Moody's predicting 17.8% price collapse in Phoenix home prices (Scottsdale, Tempe: days on market, comparable sales)

[MotleyCrew]

I prices drop to that level then I will certainly protest my tax increase this year. Bummer!

[blueeyz911]

Originally Posted by Monster Daddy

I highly doubt the home prices will drop that much. Reason being homeowners are going to be too stubborn to drop that far and banks unwilling to lose that much. And Phoenix is a big place. Maricopa and Queen Creek and other outlying areas will decline more than more central areas.

Report was also compiled before the Fed interest rate cut so with buyers can now afford more expensive homes.

I completely agree with you. I have noticed house prices drop quite a bit in the city of Maricopa and a little bit in Queen Creek. But homeowners in Phoenix, Scottsdale, Tempe and Mesa are not really lowering their asking price. Although, they may have to if they want to sell their house because a lot of houses are just sitting on the market for months. Quite a few of the houses I have seen in Phoenix are not worth the asking price imho.

[Captain Bill]

The forecast drop in housing prices from peak to bottom needs to be looked at in the specific areas. The report does not predict an overall 40% drop.

On the list of 100 areas, the report for the Phoenix-Mesa area is predicted to drop 17.9 percent from the peak of Quarter 1, 2006, to a bottom in Quarter 2, 2008.

A recent NAR economist report predicted a bottom in 2008, without using a specific date and percent drop. The Remax founder forecast a turnaround later in the year 2008.

I would not be looking for a huge lowering of the prices of existing resale homes from this point, with the possible exception of some foreclosure properties. Many lenders, even though they do not want to hold an inventory of homes, are holding their REO prices up. If their inventory is listed a little below the market, and is in good shape, some are experiencing multiple offers above the listed price.

Some high end regular resale properties are now experiencing multiple offers because the prices have become very reasonable. I just sold a home to my buyer that was listed at $1,325,00, and we had a competing buyer and we just barely won the bidding.

The seller of the home we bought, purchased a home in a different area for a price within 3% of the 1.1 million dollar listed price.

My feeling is that if buyers are waiting for that 40% drop, they will certainly miss the bottom. It's like trying to time the stock market. Everyone has a crystal ball, and they are all programmed differently.

First, buy a home as a home, in a good location, (investments are different) and plan to be in it for around 6 years (which is the average occupancy time) and my experience is that it will be a good investment.

Many experienced investors will tell you that the time to buy is when everyone is selling. Then whey everyone is buying,it's time to sell. That's part of the age-old buy low and sell high theory.

Bill

[ArizonaBear]

Captain Bill:

The 40% drop in housing values is my prediction; not the 'official' party line.

I may be mistaken; yes.

Note too there is another joker in the deck: what is going to happen to housing values if the Employer Sanctions Act is upheld forcing out possibly 150K+ illegal immigrants out of the Phx area by January, rhetorically speaking?
Time will tell by 2010.

[AZaussie]

Thats an interesting point AZ Bear
Having recently bought a house our real estate agent was talking about the impact that illegals leaving the area could possibly have on the housing market around Phoenix. I guess no one knows yet how many properties it could leave open.
I guess on the positive side that eventualy building will start slowing and more & more people will keep comming here from various states so if your willing to ride it out things will start looking up. (I hope!)

[Captain Bill]

The builders have already scaled back, and we hope they keep scaled back until the inventory settles back down to a normal 6 month supply.

We have a large inventory but from what I'm seeing with my buyers, I can't visualize a 40% drop.

People are moving into the Phoenix area every day and will continue to move here because of the weather and jobs.

While there will be an impact with the illegal population relocating, there are also legal immigrants moving here. I'm working with an Hispanic client who works for a trucking company and many of his co-workers from other states get transferred here.

The Canadian dollar has reached par with the US dollar, so housing here is very cheap for them now. I just sold a home to a Canadian buyer who is a snowbird, and many of his friends are coming down here to buy property.

The Canadians can not deduct mortgage interest from their income. Consequently, many of them pay cash for the homes. That means that when an offer is accepted, it is pretty sure to close escrow because there is no financing contingency.

The drop we experienced in home pricing has placed homes back within the reach of many first time home buyers. There are still many good low-down morgage programs for buyers with good credit. Lenders have also been working with buyers with bad credit to get their credit ratings increased so they can qualify.

There also is periodic grant money available to help first time home buyers (defined as a person who has not owned a home in the past two years) The get about a 5% down payment grant that does not have to be repaid, and a lower interest rate. This helps people to own homes who otherwise could not afford it.

Six months ago I placed several buyers with a lender to help with their credit. Today one of them is pre-qualified and we're looking for a home for them to buy. Others will be ready in about 6 months from now.

While we do have a high inventory, a portion of that is people testing the market with unreasonable high prices. Eventually they will take those homes off the market. Also, more and more agents are reluctant to take listings at the 2005 prices because they don't sell, and it costs the agents too much money to market them. Those homes being taken off the market will help reduce the inventory.

We have many foreclosures coming on the market every day, and investors are after those homes. Wholesalers pick them up and turn them immediately to investors at a discount.

Bill

[Magnum Mike]

That's why I would rather see a slow and gradual rise in home prices, rather than the sharp rise and drop, as we saw in the housing bubble a couple of years ago. We see things like that all the time in many aspects of the economy, and it only leads to economic crisis. Remember the Dot com bubble?

[sierraAZ]

Originally Posted by ArizonaBear

Note too there is another joker in the deck: what is going to happen to housing values if the Employer Sanctions Act is upheld forcing out possibly 150K+ illegal immigrants out of the Phx area by January, rhetorically speaking?

You can safely take that joker out of your deck. They ain't going anywhere! Don't pay any attention to the smoke & the mirrors.

[sierraAZ]

Originally Posted by Magnum Mike

That's why I would rather see a slow and gradual rise in home prices, rather than the sharp rise and drop, as we saw in the housing bubble a couple of years ago. We see things like that all the time in many aspects of the economy, and it only leads to economic crisis. Remember the Dot com bubble?

You'll never see slow and gradual rises in anything other than prices (come to think of it, I wouldn't call that slow in the past quite a few years). That's how this economy is programmed to function.

[Gretchen B]

Originally Posted by MotleyCrew

I prices drop to that level then I will certainly protest my tax increase this year. Bummer!

Those property tax increases add insult to injury, don't they! Oh boy, the value of my home just dropped another $20,000. Goody, goody, I get to pay more taxes than when it was worth $50,000 more.

As far as all these predictions, and even the reports of what was supposed to have happened this past quarter or year or decade, the data can be so misleading. Yesterday, I heard from someone associated with AZ R.E. Dept that while some areas of Phoenix have been really hard hit, Scottsdale had a 13% increase in home prices.

Here's some things to watch for in these reports that can really change the meaning of the numbers:
1) Is it Median or Average home prices?
2) What area are they reporting (i.e. Phoenix proper or metro Phoenix, including the suburbs)
3) What's the time frame (i.e. 1 month, 1 qtr, 1 yr)
4) What is the comparison (1 mo - Sept 07 compared to 1 mo - Sept 06)? This one is probably the most misleading. You can take any single month and compare to a single month in another year and get a really whack-o rise or drop.

It's really overall trends in individual neighborhoods that are important to sellers and buyers. Just because a general report may show a 20% decline doesn't mean that a particular neighborhood or price point has, or will, experience that. And while some neighborhoods may get hit even harder, others may actually see price increases in their neighborhood.

There's 2 key factors for determining potential price gains or losses: 1) Location - from the city to the individual lot, location is still VERY important, and 2) Supply and Demand (in a particular neighborhood and within a particular price range).