There’s nothing like a trip back in time to give some perspective on just how far the Phoenix real estate market has shifted the past several months.
This morning I was talking to a client about where the market was at the start of November when a particular property was purchased from a lender. Here are what the absorption rates looked like then:[table=23]
And this is where the market stands as of this past Tuesday:[table=54]
The obvious question is how could someone have seen this coming? And the somewhat self-serving answer is to watch the inventory updates here on All Phoenix Real Estate. If you had been following the weekly updates you would have seen the tide turn at the beginning of April. And the current market wouldn’t be a surprise.
The key to any decision is information … those who have it can make the most informed choices, those without or with only partial information are left to wonder.
Yesterday, buyers from Alaska closed on a second-home in Queen Creek. The notion of previewing each property before making an offer gave way to the reality of the speed with which homes were selling. Fire off the offers, then use the inspection period to see what kind of shape the home might be in.
On our 15th offer, we found success. Relatives in the area joined the home inspector for the walkthrough and these folks have a home which, with a little work, will be a terrific property in which they can escape the snow.
(Quick aside: I still recommend making a trip to the Valley before purchasing, just to get the lay of the land. These folks had done just that not so long ago.)
These folks read the signs, adjusted their strategy and got their property. Adjustments are necessary. It harkens back to Einstein’s definition of insanity, to do the same thing over and over again expecting different results.
Wishing we could go back to the higher inventory levels of November is pointless. That’s not where the market is. And, depending on who you listen to, it’s not where we’re going to be again anytime soon.
Such is the case of the Canadian dollar, which rallied past the 90-cent mark. There was speculation among some readers that the Canadian dollar would keep rising until it was back at par as it had been in 2007. Don’t settle for 91 cents went the message, hold out for the full dollar or more.
If you watch the currency markets you know how this worked out … the Canadian dollar has slid backward over the past couple of weeks. It’s still stronger than where it was only a few months ago but not as strong as it had been a few weeks back.
Adjust to the current market and you’ll succeed.
What’s the big thing to watch in the current market, at least for Tobey and me? Price movement or, more to the point, the lack of movement despite the decrease in inventory and increase in demand. The flattening of the price curve stands in defiance of everything we know about the law of supply and demand. And that’s because of a variable that’s been added to the equation.
If you remember my old analogy about the Phoenix real estate market being like a car stuck in the mud. The accelerator’s being pushed to the floor but the tires keep spinning, unable to gain any traction. Why? The lenders are standing to the side with a water hose making even more mud. How? By continuing to price homes below current market levels in order to initiate a quick sale.
Price new homes to the market at the level of the past sales and they’ll still move. Maybe it will take 10 days instead of five, but they’ll still sell. And then you’ll see prices move …
… assuming the assinine HVCC laws don’t continue to serve as a further anchor. (Note to the folks in charge – if most investments come with the required caveat “past performance is not an indicator of future results” then how is it that we’re now requiring appraisers to factor past declines into future values? Assume the market will remain down, hold the prices down accordingly and you have the self-fulfilling prophecy.
Banks tend to be fairly unintelligent when it comes to selling real estate so it might take them a bit longer to figure out proper pricing. And there’s a slight chance they just won’t.
If they do, though, and the prices start reacting to the laws of supply and demand as they should, are you prepared for the change?
If you’re reading this website, you’re well on your way.[tags]Phoenix real estate[/tags]