‘All Buyers Pull Back’ From Phoenix Housing Bubble
An Arizona Republic editorial on the Phoenix housing bubble. “Speculators supposedly have fled metropolitan Phoenix’s housing market, so it’s no surprise that home sales have dropped as that demand has dried up.”
“What is surprising is that home sales and building are down more than the rate at which investors were buying last year. New-home building permits were down 16 percent for the first three months compared with a year ago, reports real estate analyst RL Brown. Resales plummeted 34 percent during the first quarter.”
“Roughly combine those two figures, and the housing market is off more now than the boost investors gave it last year.”
“As many as 35 percent of all home sales Valley-wide were investor-driven deals last year, according to recent figures from mortgage giant Freddie Mac. That’s almost 10 percent higher than previous estimates.”
“Not all of the investment deals were for new homes. But in metro Phoenix, investors flooded the new-home market first. Home builders tried to crack down on speculators, but that didn’t deter their binge buying. Speculators then poured into metro Phoenix’s resale market and drained inventory and hyperinflated those home prices.”
“Look at what’s going on now. New-home deals are falling through because people who signed to buy one can’t sell their existing home or can’t sell it for enough to buy the new one or pay off the debt on their old one.”
“Valley home listings hit 36,000 in March, an all-time high. Housing analysts say as long as listings keep climbing, the housing market will keep slowing. Who is trying to sell now? If it’s the less-experienced local investors who got into the game late, then the Valley’s housing market isn’t done hurting.”
“Phoenix apparently no longer is the darling market for big home builders. From Scottsdale-based Meritage Home’s recent first quarter earnings report: ‘In Phoenix speculative activity and high price appreciation in 2005 has recently contributed to higher-than-average cancellation rates.”
‘What is surprising is that home sales and building are down more than the rate at which investors were buying last year. New-home building permits were down 16 percent for the first three months compared with a year ago, reports real estate analyst RL Brown. Resales plummeted 34 percent during the first quarter.’
Brown reported starts were down 24% last week. Is it really a surprise people don’t want to pay speculator prices, that have hardly started to fall? And with the overbuilding that is still ongoing, there will be an economic drag for years. They cannabilized future sales.
but that can’t be - it’s a reitrement area !
some said that to me about MD eastern shores potato fields =ROFLOW
DON’T WORRY, I’M PRETTY SURE SUZANNE RESEARCHED THIS.
I’m sure Suzanne did not research the chicken farm smell.
There’s so much inventory it takes people a couple extra weeks just to see enough. Just make sure you visit the ones really far apart and you are using the Realtors® gas. Ohhhh there’s an idea! Make appointments 40 miles out of town and not show up.
The real story here are the reporters with the deer in the headlights look.
Reporters are just that. REPORTERS!!! They can only report what has happened not the other way around.
It’s obvious to me that they aren’t qulified to report on this matter. Look at the wording; “What is surprising is that home sales and building are down more than the rate at which investors were buying last year.” There’s nothing surprising about that. They should be down at the Assesor’s office researhing whether 35% last year were investor purchases. They should be interviewing 2005 purchasers to determine if they frontloaded last year or whether investment aspects influenced their decisions. They don’t even know if 100% of the speculators are out yet. This is no more than a CYA editorial so they can claim they aren’t rah rah cheerleaders for the RE industry.
It’s not just this issue that the AZ media is lame on. If you’re ever in the state, watch the 6 o’clock news and be prepared to be underwhelmed.
“What is surprising is that home sales and building are down more than the rate at which investors were buying last year.”
Robert responded: “There’s nothing surprising about that. ”
I totally agree. The reporters forget that even regular old Joe’s became pseudo-speculators as they got into the housing market, even if only has primary homeowners… because they too believed that “housing only goes up” and thus stretched for something they couldn’t really afford. The true amount of speculation last year in PHX will likely never be known, but I assure you there were the classic speculators (e.g. flippers) and also the atypical speculators (e.g. Joe Sixpack who bought a home as his retirement savings).
You add the silent speculators to the cannabilization of future home buyers (who bought early to get in before “priced out forever”) and you get much more than 35% figure IMO.
Now multiply that by the fact that PHX is no longer doing so hot, and you get the reverse mania… people starting to look around and feel that something ELSE is the sure path to riches…
Clouseau
The 35% does not include traditional home-buyers who were motivated to purchase because of the frenzy. The wind was at their backs and it was the season for buying. NOW the wind has shifted and alot of traditional buyers are how waiting instead of jumping in.
You all simply must watch this! Hilarious!
http://www.youtube.com/watch?v=ipJTqCbETog&eurl=&watch2
I think people finally realize that Phoenix is in the middle of the desert and you can’t even keep your pet outside in the summer because it will die from the heat.
au contraire. Grew up there, played outside in the summertime, had dogs my entire life. No probs going outside. Always gotta make sure they’ve got water & shade. Note, though– back door was always open. My black lab used to love laying on the back patio in the shade. Nice & cool. Betcha it’s less uncomfortable than say, So. FLA in the summer. 9% humidity helps.
And yup, won’t be at all surprised when I develop skin cancer as a result of those days in the pool. Before sunblock & all the cancer studies.
MIGHT AS WELL KISS YER ARSE GOOD-BYE!
asuwest2
it’s a lot hotter than it used to be, particularly in the summer
Phoenix is GROUND ZERO of the housing bursting bubble. You mark my words. Their RE prices are now more than $100K higher than Vegas for a $500K home, their wages suck primarily do to so many Mexicans working here legally and illegally, having one of the highest crime rates in the nation, and being one of the lowest quality of life places mainly due to horrific traffic issues, extreme heat and pollution. Not to mention the high cost of utility bills month after month in trying to cool your house. Phoenix in the summer is what hell must feel like. I spoke with a reputable and long time Phoenix businessman in the home appraising business and he told me that houses in Phoenix are more than 40% overpriced and he expects them to crash and burn to even below that level. Pinal county is already getting clobbered (especially Queen Creek area were you would have to have been a complete moron to have ever purchased there and not be aware of the huge traffic issue they have - and now with $3+/g it’s even that much worse). Maricopa is next…
Queen Creek, population 19,600 as of March 2006.
Today 2569 listings on Zip Realty!
1 house for sale for every 8 people!
Wow, tell us how you really feel!
That may be true, but you don’t see homeless and graffiti tags in half million + dollar “good” neighborhoods like you do in Los Angeles. I also grew up in Phx, and played outside as a kid all summer long - you get used to it. And hey, there’s free parking everywhere!
THAT WAS A CLASSIC!! THANKS!
Awesome video. I’m watching alright!!!
Great video! Quite a production and right on the mark.
too funny!
Txchick — that is really funny. I read something about a spoof by the Columbia students — this must be part of it. Unless computers make it super-easy to do, this video looks like it took a lot of work.
great stuff … I like how they spoofed the similaries of the Police video (smoking ashtray, instrument shots, etc)
“how my poor heart aches! ….
with each of your mistakes!!!”
too funny!!
“As many as 35 percent of all home sales Valley-wide were investor-driven deals last year, according to recent figures from mortgage giant Freddie Mac. That’s almost 10 percent higher than previous estimates.”
Yeah, and it’s much higher than 35% when you take into account people putting “owner occupied” on the loan papers when they bought a house with no intention of living in it. I know of outright fraud at Richmond American who changed “Investor” to “Owner” when filing the paperwork so they could more easily sell the mortgages off at higher yeilds. I also note that the same model of house that sold at $145K in Pheonix proper
in 2003 was jacked up to $220K by 2005 and was way farther away from
city center. Thats a long way to fall backwards.
THE FRAUD IS SO RAMPANT… i would not doubt if the speculator number is much closer to 70%, maybe higher. funny how in 03 they could not give away a vacant lot in north scottsdale for 200k, and now that same lot is ont he market ofr 600k….for a phucking sandbox of about an acre if your’re lucky.
oh, where to start???….being a native of the previously great State of Arizona, I can guandamntee that it’s not just Phx…it’s Tucson, Flagstaff, Prescott (IMHO…mathwise, this area is the worse shape of the whole state), Kingman, etc…the whole state is floating on a cesspool of speculation, fishy appraisals, non-stated incomes with an ARM, about-to-be-retirees COUNTING on cashing out their equity to pay for their golden years (and that’s ALL they have…what IRA?), a whole bunch of illegal immigrants paying cash for a house then renting to 12 or 14 of their closest buddies (causing all kinds of havoc in the neighborhood), the webuyuglyhouses.com crowd, the 22 year old Safeway clerk buying a new (horribly built) Pulte for $375K……etc.
The whole state is one big blistering bubble that will superheat in July and August and then explode like a festering boil on a chuckawalla.
This started years ago, in the 70’s, with the savings and loans debacle…this is the original get rich quick state…and it’s about to become the get poor quicker state.
Agree with you but man, I love parts of Arizona. Tucson, Flagstaff and Sedona.
I love parts of Arizona to . I had a place in Prescott once .Its just a bad time to buy in Arizona . Will the overbuilding and the run-up by investors it will take time for the mess to be worked out .
Well said Catherine . Alot of vacant houses and condo’s also in Arizona right now . Who want’s to buy into tracts like that ?
Gonna explode like a festering boil on a chuckawalla.
ROTFL! http://www.anapsid.org/images/sauromalus.jpg
Well well summer has arrived. All those fair weather flippers are frying right now. I personally know of a flipper who overpaid for the house, has a 1800 mo payment, can’t sell it and is renting it for $1000. Needless to say they need marriage counseling. Prices are starting to fall some but haven’t even reached sensible prices yet. As someone pointed out about Phx. heat….I have to bring the dog in now or he will croak. Cooling bills are going up a minimum of 20%. The rattlesnakes are coming out. For sale signs abound everywhere with open houses all over with no one showing up or at least I don’t see anyone. With all the ARMs adjusting, property taxes rising, and gas going to stay at $3 I’m sure that being a slave to their stucco box is very appealing. Ill bet there is alot of surfing the midwest homes salivating at $80 sq ft while praying some sucker pays $200 sq ft for the same home in Phx!
What is there to do for a living in Phoenix? Outside of real estate, retail, and healthcare. I’ve never been to AZ, just very curious.
Plus what about future water supply? Surprisingly, deserts don’t have much water. Which is why for most of human history, few people lived in them, unless you live in CA and will swipe water from other states.
If anyone here studies history, you will find that the entire LA basin was pretty much a desert in the 1800s. It was all irrigated, and they planted so many trees that they changed the ‘micro-climate’ of the basin and made it lush. Other wise, the only trees were occasional live oaks at 3000ft, and the pines in the 6000ft range. If you ever drive thru that Marine corp base south Dana Point in the OC on I5, that is the natural landscape…pretty ugly.
Phoenix’s main wealth creating private employers are Intel, Honeywell, Raytheon, Microchip (yes it’s called Microchip, but it is a very good company), and some left over Motorola. I’m sure that there are more, but as far as sectors go it’s semiconductors, defense, and tourism
Also Freescale, Google, eBay/Paypal, Charles Schwab, Wells Fargo.
For a city this size, there isn’t much real industry. I”m an engineer and there are some defense contractors out here and the semiconductor industry is pretty big. General Dynamics, Honeywell, Boeing, Orbital, Motorola, a bunch of Intel plants, and I see quite a few big Bank of America corporate buildings. But most of the growth seems to be in building houses and in building restaurants and small retail to serve the people who buy those houses.
Re Tucson, it’s interesting that the realtors of the city ( http://www.tarmls.com ) have chosen now as the time to stop posting a public link to their monthly sales statistics, just when inventory is continuing its build up to bubble-bursting levels.
Bubble aside ,but what is the water situation? Isn’t the Colorado about dry? Where else does Az , or L.A. get their water? The future will be interesting indeed…….
Sounds like there is plenty of water in Arizona:
Residents in drought-ridden Arizona pay less for water than those in Erie County and Buffalo
http://www.buffalonews.com/editorial/20060423/1028021.asp
I just returned from an afternoon of looking at model homes near 67th Ave and Baseline west of Phoenix. What a difference from last year. First thing that I noticed was that every corner had ten plus signs advertising housing developments—there were even a couple of poor guys out in the heat (approx. 90 today) shaking signs advertising incentives up to $60,000 for new Centex Homes.
The first stop of the day was at D.R. Horton’s Avalon at Country Place development. This development is close to being completed. There are currently 5 spec homes available for immediate move in. Incentives ranged from $7,500 on a $265,000 home all the way to $50,000 on a $325,000 home. In addition, they provide up to 2% of the purchase price towards closing cost and here is my favorite: one free year of weekly maid service! Classic.
Next stop was D.R. Horton’s Vermont at Country Place development. There are currently 18 spec homes available. Discounts were as high as $55,000 for a $350,000 home. Also provided up to 2% of the purchase price towards closing cost and again, one free year of weekly maid service.
The sales associate also mentioned that they are opening a development a few blocks away called Blossom Hills at Sunset Farms. Quick comparison of the pricing showed that the new developments prices for the same models ranged from around $45K to $60K less for the new development.
We then traveled to a Centex master community at Trailside Point which had incentives of $60,000 for purchase of a new home. There were a few other people also viewing homes, but overall there were a lot of empty sales offices.
Next was a Pulte Homes development. This development had three remaining spec homes. One unit (4,000sq foot, 6 bedroom, Shady Knoll model) had an original base price of $425,000 and had over $50,000 ($~475,000 total) of options including tile flooring on the first floor, corean counters, stainless steel appliances, and many more, was being offered for $375,000.
Overall, there was no comparison to last year when I visited the same area of town. Last year it was tough to find a parking spot, people were waiting in line to talk to people, and unless you looked like you were going to slap down $10,000 on the spot, they didn’t want anything to do with you. Not so anymore. As we start to heat up out here in the Valley of the Sun, I don’t think we have gotten close to hitting the bottom.
Where else does Az , … get their water?
The Central Arizona Project (which takes from the Colorado and another river) is a major source. It’s interesting that much water use is from agriculture.
When CAP water was piped into homes, people didn’t like it. So, it is used to replenish underground aquifers instead. However, ground water levels around Tucson are, I believe, falling. Dunno about Phoenix.
I don’t suppose that these desert cities will suddenly become non-viable, but the cost of bringing in water could get higher. Just as the rising cost of oil as oil runs out is going to make changes to the way we live.
Just got back from a bike ride in Chandler AZ, there are SO many houses for sale it isn’t even funny!! Anyone buying now would have to be retarded, what a year or two and these stucco sh*tboxes will be right priced after a 40% haircut!!
I’m in NW Phoenix and over the past 2 to 3 weeks the FSBO signs have started to reappear in dramatic numbers. I would say that 3 of every 5 signs is FSBO.
So that 42k inventory is probably much higher.
for the DR Horton homes offering free maid svc for a year. When that doesn’t work, will they be changing that to naked maid service and other amenties taken care of? LOL
By next month it will be TWO naked maids and a concierge