‘Priced To Sit’ In The East Valley
Back to Arizona, this time in the East Valley. “(Realtor) Trent Powell is stuck among a for sale sign, an unrealistic seller and a leery buyer. In the lucrative game of home sales, he is checkmated in East Valley real estate. What a difference six months makes.”
“While the market clearly cooled with the weather, it has done nothing to change the perception that home prices are still soaring through the the roof and into outer space. Sellers still want top dollar, so houses are staying on the market longer.”
“‘This has got to change. Otherwise the market is never going to change,’ says Powell. ‘You can’t just put a sign in front and sell your home. It’s not like that now. Buyers are gone, investors are gone. It’s just normal people in Arizona buying homes.’”
“The bubble is gnawing at affordability. ‘It would be hard from an economic standpoint to sustain the kinds of growth rates we’ve seen for the last year and a half given our income levels,’ Jay Butler said.”
“The softening in sales is classic economics at work, said R.L. Brown. ‘Nothing changed except prices reached a point beyond where consumers are willing to pay it,’ he said. ‘Those that have to sell will become more and more realistic about their prices. At a point in time when they have reached market reality, their properties will sell. Until they do, they won’t sell.’”
“The growth in the median home prices, especially in previously owned homes, has disappeared, Butler said. ‘We’ve been running pretty close to $260,000 for several months now,’ he said. ‘It peaked at $263,000 in September and was $257,000 in January.’ Sales activity has also slowed for the last several months. The high was 10,700 homes sold in Maricopa County in August, Butler said. The number was down to 5,260 in January. To make matters worse, more houses than normal hit the market in the new year.”
“Brown said it will be anywhere from hours to days, weeks, months before some sellers realize that they’re not in tune with the consumers. ‘Those sellers that have no real reason to move, no real reason to sell, they’re just trying to cash in and make a profit..will probably try to hold their prices,’ he said. ‘That’s a common thing that occurs in a real estate market, especially a market that has seen rising prices over a period of time. The seller will list his house at an unrealistic price and say ‘Well, when the market gets there, then I’ll sell it.’ We’ve got that going on right now.’”
“That’s one of the reasons why Powell is frustrated. Just like last year, sellers wanting to cash out are listing their homes for higher prices than comparable homes on their blocks. He tells them what an appraiser would give them before suggesting a sales price. ‘Most of the people say ‘No, we want to start here,’ he says.’They’re starting $20,000, $30,000 or $40,000 above.’ In a month or two, they want to know why their home hasn’t sold. When Powell reminds them the price is too high, there’s resistance.”
“The market will force a new way of thinking in the industry, Brown said. ‘It’s been a seller’s market for so long, you could say there’s 20,000 new real estate agents who have never been involved in a buyer’s market,’ he said. ‘Those folks could think that real estate in general is always a seller’s market, the seller calls the shots. Well, the reality is most of the time the real estate is indeed a buyer’s market or certainly the optimal market is a balanced market between buyer and seller, but it’s incumbent on the seller to come to the balance point.’”
“Houses under construction will likely become available at a discount because buyers who haven’t closed yet will back out of contracts because they can’t sell their current homes, Brown said. Builders began softening price increases using discounts and incentives in May when buyers began to resist prices, Brown said.”
“‘There are buyers out there,’ Butler said. ‘The concern is you get the hypernegative market where you start suddenly seeing sales going down, more and more signs in the neighborhood, People sort of push the quasipanic button, then you can have some serious issues.’”
So *that’s* what I balanced market is. I was wondering.
Sellers need not do anything; the natural evolutionary process of the market does the work of establishing a new equilibrium. Anyone who prices too high is naturally selected out of the pool of sellers who eventually succeed in finding a buyer.
Excellent
What we need now…
…is for the NAR to listen to Realtor Powell.
Yes, there’s plenty of buyers out here.
We’re all sitting here looking at overpriced homes on ziprealty, and saving for our downpayments.
Never underestimate how long us buyers can wait.
It’s going to be a while, sellers- and the game of ‘chicken’ will be won by us.
We have nothing to lose by waiting, and everything to gain.
I’m with you. I’m ready to wait a long time. Even with plenty saved for a decent (20% or more) down payment, excellent credit rating, etc…. I’ll hold off until I feel it’s “safe to go back in the water.” Not sure how long that will be, but it won’t be this year.
Call me a pessimist (optimist?), but I think the 20% down that you’re sitting on will someday be good enough to buy outright.
Well, that might be pushing it a bit, but I get your point. I’ve thought about being able to put down at least 50% as first-time buyers. That’s probably a bit unusual, but so is this market. People think home ownership means they “made it”, even if they are paying 50% (or more) of their income to have it, which is fairly common in SoCal the past several years. Not me, no way. So I’ll continue on….renting a nice place for less than 5% of my household income while I patiently wait for this house of cards to fall apart…
(make a whistling sound, low-high-low)
5%!? I should’ve gone to law school. We’re closer to 16-17% (of net). Of course, us both being under 30 (okay, so I just turned 30 - sue me) leaves me feeling okay with where we stand for now.
I can’t believe anyone younger than ourselves would actually be thinking of buying a house. Oh, the vanity of it all. (hand raise, palm outward, to forhead)
I swear I had typed the missing ‘e’ in “forehead.”
less than 5% of gross…16-17% of net, you’re doing great, keep it up.
A couple of points.
1. I thought there weren’t THAT MANY speculators and investors. Now 6 mos later they claim this is the reason for the housing drop. Ok, so they lose credibility there because 6 mos ago they said it was a healthy market.
2. Eventually things will change. The longer a home sits, the more the seller will become desperate. While not all sellers will be desperate initially, once they see their investment fall, they will start to panic.
3. It is dependant upon sellers to come to the balance point? Well prices need to drop for the market to become balanced, and in the face of rising inventory and stagnating sells, it will.
Ecenomics 101 — Supply and Demand.
I think the sellers that are not needing to sell but can wait are going to be screwed by sellers that need to sell. The people who need to sell will sell lower thus lowering comps in the neighborhood. This will lower everybody property values in that area. So go ahead and hold out if you dare
Absolutely.
Exactly — this is another way to express the evolutionary notion that I posted above…
But….but….what about the inventory numbers? Don’t sellers understand that old, old law of supply and demand. Works every time. If they don’t want to get slaughtered eventually, they need to drop their price now.
I haven’t seen the latest inventory numbers, but a couple of weeks ago, someone posted the daily numbers in Phoenix from July, 05. If I remember correctly, the number then was something like 6 - 7,000 homes for sale. The latest number was more like 36,000 homes for sale. What seller can’t understand what this is going to do to prices?
The one (seller) whose home has been on the market since last July, and who is hoping for the hot spring market to bring back the buyers who are willing to pay last year’s comp price + 20%.
A little off-topic but might be good for a seperate posting: “she refinanced the home several times to pay for repairs and other bills, most recently about five years ago so that she could replace the windows. Now as she lay sick in the hospital, foreclosure begins on the 70 year olds home.”
The article is posted at homepricebubble.com
Sorry granny, you should have left all that juicy equity alone. I wonder what the “other bills” were? New car? Vacation? Granite CTs?
‘The concern is you get the hypernegative market where you start suddenly seeing sales going down, more and more signs in the neighborhood, People sort of push the quasipanic button, then you can have some serious issues.’
Looks like Brown has finally traded in his pom-poms. “Serious issues” is a major understatement of what is going to happen the Phoenix economy.
Slightly OT, but I came home on Friday night and the Mrs handed me a “to do” list of things that needed fixing around the house. I took the list, looked it over, and told her “call the landlord, this isn’t my house.” God I love renting.
How do you tell a “quasipanic” from a “panic”?
You gonna tell us the punchline, Sideshow?
Ya got me. Maybe in a quasipanic sellers just lose quasidollars or something…
The Quasipanic has a facial deformity and a hump.
Amazing russ:::
Now that is funny!
Ben,
I jogged past a realtor sign today in Dallas - The Ben Jones Group - of Virginia Cook Realtors.
http://tinyurl.com/odf9b
I laughed at the sign and my wife looked at me funny.
Some day, you’ve gotta take a drive down Llano street near the Whole Foods on Lower Greenville. Llano between Abrams and Skillman. I rented a duplex there 20 plus years ago. I drove down there today and nearly drove off the road. All and I mean ALL of the old houses have been scraped and the entire street is one GIGANTIC (5-6K squre foot) McM after another. I mean these things are HUGE. They have to be selling for 600K plus. WTF is going on? Who is buying these things? And most of them are just hideous.
There is one very cool ultra contemporary one on the north side of Llano between Abrams and Skillman. Take a look for it when you get in that area.
I’ve been through there and wondered the same thing - what do these people do for a living?
Got to be a lot of Option ARM nonsense going on around there.
… and resetting soon…
I think this is going to be far worse than the stock market crash. At least with a stock you don’t have to pay holding costs(insurance, maintenance, taxes, etc). These sellers that plan on “”waiting out the downturn” will have no choice but to sell when there savings are getting low and the taxes become due.
Amen Surffroggy. Don’t forget the magnitude of the asset, or the leverage. No one in Main Street America borrowed four to seven years’ gross salary to buy stocks in the 90’s, let alone for stock in any one company. Imagine, borrowing 500 grand, and pumping all of it into Microsoft, at 75 bucks a share? You are still down 60% and writing a check every month to pay the note. That is what today’s recent house buyers will be faced with…
My wife and I drove by a condo on the ocean in Huntington yesterday.
I got curious as to what $429,999 buys you in a 1 bedroom 1 bath on PCH.
The place is called ‘Pier House’.
It might as well have been called ‘The Big House’, as it reminded me of a big, pink prison for women.
At the TOP of the market- this condo complex is a DUMP.
The tiny little prison like dwellings were so bad, it made my wife laugh out loud. I had to calm her down, since we had snuck in.
When we finally got to the $429,999 prison unit, we’d made up our minds.
We’ll keep saving and saving. We’ll wait until Hell freezes over before we’ll live in prison.
We came back home to our lovely rental…
…and felt fortunate.
Tooooo Funny!!
Wife and I live in a 1/1 apt in Rancho Bernardo (San Diego). 780 sqaure feet in one of the nicest neighborhoods in the county. 5 eastward-facing windows see the sun rise over mountains. 15 minutes from La Jolla and Del Mar. $429,999 buys you 32.5 years of rent here.
Of course, at the end of your 30-40 year loan, you’ll have your 429,999 P.O.S. to pass on to your heirs (won’t even try to predict future value in today’s dollars - likely less than 429k, though). Also, you will have paid oodles more than 429k in net interest (after your precious deductions). Mtnce, Repairs, weathering, transaction costs… yada, yada, yada.
On a side note - reading the thoughts of you fine people are half the reason I get up early on weekends. Just wanted to say it.
San diego is nice to visit but don’t think I could live there again. Was born there and lived there about 13 years. Have a lot of great memories and love those beaches
So maybe it’s time for you to grow a set and tell them “I don’t do fantasies”. Seriously, we’re always told to inteview agents. Why shouldn’t an agent refuse to take a listing if it’s overpriced ? It only makes the agent look bad if it doesn’t sell and it costs the agent money to market the listing so why not start getting tough with sellers ?
Successful agents with plenty of listings do turn down over-priced listings. But an agent with no listings (and there are plenty of them) will jump at the chance even if they know the house won’t sell. This is because a listing, any listing, gives them a place to hang their hat and a base camp for meeting new clients.
1 in 50 in CA are agents. Need I say more?
Very telling statistic!
With so many Californians “invested” in the success of the RE market, it is no wonder we have houses sitting for so long. And sellers not pricing down realistically.
. . .
If spring is not the “saviour” that the RE industry has been hyping–and frankly *I* for one am not reckless enough to drop my nest egg on prices right now–then it gets real interesting…
On the horizon:
1) expected increase of 1/2% fed rate by June.
2) Y-o-Y price declines (guessing will show up in summer)
3) 3-1 ARM resets. late 2006, 2007, 2008 (heaven help the 3-1 ARMers who bought in summer 2005
4) 5-1 ARM resets. late 2007, 2008, 2009
I see all of the above putting pressure on sellers and causing price reductions.
Patience all… Based upon inventory levels now, and in light of the above, I think buyers are just starting to get the leverage, and they will keep it for many years….
“Buyers are gone, investors are gone. It’s just normal people in Arizona buying homes.”
Normal peple will not bait all these @#$%.
Does anyone know how many of these 37k+ houses are own for less then 2-2.5 y ?
I’m a normal person living in Tucson since 1992.
And i would wait till prices drop to 2000-2001 level.
The seller will list his house at an unrealistic price and say ‘Well, when the market gets there, then I’ll sell it.’ We’ve got that going on right now.’”
That’s great — the more For Sale signs out there the better. Nothing like driving down a street and seeing 7 or 8 signs to make a buyer think twice.
Drove around the Chandler AZ today, haven’t seen more open house signs in 8 YEARS!! Can you say B L O O D B A T H ! ! ! ! !
ziprealty shows 37,000 listings in the Phoenix area. All of San Diego County has 17,400. SD Co. pop. is about 3 million, Phoenix area must be more or less the same. Does Phoenix have 2x the listings for the same population as SD County? Anyone know?
that’s sounds about right.
That’s why so many feel (including me) that Phoenix Metro has overtaken San Diego as ground zero for the RE bubble bursting.
Miami can’t be far behind.
Cape Coral/Ft Myers looks like the worst of the worst. Population around 520,000 in the whole county, and 17,400 properties for sale according to housingtracker.
Phoenix has a higher population than SD. Pnx in anout 3.8 mil and SD about 3 mil. You can get the population abd listing chart for both at homepricebubble.com
Those phoenix numbers are for all of Maricopa County which includes Mesa, Chandler, Scottsdale, et al. The San Diego numbers are only for San Diego proper. If you compared the San Diego numbers to just Phoenix you’d find they’re very similar.
and San Diego inventory has about tripled from a year ago. I agree Phoenix could be ground zero. However, todays San Diego Union said there are 6,000 SD downtown condos on the market, I think most are being sold by the builders and are not included in ziprealty figures.
SD Condos for everyone!
From http://www.realtor.com
~7:42pm 3/5/06
San Diego: 6886
Phoenix: 6,377
sd condos for everyone!
Yeah I live here in Gilbert, AZ. For Sales signs everywhere you look. In fact both houses next to me just put for sale signs. I do a lot of business with apartment complexes converting to apartments. It just amazes me that anyone would pay $300,000 for what basically is a 1200 square foot apartment, although they fixed it up with new flooring, cabinets, and granite countertops. Now as some of these are finishing up you walk through there and there is no people. Basically investors have bought all this stuff up and most of the units are empty. In fact one of the apartment conversions that I am selling to I recently found that they payed $180,000 a door for a 155 unit complex. They are trying to sell these for as high as $400,000 for the largest unit in Phoenix. I believe these buying into these conversions will be the first to flop.
32,728 active listings in the Arizona Regional MLS at this moment in time.
31,071 on Feb 18.
3,402 in January 2005…
Jay - yep. It’s a lot!
Ziprealty.com is showing 37k+ plus MLS listings right now for Phoenix Metro area. Just curious, what is your source for your numbers?
According to ziprealty.com the total listings is 31,599 (not counting empty land listings)
37,000 would be the total if you included empty land listings.
The MLS… don’t shoot me, I’m a Phoenix realtor…
Straight out of the Arizona Regional MLS (ARMLS):
Homes (includes SFH, condo/TH, mobile/mfg)
Active Listings: 32,730 (only 2 new ones in the last couple of hours!)
Active With Contingencies: 1,183
Pending: 7,726
Sold (Feb 1 - Feb 28): 5,913
Land:
Active: 7,715
AWC: 113
Pending: 725
Sold (2/1 - 2/28): 500
He tells them what an appraiser would give them before suggesting a sales price. ‘Most of the people say ‘No, we want to start here,’ he says.’They’re starting $20,000, $30,000 or $40,000 above.’
Yeah-f*ck what the honest appraiser says…what the hell does he know…We are Joe Q. Greedhead and we know it all. When the right sucker comes along we’ll just go find a rubber stamp number-hitter in bed with the buyer’s mortgage company to get us our extra $40k…Stupid azzhole realtors…who do they think they are…
Couldn’t agree more.
IMO, what will make sellers come clean on price are the HBs. They are very pragmatic and will price their properties to sell. They can’t afford the carrying costs so they’ll bomb their prices, a la CTX. Resale owners won’t be able to compete when a comparable brand-new home sells for 20% less than their asking price. Comps will get destroyed. Once sellers realize what is happening, panic selling will ensue this summer.
Help me please.
Can anyone tell me how to get ziprealty to tell me how many listings there are in Orange County- without doing the totals by hand?
There MUST BE A WAY…
auction, you gotta sign OUT of the program. select”buy a house” on two cosecutive menus. then pick your region and it will give you a total at the top.
Try here:
http://www.benengebreth.org/housingtracker/location
Thank you, Cereal and HK_Vol…
(Now, back to our regularly scheduled program.)
San Diego 17,400+
http://www.ziprealty.com/registration/register.jsp?usage=&level2=socal&cKey=3t2k4jf1&pageLink=%2Fregistration%2Fregister.jsp%3FcKey%3D5l0h54pg%26&metro=sandiego
Pheonix 37,000
http://www.ziprealty.com/registration/register.jsp?cKey=x2t568c7&metro=phoenix