It looks like the Arizona real estate market may be decreasing at a decreasing rate. That is, it looks like the Arizona real estate market may be starting to pull out of it’s nosedive.
Phoenix homes have depreciated 31% from their peak value in June 2006 according to my analysis of the Case-Shiller data.
Let’s say that another way; Phoenix homes were 45% more expensive in June 2006.
From April to May, metro Phoenix Arizona home prices fell 2.5%, according to the S&P/Case-Shiller Home Price Indices. The declines have been running in the range of 3.4% to 4.3% per month since December 2007 so a decline of “only” 2.5% is an improvement.
As always, the Case-Shiller index obscures the large differences within metro Phoenix sub-markets. This web site, ArizonaRealEstateNotebook.com, is the best I’ve seen for allowing you to look at real estate trends by zip code and to tease out trends within the metro Phoenix area.
{ 7 comments… read them below or add one }
Ken44 07.30.08 at 5:45 pm
Humm… Just noticed a big spike in Phx inventory. Not good.
Peter Fork 07.30.08 at 6:40 pm
Ken44: where do you see a spike in the inventory? You have a link?
Ken44 07.30.08 at 6:48 pm
Seems to be exploded over the past few days. I wonder it`s correct:
http://www.ziprealty.com/buy_a_home/search/form/city.jsp?usage=dynamic&cKey=m518bf6p&districtId=14&metro=phoenix
Brian McMorris 07.30.08 at 9:29 pm
The thesis has been put forward on this website that the higher end markets were somehow immune from the market declines because people in the higher income brackets would not need to sell during a downturn. They bought with cash or otherwise were not affected by the mortgage market.
I have questioned that thesis in the past. It does not make sense that one part of a local economy’s RE market could become disconnected from the others. A decline in one neighborhood must certainly affect adjacent areas, all other economic and geographic factors being equal.
It is interesting that Scottsdale a fraction of the size of Phoenix, has about 50% as many listings (7500 vs. 15K). Even Fountain Hills has 1100 listings, more even than Tempe which is many times the size by population. Paradise Valley has over 500 listings. I did not know there were that many homes in Paradise Valley what with all the 5+ acre lots ;o).
Maybe the high end is starting to catch up with the low end of the market.
P.S. I have long predicted a 30% price decline in Phoenix. Looks like I was too conservative.
Brian McMorris 07.30.08 at 9:44 pm
“I see the real estate industry rebounding long before the banking industry.”
John, not sure how you can see it that way, though I know that you would like it that way, for obvious reasons. The RE market needs mortgages to function / prosper. With a weak banking system, it will be very hard to get mortgages to market. I think there will not be a good secondary financing market for some time as many are investors around the world are now licking their wounds, if they have even survived.
The only reason mortgages are available at all right now is because of government intervention. If Fannie and Freddie hadn’t been rescued, and if the conforming loan limit had not been raised to replace non-GSE lending (jumbos) that disappeared a year ago, there would be no mortgage industry at all.
That means the only buyers would be cash buyers. How many of those are there? Before RE gets back on its feet, the mortgage industry / banking must recover. If left to its own devices, as CBass and others (perhaps properly) suggest, the fit would survive and the weak would perish. That may be as it should be, but also might require 5-10 years during which time RE would do well to tread water.
But it looks like the Feds will do whatever they can to fix it faster, even if not as permanently.
John Wake - Real Estate 07.30.08 at 10:56 pm
Brian,
About higher end markets, my current working theory is that they will fall less and later. They don’t have the high number of bank owned properties which cause quick price declines. The sellers themselves in the higher end area will have to lower their prices voluntarily and that learning curve doesn’t look to be very steep.
I imagine that many home sellers in Paradise Valley think they are smarter than the folks in Queen Creek but right now the crazy high inventory and low sales in Paradise Valley looks a lot like Queen Creek circa 2007 with an extra zero in the price.
In a few years these folks may be able to swap stories with each other about how they all chased the market down during the Great Housing Bust.
“I see the real estate industry rebounding long before the banking industry.”
I agree certainly that the banking industry is needed for a healthy real estate sector. My working theory this evening is that a lot of the Phoenix real estate market will bottom out by next summer. The legacy mortgage companies will be under pressure for many years to come as anyone who bought in 2005 (2004?) will have negative equity and will walk away when they have to because of job change, divorce, sickness or death of a spouse. Those 2005 buyers may still be walking away 3 years or more from now.
However… I’m also guessing that a whole new mortgage industry will develop. New lenders will be created that aren’t saddled with loser legacy mortgages and the new players will provide much of the money for home buyers.
That’s the word tonight from “Crystal Ball Central.”
Russ 07.31.08 at 9:21 am
“Those 2005 buyers may still be walking away 3 years or more from now.”
That is part of the reason that house prices can not bottom next year.