The Roaring 20s, with an economy built almost entirely on credit? What could possible go wrong?
Troy? Forget what Cassandra has to say and pass the wine.
The Roman Empire? Too big to fail.
The honeymoon phase of any marriage … well, okay, you get the drift by now.
How about the Phoenix real estate market of the past year? Values have soared higher as inventory shriveled into the several thousands and buyers continued taking advantage of historically
ludicrous low interest rates to purchase homes. And there probably was a more than a little bit of an overcorrection to the downside reverting back to the mean.
And so it is.
As of the moment, there are 9,726 detached homes on the market in Phoenix; that’s up about 5 percent from last month’s market report (which was about 3 weeks ago.)
This isn’t shadow inventory – only 449 are bank-owned, 47 are HUD owned and 357 are short sales. These are investors who are completing flips and, increasingly, sellers who are realizing they have equity and are smart enough to clear their chips off the table and cash out.
Even if there’s little risk of values falling precipitously, risk in terms of the ability to sell a home in a timely manner increases as inventory rises. Less homes equals shorter marketing times and higher sales prices; more homes equals longer marketing times and prices that aren’t nudging the envelope higher.
Maybe it’s worth it to some sellers to hold on and try to eke out another couple of percent, ignoring all the way that historical appreciation here in Phoenix is in the 3 to 5 percent range annually – not monthly. In other words, that $150,000 home you have now, in a historically normal market, would be worth around $154,500 to $157,500 a year from now.
That’s better than a poke with a sharp stick (and better than 2006, 2007, 2009 and 2010) but maybe not spectacular enough to warrant taking a chance on a market with significantly higher inventory.
And none of this, incidentally, takes into account the likely rise in interest rates as the Fed slowly tries to take the training wheels off the economy.
All of the above deals with the supply side of the equation. The demand side?
In June, there were 6,143 closed sales recorded in the Arizona Regional MLS (data is deemed reliable by ARMLS but not guaranteed.) That’s more or less the same as last year’s 6,278 but well off the near-record 7,791 from June 2011. (There were 7,800-odd sales in June 2005 when the bubble was inflating unchecked.)
So, for now, the demand remains.
But watch the supply, kids. This party isn’t going to last forever. If you’re even thinking slightly of selling, call me today and let’s talk numbers and market reality.