‘Affordability Continues To Be An Issue’ In Phoenix
The Arizona State University has some numbers out for the Phoenix area. “With 5,455 recorded sales in February 2006, the greater Phoenix resale market has rebounded slightly from the 5,260 sales recorded in January 2006. However, it is well below the 7,935 sales recorded a year ago and the 10,700 sales of August 2005. The 2006 year-to-date is 10,715, in contrast to 17,290 for 2005.”
“‘The basic direction of the local real estate market will probably not become clearer until into the second quarter,’ said Jay Q. Butler, director of the Arizona Real Estate Center.The primary news of last year’s housing market was the rapid rise in the median home price from $194,000 in January to $260,000 in December. Since the record of $263,000 was set in September, the growth rate had been disappearing, with the median price being $257,000 in January. A slight re-emergence of price growth occurred in February at $265,000, while it was $200,000 for a year ago.”
“‘This is not too unexpected,’ said Butler. ‘As housing markets slow, the move-up market tends to dominate activity with higher-priced homes. For example, in January 2006, 23 percent of the sales were in $300,000 to $499,999, while it was 25 percent in February.’”
“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 $945 to $1,325.”
“Phoenix recorded sales decreased from 2,235 sales to 1,680 sales. The Scottsdale resale home market declined from 635 to 400 recorded sales. Mesa’s resale housing market declined from 945 to 655 sales. Glendale decreased from 545 to 435 sales. The Sun City resale market fell from 150 to 100 sales.”
“Resale activity in Sun City West also fell from 70 to 60 sales. The resale market in Gilbert decreased from 495 to 290 sales. Chandler’s resale market slowed from 560 to 400 recorded sales. The Tempe resale market decreased from 165 to 120 sales. Avondale’s resale market fell from 170 to 110 sales. The El Mirage resale market decreased from 120 to 60 sales. Goodyear declined from 150 to 80 recorded resales. The Surprise resale market decreased from 345 sales to 200 sales.”
“For the last year, the ever higher home prices have drawn people into the market based on continued optimistic growth assumptions about future prices. Thus, both investors and owner-occupants have been buying on future expectations about continued appreciation to provide for profit and/or re-financing opportunities. If home prices continue to be stable or even decline in some areas, owners may increasingly bring homes to the market, in order to lock in profits.”
“‘As prices have stagnated since August, inventory levels have continued to grow, as we suspect an increasing number of speculators are placing their homes on the market,’ Raymond James analyst Rick Murray wrote to clients Monday. From a months-supply perspective, six months of inventory were on the market at the end of February, compared with 1.6 months in August, noted Murrary.”
And here is a builders incentive in Queens Creek. “SPEC Homes Currently Available Move-in Ready! Special Offer! With purchase of one of our finished spec homes at Skyline Ranch Scott Communities will provide buyer with a voucher for a FREE CAR!”
So the builders keep building and existing homeowners are frozen, hoping some greater fool will hand them a windfall. If I was buying, I’d take the Honda.
Same story is playing out all over. The only way those homes are going to move is if they either 1- some how become more affordable for buyers or 2- wages increase significantly and quickly.
Right now its real hard getting financed on a home compared to last year. Banks are not willing to lend the money to people who run the risk of foreclosure, 100% financing, io loans and option payment loans are hard to get. Income to payment ratios are now important again, seems like lenders don’t want to get involved with someone who is sinking 40% or more of their pay into the house.
This is a serious situation for Phoenix. The huge runup in prices sparked even more building, when there was too much to begin with. As the builders pull back, construction jobs will be shed left and right. Wages will likely fall and unemployment rise. They should have seen it coming. If say, ‘there are x number of people moving here in the next 10 years’, that doesn’t justify building all the houses before they arrive.
That starts to smell like oil-bust Texas (Houston?) revisited.
BL, Thanks for your comments. I hope this is the case. Are they based on anecdote, your personal experience or some other source? Just curious to know more.
Here is an article by the AZ republic following a couple trying to sell there house while already having a new one built. The amazement of how far ignorance can stretch…
http://www.azcentral.com/arizonarepublic/business/articles/0208morehouses08.html
ZipRealty Price Track:
Price Reduced: 01/19/06 — $463,000 to $449,000
Price Reduced: 02/05/06 — $449,000 to $434,900
Price Reduced: 03/08/06 — $434,900 to $419,000
Days on Market: 129
MLS #: 2434945
To the Bilyks: I want to know if St. Joeseph is helping you with both mortgage payments…
Hope you enjoy
P.S. What bubble??
Speaking of affordable housing issues, how about a nicely priced new home in NOLA?
- $130-140K for an “affordably priced” home
- $280-450K for a “market priced” home
Who would have thought the market down there would be so hot, so soon after Katrina left the town in a shambles?
“KB HOME/Shaw Louisiana LLC Announces Plans for New Construction of over 70 Homes in New Orleans’ Historic Garden District
Last Update: 4:38 PM ET Mar 21, 2006″
http://tinyurl.com/eluel
“The El Mirage resale market decreased from 120 to 60 sales.”
Don’t know Espanol; could someone please translate El Mirage for me?
It’s not in any of my dictionaries. It might be a loan word in border Spanish, but I suspect it’s just a developer’s concoction. There are a great many incredibly unidiomatic pseudo-Spanish mishmashes out there–development names, streets, and so on–coined obviously by English speakers who didn’t know a thing about the real language. This is probably another.
OK, so let’s just assume that maybe they borrowed the word from English:
Main Entry: mi·rage
Pronunciation: m&-’räzh
Function: noun
Etymology: French, from mirer to look at, from Latin mirari
1 : an optical effect that is sometimes seen at sea, in the desert, or over a hot pavement, that may have the appearance of a pool of water or a mirror in which distant objects are seen inverted, and that is caused by the bending or reflection of rays of light by a layer of heated air of varying density
2 : something illusory and unattainable like a mirage
Yep — sounds just like Phoenix!
>it’s not in any of my dictionaries
GS was making a funny.
yes, it’s “the mirage”. But no, not some spaced out developer with a bizarre sense of humor. Town’s about 80 years old. Used to be out in the toolies. Used to be.
Butler’s headline: Greater Phoenix Resale Home Market Experiences Up Tick in February
The true headline: Greater Phoenix Resales Drop 30% from Last Year. Inventories Up by 350%.
I notice Mr. Butler has a 100K HELOC.
look at the increase of sales to increase of product ratio. it’s even more negative than we’ve imagined.
hey phuck - that would be cool to see on your bloodbath reports
Another nail in the coffin of the Queen Creek floppers. What a bunch of pigeons.
I went to a job interview in Queen Creek a couple of years ago. Not the place for me.
Queen Creek is rapidly looking like Ground Zero of the bust.
maybe, but I suspect that lovely Maricopa will detonate more. 15 miles of open (reservation) land between I-10 & the town. Last projection was a 100 fold population increase for this decade. No job base, all commuters.
Oh yeah– One road to I-10, single lane in each direction. Welcome to Hell, buddy boy!
Home-Based Businesses! LOL
The prices in queen creek a F@cking joke. The car give-away should be standard considering the 50 mile commute to phoenix.
How can the glut of listings not just keep going up in Arizona .Buyers are going to see the glut and be afraid to buy I bet . Interest rates going up , tight money market …..isn’t good for a flipper resale of his investment .
I would think that the offering of a ‘car’ as an incentive to buy should scare people away…
we don’t have near the inventory glut here as in Arizona where it is freakish, but even so I can’t really make good sense of the openhouse listings…there’s too much to see and when the buyer sees *that* many overpriced listings it feels like a better bet to play catch with the kids and stop the craziness, even if it has become mostly a sociological exercise…
I turn on a Phoenix TV station about once every two months. In the last six months the 5 oclock news channels have been running reports on the housing glut and showing pictures of sad sellers standing beside their for sale sign. So IMO it’s already on the street there. I even hear it being talked about in grocery stores.
Ben
There are a lot of people in Phoenix that are still in denial. Even people I know that are highly educated and own business can not see the pending decrease in housing prices. Lots of “its gone up every fast but it won’t come down. It will stay flat” “The houses still sell in a few days, they just leave the signs up for advertising” Houses are still coming on the market for stupied prices.
Those are the people with investment flips or HELOC’s.
Mental note:”Maybe if we deny it long enough, the problem will just go away”
I think I now finally grok that “Got sand?” bumpersticker I’m always seeing.
“grok”?
Robert A. Heinlein, Stranger in a Strange Land
“‘The basic direction of the local real estate market will probably not become clearer until into the second quarter,’ said Jay Q. Butler, director of the Arizona Real Estate Center.”
You don’t need a weather man
To know which way the wind blows
- Bob Dylan -
We sold our N. Scottsdale house in late August at the height of the boom and no house in our old neighborhood has sold for close to what we sold for. Luckily we had a second home in N. AZ to live in while wait for bargains to get better in the Valley, but after living up north I don’t know if I can live down there again…we are sick of the heat from May to October.
I wonder why he didn’t just say ‘no comment’ or ‘I plead the fifth’.
He hasn’t finished the NAR’s “Staying Out Of Jail in 2007″ class yet. *rimshot*
After all these years, you’d think that people would be able to apply the law of supply and demand to come up with a reasonably accurate picture of where the market is heading. “Let’s see, inventory up 900% and demand way down. Affordability at an all time low and interest rates heading up. Hmm… can’t make a call on this one. We’ll just have to wait and see!”
They said wait till spring, now it’s wait until the second quarter, then after that it will be wait till the fall. Then the spring.
What baffles me is that after years of the dog chasing his tail, he’s finally realize that the party was over years ago.
he’ll….
darn typos.. sorry at work and I am multi-tasking.
The second quarter is in less than 2 weeks. At least the dope could have said the 3rd quarter or something like that to give the floppers a shred of hope.
OT Saxon broke below its 52 week low today.
‘Saxon Capital, Inc. operates as a real estate investment trust (REIT) in the United States. It engages in originating, securitizing, and servicing nonconforming mortgage loans, including subprime residential mortgage loans.’
I think things are leaking out that the numbers they will report 3/31/06 are not very rosy. I wonder if the restatement due to hedging is going to put to light a mini- Fannie and Freddie type accounting time bomb over there?????? The stock price is acting like it.
I believe the creep up in prices we are seeing all over of late has to do with the dropoff of sales in the lower priced condo market. Any thoughts?
Could well be. Anecdotally that has certainly happened before. It would be interesting to see some detailed like-for-like comparisons either side of bubble peaks.
Of course, this can’t be done until we’re certain that the bubble(s) in question have peaked, and it would be a lot of work. Maybe some economics postgrad should pick this up as a topic; you could pretty much guarantee your results would get cited a lot if your work was reasonably competent.
“‘This is not too unexpected,’ said Butler. ‘As housing markets slow, the move-up market tends to dominate activity with higher-priced homes. For example, in January 2006, 23 percent of the sales were in $300,000 to $499,999, while it was 25 percent in February.’”
In SD, the median is up because the lower end buyer is squeezed out by rising interest rates, skewing the distribution of homes sold. This is the same as the quote in the article, which I copied here.
Too bad, that they don’t tell you that when they print the numbers. Everyone just thinks prices are rising, but they are falling. A distribution shift accounts for the rising median.
A 30-year car loan! What a great idea. While they’re at it, I wonder if they’ll throw in a 30-year loan on a computer for me.
That’s a great point and don’t forget the same applies to people rolling their credit cards into HELOCs. How about a 30 year plan on a six pack, Joe?
OT - But funny:
Prince is being sued by a furious Hollywood landlord for carrying out unauthorized renovations to the house he rents, including painting the outside of the property purple and installing purple monogrammed carpet in the bedroom.
NBA player Carlos Boozer, who owns the mansion, is furious about Prince’s purple alterations to the $70,000-per-month property.
Prince is a renter, LOL, and at $70k per month?
lets try for a 40 or a 50 or a 100 yr car note. My grandchildren can pay off a car that was trashed 60 yrs before they were born. Brilliant. Sounds like our illustrious fed gov’t. And Arnold is headed down the same path. Nice to see another city getting screwed also (although a lot of it caused by floppers from California.) This place has turned into a big DUMP. And now, exporting it to other cities. And New Orleans should be abandoned to the sea. The sea will take it eventually anyway. Then someone will call the sea, racist. No, it is mother nature, and nothing humans can do. Another hurricane will hit it again, and it will flood completely soon.
Is the “FREE CAR” something like the “free lunch” I’ve heard about?
I’ve arranged some data and got MOI (months of inventory) of each of the bubble markets down. see Bubble Markets Inventory Tracking.
well whaduyaknow
coming around turn 3 and it’s sacking sacramento by 3 lengths over phoenix in flames with naples on the rocks closing in on the outside……
Any thought to tracking the San Jose and San Francisco markets?
I am tracking San Jose but the numbers are suspeciously low. Are there any bay area locals around? what does the inventory look like up there? does it really match the dismal inventory numbers from ziprealty?
I’ve been informally keeping track of San Jose proper via realtor.com. Inventory was just above 2000 at the start of the year, went up slow but steay to about 2200 by the end of January, and has remained right about there since then (2193 today).
Based purely on what I’m seeing both in person and on the MLS there is no evidence of a declining market on the SF Peninsula. Inventories are lean and well-priced attractive homes are selling quickly. Even some of the cr*p is selling quickly.
Some cr*p is just sitting, however. This stuff might have sold last spring but not now. I suppose you could call that a modest market slow-down.
Checking other MLS sites for Santa Clara County, I’m getting maybe 500 to 1000 additional inventory to ziprealty’s number, still a very low number given the dropping sales volume and population size.
I’m holding off on additional bay area trackings until I can confirm this low inventory is really accurate.
I don’t know how trustworthy the MLS listings are for the Bay Area. In Cupertino, near 85, Homestead and Foothill, there were 5 open housees last week. I visited one of them and got flyers for all of them. Reaching home, I checked on ZipReality, guess how many of them showed up. NONE. Yes, not a single one of them is there.
I don’t see any conspiracy yet, seems like listings are not regularly updated. I have also seen duplicate listings. So the accuracy of their data is in serious doubt.
BA or not BA,
Here’s a competing MLS listing hosted by Coldwell Banker, californiamoves.com. For Santa Clara, 4,849 SFR/condo/MFR/mobile homes/land came up on search. Ziprealty currently shows 3,163 homes. So we are talking a 1,700 difference.
The problem with californiamoves.com is the inclusion of pendings, and if last month’s sales volume was 1,600, this 1,700 difference may all be from pending sales.
Do me a favor, see if those 5 open houses can be found using californiamoves.com. If we can find them on this site, then we are looking at a ziprealty problem. But if we can’t find them on this site either, then the Bay Area MLS in general can’t be trusted. Thanks for your help!
Freinds in the SillyCon valley have told me that the market is still pretty hot there.
A voucher for a free car. That really spells it out. I didn’t see the word “NEW” in the ad. I didn’t see the worth of the car. Is it a lease? Does it have to be reported on my IRS form at tax time? The best part is that I overpaid on the house to get the ‘free’ car that may or may not be new, that may be leased and after a year or two goes back to the dealer with overage due to mileage, and I’ve rolled the true value into my loan for the next 30yrs while increasing my tax base. What a deal! I’m sure they’ll catch a lot of east coast retirees with that one.
The big builders’ gross margins (per their 10K’s) are running from 20%-30% depending on their segment. So a $350K median house in PHX would average $87.5K in gross profit (@ 25% GM). Most of the builders are now throwing in a “free” pool with purchase (about $18K at cost). The free car is just another version of the same marketing technique. Until it becomes unprofitable to build houses, they’ll keep churning them out. We still have a long way to go to get to unprofitable.
Waiting patiently…
“We still have a long way to go to get to unprofitable.”
Your statement depends heavily on a steady supply of increasingly-well-informed and credit-constrained buyers who are willing to sacrifice their net worths in order to purchase a declining-value asset.