Jeff Brown, aka the Bawld Guy – one hell of a real estate investment guru, by the way – have been having a debate about the true state of the Phoenix real estate market.
We don’t always reach quite the same conclusion because we find ourselves each looking primarily at one side of the supply-demand equation. He maintains there is pent-up supply waiting to be unleashed upon the market; I don’t fear that supply because I see the demand that exists.
Our latest debate came yesterday over this article on ZeroCrunch that says there are another 9 million homes waiting to hit the market nationally.
Try as I might to get excited about that notion, assuming that someone using a movie character that existed as the figment of the imagination of a deranged mine and who can’t spell the word deferred has credibility, I just can’t seem to do it. I feel much like an Oklahoma or Texas farmer might have felt back in the mid-1930s when they were told there were thunderstorms on the horizon – by all means, bring on the rain.
There are 8,740 single-family detached homes for sale in Maricopa County, an area the size of New Jersey. (If you’re in the mood for fiction, Zillow shows 16,773 and Trulia shows 16,915 – more on this in a bit). In the past week, 7,870 such homes went under contract. Of those, just over 1,300 were on the market for 16 days are fewer (choosing 16 because on many bank-owned homes, investors are shut out until day 16.)
If you’re not on the ground, you may never realize just how parched this listings landscape is. You likely won’t see the dozen or more offers that are submitted on virtually all new listings that reach the market, and how the lack of new inventory is helping to clear the existing inventory as buyers seek anything they can get their hands on – within reason, of course. If a seller has their home priced well above market, they’re managing to find a way not to sell in a strong sellers’ market.
In the first three months of this year, 16,426 detached homes sold in Maricopa County according to the Arizona Regional MLS. Last year, the first quarter of what turned out to be a near-record year, 16,707 homes sold in the first quarter.
The demand for homes exists and, I believe it’s safe to argue, sales would be higher if inventory levels were closer to the 15,000 – 16,000 detached homes we saw a year ago than the 8,700 homes we have now. Which is why I say now, and have said to all who will listen, feel free to drop 8,000 to 9,000 homes on the market tomorrow. Like the first raindrops hitting the Panhandles, they’ll evaporate quickly.
Back to my favorite whipping boys, Trulia and Zillow … one place where they do have a bit of value is in displaying foreclosure properties according to RealtyTrac, homes where the Notice of Default have been sent by the bank and the foreclosure process is underway.
According to Trulia, there are just over 25,000 homes sitting in purgatory … will all of these hit the market? In theory, eventually. In reality, some will disappear if they are sold as a short sale. Others will not hit the market if they’re purchased at the actual trustee’s sale. And even if all do hit, they all aren’t going to hit at the same moment in time. Just a basic reality.
Again … the market can handle another eight to 10,000 homes tomorrow with little more than a hiccup. And that’s why, as the call for the second wave of foreclosures is sounded now as it has been since 2008 without an actual sighting taking place, I say there is little to fear.
Photo credit: NOAA George E. Marsh Album