‘Buyers Have Lost Confidence’ In Arizona Housing Values
The Tucson Citizen takes us back to Arizona. “Greed is out and fear is in when it comes to Tucson’s housing market. The psychology of the market has changed significantly from a year ago, when speculators and investors, primarily from California, descended on Arizona like locusts.”
“The formerly white-hot Tucson real estate market has cooled so much that one builder, KB Home, recently laid off 17 workers in its Tucson division, about 8 percent of its work force. The job cuts at KB were made across the board, hitting both field and office personnel.”
“Marshall Vest, a University of Arizona economist, agreed that Tucson’s housing market has cooled off considerably. ‘Things are slowing down for sure,’ he said. ‘The number of houses sold are coming off their peaks, and prices are leveling off. The median price of homes in Tucson has been steady for about six months.”
“While Tucson’s housing market is cooling, the market in Phoenix is in the deep freeze. KB Homes and Fulton Homes have each laid off workers in the Valley of the Sun, where the inventory of unsold homes is piling up. Vest said housing prices in Phoenix are tumbling. He said median home prices in the capital city have fallen from a high of $350,000 to about $300,000.”
“‘The frenzy is gone,’ Vest said. ‘The scramble to buy and get in on the action is gone. Investors and speculators have retreated from the market.’”
The East Valley Tribune. “New home permits and sales of existing homes fell sharply in April compared with the same month a year ago and they didn’t meet industry expectations they would match 2004 levels.”
“RL Brown said consumers have so far failed to buy up the growing inventory of new homes generated by an apparent wave of cancellations from consumers. He said this is because consumers haven’t been able to realize gains in their present homes in a faltering resale market.”
“And, he says, buyers have lost confidence in the current state of builder housing values. ‘It appears that ‘optional’ consumers have opted out for the moment while ‘must-buy’ consumers are searching for the deepest discounts and best buy-downs, placing the market in a holding pattern after four months of 2006,’ Brown wrote.”
“Brown said the market should be showing some evidence builders have stemmed the flow of cancellations, adjusted their pricing policies and regained some momentum in their sales offices.”
“‘It is becoming more and more unlikely that we will salvage a 2004-like year out of this quagmire, especially with rising gasoline costs, increasingly strident complaints about transportation infrastructure and the impact on edge areas, and the bumbling State Legislature, plus the buzz about rising interest rates,’ he wrote.”
“Greg Burger, who helps Brown with his research, said some areas have been hit harder than others. One is the Johnson Ranch-Hunt Highway corridor. ‘I would hedge a bet that part of it might be the transportation issue,’ he said. ‘Over the last year, the median price down there is up $100,000. All of these houses were sold, but the boulevard wasn’t created.’”
“Brown said builders haven’t been able to hold buyers to contracts even when customers are forced to fork over thousands in earnest money for cancelling the deal.”
“‘Consumers are perceiving that the deep incentives builders are offering new buyers are indeed price cuts that will leave them with homes and mortgages that are perhaps $50,000 to $70,000 higher than what a walk-in can buy,’ Brown wrote.”
“‘Builders can’t stomach giving the old buyers credits down to the ‘new price’ at closing and seeing those profits flushed out,’ Brown said.”
Recently, when I mentioned to some contractors that KB Homes was laying folks off in the valley, they looked like they saw godzilla over my shoulder. Here is an editorial on that ‘bumbling legislature.’
‘Last week the state’s legislative leaders proposed a $9.9 billion state budget for next fiscal year, which begins July 1. It includes both increased spending and a handful of tax cuts. There are enough of each so that come August, when the election year is in full swing, most legislators of both parties can tell their constituents - or at least their party’s faithful, who are the most likely to vote - they stuck to their principles and delivered. What provided this cake for them to have and eat, too is a robust state economy that has provided legislators a $1 billion surplus.’
‘Yet while the suits and skirts party under the statehouse copper dome they fail to see the dark clouds on the horizon. There is a housing crisis brewing in this state. If managed poorly, it could prove the economic ruin of us all. The robust housing market that most Arizonans have been borrowing money to revel in for the past four years is about to demand its pound of flesh.’
‘The cost of homes, new or used, is now ridiculous. The so-called starter house, which used to be priced around $100,000 to $120,000 10 years ago, is now $220,000. Mortgage interest rates returning to the 7 to 9 percent range of the 1990s will make all those $220,000 homes under construction in Marana, Sahuarita, Queen Creek and Buckeye too expensive for homebuyers with modest incomes. That will create a glut of new homes and bring new housing starts to a halt.’
‘There’s no denying the clouds are out there. Perhaps it would be wiser for the Legislature and the Governor to hold on to a good portion of that $1 billion surplus. There’s a good chance we’re going to need it.’
Love the Godzilla line
‘The cost of homes, new or used, is now ridiculous. The so-called starter house, which used to be priced around $100,000 to $120,000 10 years ago, is now $220,000.
Geez… is that all?? In my neck of the woods (L.A.) any marginally habitable “starter” home in a neighborhood where you don’t have to routinely dodge bullets is going for at least $600K and up! Not saying AZ prices aren’t bubbly, but I guess “excessive” is a relative term.
The key isn’t the absolute price, a starter home at $2 million would be quite cheap if the average college graduate earns $2 million a year, and a high school graduate makes $1.2 or similar. It’s price compared with incomes or rental value that determines the bubblishness of a home’s value.
Hello everybody!
Just thought I would check in and let people know that I have a new post up.
http://www.housingbubblecasualty.com
Thanks!
SoCalMtgGuy
wow , just on prime time TV. Couple can’t get a bid in phx. Mentioned inventory in several cities.
Really, which cities were mentioned?
“‘Builders can’t stomach giving the old buyers credits down to the ‘new price’ at closing and seeing those profits flushed out,’ Brown said.”
Nor should they be expected to, the people that are going to get hurt are the one’s that were trying to make a quick buck. A couple of guys that I wor with have bought houses out in the outlying Pheonix areas, not sure if they have rented them out yet or not.
I bet they are in Queen Creek!
Is the article painting a rosy picture, or is Tucson doing fine and basically just “returning to normal”? Inventory is way up but prices are holding steady. Would love to see the market correct, but we’ll see.
I do suspect we’re seeing a rosy picture painted by the rag because why would developers cut costs or throw in freebies if the market wasn’t in a crunch?
the market in Phoenix is in the deep freeze. KB Homes and Fulton Homes have each laid off workers in the Valley of the Sun, where the inventory of unsold homes is piling up. Vest said housing prices in Phoenix are tumbling. He said median home prices in the capital city have fallen from a high of $350,000 to about $300,000.”
____________________________________________
WOW! The truth is starting to hurt!
14.3% haircut?
thats a 16% drop off the top of my head.in 2 years 35% ?
PHX MLS today:
46,000 listings
40,000 dweling units
I bet by friday it will jump 500-1000, keeping pace with current trend.
Ryland warns, 2nd quarter sales down 35% from last year. They’ve also bought back 2.2m shares at an average price of almost $70. Given the current share price, they’ve effectively pissed away about $40m.
Thanks!
How interesting to see the Tucson paper wacking Phoenix but claiming Tucson’s just “returning to normal.”
How interesting to see the Tucson paper wacking Phoenix but claiming Tucson’s just “returning to normal.”
All the papers are doing that.
They all say “5 miles from here it will be a disaster, and people are jumping off their worthless buildings. But it’s different here. We’ll be fine”.
The San Diego paper often discusses the bubble popping in Massachussettes or So FL or PHX but never San Diego.
It is because the journalists own homes in the area, and do not want to believe that house values can go down.
And we’ve already seen how “popular” a few reporters have become in their local real estate community for having the temerity to write an honest article about the health of their local market.
No kidding, talk to anyone that owns a house about house values decreasing and they get defensive very quickly.
I often wonder if the local SD realtors have a bounty and Toscano (aka Prof. Piggington) or not. They must hate him by now.
I just overheard this 25 year old in my office say that her and her boyfriend put in a lowball bid on a 16year old fixer upper CONDO! And it was accepted! I didn’t say a word…
How low? What percentage or dollars off at what price? Maybe good but maybe too early.
The Baltimore Sun takes the cake…see this link–they changed the headline of an AP story about the new home sales numbers from “HOme sale up 4.9% in Apr.” to “New home sales soar in April”, the only paper to do so according to Google, all the while editing out comments about inevitable dropping prices…pretty pathetic. This is why I started the Balto. blog, but it’s nice to be vindicated. The Sun is a shill for the MD. Association of realtors, and this proves it.
What? Wrong link–that was weird…here the real link
http://tinyurl.com/zeezm
Argh–vindicated = validated…watching Lost.
That black cloud forming is the ‘Real-ity tornado’ headed across the nation. Just watch what happens when the temp goes above 100 degrees mark and all those vacant houses shut up tight start heating up inside. And those open houses with the air conditioner running for hours and no buyers show….tsk, tsk
“‘The frenzy is gone,’ Vest said
The people in PHX still do not realize that there never should have been a frenzy. All of my friends in Arizona (who are very educated) really believed that every retiree, man, woman, and child wanted to move to PHX - it was the 21st Century promised land.
The nation-wide financial reverberations from the fallout could be staggering. It’s like watching a car wreck - I just can’t avert my eyes.
Thanks Ben - you blog has been sucking the productivity from me for the last 6 months.
Well said!
I have to admit something similar provided this is not revealed to anyone:-)
Yes, it’s very addictive isn’t it. The only time I haven’t looked at this blog on daily basis was in January while on vacation in Hawaii.
Ah yes, but the question is: Did you go back thru the archives to see what you missed? If so, it might be 12-step time………
….Uh, oh….
LOL! I’ll be in Hawaii next month. I’ll be taking my laptop. ‘Nuff said.
Hi my name is Joey and I am an addict. LOL!
HI JOEY!
My name is Sammy, and Joey is a blog-a-holic. Whew, felt good to finally get that off my chest.
Now,
I don’t mean to offend. I think Arizona has many beautiful places(love the Mogollon Rim and dream of the Chiricahua Mts.). But to me, a fairly typical Americano, Phoenix has all the appeal of a dirt sandwitch. LA traffic in the sweltering heat….enough said.
“…sucking the productivity from me for the last 6 months.”
You mean it’s not just me? I was beginning to think all the regulars here were self-employed or retired. I’m glad I have the ability to erase my electronic footsteps on working hours…LOL.
OT
Showdown at the DumDum Corral
Sez the flipper to the builder: “I kin sell my house for 20% more than I paid you for it.”
Sez the builder to the flipper: “I kin sell our houses for exactly what you paid for yours, as long as I throw in granite countertops, European cabinets, 7 nights with Suzanne and a free pool.”
Sez the flipper to the builder: “I kin sell my house for 10% more than I paid you for it if I first rent it for more than my carrying costs to perfect tenants with no pets who will stage for me for free.”
Sez the builder to the flipper: “I kin sell our houses quickly by cutting my pretax 20% profit margin to zero, and breaking even while leering and twirling my mustache.”
Sez the flipper to the builder: “I kin … uh …”
Sez the builder to the flipper: “Looks like you brought a knife to a gunfight.”
That’s about how it will work out, I believe.
I don’t want 7 nights with Suzanne. You couldn’t pay me enough to hit that skank.
Funny I live In Gilbert, AZ and I was at a local restaurant-bar back in like August of 2005. I was sitting next to this woman and her husband and I could overhear her talking about how smart she was because of the value of her house now. I told her that she better sell it becuse the price would eventually go back down. This woman lierally went after me verbally and her husband had to calm her down. She very easily could have made money but the funny thing is that so many of these people in the Phoenix area actually were believing that their house that cost $130,000 in 1998 was actually woth $315,000. Well it possibly was last year but it isn’t anymore. This is just the tip of the iceberg. A few are losing jobs now but I hate to say it but there will be a lot of unemployed in the near future.
People that butt in to other people’s private conversations in a restaurant are annoying and out of line.
“People that butt in to other people’s private conversations
in a restaurant are annoying and out of line.”
Well, yeah, but maybe I just spent too much time overseas, and when I got to America (Mid-Atlantic) and hit the restaurants, I thought “My God, all these people are so loud! Do they really want us to hear everything they say?” Seems so, especially in the case of someone bragging about their smart moves in the property market. Personally, I (almost always) keep my mouth shut, even when I hear stupidity at the next table, but what happened to quiet discreetness at dinner? Oh never mind, that’s OT.
Anyway, whenever I hear people here pat themselves on the back for their rapidly appreciating (till now) house values, I can console myself that I won’t need to take revenge on these boasters: The tax assessor does it every three years as the assessments go sky high!
Way OT but what about people on cell phones having extremely private and sensetive conversations right out loud while in the supermarket checkout line. I’ve overheard some embarrasing marital spats that would have taken place only behind closed doors in the “olden days.”
http://www.overheardinnewyork.com
I have had that same conversation with the same results. It is not Profit untill you sell it!
I am a Ben addict too. Get hives if don’t check this site every little while.
Everyone wants to live in Phoenix/Tuscon in the summer. And I am King Kong also. Love that 115^F. Ciao = the next hot spot for investing will be Needles California. Closest depiction of hell that I can think of.
n2lc– WAY too late on that one. Was there last May for a Scout canoe trip on the river. Talkin to the shuttle bus driver. He was telling us how prices there had soared. New condo developments, everything. IN FRIKKIN NEEDLES. If that ain’t a sign of the coming of the Apocalypse, don’t know what is.
O– sorry– for hell, please continue south 185 miles. 31% 05 vs 04. Didn’t know hell was so expensive.
How about Indio? I nearly had a heart attack when I saw all the new developments being built along the I-10. My wife and I used to go to the Indio Date Festival back in the 80s and we always used to discuss how it must suck to live there in the middle of summer.
Flat, dusty, dry and 100 degrees plus all summer. I think it’s below sea level like Palm Springs.
c’mon…it’s not that bad. If you get a little warm just take a dip in the 82 degree pool to cool off.
It’s interesting to note that the article used the same word for these speculators that I used a while ago on this blog - “locusts”.
It shows that finally this phenomenon (of so called investors moving from place to place, sucking it dry, and then spitting it out just to move on to their next target) - is being recognized in the media and hopefully that will help prevent its virulent spread in communities that are still healthy (housing wise) and not yet infected.
perfect word
I noted that too.
Some reporters are reading this blog.
Congrats. You made it to the big time!
clouseau.
I dunno’ how about maggots, jackals or hyenas? They all like to travel in packs and devour their prey before sizing up their next victims. I’m sure we’ll see some real “cute” metaphors used by people in the news who have been harmed by the housing terrorists.
It is Official: Flipping House Is Harder to Do!
Please see this article with the same headlines in MSN Money….
http://tinyurl.com/kncjc
Alot of these flippers didn’t even do anything to the house/condo . Other flippers bought pre-construction deals and flipped the deal before it even closed escrow . That means a flipper flipped his flip to another flipper before the condo or house was finished and that flipper never even took out a mortgage . By the way , alot of real estate agents engaged in this practice which is called a “double escrow “.
Phoenix Flipper of the day:
owner: GOETTGE DAVID J
9165 W SALTER DR, Peoria, AZ 85382
MLS #: 2538912
List Price: $324,900
Sales Price: $155,007 (5/17/2001)
9154 W SALTER DR
PEORIA 85382
MLS #: 2538907
List Price: $324,900
Sales Price: $156,416 (5/17/2001)
I guess some one doesn’t like the recent rate adjustment on the ARM. Now it doesn’t cover the $1195 per month rent he has a contract on. Time to bail…phuck the flipper!!!
everyone is saying the market is returning to normal…and just passing buy in it’s way to a terrible one.
It is returning to normal. Pre-bubble 1999 normal.
Interesting article on weakening dollar
http://www.infowars.com/articles/economy/iranian_oil_bourse_opens_for_business.htm
It’s ironic that Iran should take steps to protect the dollar. If the dollar loses its status as the world’s currency, then interest rates must rise to compete with other currencies, and the housing bubble will have to take a back seat, which means that deflation will be on the way.
In this country, cash will be king.
Watch for the Fed lowering, or even maintaining current interest rates. If they do, get out of the dollar.
If the US starts purchasing oil in foreign currencies, expect hyper inflation.
Ben, I propose a thread devoted purely to creating a “photo essay” of this, i.e., photographs of whole blocks of newly built home depot - mediterranean style homes with multiple for sale signs out front.
This just released by the Consumer Federation of America, something that many have been saying for quite a while here on Ben’s Blog………Titled:
New Analysis of Non-Traditional Mortgage Borrowers Shows Less Wealth, Weaker Credit Than Industry Suggests
http://www.consumerfed.org/pdfs/Exotic_Toxic_Mortgage_Release052406.pdf
Duh. The suggestion that these FBs are betting their financial world on housing assumes they had something to lose when they placed this bet??? They have poor credit to begin with for a good reason - they are credit risks! So they default and their poor credit gets a little worse. The real victims here are regular folks with pensions and 401ks invested in stable market funds that without us even knowing own MBS… that will get crushed.
Screw the FBs.
Before this nightmare is over, some with formerly satisfactory credit ratings will join the group with problems. Az BP makes a good point that it is hard not to get hurt in this debacle.
Realtor.com numbers for Long Island inventory update:
03/31/05 15,524
02/19/06 24,691
05/11/06 30,089
05/21/06 31,048
Today: 31,272
For sale signs for everyone!
I live in the Inland Empire of Southern Califronia. An anecdote about an acquaintance of mine illustrates the lack of education still out there about AZ and RE in general. This guy had a high-paying LAPD job (100k+) with benefits and the requisite early (safety) retirement. He recently quit outright to become a realtor/investor. When I asked him why here was his exact reply: “Oh hell yeah, man, these buddies of mine flipped some houses in Arizona and made a killing. But now the thing in AZ is land, man. I just invested a bunch of cash in some land out there, I’m gonna subdivide it and sell the lots, I’ll make at least 600k on that deal probably.” And he hasn’t sold a house as a realtor here since he started. I think his wife is really starting to worry.
For those watching the SoCal market, I can tell you that on my block there are 3 houses for sale that have been on the market an average of 4 months. One just price-reduced from 645k to 627k and is on the third realtor, one is on the second realtor and slightly price-reduced and two of then sit empty. Inventory is rising daily, sales are taking several months and the sales that do happen are all below asking price. This is just the beginning, but it sure as heck beats the days when the prices were going up 75k every 6 months around here (Rancho Cucamonga, CA).
Wow, I can’t believe the Long Island numbers. It’s NYC premium suburb stuff. I have friend telling me all the reasons why prices won’t fall there….cuz its different there. But the inventory numbers tell me different.
Thanks for the info.
Simmssays…
http://www.americaninventorspot.com
Recently moved from Connecticut. And went on vacation to Florida right before move. Tons of houses for sale in Fl. More then I could count. Large numbers in CT too, less thou the Fl. Almost none here in the Bay area. I guess it will take some time to bust here.
The SF bay area might take the longest of all to take its hit. It’ll spread from all the 1-2hr commute areas inward, like cancer….
OT, but scary:
American Dream Faces Setbacks in Peoria
“There’s a scandal brewing in Peoria and it doesn’t smell like potpourri.
“Allegedly, low-income first-time homebuyers got hooked up with predatory lenders who charged them balloon payments, high interest rates and refinance penalties. Having received government assistance for some time, there were rules in place barring making these loans to these individuals. Now they can’t make payments.
“It seems the poor people attended a home-owning class sponsored by the Peoria Housing Authority. The instruction then turned into a pitch session for the predatory loans.
“A PHA employee who complained about the practice was fired.
“The Peoria Pundit has been following the story, with growing indignation.
“The Peoria Journal Star too tracked the tale, less stridently, but with these quotes:
‘These types of loans should not have been part of the program,’ PHA attorney Brian Mooty said at a board meeting on Monday.
PHA Executive Director Roger John blamed the situation on a previous employee… who left the agency… ‘It didn’t come to light until after she left,” John said. “Hindsight is 20-20.’
“Ho hum, a 58-year old housekeeper who took one of the loans, ‘will pay $97,494 in interest on the $53,500 loan and won’t be building equity in the home until making five years of payments.’ Whoopsydaisy.”
There should be a legal requirement that borrowers must be able to read and understand loan documents, or the’ll continue to blame the lender for their stupidity.
That would be “discriminatory”.
It would also lead to claims of racism, since the “minority groups” are the ones who buy into these things. After they do, some do-gooder organization claims they have be “targeted”.
We all know the truth…….everyone gets “targeted”, but only the ignorant buy in.
So, nothing will change, and the game will continue, requiring tax-payer bailouts for the poor and oppressed.
These folks need to check out the Indiana usury loans. They may have a way out of the note. In any case, a big class action suit is called for.
These folks need to check out the Indiana usury statute. They may have a way out of the note. In any case, a big class action suit is called for.