Now that I have your attention …
No bold predictions about the bottom will be forthcoming, dear readers. I’ve go about as good a chance of predicting the lottery numbers than I do of knowing the moment when the Phoenix real estate market is going to bounce.
But as of the general aspects of the real estate business in Phoenix into 2009, here are three I’m more than happy to share:
1) Canadian investment will pick up some momentum as the loonie gains in strength, but will taper off as it settles long-term into the 80-cent range.
The days of the 94-cent Canadian dollar most likely are behing us, barring another surge in oil prices. Rather, there will be opportunities appearing as the loonie bounces around the 80s … windows will close in the 70s, and reappear in the mid-80s as buyers realize this could be their last chance for a while.
In short, it’s not the best time to be sitting on the fence. Know your conversion rate, have some properties in mind, and make the move before the window closes for good at a rate not much better than a few years back.
2) Bank owned homes will drive the market. This likely is where my business will be headed even more heavily in 2009. Inventory may plateau briefly while the various banks impose moratoriums on foreclosures, but in the long run that’s only going to lead to a surge of bank owned homes once the moratorium ends. (Search all Bank Owned Homes in the Phoenix MLS here.)
Bank owned homes will lead to continued downward pressure on prices, at least until an equilibrium between supply and demand for these homes is reached. Keep in mind, there likely will be several different equilibrium points depending on the price range. Which leads to …
3) The mainstream media’s going to report the story and still miss the story. This goes back to a conversation I had yesterday before the ASU debacle with a friend in Tucson. The market for higher-priced homes has dried up in many places, including the Phoenix real estate market. Fewer sales at the higher price point lead to a lower median price (the median’s the price point at which there are an equal number of sales above and below that point.)
Sooo … fewer high-priced homes sell, the median drops and the media talks about the dramatic drops in home prices. Except not all prices are going to drop equally in all areas. And the focus on the lower median can obscure an increase in sales at the lower price points where many of the bank owned homes reside.
What causes prices to move? Supply and demand. But if the sole focus is on median price, and activity in the low to mid $100s is being overlooked because the only thing that the media’s looking at is the median price, there’s a distinct possibility that demand could match supply – at least in certain price areas. And once demand has overtaken supply – when almost every bank owned home is the subject of a bidding war, and not just the six out of ten (an educated guess) we see now – well, the bottom for that price range will be in the rear-view mirror.
Of course, that doesn’t mean that we’ll have seen the bottom for the higher end of the market. Multiple bottoms? Does that even make sense? Oddly enough, yes.
Call it Dalton’s Theory of Real Estate Relativity.
[tags]Phoenix real estate[/tags]