Phoenix Housing Prices Up - But Use Caution (Scottsdale, Chandler: mortgage broker, broker)

[Zippyman]

Its January 2013 now.. and if you were here to see the peak of the bubble, its been 5-6 years (depending on how you define the peak). And a *lot* of things have changed in that time.

Gold bugs would tell you that a dollar today is only worth a couple quarters from 2005. Prime mortgage rates are about 50% less than they were in 2005-6, so even though mortgages might be harder to get, if you can find a house worth buying, youll like the payment.

With the foreclosure pipeline slowing down, hedge funds scooping up bulk purchases, normal population growth occuring, and a few jobs being added to the economy, i can see another 20%+ increase in values this year. Especially on the bottom rungs of the market. That first "wave" of speculators that gave up and walked away in 2007,2008,2009 have officially completed their stint in the government financing "time out" box, and ready or not - they can qualify for mortgages again. Today's pricing still looks good to them, especially compared to rent.

Its going to be an interesting spring.

[brianasher]

Originally Posted by Zippyman

Its going to be an interesting spring.

So glad we are moving to Phoenix now and not last year at this time :/

But I think we'll still be able to get something for a good price and build some equity. No gettin' rich quick!

[Potential_Landlord]

Originally Posted by ShampooBanana

What Captain Bill alluded to frokm Mike Orr's commentary makes it even more interesting just how low the inventory is here in Phoenix right now. As a percentage of total homes I'd say it's historically low, maybe the lowest ever.

That's what I'm seeing on my way to work. I ride my bicycle through a few neighborhoods in North Phoenix (about 5 miles total). Or actually NOT seeing - there are virtually zero For Sale signs any more. I do see more For Rent signs over the last few weeks, not sure about seasonality or simple coincidence, but the For Sales seem just about gone.

[Potential_Landlord]

Originally Posted by jimj

I took the shadow inventory thing with a grain of salt (here at least) because I noticed it wasn't banks holding houses but taking forever to wind through the foreclosure process. We've still got a house on our street that's been empty for over 2 years winding it's way through and the one next door that emptied first was just sold last month.
We're also seeing houses slowly trickling on the market as some of our neighbors who've tried like heck to hang on finally give up.
We've now got one neighbor who's got no power or gas (shut off) but trying to hang on to the house. I didn't know the utilities can do that in the winter here, in some states you can't.
I've also noticed that we can walk through the neighborhood and pick the houses that'll go under based purely on how long they've been living here.
Sadly it's been very accurate so far.

I think with the non-judicial foreclosure process in Arizona it was rather quick comparatively. Also, it seems to look different in my neighborhood. We live in a North Phoenix 'hood from the mid-80s. I guess this is when 2-storeys were first built but still on big lots and with wide side-roads. In my cul-de-sac there is only one more candidate out of 9 homes and the neighboring cul-de-sac one is now completely cleared. I do not see that much of a shadow inventory as per your definition in my area.

[Captain Bill]

According to Mike Orr of the Cromford Report, the current months supply of inventory in Phoenix Metro is 3.0 months. Except for 2005, it's the lowest since year 2000.

There are some exceptions where the inventory is not that low; In price range over $800k; and in cities like Maricopa, San Tan Valley, Carefree, Wickenburg, etc.

A survey by PulteGroup shows that around 6 of the 10 renters being interviewed plan to buy a home in the next 2 years. If that pans out, then that means 60% of all renters would need a home, to buy and we do not have that kind of supply. As Mr. Orr stated, a smaller number are likely to buy, however, the trend of more renters buying homes would probably increase the demand for traditional sale homes, and decrease the rental demands. If that trend were to begin, then some of the landlords would most likely sell their homes.

[Tall Tiger]

Originally Posted by Captain Bill

According to Mike Orr of the Cromford Report, the current months supply of inventory in Phoenix Metro is 3.0 months. Except for 2005, it's the lowest since year 2000.

There are some exceptions where the inventory is not that low; In price range over $800k; and in cities like Maricopa, San Tan Valley, Carefree, Wickenburg, etc.

A survey by PulteGroup shows that around 6 of the 10 renters being interviewed plan to buy a home in the next 2 years. If that pans out, then that means 60% of all renters would need a home, to buy and we do not have that kind of supply. As Mr. Orr stated, a smaller number are likely to buy, however, the trend of more renters buying homes would probably increase the demand for traditional sale homes, and decrease the rental demands. If that trend were to begin, then some of the landlords would most likely sell their homes.

Very interesting....this is going to accelerate price pressure to rise sharply in the coming few years. The inventory in Maricopa, San Tan Valley, etc. has dereased tremendously since I bought a couple houses there 20 months ago. The house I paid $116K (3800 sft) for I've seen the same house plan listed for 4 houses that are listed between $180-$225K and that's still a fantastic price as I doubt you could build it for under $325K.

When I bought those houses, a friend of mine in Scottsdale implored me to buy in Scottsdale rather than Maricopa and of course, who wouldn't like Scottsdale better....but I see prices in Scottsdale have only increased 6.6% in the last year per square foot versis 26.9% increase in Maricopa so I guess so far, I made the right call. I was hoping to double my investment in 5-7 years when I bought it....it now looks like that could come sooner.

[Captain Bill]

Originally Posted by Tall Tiger

Very interesting....this is going to accelerate price pressure to rise sharply in the coming few years. The inventory in Maricopa, San Tan Valley, etc. has dereased tremendously since I bought a couple houses there 20 months ago. The house I paid $116K (3800 sft) for I've seen the same house plan listed for 4 houses that are listed between $180-$225K and that's still a fantastic price as I doubt you could build it for under $325K.

When I bought those houses, a friend of mine in Scottsdale implored me to buy in Scottsdale rather than Maricopa and of course, who wouldn't like Scottsdale better....but I see prices in Scottsdale have only increased 6.6% in the last year per square foot versis 26.9% increase in Maricopa so I guess so far, I made the right call. I was hoping to double my investment in 5-7 years when I bought it....it now looks like that could come sooner.

But the inventory in Maricopa and San Tan Valley has not decreased as much as the rest of the valley. And while the current inventory is low, we're now looking at more people putting their home on the market now that they've seen the price increases.

We need to watch all the stats and wait and see how the spring shapes up before we'll have a good indication of how the rest of the year will go. As the new listings come on in the first three months, buyers will react to the listed prices, which are anticipated to be high, testing the market. Investors will not be interested at the higher prices, so they won't buy. That will be good for buyers who are financing because they'll have less competition. However, they will still balk at immediate higher prices.

So if we do get an increase of inventory, and the buyer demand decreases, then the prices will tend to level off.

Right now it's too early to tell, but if I were a buyer, and found the house I wanted, I would negotiate the best price I could and buy it now because the rest of the year is unknown. (That is my personal opinion -- I'm not advising people to go out and buy). But for me, I would be thinking that worst case scenario would be that prices can increase above my budget. At the moment, many buyers trying to buy cannot find the house they want, because of the low inventory.

Given our current state of the market and the economy, I would not expect the prices to decrease any for the rest of the year.

However, we're still in an "unsure" time period, and we won't have a good feel for the market direction until around February or March.

[miran]

hello bill,
what is the current inventory in san tan valley compared to of the places?

[Tall Tiger]

Originally Posted by Captain Bill

But the inventory in Maricopa and San Tan Valley has not decreased as much as the rest of the valley. And while the current inventory is low, we're now looking at more people putting their home on the market now that they've seen the price increases.

We need to watch all the stats and wait and see how the spring shapes up before we'll have a good indication of how the rest of the year will go. As the new listings come on in the first three months, buyers will react to the listed prices, which are anticipated to be high, testing the market. Investors will not be interested at the higher prices, so they won't buy. That will be good for buyers who are financing because they'll have less competition. However, they will still balk at immediate higher prices.

So if we do get an increase of inventory, and the buyer demand decreases, then the prices will tend to level off.

Right now it's too early to tell, but if I were a buyer, and found the house I wanted, I would negotiate the best price I could and buy it now because the rest of the year is unknown. (That is my personal opinion -- I'm not advising people to go out and buy). But for me, I would be thinking that worst case scenario would be that prices can increase above my budget. At the moment, many buyers trying to buy cannot find the house they want, because of the low inventory.

Given our current state of the market and the economy, I would not expect the prices to decrease any for the rest of the year.

However, we're still in an "unsure" time period, and we won't have a good feel for the market direction until around February or March.

Since you are both in the business and on the scene locally in the area, I really appreciate your insight and comment. The increased inventory anticipated that you mention, is that from still more foreclosures primarily, investors that bought low and now want to sell, or homeowners that were patiently waiting for the right time to sell?

JMO, but it seems like the Phoenix area prices are still a great value compared to most of the rest of the country and even compared to world markets. When I bought, I thought that Phoenix area had the best house values in the world. I think that has now possibly shifted to Las Vegas as their prices haven't appreciated in the last year as Phoenix has. It will be interesting but if I were a betting man (and I am), I would bet on the prices continuing up for some time there locally.

[Captain Bill]

Originally Posted by Tall Tiger

Since you are both in the business and on the scene locally in the area, I really appreciate your insight and comment. The increased inventory anticipated that you mention, is that from still more foreclosures primarily, investors that bought low and now want to sell, or homeowners that were patiently waiting for the right time to sell?

JMO, but it seems like the Phoenix area prices are still a great value compared to most of the rest of the country and even compared to world markets. When I bought, I thought that Phoenix area had the best house values in the world. I think that has now possibly shifted to Las Vegas as their prices haven't appreciated in the last year as Phoenix has. It will be interesting but if I were a betting man (and I am), I would bet on the prices continuing up for some time there locally.

Homeowners who have been waiting to sell.

They are a bargain because the prices are below where they would have been if a trend line were to continue from year 2000 considering inflation. And yes they are a bargain compared to the rest of the country.

I'm also optimistic about the future, and I'm trying to post information that will allow people to see things as they are happening. Probably after the spring season has settled, the Cromford Report will issue their forecast on the rest of the year.

Last year they estimated a 25% increase in prices. We beat that. From Dec 2011 to Dec 2012 we had a 30% increase. But that can be tough to achieve this year, and I want to make sure that I don't lead people to think that may happen.