing”? I hate to see what kind of inventory growth it would take for it to be in free fall…..
How can the reporter not follow that response up?
He’s right, if you’re watching month-to-month numbers. It’s been stabilizing over the past couple of months. This is the lull just before the slaughter begins, as FBs hang on by their fingernails. Home sales and prices at these levels won’t save the upside-down FBs, as their payments rise with no way out.
A little patience will be rewarded. A lot of patience and you’re golden. Lenders will be desperate by this time next year to get anyone to take the albatrosses off their books - CUT THEIR LOSSES AT ANY PRICE, ONCE THE KNIFE CATCHERS ARE DEPLETED.
Some FBs can hang on for a really long time.
I am observing a FB with a money losing Motel. Paid way too much for it, owner financed at 9%. He has been hanging on for far longer than I thought was humanly possible.
He is not the atypical FB though. He is very resourceful, and has gained a good reputation in the county for good contracting work at reasonable prices. Has an old dump truck, an old backhoe, repairs/installs sewers, delivers gravel, repairs furnaces other contractors would replace, etc… So he is lucky to be able to do other things on the side for other folks and of course he has saved tons of money by doing his own contracting work on his property as needed.
Recently, the lender has been threatening him with a lawsuit if he does not increase his insurance coverage to an inflated property value. My best guess is that when the FB finally does walk away the lender then torches the place.
It is going to be interesting to see how all of this plays out.
Off topic, but wondering if there is connection. Anyone notice the new consumer confidence report? The number was below expectations. Last month it was at a 15 month high, and they are linking the drop to gas prices once again. I am sorry, but the price flucuations have not been all that dramatic. I am wondering if this is further support for the bear case? People’s finances are either extremely tight, or they are way too influenced by trivial economic blips.
Most likely the latter. Consumer incompetence (as I like to call it) correlates most strongly with gas prices. That said, I do think housing will start to take its toll on it.
I like your phrase, consumer incompetence. Very fitting. Recent price changes have only resulted in a savings of a couple of bucks per tank. What to do with all the extra cash??? Time to party!
I don’t care if gasoline was free, house prices are still so prohibitive that only the wealthy can afford them.
consumer confidence correlates very highly with the stock market, specifically the Dow Jones Industrials. Gas prices are more coincidental. 15yr record was hit just about the same time the DJI surpassed 12k.
Consumer confidence depends on where they get their news, ordinary MSM news, talk radio, or here.
If it’s MSM news, they’re all going to be confident because their buddies the Dems are taking over,
If their talk radio they don’t know what the hell is going on (like me), and
If they read this blog they’re scared as hell the whole world’s gonna end.
Prices have stabilized. It’s relevant to repost here, but you will find graphs for two Scottsdale neighborhoods (both of which I have lived in) which shows a flattening of prices in early 2006. My RE agent, whom I stay in contact with, says prices are stable.
http://www.turpintime.com/ViewItem.aspx?ContentItem=632981842055467261
Both are North Scottsdale (La Vista is on Pinnacle Peak between Scottsdale and Pima, Village at FLW is just east of the 101 on FLW).
The tax data is about 8 months old (at least sales price data, deed dates are up to date but there’s no new sales price data in 8 months or so) but those prices match up to currently listed houses in the neighborhoods (well at 95% of list price they do). I’m not sure why the tax data is so old.
Prices in my neighborhood have also “stabilized” in the sense that a few houses are selling, and current listing prices are in the ball park with recent sales. However, as many folks have noted on previous threads, only about the nicest 10% of houses in a given neighborhood and price range have a realistic chance of selling. Everything else just sits.
Buyers mostly seem to be young professionals. They are thrilled with the chance to buy a small but beautifully restored and upgraded house in a “historic” neighborhood near downtown for “only” $250K to $350K. The available selection is incredible compared the the last couple of years.
Once the current inventory of nicely restored houses runs out there will be no more sales to this category of buyers and the downward momentum will likely pick up again. The professional restorationists have quit buying, as have the amateur flippers.
Could some kind, informed person give me a rough idea of what the numbers would have to look like before it’s a good idea to buy in Tucson, and when that might come about.
I can only tell you what I am doing. I have researched nice areas north of Tucson & I don’t mean tract homes. I am looking for about a 25% reduction & to buy next fall. No, it will not be the bottom, but close enough for me.
I’m thinking 35% off by early 2008 in TUC. Prices don’t sound astronomical by CA standards but they are clearly out of whack when compared with median incomes. Don’t kid yourself. Abstract financial instruments (I-O, HELOCs, NegAM…) are widely in use in AZ too. Tucson was a lot stickier than PHX during the RTC bust but there has been a lot of overbuilding in this town this time around. Rent and wait, if you can.
When it is cheaper to own than rent. That will not mark the bottom of the market, but it will mean that you’re not getting ripped off.
Of course you have to consider the total cost of ownership, including maintainence (~1% of the home’s value per year), property taxes, insurance, mortgage, homeowner’s association, equity built through principal payment and tax deductable interest.
That is the opinion I keep seeing about Tucson. I think we’re about two years away. I was hoping that it would arrive sooner because of the ridiculous amount of building, but I guess I’ll have to wait for the resets to reshape the market. Thank you both.
Breaking News:
Ryland home sales down 40% first 9 months of 2006: CEO - MarketWatch
From Reno, NV:
‘Remember my clients who paid $595K for a beautiful, 3003 square foot home in Wingfield Springs last year at the height of the market? Last night we dropped the price to $450K. That’s only $150/sq ft for a beautifully upgraded, fully landscaped, picture perfect home… I don’t think you could build this home for that price! Let their loss be your gain. It’s a company relocation, they have to move, they’re motivated.’
Wow,…….Ben these haircuts are coming early in the bust.
I have read that 90% of RE corrections happen in the first three years.
Ben in Australia, we generally see small drops to start with (except for the odd desperate fire sale) and then about 3 years in, the real bargains begin appearing. At that point nobody wants to talk about real estate and the smart money starts to show up. It will be interesting to watch as the American situation as it plays out. BTW……..that’s for the blog
That’s=thanks
That’s the first time I have seen a Realtor (TM) with a blog for showing the properties. There is even a comments section for visitors to give feedback where a visitor (probably someone from here) pointed out the obvious risk of purchasing the property. Also the first time I have seen an agent utilize youtube to show a property although virtual tours have been around for some time. Pretty cool.
“they’re motivated”….clearly this implies they’ll reduce the price further. Why not just lower the price in these situations? Certainly the lower the asking price, the higher probability of generating interest in a “slow” market. If they’ll take 425, and nothing less, fine but why put “motivated” in the description at all? Silly games in a seriously “challenged” market.
I love the comments, things are looking better all the time, if you’re looking to buy in the next year or so. They need to stew in their jucies a while longer!
Butler said, “……seem to be bouncing along the bottom here……” Nope. We’ve simply hit some support and greater fool dip buyers are buying. Once we crack through the “…bouncing along the bottom…” we will drop to the next support level. This current “…..bounce along the bottom…” will then become resistance. For some time to come, property will move between support and resistance. Always breaking through support until we FINALLY bounce along the bottom. Then I think we will have stagnant prices for several years to come. I figure 2007 (late) and 2008 will be the bottom UNLESS we hit a recession. Then all bets are off.
Back to the numero uno reason why the bottom isn’t Property is NOT AFFORDABLE and it’s better to rent until the fundamentals are more in sync. That is, rental prices vs. mortgage payments.
CNBC just had an interview with a builder concerning the kick backs (a.k.a bribes) the realtors are getting to bring in the suckers. So, is it legal for a manufacturer of military weapons to offer a government employee $10,000 if he brings in a government contract? This kind of practise needs to be STOPPED. Of course, it’s not that I don’t trust the realtors. Naturally, they would throw their hands up in horror if a builder offered them a “bonus” of $10,000 if they reel in a naive buyer of their overpriced houses. Excuse me while I puke.
100% agree. The rate of growth has stabalized, not the market.
That’s like saying that water is stabilzed at a 1 foot/hour increase behind the dam. Don’t worry, we still feet of safety margin. Ignore that crack.
The “unintentional speculators” at my work are starting to get worried. One after the other is finding that they cannot sell off their extra property. (Many work between two locations and decided in this run-up to buy properties at both locations.) Some have decided to take their profit (e.g., they’re retiring and want to ditch the other property)… but cannot.
We’re still in Denial.
Fear… will be within months.
My blog on real estate emotions (old entry)
http://recomments.blogspot.com/2006/10/market-cycles-time-to-buy-2008-or-2009.html
Neil
I found this terribly amusing.
http://dallas.craigslist.org/lgl/232459929.html
That is too funny. Trying to raise money for condo conversions (looking to convert apartments, medical offices, and vacant office buildings). Yeah, now seems like a good time for that.
From their website:
“RED DOOR REALTY MARKETS
Las Vegas, NV
Phoenix, AZ
Houston, TX
Dallas, TX
Austin, TX
New Orleans, LA
…and more offices opening up nationwide each month.”
Nothing like trying to raise money for condo conversions in imploding bubble markets.
perhaps they would like to partner with our group- repocondos.com, maybe we can make music together.
read oftwominds.com a couple of weeks ago, he had a great explanation that we were in a “plateau of denial” right now. when increasing foreclosed inventory meets with decreasing builder production, the bottom will drop out of the house of cards.
Once again, this is MISLEADING. There is not a slight uptick. October has more days than September, so if you compare sales/day, it actually DECLINED, again. I guess you can’t expect real estate professionals to be very good at math. It is still a disaster in Phoenix, since prices are not in line with reality.
Once again, this is MISLEADING. There is not a slight uptick. October has more days than September, so if you compare sales/day, it actually DECLINED, again. I guess you can’t expect real estate professionals to be very good at math. It is still a disaster in Phoenix, since prices are not in line with reality.
That stabilization that the idot Jay Butler is tallking about is known here in AZ as a “mexican standoff.” Buyer & Sellers staring at each other with crossed arms. Butler was predicting double digit appreciation as late as Dec 2005 (after that I quit reading his drivel.) And as for the questions of “when to buy in Phoenix…” In 2001 you could get a 2-story 3500 SF, 5/3 for about $235K. Now that gets you a 3 bed with a carport, 1400SF. Use that as your guide for “when to buy,” geniuses.
Any know what happened to Ph**ktheflippers? I would be interested in seeing his PHX inventory numbers that started at 7000 April 2006 and were up to over 50K last time I saw a post from him.
Everything will sell if the condition of the property and the price is right. No such thing that all of a sudden nobody is buying homes in a country this size, their are always reasons that property has to turn over death, job- transfer, move up, whatever. The stupid prices investors for the most wanted had to end it was just a frenzy the likes you probally won’t see again. Xlnt property with location will always sell and hold value bad property with no appeal sold because nothing was left, now that situation has changed, if you are holding a house for example in a undesirable location and condition you know what you have to do in plain terms DUMP IT> The market will stablize, interst rates are still very good and flippers your time came and gone, if you didn’t catch the train another one ain’t coming unlesss you lower the home from a starting point of what you paid, not from the top, where you didn’t pay?