Earlier today I mentioned a couple of quick thoughts on recent trend charts I’ve seen for the Phoenix real estate market with data dating back to 2001.
(And for those playing along at home, the area with the most sales in the month of September was Sun City/Sun City West … more on this in a bit.)
Much time has been spent discussing the soaring inventory here in the Phoenix real estate market. At 2 p.m. today, there were 57,425 active properties in the Arizona Regional MLS. As anyone who reads this blog knows I consider that number in and of itself worthless as it mixed multiple property types (single-family detached, townhouses, condos, lofts) and also areas (anything in the state entered by a Phoenix-area agent will show up. There are 37 Tucson listings in the Phoenix MLS, for example.)
More significant is the Maricopa County-only inventory figure for any given subset. For purposes of this blog, I track only single-family housing as that’s where the highest public demand remains. There are 40,700+ such properties on the market.
Almost universally, it is posited that short sales, pre-foreclosures, foreclosures and lender-owner properties are causing inventory to swell. But a quick look at some historical data shows new inventory in 2007 – the number of new homes coming onto the market – is little different than in past years.
Much of what we’re seeing now in terms of oversupply is caused by a surge in listings a year ago (many of which still are on the market – and severely decreased sales. As I said in my earlier post, sales will need to spike to reach even 2001 levels.
Higher home prices are part of the cause for slower sales, but not the full cause. In some areas prices already have fallen precipitously – El Mirage, for example, now is home to dozens of homes in the mid-$100s after run-ups that saw prices climb into the low $200s. The same can be seen in Buckeye or in Queen Creek.
Tightened lending standards also have played a part though the pendulum nearly swung to the far extreme, where credit was non-existent. Those with good credit and money to put down still can get loans. For that matter, 100% loans also still exist albeit with higher rates than in the past. Underwriting standards have loosened to the point that a quart of blood no longer is necessary to secure a loan.
The mainstream media hasn’t caught up to that side of the story.
One final thought … much is made of the current median sales price figures primarily because these sales prices don’t reflect incentives provided by builders (for spec inventory in the MLS) or by the sellers in the form of contributions to buyers’ closing costs. Many would throw out the current numbers as useless for comparisons with the past.
What’s missing in this line of thought is perspective. Seller contributions and builder incentives have been there all along, to some degree, depending on market conditions.
When my ex-wife and I bought our first house in 1998, the builder offered us incentives off the price for using a preferred lender. There was no outcry on the real estate bubble blogs because the blogs, bubble or otherwise, did not exist.
When I purchased my second house in 2002, the seller paid 3% of the sales price toward my closing costs. Again, there was no major scandal involved. I was short on ready cash, the seller was long on equity and the deal went through. Again, no major outcry.
When I purchased my current home in 2003, we received a much-needed allowance to replace the carpeting. (If I’d known about Morgan then, I wouldn’t have bothered.) Again, the incentive didn’t change the final sales price. And again, no Congressional investigation was needed.
What’s the point? The point is we live in a society that is so driven by the now that there is almost no sense of the past. Some believe current sales figures are corrupted by various practices that have been in place for years, even in those years that are held up as “pure” data. And this happens because those tracking the market now, particularly the bubble bloggers, couldn’t have cared less about the market five years ago.
We don’t demand perspective in today’s society. Listen to talk radio, or to the call-in show after your favorite sports team’s latest game, and you’ll see perspective usually is all but forgotten.
But that doesn’t mean that’s the way it should be. The past is prelude. Remember that.
[tags]Phoenix real estate, real estate sales, real estate marketing[/tags]