Phoenix Real Estate Market Keeps Tanking (Miami: house prices, job market, calculated)

[jimj]

Originally Posted by MN-Born-n-Raised

Homes depreciate like any other asset (car, electronics, etc). It's the dirt that goes up in value (pulling up the entire value so people assume it is the "home" that appreciates).

So when the land looks mature with trees (as in an older neighborhood) that pushes up the land price even more. So the reason why homes go up in value is because people want to live in that area and they cannot buy new. Hence, the land goes up and people think their "home value" went it. I realize it is semantics.

One disclaimer: if the material and labor costs triple in value, then the older out of style home will also go up (substitutes). But most people (not all) want the new look and new style. Additionally, classic homes can also go up in value (1920 tutor homes with character etc).

Those people who buy older used homes accept the compromise of not getting the newer look. That is because the location trumps the homes newness. Hence, the location or the value of the land is the real driving force.

Putting it another way, in a normal market, I don't expect the value of my home in the outer burbs to go up until people are forced to go farther out. In other words (for me), Surprise has to build out completely for bigger appreciation. That's going to take YEARS and YEARS. If I was focusing on appreciation, I'd chose a spot as azriverfan mentioned. Something that is nearly built out OR better yet a property with exclusivity (golf course, on water, backing up to a park, ski resort etc).

I've subdivided land 3 different times (all on lake property) and profited handsomely. As I said, pick a desirable location and the land is where the big gains are made. Ask any land developer where the money is in a stable market.

The only thing you've said that I disagree with is having to wait until Surprise is totally built out. There are a few different factors that can cause our homes (we live out here as well) to appreciate. 1. Commercial construction as people like to live somewhat close to their work. 2.Appreciation in the "closer in" properties forcing people to move outward, like what started the boom out here to begin with. 3.Quiet and rural area/larger lots.

[MN-Born-n-Raised]

Originally Posted by jimj

The only thing you've said that I disagree with is having to wait until Surprise is totally built out. There are a few different factors that can cause our homes (we live out here as well) to appreciate. 1. Commercial construction as people like to live somewhat close to their work. 2.Appreciation in the "closer in" properties forcing people to move outward, like what started the boom out here to begin with. 3.Quiet and rural area/larger lots.

Anything that makes the land value go up will result in appreciation. Your land is more desirable if you have commercial infrastructure, jobs, etc. If substitutes are higher priced (because they are not out as far) that too will raise your land value.

But so long as someone can buy a brand spanking new home (even for more money) many people will do so. Where I live in Marley Park, several homes are being built and sold for MORE money with the hassle of seeing dirt around them and hearing the sounds of construction for several more years. They are forgoing the deals and getting exactly what they want with NEW construction. As the land availability becomes less and less, the price of the new land becomes more valuable. Home values RAISE the most when everything is built up. If the neighborhood isn't kept up, the depreciating physical home will finish depreciating like an RV and the land MAY depreciate with it.

So IMHO, buying in the sticks won't show great appreciation unless it fills up quick enough while the homes are still new(er) looking.

[Captain Bill]

Appraisers are probably having a very difficult time out there today because of the fast rate the prices are moving up.

One of my short sale buyers had a contract in September for $134k. Last week we got the approval, but were asked to pay an additional $600 to bring the lenders amount to their required net. That was a no brainer for my client. The comps in that community are now at around $155k; up 15% from the time they entered into the contract.

For the past month Feb 23 to March 23, the average price/sf for all types of homes in Phoenix Metro has increased 6.7%.

During that month the Active Listings (excluding AWC) declined 12.9%.

• These numbers are for all price ranges
• They vary in different price ranges, cities, zip codes and communities.

What we're seeing is that the current market is not attracting more listings into the market. While the bulk of the price increases are in the low price ranges, they will be beginning to trickle up.

Prices will need to increase more, and the public must be made aware of the market changes in order to attract more homes to the market.

Yesterday a client sent me 6 homes (newly active in $100k range) to check out.

• One went Pending by the time I received it
• When I called to make an appointment with another, they had received 12 offers (first day on the market) and won't do any more showings.
• The other had 30 agents on the first day, with multiple offers, so today the seller is not making appointments; he's just holding the house open so agents can all come all day at any time.

Below is the MLS listing info for Single Family Homes in Greater Phoenix on March 24, 2012

• 11,442...... Active
• 6,881 ........AWC (short sale under contract negotiating with lender)
• 10,775...... Pending (under contract in escrow)
• 7,129........ Closed Sales since Feb 23, 2012

The chart below, courtesy of the Cromford Report shows:

• The shortage of supply (<3.3 months) beginning at the $275k price and below.
• From $275-$350k there is around a 4.7 month supply.
• It's $400k and above where we have a more balanced market.

The homes priced at $1 mil and above take more time to sell because of the small number of buyers who can afford those prices, so it's normal to see a greater than 6 months supply there.

[Captain Bill]

The number of Active listings (excluding AWC) is continuing to decline. In the past 30 days...

• Traditional listings declined 9.7%
• REO's (bank owned) declined 17.2%
• Short Sales declined by 28.6%

In Nov 2010 there were 12,054 Short Sale listings. Today there are only 1,131.

The numbers above are from the Cromford Report and include all types of dwellings in the Phoenix Metro area.

[themudpuppy]

I'm almost afraid to look at my daily updates anymore to see how many on my possibilities list have gone AWC or pending overnight. There goes another one... and another one...

[Potential_Landlord]

Originally Posted by Captain Bill

The number of Active listings (excluding AWC) is continuing to decline. In the past 30 days...

• Traditional listings declined 9.7%
• REO's (bank owned) declined 17.2%
• Short Sales declined by 28.6%

In Nov 2010 there were 12,054 Short Sale listings. Today there are only 1,131.

The numbers above are from the Cromford Report and include all types of dwellings in the Phoenix Metro area.

Bill et al.,
In your experience, have you seen similar turnarounds in the Phoenix RE market as the one we are currently seeing or have they been different? - Maybe more of the "old-timers" who have gone through more than the current boom-bust-recovery cycle can also voice their opinion? - As you know I'm relatively new to the US (it's all my wife's fault; why did she have to make the trip to Europe, make me fall in love with her and settle here ;-) So it is important for me to get a better feeling on how the RE market works here. From my experience in Germany I would say the RE market there moves much more slowly both ways.
Thanks guys! PL

[Ponderosa]

Originally Posted by Potential_Landlord

Bill et al.,
In your experience, have you seen similar turnarounds in the Phoenix RE market as the one we are currently seeing or have they been different? - Maybe more of the "old-timers" who have gone through more than the current boom-bust-recovery cycle can also voice their opinion? - As you know I'm relatively new to the US (it's all my wife's fault; why did she have to make the trip to Europe, make me fall in love with her and settle here ;-) So it is important for me to get a better feeling on how the RE market works here. From my experience in Germany I would say the RE market there moves much more slowly both ways.
Thanks guys! PL

In the late 80s we had a housing crisis when numerous Savings and Loan institutions collapsed due to poor investments/management and excesses. Land prices fell dramatically, and then housing prices went down as well. Though the percentage drop was not as bad, the newpapers were full of page after page of "HUD homes" for sale - foreclosures on FHA loans. There were bus tours of HUD homes and the doomers of the day were predicting decades of decline. Then, almost overnight, demand jumped as prices fell to the point where seemingly everyone wanted a HUD home for investment, living etc. The inventory just evaporated, it seemed. Prices firmed and went back to the long term price trends before the fall. Deja vu!

[Ponderosa]

Originally Posted by Captain Bill

The number of Active listings (excluding AWC) is continuing to decline. In the past 30 days...

• Traditional listings declined 9.7%
• REO's (bank owned) declined 17.2%
• Short Sales declined by 28.6%

In Nov 2010 there were 12,054 Short Sale listings. Today there are only 1,131.

The numbers above are from the Cromford Report and include all types of dwellings in the Phoenix Metro area.

There are only 1131 active short sales in the valley? Is that a typo?

[Captain Bill]

Originally Posted by Ponderosa

There are only 1131 active short sales in the valley? Is that a typo?

Not a typo.
The number was from Cromford Report as of yesterday.
Just now I checked the mls and find 1,237 Active short sales, all types.
Filter to single family residence and there are 1,047

[SOON2BNSURPRISE]

Lest we forget that some people purchase homes to live in and not as investments. We would have loved living in Surprise but with the declining market over the past few years prices also declined in our home city of Oxnard CA. We also love it here and for now Surprise and the rest of the Valley are a destination place to visit family and friends.

With that said, does it matter what the price or cost of a residence is when you consider it is a place to live? Many of my friends own their homes, meaning they are paid off. They never seem to care where prices are going as they have no intention of moving from their homes. That is our goal. My wife and I want to be in that position.

As far as the Temple in Gilbert, I know that many in my Church love living by Temples and even the other Mormon buildings that the church owns. Gilbert isn't the only place in the valley that is getting a new Temple. They are also building one in the North part of Phoenix and looking for land for another on the West side of the valley. I can bet that many within the Mormon Church will buy homes near there and start businesses near by. Kind of a secondary economic market so to speak.