And anyone who says they have any definitive sense of what 2014 will bring is more full of bluster than General Montgomery. (Which reminds me, for a really good read on World War II, check out Terry Brighton’s Patton, Rommel and Montgomery. But I digress.)
Inventory, after climbing for months, has tailed off and now sits at 15,750 detached homes across the Phoenix area. Yet the decrease doesn’t seem to signal much more than the change in the seasons, as inventory always tends to fall off at the end of the year.
There are a couple of days left in the year for the usual rush of closings to improve the numbers, but at the moment we’re 700 sales below last December. I’ll go back through the years once we have a final number next week but it doesn’t appear our run of “worst months since 2008” is going to come to an end this month.
Despite our intrepid local television stations still talking about what a hot market this is, lower sales on higher inventory doesn’t necessarily bode well.
At the same time, those waiting for a bubble burst like we saw after the 2004-05 climb may also be disappointed since there really isn’t anything one thing that in and of itself was behind this rise. A bubble can’t burst where it didn’t really exist; the increases we saw this past year were driven by very low interest rates and very low prices.
Is that in itself enough to cause a bubble to burst, considering interest rates are on the rise?
Interest rates are rising because the Fed is sensing the economy is strengthening on its own. A strengthening economy, in theory, makes it possible for more people to buy in theory if not in fact because the housing market is tied heavily to consumer confidence and confidence rises with the economy, making those reluctant to purchase less so even in the face of increasing interest rates.
I’d edit that last sentence but, frankly, I wouldn’t know where to start.
The other thing to remember with interest rates is, though the rates are high compared to the very recent past, they still are ridiculously low in terms of historical norms.
In other words, a five percent interest rate really isn’t bad.
At this point, you may be starting to think my thoughts are muddled but I assure you, it’s not my grey matter but the state of the market.
Conflicting signs abound. Which means, if nothing else, that whether this is a good time to buy or sell depends more on your own circumstances than the market. Because the market just doesn’t know what it wants to be and where it wants to go.
* * *
While the market makes up its mind and Mother Nature buries much of the country under snow, here are some views of lakefront living in 60 to 70-degree temps here in Glendale Arizona in Arrowhead Lakes:
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