The Arizona Republic tried something new today.
They have a sidebar to Catherine Reagor’s article promoting, “View a video of Catherine Reagor discussing Valley home prices at video.azcentral.com.”
I love that they are trying new stuff.
Unfortunately, the video is nearly impossible to find.
There are over 100 links on the page they refer you to! Over 100!
I figured if they promoted the video on the Arizona Republic the link would be at the top of the page or somehow the video would be easy to spot. No way.
I gave up on finding it after a minute of searching. I even tried to find it using the azcentral.com search feature. No luck.
Then I found it searching for “prices” using the “Find on this page” feature of my Firefox browser.
Right now, the link text is “Valley home prices” and it’s located in the third column. It’s the second link below the photo of the guy with a basketball.
They couldn’t have done a better job of hiding the link. Or perhaps they could’ve said, “Somewhere on azcentral.com you’ll find a link to…”
Nevertheless, real estate wonks will want to check out the video if only to see Catherine Reagor in action.
By the way, if I could have linked you directly to the video, a la YouTube.com, I would have. Unfortunately, azcentral.com is not set up that way. You have to go to their page and click on the specific video link. If YouTube.com used the azcentral.com style of linking, YouTube.com would have been a huge failure.
{ 8 comments… read them below or add one }
Cbass 11.26.06 at 2:18 pm
John,
I feel less intelligent since I have now watched the clip, thanks.
She basically gave no useful information in that entire piece? The only facts she cited were for the year 2020?
When you say that homebuilders are going to cut production because sales are down you better get into that a little deeper not just tell me it will be O.K. Give me a plausible explanation as to how and why this will be O.K!
If sales are down that means less commissions for the realtors, mortgage brokers, etc… and that means job cuts are coming and disposable income goes down. In addition to lending activity when the homebuilders cut production that means they cut jobs. When 33.3% of your entire economy is based on the housing industry you got problems.
When will someone give me a rational explanation to these issues? I would really appreciate it if you or one of your informed readers can clue me in.
mrd 11.26.06 at 3:52 pm
I find it strange that home builders are going to cut production instead of continuing to cut prices. These builders were able to make houses at an acceptable profit way before the bubble. The last few years must have provided huge margins for these guys.
The builders don’t make any money if they don’t build and sell houses. As long as there is reasonable profit, I would assume the builders will continue to undercut the local markets.
What I saw on the video clip, was someone that was simply saying: all is well.
If there does come a time when the builders substantially slow down, this means there are some big problems. Phoenix is very much addicted to growth. A substantial slow down in the building of homes would hurt a whole lot of people.
I agree with Cbass. It would be nice to see a rational explanation to the issues he has posted.
David 11.26.06 at 4:04 pm
Explain John
And stop deleting informative posts. Why don’t you just come out and say “there’s one born every minute and I’m gonna find one…there must be at least one left so I can close one more killer sale.”
What caused this vertical line?:
http://www.biggerpockets.com/images/blog/shillerbig.gif
a) Massive influx of wealthy mexicans.
b) Lack of barren desert moonscape, where one would perish if it wasn’t for air conditioning.
c) Speculative binge fueled by ridiculously easy credit and exacerbated by unemployed waitresses and cab drivers who took the weekend “get rich in real estate” seminar at the local Holiday Inn.
John L. Wake 11.26.06 at 7:32 pm
David,
If you use a bogus name like “Shiller” and link to a graph based on data by the real Shiller, your comment will get deleted.
I had a guy today make an intelligent comment but said his name was David Lereah. It got deleted.
When people leave obviously bogus emails, I might delete the comment as well.
If you’re afraid to leave your real name and email, I’m not going to take you seriously so don’t comment.
John L. Wake 11.26.06 at 7:51 pm
mrd,
Builders have been cutting prices significantly indirectly through huge incentives, the free upgrades.
As the market rebounds builders can easily cut incentives without looking like they are increasing prices.
Also remember builders often have homes under contract for months before completion. When they cut the price, many of those homes under contract will be cancelled, not to mention the ill will it would create with previous buyers.
If the builder, however, just increases the incentives, it’s harder for the buyers currently under contract to know.
So, increasing incentives instead of lowering prices directly helps keep home under contract from falling out.
Further, lowering prices directly may make it more difficult to raise prices later. It’s much easier to simply reduce the incentives when the market improves.
They have to look at how a price reduction today affects profits next year.
I’m no expert on the economics of home builders. There could be many other reasons behind their pricing strategies.
John L. Wake 11.26.06 at 8:05 pm
cBass,
You’re right, as residential construction tanks, it will definitely hurt employment and ripple through the Arizona economy.
But it doesn’t have to be catastrophic.
1) Growth has been very high. The economy can absorb some job losses and just grow at a slower pace.
2) Most economists seem to be estimating that non-residential construction jobs in Arizona will keep forming at a good clip.
Commercial construction, for example, is still doing very well.
So the basic idea is that large job losses in residential construction will be partially offset by job growth elsewhere in the Arizona economy and a death spiral will be avoided.
That’s the theory anyway. Time will tell.
mrd 11.26.06 at 10:54 pm
If the builders are not lowering prices, why are home prices in the outlying areas dropping?
I understand that there are incentives being given, but these are somewhat equivalent to lowering the price of the non-enhanced house.
I bet that if you ask anyone that is living in an outlying area near new home construction, they will say that their home value is being undercut by the builders.
John L. Wake 11.26.06 at 11:16 pm
Yes, absolutely it has the effect of lowering the price.
So, essentially, the builders did lower the prices and sales were still low.
Nevertheless, they kept building in a game of chicken with the other builders until they said, “uncle” and started to cut production.
I guess your point would be that they should cut prices even more until sales improved.
Perhaps it has to do with the elasticity of demand. The builders may figure they make more money by selling fewer homes at a higher price.
Also, demand across the board is less because so many people have bought new homes in recent year. So at every price, there’s less demand for homes.
So builders may be trying to just hang on until supply (inventory) declines or demand rebounds, and prices improve.