Illusory Housing Shortage and the Echo Bust (Phoenix, Chandler: for sale, real estate market)

[azjack]

I never thought that I would reference (in a positive manner) a real estate agent who doubted the existence of a housing bubble several years ago. But since Greg Swann obviously "gets it" now and is an above average writer, here are some excerpts and a link:

"Do you feel an insatiable urge to rush right out and buy a house?
There's a reason for that: You're being conned into thinking there is a shortage of available housing, when the exact opposite is actually the case..."

"...Even better, as I write this, only 7,607 lender-owned homes are listed as being active in the MLS database. That's just a month and a half's supply. Happy days are here again!
Not quite. That Fannie/Freddie moratorium on new foreclosures ended on April 1. In the first three weeks of April, there were 2,460 new lender-owned listings. And there are still two years of foreclosures in the pipeline..."

"But even if we see a month or two of stable or even rising prices, there is an echo bust in our future as buyers catch on to the artificial nature of our illusory housing shortage."

Realtor: Don't rush into buying a home

[SOON2BNSURPRISE]

I mentioned a similar thing in the LA forum. In an article printed in Forbes regarding the Phoenix, LA, Las Vegas and much of Florida the consensus is that we have another year at least of losses before things calm down to "normal", what ever that is. A representative from Moodys stated that to get to a normal cost appreciation using 1990 as a baseline we are more like 20 to 30% overpriced still in this current economy. The idea is that if we had continued to grow at a normal rate we would still be priced lower than we are today. Hope we go down as we are in the market for a home in California.

Just wait for all the arm's that are going to adjust this summer and see what happens.

[Beena]

Yesterday I flew over Queen Creek, Maricopa, Gilbert and Chandler. If you want to get some feel for where our housing market is REALLY headed...I suggest you do that. Count all of the housing communities where about 20 or 30 homes are built, and there are 100+ lots that are either vacant or have half built homes on them. You will be stunned.

Consider that those 20 or 30 homeowners obviously purchased within the past 3 years or so and that whenever those vacant lots ARE built on, the homes that are built there will undoubtedly be significantly cheaper than what those people paid. And suddenly you will see an entirely new wave of people walking away. And yes this summer's arm resets are coming, as are this fall's, winter's and next years, which will also cause a lot of people to walk away from their homes.

But take a little flight over those parts of the valley and you will realize we are a longggggggg ways from the bottom.

[Captain Bill]

Below is an excerpt from a March 23 article by Greg Swann

"...The Phoenix real estate market is awash in incredible bargains. I’m going to start writing about them until they’re sold.

Here’s the way it is: Decent-quality homes are for sale for fire-sale prices. Interest rates are at all time lows. Whether you’re buying a home for your family or a rental home — perhaps to produce income now and serve as a retirement home later — opportunities abound.

Today’s bargain is actually four bargains, four homes in the same floor plan.

If you follow that link, you’ll find photos on eleven houses, but today we’re just going to talk about the four that are selling for the lowest prices.
The photos I’m showing you are “warts and all” pictures.

These are lender-owned homes, and all of them will need some work before they are move-in- or rent-ready. But, as you’ll see, most of them won’t need much work, and we can help arrange for contractors and handymen to get these minor jobs done — quickly and economically..."

My question would be, if Swann is concerned about the echo bust in one article, then why is he promoting the incredible bargains in another article?

The talk about an echo bust is old news. We've known for some time about the moratorium and that there may be more foreclosures on the horizon.

However, we should not forget that there are plenty of loan modifications happening that will mitigate that to some extent.

As Swann pointed out, we should also not forget that interest rates are at a historical low rate.

We should not forget that for a short time there is an $8000 credit as an incentive to first time home buyers, and they are taking advantage of it.

We should not forget that we are hearing on this forum from people outside of AZ how cheap the home prices are and that they are coming here to buy the property.

Also, note that Swann is pitching very hard to investors, who are also coming here to buy property.

As Beena pointed out, there are plenty of vacant lots. That is also very old news. We've known for a long time that builders stopped their building and sold off many of their lots, and large investors have bought up large chunks of this land.

If forecasting a housing market future was as simple as counting vacant lots, then we wouldn't need economists.

I would welcome some NEW negative news, instead of a repeat of the same old news.

[musicforme]

Originally Posted by Captain Bill

My question would be, if Swann is concerned about the echo bust in one article, then why is he promoting the incredible bargains in another article?

It sounds like he's being honest. You quoted an article from March 23 while the original post made reference to an article dated April 25th.

I think it takes some cojones to come back at a later date and contradict yourself. Especially considering he works in the real estate market and could be driving away potential business as a result of his article.

[azjack]

I find Swann's writing and analysis to be cogent, and coming from someone who obviously would welcome investor business, his Arizona Republic article on the "fool's gold rush" has credibility. I would hardly call record and near-record foreclosure levels in the two past months and their inevitable effect on prices to be old news unworthy of attention. I doubt that loan modifications will provide any meaningful impact in Arizona. The percentage decrease in values generally places most underwater borrowers beyond the help of the program guidelines that I have read. People who owe $100K or more than their house is worth are not going to get six-figure principal reductions, and have little motivation to stick around when they see their neighbors walking away.

[Beena]

Originally Posted by Captain Bill

If forecasting a housing market future was as simple as counting vacant lots, then we wouldn't need economists.

People have a tendency to miss really simple things. Like when median home price is 6 times median income, we are in one helluva bubble and it is gonna burst.

Bill, I am going to assume you told every one of your clients not to purchase in 05, 06 or 07. Coming to that conclusion was pretty simple.

[Captain Bill]

Originally Posted by musicforme

It sounds like he's being honest. You quoted an article from March 23 while the original post made reference to an article dated April 25th.

I think it takes some cojones to come back at a later date and contradict yourself. Especially considering he works in the real estate market and could be driving away potential business as a result of his article.

I was aware of the date of both articles, and yes it is a contradiction, and I question the reason, since the trend that was established over a year ago has continued through April.

April had higher sales than March, with less inventory, and in some cases, such as Queen Creek the sales prices were higher.

That's why I question his reason.

[markas214]

What happens in December? The tax credit disappears and foreclosures continue. We move to the area in 4 weeks and I'm looking for a 6 month rental. I feel no urgency. Many homes priced sub $150,00 seem like good deals. The type of house I want is still over $100,000-$200,000 over the last sales in '02. When they hit that level, pre-boom, I'm in.

[Captain Bill]

quote=Beena;8808387People have a tendency to miss really simple things. Like when median home price is 6 times median income, we are in one helluva bubble and it is gonna burst.

People also have a tendency to Monday morning quarterback.

Bill, I am going to assume you told every one of your clients not to purchase in 05, 06 or 07. Coming to that conclusion was pretty simple

Beena, it is not a Realtors function to tell clients when they should purchase, nor when they should not purchase. That is akin to giving financial advice and not being licensed as a fiancial advisor.

As a Realtor it is my job to assist my clients (who have made the buying decision) to locate the right house; to negotiate the best price; and assist them through the escrow process and keep them out of legal trouble. I educate them on the existing trends, so they know what is happening in the market. That's what I do.

The thread topic was the echo bust article by Greg Swann.




And my question was why Swann would come out with old negative information.

• We all knew the moratorium was over. (We don't know that there won't be another one).
• We knew the trend of new foreclosures were up, as I posted them for the last couple of months; and
• We knew about the arms. (We don't know how many of them will be modified),

So this is all old information.

Only a month earlier he made the statements about the fire sales and opportunities abound.

No new negative information has come out during the month interval between the articles.



In fact

• the overall inventory has continued to decline
• The sales contined to increase
• And in QC, the sales prices increased.

He did not make a statement that he is correcting his March article, or that his information in the March article was in error.

These are very conflicting articles, and I still question why.

Azjack opines that Swann is welcoming investor business.

Does that mean he is writing one article focusing on the negative aspect so as to attract investors who are looking for housing to continue to decline? While in another article focusing on the bargain pricing to attract other type buyers?

I'm confused.

However, I am, and have been, aware of all the old negative news of the foreclosures and have posted the foreclosure stats on C-D.