Catherine Reagor looks at a score card for the Phoenix residential real estate market.
1) “The number of resales on the market falls below a seven-month supply.”
Nope. Not there yet, however, several zip codes in metro Phoenix have less than 7 months supply.
2) “Home sales need to stop slowing.”
Yep. Sales of resale homes are way up (although about half of them are bank-owned, and sales are still dragging in many areas).
3) “New-home permits must fall.”
No problem there. New-home permits in October were the lowest level in more than 25 years, according to RL Brown’s Phoenix Housing Market Letter.
4) “Mortgage-purchase applications increase.”
I’m not crazy about this point because it can vary a lot from week to week.
5) “Thirty-year mortgage rates drop to 6 percent.”
We’re just under 6 percent.
6) “Affordability must improve dramatically.”
Jackpot! Resale homes have dropped 38% in value from the June 2006 peak according to Case-Shiller numbers.
7) “At least one major home builder goes away.”
No problem there. And expect more to fold.
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Artur | Phoenix Market Trends 12.04.08 at 4:48 pm
There is no recovery yet but when there are multiple offers on properties - there were 16 offers on one home - as an example - in Central Phoenix, there is pent up demand: demand for a good deal though.
Roberto 12.04.08 at 10:01 pm
the number of foreclosures is still running in the high 3000 range, compared to barely 4000 sales. There is no way in hell this market gets better, until the number of foreclosures on the mls drops drastically, and right now it is still going up. add to that so many job losses that the unemployment insurance department in arizona ironically just hired 47 new workeres, and the next 12 months are going to see brutal price drops.
Cbass 12.04.08 at 11:11 pm
2) “Home sales need to stop slowing.”
Yep. Sales of resale homes are way up (although about half of them are bank-owned, and sales are still dragging in many areas).
*Up as compared to what? A data set here might be nice like the sales numbers being compared to every year since ‘99 or longer. How many are actually sales and not bank repossesions if those are included, number or REOs sold as a percentage and other important information would make this statement more meaningful. Not just that they are up over ‘07 so we are good to go.
6) “Affordability must improve dramatically.”
Jackpot! Resale homes have dropped 38% in value from the June 2006 peak according to Case-Shiller numbers.
*I don’t find the corelation here John? Just because the price dropped does not mean it is now affordable. For example, if I have a leather jacket for sale for $100K and I drop the price 50% then is this jacket now affordable? Income to price ratios, price to rent ratios, etc. could make this statement more meaningful as well.
This article is sad and I think now may actually be a good time to buy or at least just run around and try low balling and see if anyone will bite. If the economy pulls out of its tail spin sweet and if it don’t, well we will all be screwed and it won’t matter anyway, but this article by CR is pure spin. Peoples financial futures are on the line with a major purchase like buying a home. They deserve some in depth analysis on the subject, not a half hearted, subjective, fluffy and don’t worry it is all good story.
Peter Fork 12.05.08 at 1:17 pm
Concerning 6) “Affordability must improve dramatically.”:
When data will show that the median house is more affordable than the most affordable year in the 1990s (given the median salary and unemployment data), I think prices will be affordable.
PS: The problem with most “price trends” is that the so-called trend is based on past values of the price instead of being based on the fundamentals. Using ratios, like housing costs/salaries and listings/sales (months of inventory) gives you a better insight about what is a fair price. In other words, use value investing instead technical analysis.
Brian 12.06.08 at 5:34 pm
I agree with Peter’s summary, if at a similar mortgage interest rate in the mid 1990s (7% for example). Affordability in housing has very much to do with mortgage interest rates, all other things being equal (like family income and unemployment rates). If the Feds are successful in driving mortgage rates down to 4% and if unemployment levels recover to 5% because other “economically stimulative” efforts are successful, then current home price levels will probably be considered very affordable. But that is a lot of “ifs” and we are not there yet. But maybe all this will come together by the end of 2009 (I sure hope so).
An example of affordability under these circumstances: average home price = $140,000 (in Phoenix area it is already there according to Schiller data), down payment = $14,000, mortgage rate = 4%, 30 year fixed rate PI = $600, median family income = $43K (2003 US Census for Phx), Home price = 3X average household income.
3X is a historically mid-range multiple of house price to average family income, and at 4% mortgage rates, it could be argued the multiple could be somewhat higher to adjust for the historically low rate. So maybe we aren’t too far off from righting the ship of the housing market, but not quite there yet due to economic weakness and abundant supply.