There’s a Housing Tsunami Coming. In Other News, WOLF! No, Really. I Mean it This Time

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

About Jonathan

Jonathan Dalton is a 30-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.

  • Hey Jon — It’s gettin’ downright irritating. You insist on defeating my view, at least at the local Phoenix level, via empirical evidence. Stop it! Though I’m still a believer in the national numbers, re: future foreclosures and their market affect, it’s beginning to look as if I may’ve come to a gun fight with a rubber knife, when it comes to your market.¬†

    But seriously, stop with the documented crappola, will ya? ūüôā

  • How very, very insensitive of me Jeff … I’ll try better to at least all of my claims thoroughly undocumented. ūüôā

  • Another Investor

    Told ya so Jeff!¬† Time for a road trip to Phoenix¬†and some “boots on the ground” research!

    I spent the last week out there, sniffing dirt.  Walked into about 8 subdivisions.  Six had buyers in the office writing contracts.  One was sold out and the last one I visited about 10 minutes before closing the day before Easter.

    Most builders have had more than one price increase in the last four months.  Beazer has had three, according to one of their sales reps I have known for about 10 years.  Another builder rep said the asking price for the remaining unsold section of finished lots in the subdivision had doubled since last October.

    Stood outside waiting¬†to view a listed comp for a house in Tempe I’m thinking of selling.¬† Three prospective buyers toured the house within the half hour we were there.¬† The agents are downright rude again, just like 2005.¬† In another Tempe rental, the parents of the renters asked if I was interested in selling the house or if I had another¬†house I wanted to sell for their other child.

    The shopping centers are full of shoppers carrying bags.  Restaurants are busy again.  There is an explosion of road and infrastructure construction in the West Valley.  A huge new warehouse is going up next to one off the 303 that sat vacant for several years.  The 303/10 interchange is now under construction.

    It’s hard to pin down the amount of the¬†pent up supply, but the pent up demand is there and there is a lot of it at current prices and interest rates.¬†

  • Why thank you, AI … I haven’t been in the new builds of late but I’m not surprised about what you’re reporting. My feeling has been that we were one of the first markets to fall, stands to reason we’d be one of the first to recover. Numbers are starting to match that expectation slowly but surely.