At least according to this article.
I got a call from a reader yesterday about the Scottsdale real estate market. She was worried that home prices might be weakening in her area. Also, she had watched this video of mine where I stumbled onto some erratic graphs for the Scottsdale real estate market.
Before I checked out the situation in her community, I reviewed the Scottsdale real estate market as a whole and that’s what I’m showing you here.
Click any of the charts to enlarge them.
Scottsdale Price per Square Foot Weird
The price per square foot in Scottsdale increased sharply from October to January but then fell sharply in February 2016. What’s going on? Is February an anomaly or a trend?
Scottsdale home sales strong
The number of homes sold in Scottsdale in February were up 3% compared to February 2015. So the number of home sales is fine.
Number of homes listed for sale up 14% in Scottsdale
That inventory change could be causing some of the market weirdness.
Inventory up 21% in far North Scottsdale
Okay, home sales are up a bit in Scottsdale but the supply of homes for sale is up a lot more, especially in far north Scottsdale in zip codes 85266 and 85262.
New listings hitting the market up 24% in Scottsdale in February
There’s the culprit! More people are putting their homes up for sale in Scottsdale this year. But was February a fluke or a trend?
Number of new listings in early March double last year!
It’s only 4 days so I assume it’s a fluke but, Yikes!, double is a big number.
I’m going to assume it reflects a longer term trend this year of more people in Scottsdale deciding to put their homes up for sale.
It’s still early in the high season. I’ll have a much better idea of what the 2016 Scottsdale real estate market is going to look like in a month.
I had assumed that Scottsdale home prices would increase strongly in 2016 – as strong or stronger than in 2015.
But if the number of homes hitting the market continues at the February pace, then Scottsdale home price appreciation won’t be as high in 2016 as it was in 2015.
I don’t know exactly why the new listings are increasing so much. If you have a theory, please leave a comment.
I don’t think the rest of the Phoenix real estate market is seeing this but I was only diving into the Scottsdale market today.
Man, that’s gotta hurt. You pay your mortgage reliably for 10 years and the house still sells for less than the purchase price. ARMLS.
I’m trying and figure out what the hell happened during The Great Real Estate Bust so I’m going back over my old posts here in this blog to see what I was thinking at the time and to find the clues about the future that I missed.
It’s sort of therapy for an economist.
For the Arizona housing market it’s a race between housing inventory and economic growth. As long as the economy stays strong, the housing market can work it’s way through the huge overhang of unsold homes.
If the economy tanks before the inventory gets into line, then we would enter an economic slowdown with an already high inventory of homes to begin with.
My ballpark guess is that the economy will be fine for the next 12 months at least. If the economy can stay strong for 2 years, the housing market should be able to work it’s way through the excess inventory of homes from 2006.
The key to reducing the inventory is putting families (owner occupants) into homes that are currently owned by investors… and for home builders to get their act together regarding their own inventory. »
A lot of homes bought from 2005 to 2008 in Phoenix were so expensive with such large mortgages that they would never be cashflow positive as rentals. Later on we learned that some people lied and said their investment homes would be their primary residences in order to qualify for much better loans. I wonder, however, how often mortgage companies looked the other way.
Many rented out their investment houses to cover some of their expenses but only for a year or two while the homes appreciated. That was the plan anyway.
Those investors were betting 100% on appreciation and as it started to become apparent that appreciation had stopped, some got scared and started to put their investment houses back up for sale in hopes of breaking even, then in hopes of not losing too much money, and then later they gave up all hope and started to walk away.
The recent home price boom started in California, then spread to Las Vegas before arriving in Arizona. Hopefully, this article about “short sales” in the Sacramento Bee doesn’t foreshadow things to come in Arizona. »
In the autumn of 2006, I thought the market could, in time, absorb those homes that investors were trying to sell on the MLS. I wasn’t thinking much about short sales and foreclosures.
The number of homes entering the foreclosure process (Notice of Trustee Sales) was still within the normal range in the autumn of 2006. The tsunami was later.
Anderson Forecast of the University of California, Los Angeles, forecasts the market prices of homes to hold steady over the next five years. »
I thought it was pretty funny until I saw my comment, “Anderson Forecasts tend to be overly pessimistic.”
Americans are anti-pessimism. Pessimism is bad. Good people are optimistic.
I have a theory that optimists naturally do better in good economies because they expects things to turn out well and they do. They take more risks and it pays off during good times.
Pessimists naturally do better in bad economies because they expect to be disappointed and are. They’re more cautious, they focus on not losing money and it pays off in down markets.
I think of myself as a realist but I’m surprised to find out that sometimes I was too optimistic, way too optimistic.
In the last few days I heard someone on TV (don’t remember who or where) say something along the lines of, ‘When you see a TV show called “Flip This House” you know the boom is over.’
Is it true?
It turns out that “Flip This House” premiered on July 24, 2005.
That’s right when the boom ended!
The median home price in metro Phoenix, Arizona in August 2005 was $255,5000. Last month, August 2006, the median price was pretty much the same at $254,900.
Does that mean when they cancel “Flip This House” it’s a signal to buy real estate?
Or, at least, if you ever see a show called “Foreclose It!” you’ll know the market’s already bottomed out and started rebounding. »
Strangely enough, that’s exactly what happened. A reality TV show called Betting the House started filming foreclosure auctions in Phoenix in September 2011.
The number of foreclosures at that time was about one-third less than during 2010, Peak Foreclosure. And September 2011 was almost the exact month Phoenix home prices bottomed out. They’ve been pretty much rising ever since.
The introduction of that reality TV show called the bottom of the Phoenix real estate market almost perfectly.
Chatting with a real estate agent friend who’s with a large national franchise, I found out that a lot of their “listings” are promoted internally as “Coming Soon” listings and are sold before they ever hit the MLS. The friend said some luxury listings are sometimes in “Coming Soon” status for months.
It’s a great way for large brokerages to capture both sides of the sale, they represent (make money from) both the seller and the buyer.
I think this is a long term trend. I’m promoting “Coming Soon” more myself but not so I can get both sides of the commission but to improve the odds the seller can cut in half the real estate commission they pay.
However, if large brokerages are shifting toward trying to sell more homes in-house that could explain, at least part, the low (MLS) supply.
Maybe it’s not so much that sellers are not selling for some unknown reason but that the number of homes listed for sale in the MLS is lower and the number of homes listed internally within brokerages is higher.
Phoenix Real Estate Market Update
Supply is down and prices are up. That’s the story. Bye bye.
Why supply is low is a bit of a mystery. But home buyers and sellers just need to know that for the metro Phoenix real estate market as a whole, prices are increasing and given the lowish supply of homes for sale, will likely continue to increase rather strongly for at least a while more.
But that’s for the metro Phoenix market. Your city might be different so check out the video tutorial find out how to find out what’s happening in your specific area of metro Phoenix.
I changed the look of this blog once again.
I had just changed it to a fancy modern theme last summer but decided last week to switched back to an updated version of a theme I used way back in the Dark Ages, 2008-2011. It’s called Thesis.
- Does the retro look bother you?
Since 2011, I’ve changed the theme of this website 3 times, now 4 times. I’m never happy with it.
But on the other hand, some of the biggest websites on the internet are retro as hell like Craigslist and Reddit. So maybe I should just focus on researching and writing stuff.
Here’s why I changed
Simpler navigation. It’s old school so you don’t have to think. You know automatically how to find stuff.
Easier to browse. Having the posts stacked one on top of the other makes it super simple to stumble upon other interesting posts. Just scroll.
Easier commenting. I’ve been all over the place on commenting. I went from using Facebook commenting, to Disqus commenting, to WordPress’s commenting. I like the commenting system that comes with this WordPress theme because it’s so simple so wanted to try it. I want more comments and discussions. People left the traditional blog commenting systems because of spam but I hear it’s not as big a problem now.
Check it out! Leave a comment. 🙂
Faster webpage loading. This is a little esoteric but the faster a webpage loads, the better Google likes it. Faster pages tend to rank a bit higher in the Google search results. This lightweight WordPress theme is fast.
Better suited to short posts. On my other website, I have a lot of deep-dive posts but sometimes I just want to make a quick comment. This format is great for short blurbs.
Easier for me. I hope I’ll blog more. Blogs with current posts always look better no matter what theme.
Let me know what you think in the comments
- I’m I getting old?
- Is this experiment crazy?
- What do you think?
I’m going through the first posts I wrote on this blog back in 2006 and it’s pretty humbling. I had NO idea that home prices would fall as much as they eventually did. I thought the towns on the outskirts like Queen Creek, Maricopa and Buckeye would be hit first and hardest but I had no idea how hard.
My operating theory in the summer of 2006 seems to be that home prices would stagnate for several years and that real inflation-adjusted home values in metro Phoenix would decline slowly and orderly.
I hadn’t yet learned about the huge lag times in real estate. I thought that because the number of homes sold tanked in the summer of 2005 that prices would soon weaken. Instead they continued to increase for metro Phoenix until the summer of 2006.
I later learned that the lag between cause and effect in real estate is typically 1 or 2 years. Inertia is the most powerful force in real estate.
It’s fun to remember my observations about the market back then.
I had a call recently from a homeowner in Johnson Ranch who thought her home was worth $640,000, although she would be willing to price it at $620,000 to sell quickly. In fact, I would be surprised if she could sell it for what she overpaid for it at the top of the market last August, $475,000. »
It’s also scary to see how wrong I was.
Keep in mind that most home sellers in Maricopa aren’t going to lose money. They just aren’t going to make as much money as they once thought. »
My attitude in the summer of 2006 was along the lines of, “Yeah, prices are falling on the outskirts but home prices in closer-in locations are still increasing, and home builders are cutting production so that should take care of the supply overhang.” If only.
I used the term, supply or investor “overhang” a lot.
Freddie Mac didn’t seem too worried.
Though the direction of housing activity is unambiguously heading cooler, we remain confident that the climate is still temperate and that 2006 will finish as the third strongest year ever for the national housing market. »
Back to me again. Sales were way down but prices for metro Phoenix overall hadn’t.
Despite overall strength in median home prices, the number of homes sold in June was way below June a year ago. Many cities had less than half the number of homes sell in June 2006 versus June 2005.
I still haven’t figured out how home prices in some cities can increase at the same time the number of homes for sale increases. »
The first price declines show up.
Next month’s home price chart (see below) will probably show that the median home price in El Mirage was slightly LESS in July 2006 than in July 2005. Brace yourself for an avalanche of negative publicity. (If you are selling a home in El Mirage, price it to sell right now.)
I sure hope the media doesn’t unintentionally stigmatize El Mirage real estate when they use it as the poster child for their real estate bubble stories. El Mirage may be the first city but it soon will have company. »
Interest rates seem high by today’s standards but the 30-year fixed rate wasn’t that much higher than during the peak boom years of 2004 and 2005.
6.70% and 0.9 points – 30-year fixed-rate mortgage, average in Western U.S. for week ending July 13, 2006.
The interest rates on adjustable rate mortgages had, however, increased a lot since 2004.
On a technical note, it’s fun to see that I was already playing with audio and video back then but the video was only 240 pixels wide by 180 pixels tall. Pretty cutting edge stuff to have streaming video on a website in 2006.
This morning I went on a Realtor tour of homes listed in 85260 (sponsored by Guarantee Title). Many Realtors complained their listings were getting few showings. »
The Arizona Real Estate Center at ASU says in August 2006, “This is the weakest July since… July 1999” but then allays any fears by saying the cumulative home sales January through July were similar to the same period in 2003 and 2004.
The unusually large decline in Sun City West made it the first Valley city to show no gain in median home prices year over year, beating out El Mirage which stopped a 5 month slide with a strong $5,000 gain in July… metro Phoenix has between a 7 and 8 month supply of homes. »
From the Wall Street Journal;
In his 40 years as a home builder, Mr. Toll says, he has never seen a slump unfold like the current one. “I’ve never seen a downturn in housing without a downturn in employment or… some macroeconomic nasty condition that took housing down along with other elements of the economy,” he says. “This time, you’ve got low unemployment, you’ve got job creation, you’ve got a stable stock market and relatively low interest rates.” »
I blamed homebuilders saying they had never before raised new home prices as fast as they did in 2004 and 2005, either.
But I was even handed.
On the other hand, if you as a home builder raise a model’s price $10,000 in one month and sales don’t decline, then you raise them another $10,000 the next month and sales still don’t decline, what are you going to do? Continue raising prices, of course… until people stop buying. »
Homebuilders weren’t the only ones setting crazy high prices.
A home owner commonly believes their home is worth more than it actually is worth but during the crazy market of 2004 and 2005 those overly optimistic sellers often turned out to be right. A seller would ask a crazy high price… and eventually get it!
It got to the point that I didn’t recommend a list price based on what the home would sell for today, but how much I believed the home would sell for in 2 months, which was considerably more. That worked great at getting the most money for my sellers.
Today, however, the estimated selling price in 2 months is the same as the price today. Many sellers, however, have been slow to adapt to the new reality and are pricing their homes too high. »
Back in the day, many buyers were willing to pay above appraised value.
Sure, during the crazy market of 2004 and 2005, some buyers paid more than the appraised value. They saw the rapid appreciation and believed the home would soon be worth far more than the offered price, even if it wasn’t worth it at the time. »
I’m kind of afraid to listen to it knowing I’d likely fixate on any mistakes I made but I remember right after the interview feeling it went fine.
It does, however, give a nice quick forecast of the Phoenix real estate market in 2016.