Can the Phoenix Real Estate Market Recovery Sustain Itself?

IMG_1200There have been a pair of articles of note of late, spelling doom for the national real estate housing market.

The first comes from SeekingAlpha, where the downturn in existing home sales as reported by NAR has the author believing the bull market of the past year-plus is going to stall. I’m hard pressed to disagree, if only because the double-digit appreciating we have seen here in the Phoenix real estate market cannot be sustained. At some point, inventory is going to climb as increasing numbers of home owners either take advantage of the equity recently built or find themselves above water for the first time in the past half-dozen years. And let there be zero debate, the increase in values is being driven solely by a severe shortage of inventory.

As for the second … it’s less an analysis than a Rorschach test using median sales prices as the picture in question.

Calling a bubble while a) looking at an incredibly short time frame and b) not examining what might be the cause of price increases is fairly irresponsible. And comparing what we’re seeing to 2005 seems like one hell of a stretch, if for no other reason than the 2005 bubble was fueled by the prevalence of garbage loans and lending standards. Ask any buyer today how much fun it is to deal with their lender’s underwriting department and they’ll tell you we’re nowhere near the No Income, No Job, No Problem salad says.

Having said that, here’s what the median price chart looks like for Glendale over the past year …

We’ve moved from south of $125,000 to approaching $165,000 as a median price in 12 months … that’s an increase of about 32 percent in a year’s time.

Read this and repeat it to yourself … THIS CANNOT BE SUSTAINED!!

Despite what some shadow inventory conspiracy folks say, this is not an artificially-created situation.

According to iMapp, one of the two tax record suppliers for the Arizona Regional MLS, Bank of America owns 357 residential properties here in the Phoenix market. (For these purposes, I looked at properties zones single family, five acres or less.) Of those, 24 are on the market; the other 333 are in limbo.

Yes, that’s more than 90 percent. That’s also only 333 homes across the entirety of Maricopa County.

JP Morgan Chase owns 79 homes. Total.

Wells Fargo owns 112.

Fannie Mae owns 1,143 … nearly 650 of those properties, well over 50 percent, are on the market and either currently active or under contract.

There is no shadow inventory with discussing. It’s really just that simple.

Of course, urging sellers to get their homes on the market now is like telling someone on a hot streak at a blackjack table that the cards are about to run against them. Vegas has been built upon our irrational belief that trends are irrelevant, that mathematical impossibilities eventually even themselves out.

Whether the current ride ends next week, next month, next quarter or next year, I can’t say. But it’s going to come to an end.

Inventory will not remain sub-10,000 forever. History says so.

Jonathan Dalton

Jonathan Dalton is a 40-plus-year resident of the Valley and has been helping folks buy and sell homes since 2004. He can be reached at 602-502-9693 or info at