‘The Frenzy Of Speculation Has Stopped’ In Phoenix
Inman News has this second piece on Phoenix. “New-home construction in the Phoenix area is analogous to the pink Energizer bunny’s incessant drumming. ‘It never really has slowed down,’ said Michael Chasse, a home builder specialist with a land brokerage company. ‘Since 1992 every year has been an increase from the prior year. We have been on a constant run.’”
“Home prices in the Phoenix metro area have been marching up at the fastest pace in the country, outpacing income growth and forcing affordability issues to the forefront. And there are indications of cooling in the Arizona real estate market and in other major metro areas across the country.”
“Existing-home prices were roughly flat in fourth-quarter 2005 when compared to third-quarter 2005, gaining about $400, or 0.15 percent, in that time. Single-family building permits, at about 54,000 in December 2005, dropped 5 percent in the Phoenix metro area compared to December 2004 permits, though this level of permits still ranks among the highest in the nation.”
“‘I really think things got overpriced for awhile, relative to the rest of the country,” said Shannon Hubbard, a realtor and real estate investor in Phoenix. ‘I think first-time buyers have been priced out of the market. There are not nearly as many investors as you had a year ago. Sales are down and inventories are up.’”
“Hubbard said the rental market is starting to get saturated. Builders seem more willing to offer co-broke commissions to real estate agents and offer incentives to buyers. ‘Days on market is up pretty much across the whole Phoenix metro area,’ she said. ‘A lot of buyers were getting in with interest-only loans and adjustable-rate mortgages. It will be interesting to see how many of those go back on the market as rates go up.’”
“Single-family building permits in Maricopa County, which includes Phoenix, Mesa, Tempe and such fast-growing suburbs as Gilbert and Surprise, reached an unprecedented 13,660 peak in third-quarter 2004 and are projected to maintain a level between 10,000 to 11,400 for the first three quarters of this year. Ten years ago, single-family building permits in the county ranged from about 5,700 to 8,200 per quarter.”
“Investors seemed to enter the Arizona real estate market ‘in droves’ in 2003-04. By mid-2005 property listings dwindled to about 5,000 in the valley area around Phoeix,’ Chasse said.”
“Grady Gammage Jr., a land-use lawyer, said residents are still grappling with rising house prices in the region. Housing has historically been very affordable in Arizona, he said, but the times are changing. ‘We still think of ourselves as affordable. We’re all just in shock at what housing prices are right now. We’ve never seen that before. Our sense is that it’s now stopped, housing prices have flattened and even dropped, the frenzy of speculation has stopped,’ he said.”
“Hubbard said she isn’t rushing to sell the properties she owns now given the latest market conditions. ‘My husband and I, we’re holding what we have and just kind of waiting to see,’ she said.”
“properties?”
how many do you own, sweetie?
Seems like everyone these days owns more than one property…i think my maid owns 3 properties now…
Let me know how that works out for you, kay?
Don’t wait too long or you’ll loose all the juicy paper gains.
Help! I got home a little while ago and the landlord put a for for rent sign in the yard. My lease is good till the end of march. I’m looking through my contract and see no where that it states they can do this. I’m a little pissed about having it in the yard for the next month. What do you think?
Why would he/she want to rent it out to somebody else when it’s already rented? Do you mean a “For Sale” sign? In your lease, it should state what the terms are when the lease expires (that it will go month-to-month, etc.).
If they’re trying to rent it out, ask them why. It’s a BIG hassle for a LL to turn over a rental. Call him/her today, IMHO.
Good luck!!!
Okaaaayy, I thought I saw a post regarding a LL putting up a “for rent” sign in one of our poster’s front yard. That is what I was replying to…what happened to the post????
They are trying to get tenants lined up for when I leave at end of month. In the lease it states that tenant shall allow or conduct showings during last month of occupancy. It says nothing about a for rent sign being in the yard for the last month of my lease. I don’t think it is right.
So you intended to leave at the end of the lease? I agree the sign is a pain, but the LL does need to get the place rented out. Why are you moving?
I’m going back to cali for work here soon. I have a place up there but won’t leave for a little while. Thanks
I disagree. I think the LL has a right to market the place w/signage since this is your last month.
BTW, what do you think his cashflow situation is?
I saw this on another blog - ‘Spray paint the outline of a body on the sidewalk in front of your unit. If anyone asks just say, ‘I don’t want to talk about it’. That should keep the traffic down for you. heheheheheheh
Bottomfisherman
You are definitely wrong on this one here. They should wait till my lease is done to have a sign in the yard I am paying to rent. I don’t care about having tenants come over to look but a sign in the yard is garbage.
“Mr. LL, I know that for-rent sign was there last evening, but I have no idea where it might have gone. I hear that kids are stealing signs from all over the neighborhood these days.”
Shannon doesn’t sound like the brightest bulb on the tree. She has an amazing grasp of the obvious. A true investors knows when to cut losses and bail.
Spray paint the outline of a body on the sidewalk in front of your unit. That will keep the traffic and interuptions down.
In the race between prices and construction, guess which contestant will eventually win?
HaHaHaHa!!!
TXChick
What do you do for a living? Are you some kind of day trader? Is the 57 in your name because that was the year you were born?
Yeah, I am a prop trader and manage a few accounts for other people. And no, the 57 doesn’t denote anything in particular other than 57 is my lucky number
TxChick
What is a Prop trader? I have money that I paid someone to manage in the late 1990’s and got creamed. Now I pay alot of attention to what is going in the markets - housing and stocks. I bought gold and silver stocks a few months ago against the advise of my new financial planner. I have come to realize that the only one that has my best interest at heart is me. This blog has made me more informed than I ever was. I was born in 57 and I use it in some passwords.
I trade a money management firm’s money. I keep all the profit and pay them back the commissions marked up a bit. You have to trade a lot of shares for them to give you that deal. Ideally 2M shares a month or more.
HOV warns on Q2 earnings after the bell:
http://biz.yahoo.com/prnews/060301/phw032.html?.v=43
Lots of claptrap about how the year will be back-end loaded, etc., etc. Translation after you cut through corporate BS: We promise we’re going to make the full-year earnings because we’re expecting everything to get better down the road. But oh, by the way, supply is surging, demand is falling, and investors are bailing now, so we’ll miss the next quarter.
You saw this same stuff when tech demand started slumping back in the Nasdaq boom. Everyone would say it was a one-quarter problem and that you should just wait because things would soon turn around. Hope no one falls for it this time around.
THANKS! I missed this one!
Hubbard said she isn’t rushing to sell the properties she owns now given the latest market conditions.
The ‘latest market conditions’ may be the best that sellers will have until, say, 2010.
The likely reason is that she can’t pony up the cash it would take to get out of them.
more like 2015 methinks
Old Miss Hubbard went to the HELOC cupboard, but the HELOC cupboard was bare.
‘My husband and I, we’re holding what we have and just kind of waiting to see,’ she said.”
I wish every locust RE speculator thought this way. I wish home buyers with families the best, but I can’t help wishing that the REtards who own multiple homes get a financial education the hard way.
Remember, the intent of the Hubbards was to create a situation where working-class families who required shelter would be forced to direct the lion’s share of their income to her Hummer fund. Whatever happens to her, it won’t be severe enough.
Couldn’t have said it better myself.
Your comment makes me laugh, with you and at The Hubbards!
Don’t worry though, markets historically swing to extremes of over and under valuation, as is the residential RE market is in the process of doing now. The Hubbards should either sell into the weakness or get busy finding a good bankruptcy attorney - sounds as if they’ll need it.
They may need it but the probably can’t pass the means test so that means Chapter 11 for them (I’m assuming they have more than 250K in unsecured debt or guarantees and the like)
Now that it is a buyer’s market, she will be at the mercy of buyers and hopefully they show no mercy.
The ‘latest market conditions’ may be the best that sellers will have until, say, 2010.
Try 2013
Try 2025, maybe 2030.
Xicote - if the demographics don’t change, this may be the highs for a veerryy long time.
And to think I sold my home in Phoenix in 2002, just before the runup. I guess I left some on the table.
Rob,
No need to get greedy. A good investor knows his exit before he even enters. You can dynamically change the way you look at it obviously, but if the dynamics don’t change you know when to get out.
Also a good investors knows when to cut his / her losses and sell.
Sell when you can, not when you have to.
No one has a crystal ball, if we did we would all be rich. I have a couple friends that sold in San Diego in 1999-2000 and were excited because they finally broke even from the fallout of the last bubble (boy if they had only held for a few more years). Also, the lack of a crystal ball will also serve to NOT help the current speculators that will lose their ass in the next couple years as prices start to fall back. Lack of predicting the future works both ways. The rest is pure luck.
Starting ? The PHX market was saturated with actual apartment and rental townhome complexs well before investors hit the market. Now for a little more than apartment rates you can rent a house with garage and yard. Only problem is the rents do not cover the expenses on the rental houses in most cases of investors who come to the market in the last two years. In this environment any investor who is neg cash flow should slash the price to near cost and get out.
Neg cash flow (passive losses) up to 25k per year is deductable against other income. Investors are on the come for capital appreciation and capital gain (15%) when they sell. IF the property goes up. If it goes down then they have F’D up.And, they are a truly double F’D borrower.
Near cost, I doubt it! Most of these recent speculators (last 12 months) will not be able to get out near cost if they need to use a realtor (commission) and sellers closing costs, etc. They will get screwed by other speculators that bought a little bit earlier (even by 3 months or so in the Phoenix area) and can sell lower at break even or clear a small profit. Even more drastic, what about “Real” RE investors or resident owners that may have bought their properties in the 90’s and in some cases are sitting on 200-300% gains. If they decide to start selling, they can severely undercut speculators and leave them upside down in a heartbeat.
We are soon moving from Iowa to the Phoenix area. Do we rent or buy? We are early retirees who do not want to loose our equity but want to own at some point. The numbers show house sales are down around 5% over last years record sales figures. Wouldn’t a true bubble pop show declines of 50 to 80%? We will probably rent at first but I would like to hear some opinions on the Phoenix market.
When you say sales, you mean # of sales, right?
5260 homes sold in Maricopa county in Jan ‘06, compared to 9,360 in Jan ‘05. That’s a decline of 44%, and it continues to decline. Is that the number you are looking for? 7 months of supply right now. That’s huge. If I were you, unless I knew where exactly in Phoenix I wanted to live and it didn’t matter to me how much I was paying, I’d rent for a year and get to know the area. But hey, do what ya gotta do. In the meantime watch aking prices go down and inventory go up here:
http://www.benengebreth.org/housingtracker/location/Arizona/Phoenix/
that was a reply to outofiowa
Thank you for that information Xicote. I concur with your advice.