Phoenix Real Estate Market Trends, Part Deux

Jonathan Dalton, Phoenix Real Estate AgentEarlier 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.

Phoenix real estate inventory

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]

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 allphoenixrealestate.com.

0 Comments

  • Jeff Brown 10 years ago

    Jonathan – Your points are so perfectly stated, so elegantly supported, with so few words, and with such rational thought, you’d think everyone would be nodding their heads.

    I agree with you.

    However, you’ve also pointed out, between the lines the paradox of the last decade.

    So many times the past has been a prelude. How many times have I written, “I’ve seen this movie before….blah blah blah”?

    The paradox is though much of what’s happened and is happening, are first time events.

    In my many years, I’ve not seen a run-up lasting nearly so long. Not even close. Phoenix experienced, in ’05, appreciation just under 50%! Also a first by magnitudes of order.

    On the flip side, (pun intended) the whole sub-prime/stricter underwriting thing hasn’t happened in my time until now. Neg/ams and stated have been around since Reagan was in office with no problems, with mostly prudent underwriting.

    It’s my contention what you’ve said today is true. It’s also my contention much of what we’ve seen in the last 10 years and today is brand new to us historically.

    Any thoughts?

  • jon 10 years ago

    Great Article.

  • Jonathan Dalton 10 years ago

    Sorry, Jeff, wasn’t ignoring you … got wrapped up in something.

    The price runup was unprecedented but at some point it reverts to being another cycle (more exaggerated as it may be.) Same can be said for letting the sub-prime lenders run amuck. But I don’t think sub-prime is dead forever. Forever is a long time.

    Given the resets already have started to happen and foreclosures are on the rise, it strikes me as interesting that the number of listings have not risen more precipitously compared to historical norms. Much of the hype would lead you to believe that the number of new listings is unprecedented – that could not be further from the truth.

    What will happen next year? I don’t think anyone knows. One analyst will say the resets will kill real estate as we know it. Another says many of the sub-prime buyers facing reset already have refi’d back out, assuming that they could.

    I don’t think anyone has an absolute answer (or anything close to it.)

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  • Jeff Brown 10 years ago

    You’re right Jonathan, nobody has a clue – at one we’d wanna rely on. 🙂

    I think it matters though when it comes to my point about the reasons for our current market. You say it’s part of the normal cycle which is mostly right. I’m saying the cycle this time was more than just extreme, due to the unique factors causing the boom in the first place, and the underwriting woes which has served to concentrate the correction.

    Past lender caused problems have historically been ‘one wave’ tsunamis. This is a multiple wave disaster.

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