This week’s seeming doom-and-gloom missive came courtesy of Moody’s Economy.Com, whose writers predicted a 17.6 percent drop in home prices here in the Phoenix area.
At least that was the headline which gained the most attention.
My first thought when I read this was it was another generalized, macro-level prediction that doesn’t take into consideration differences in the Phoenix real estate market. Many of us refer to the Phoenix real estate market as a whole entity when in truth it’s a grouping of diverse real estate markets with very different characteristics.
What happens in Paradise Valley, land of the million dollar homes, has next to no bearing on changes in Buckeye or Maricopa or Queen Creek.
My second thought as I read the article is this “prediction” is based largely on an already established pricing history. Moody’s isn’t predicting an additional 17 percent decline in prices but rather a 17 percent decline overall.
Bold. The Phoenix market peaked in July/August 2005 and has been declining ever since. Take a look at the my median price charts provided by Altos. It’s not too hard to find five-percent declines just over the past couple of quarters. Stretching to 17 percent in some of the hardest hit areas – Queen Creek, Buckeye, Maricopa, El Mirage – is a short leap from there.
This line of thought was confirmed by the chart at the bottom of the article where Moody’s is calling for the Phoenix market to bottom in Q2 2008 – about six months from now.
If this is in fact the case, is this the time to sit on the sidelines or to make a move? There’s risk inherent in either pose – wait for the bottom and it may come sooner than expected once the spring season begins, buy now and you may have an asset that depreciates for a little while before rebounding.
I covered the idea of picking a bottom in the Phoenix real estate market earlier this week, as well as the idea that buying a home at $225,000 now is no different than buying the same home for $225,000 six months later.
Except that six months later, if the market is turning, there would be less inventory, an unknown rate environment and sellers feeling their oats after gaining some leverage for the first time in years.
And for my Canadian readers – your dollar’s nearly at parity for the first time in decades. Your buying power in the United States, therefore, is better now than it has been for some time. By mere virtue of the exchange rate, the homes you purchase in Westbrook Village and elsewhere now are coming at a lower cost than they did even a few weeks ago.