Phoenix Real Estate Market Update (Surprise: rent, bad credit, home sales)
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It's a big problem. Home price appreciation moves in lockstep with wage growth. There are a couple of considerations though. First, Americans are highly leveraged (in debt to their eyeballs). As they de-leverage they will have more disposable income to invest in homes. Paying a credit card is like getting a tax free raise. Second, in the local market, wages are, as the detractors never fail to mention, somewhat lower than in other places. If (big if) the quality of jobs in the local market improves then wages will grow locally even though they have fallen in other parts of the country and on average nationally. Prior to the recession, Phoenix was seeing strong growth in per capita earnings. I think it is reasonable to expect that trend to resume and continue as the city matures.
That's the glass half full look at it, but overall I do have to agree with you. No wage growth = no home appreciation. If we keep doing things that undercut the middle class in the US, we are in deep excrement.
Let's try this again.
I agree. The lack of wage growth in Phoenix (and arguably some decline in Phoenix) is a huge impediment to the health of the Phoenix real estate market and I don't see a lot going on in the Phoenix market that would make Phoenix wages grow in the near term future. Throw in the amount of debt consumers have in a place like Phoenix, and that's a further problem for the Phoenix market.
My husband read a Case Shiller report yesterday that real estate will continue to drop over the coming year by another 10% by summer. Who knows what will happen and we simply hang on for the ride.
In September in Phoenix 1 in 295 homes was given a foreclosure notice.
In October it has just come out that 1 in 251 homes received a foreclosure notice.
That is a 15% increase in foreclosures in one just one month. Foreclosure rate is picking up in Phoenix, not going down according to Realty Trac.
Buckeye is now 1 in every 39 houses given a foreclosure.
Queen Creek 1 in every 35 houses given a foreclosure notice in October.
Laveen is 1 in every 16 houses given a foreclosure.
As long as foreclosure rates are high like this, the real estate market is not going to improve. Homes that are super cheap (foreclosures etc.), the investors are going to keep buying them up. Until the home buyers are those buying for their personal use start to materialize in large numbers, there is not going to be much going on for any real estate market improvement.
In September in Phoenix 1 in 295 homes was given a foreclosure notice.
In October it has just come out that 1 in 251 homes received a foreclosure notice.
That is a 15% increase in foreclosures in one just one month. Foreclosure rate is picking up in Phoenix, not going down according to Realty Trac.
Buckeye is now 1 in every 39 houses given a foreclosure.
Queen Creek 1 in every 35 houses given a foreclosure notice in October.
Laveen is 1 in every 16 houses given a foreclosure.
As long as foreclosure rates are high like this, the real estate market is not going to improve. Homes that are super cheap (foreclosures etc.), the investors are going to keep buying them up. Until the home buyers are those buying for their personal use start to materialize in large numbers, there is not going to be much going on for any real estate market improvement.
In September in Phoenix 1 in 295 homes was given a foreclosure notice.
In October it has just come out that 1 in 251 homes received a foreclosure notice.
As long as foreclosure rates are high like this, the real estate market is not going to improve. Homes that are super cheap (foreclosures etc.), the investors are going to keep buying them up. Until the home buyers are those buying for their personal use start to materialize in large numbers, there is not going to be much going on for any real estate market improvement.
This is the point. Investor purchases are "one and only one", whereas in a healthy market a first-time buyer jumps in and buys from a move-up buyer who buys from a higher-up seller who buys a mansion etc. It's a chain reaction and a positive ripple effect. That's exactly what we need. But this is only going to happen once Joe 6-pack come out of his home-buying freight and has the rising wages to make his purchase sustainable for the duration. Both prerequisites are clearly lacking right now.
The investor purchases are important as they put a floor under the market, but they will not create a positive ripple effect or price appreciation.
This is the point. Investor purchases are "one and only one", whereas in a healthy market a first-time buyer jumps in and buys from a move-up buyer who buys from a higher-up seller who buys a mansion etc. It's a chain reaction and a positive ripple effect. That's exactly what we need. But this is only going to happen once Joe 6-pack come out of his home-buying freight and has the rising wages to make his purchase sustainable for the duration. Both prerequisites are clearly lacking right now.
The investor purchases are important as they put a floor under the market, but they will not create a positive ripple effect or price appreciation.
Affordability is not the problem. Affordability (median income to median price ratio) at the Joe 6pak end has NEVER been better than it is right now in the Phoenix area. All of us who own homes now bought with less favorable affordability ratios than first time buyers today are looking at. On top of that interest is at a historical low. In fact, Joe is paying 40-80% more to rent a house in that price range than it would cost him for a loan. He is not buying because maybe his credit is bad, but most likely because he is behaving exactly how we would expect in a deflationary environment. He is waiting for a drop in prices or a bottom to be evident.
He is not buying because maybe his credit is bad, but most likely because he is behaving exactly how we would expect in a deflationary environment. He is waiting for a drop in prices or a bottom to be evident.
Ponderosa,
You seem to have an intricate understanding about the locale. Would you dare a guess for us when J6P may change his mind and go back from renting to buying and thus driving a sustainable price change?
I think Captain Bill quoted from a Cromford Report that for 9 months we have favorable demand/supply situation yet prices have not yet responded but that the longest time span in the past was 18 months for a response (thus from the historic perspective leaving 9 more months max. before we see meaningful appreciation). - Thanks.
Ponderosa,
You seem to have an intricate understanding about the locale. Would you dare a guess for us when J6P may change his mind and go back from renting to buying and thus driving a sustainable price change?
I think Captain Bill quoted from a Cromford Report that for 9 months we have favorable demand/supply situation yet prices have not yet responded but that the longest time span in the past was 18 months for a response (thus from the historic perspective leaving 9 more months max. before we see meaningful appreciation). - Thanks.
Ha! If only I knew. I tend to be an optimist on the economy. I was certain it would be this year, but then the Greeks came back and the Libyans and oil prices, and then the Chinese inflation problems and now the Italians. This economy just can't get a break, no how, no way, it seems. However, there is some glimmer of hope in recent consumer spending trends, employment, work week and earnings. In spite of what consumers say, they are spending again. Retail has been picking up in Phoenix all summer, for example. A long time car dealer here, Luke, recently said they just had the best October in their entire history.
Ultimately, J6P has to come to believe that prices have bottomed and that the economy is strong enough that he has a reasonable expectation of continued employment. I think if we can get through to the spring buying season without another shock, the economic recovery will be more obvious and the dry up in inventory is going to be big surprise to people who have been on the sidelines. The rush to buy before they are gone is going to create a mini-boom which will pull things back toward trend a bit. That would put it pretty close to Cpt Bills 18 month scenario. You can see from the threads that to some degree this is already happening to folks who are looking - they are seeing drastically slimmer choices than just a few months ago and at least firmer pricing. In my own circle, the kids of my friends have become buyers (sometimes with Mom and Dad as investors) of late. Several of them still have 20 somethings at home who are getting itchy to marry and get out. I am sure that is going on nationwide as well. We have been building homes at far less than the rate of household formation for several years now. Something has to give.
"It's funny that people are asking about a triple dip just as sales prices start to move significantly higher.
The average $/SF for monthly sales across all areas and types within ARMLS is today over $82 for the first time since July 3, having risen 4.6% since the bottom hit on September 15.
With pending $/SF also up 3.6% since it's low point on August 20 we are currently on a strong upward pricing trend, with no sign of a triple dip anytime soon. In fact we are now at almost exactly the same average $/SF that we hit on April 6, 2009, more than two and a half years ago."
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