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We have to consider one factor that many are overlooking. In the Phoenix metro area, 52.5 percent of 486,466 residential properties with a mortgage had negative equity. In addition a large number are just above negative equity. These numbers are only beat out by Nevada.
Until these potential foreclosures (many people are expected to give up, and just walk away when they owe a lot more than the home is worth) numbers start to go down, it is making many people nervous about buying a home as half the homes are worth less than the mortgages, and the potential of a lot more foreclosures going on the market over the next year or two is out there.
One major reason that the average and mean prices have increased, is the very bottom of the market has been cleared out of homes largely by investors, thus average and mean prices go up even though actual prices may not be increasing. Average price is determined by adding together prices of all homes sold, and dividing by number of homes sold. Less cheap homes sold, and the average goes up. Mean is determined by finding how many homes have been sold, finding the half way point between the cheapest home and the highest price home, and that is the mean. Less cheap homes moves the mean to the right and higher mean prices.
We have to consider one factor that many are overlooking. In the Phoenix metro area, 52.5 percent of 486,466 residential properties with a mortgage had negative equity. In addition a large number are just above negative equity. These numbers are only beat out by Nevada.
Until these potential foreclosures (many people are expected to give up, and just walk away when they owe a lot more than the home is worth) numbers start to go down, it is making many people nervous about buying a home as half the homes are worth less than the mortgages, and the potential of a lot more foreclosures going on the market over the next year or two is out there.
One major reason that the average and mean prices have increased, is the very bottom of the market has been cleared out of homes largely by investors, thus average and mean prices go up even though actual prices may not be increasing. Average price is determined by adding together prices of all homes sold, and dividing by number of homes sold. Less cheap homes sold, and the average goes up. Mean is determined by finding how many homes have been sold, finding the half way point between the cheapest home and the highest price home, and that is the mean. Less cheap homes moves the mean to the right and higher mean prices.
So if this reasoning is true that also means the initial dip was caused by large investor buying all the lower priced homes causing the average to fall in the first place. Just to clarify i don't mean the big fall from the top..i am just talking the last 5-10% when it looked like it was bottoming and then fell a bit more.
Until these potential foreclosures (many people are expected to give up, and just walk away when they owe a lot more than the home is worth) numbers start to go down, it is making many people nervous about buying a home as half the homes are worth less than the mortgages, and the potential of a lot more foreclosures going on the market over the next year or two is out there.
This may be coming and I agree that this is what stops many from buying.
...One major reason that the average and mean prices have increased, is the very bottom of the market has been cleared out of homes largely by investors, thus average and mean prices go up even though actual prices may not be increasing... .
But actual prices are going up. Ask the buyers who have to offer 10% and more above list price (listed at current market value, not a low price to attract offers)
They are having to offer above what the comps are showing. Appraisers are having a difficult time keeping up.
...Should home prices hit a bottom then stabilize, itwould push many potential buyers off the fence, according to Mike Fratantoni, a vice president at the Mortgage Bankers Association. House hunters would no longer be afraid of investing in assets that were losing money.
"The market is already on the verge of turning the corner on prices and this will help," said Fratantoni...
The problem is that people read headlines and don't digest the article, so I agree that the sensational type headlines helps to keep people out of the market, even though all the info in the article is not negative.
I think we can safely say that prices have hit a bottom in Phoenix, and more than stabilized.
Since about last August when the low was at $107,000, prices have increased to $133,000, which is about a 24% increase. Plus we have an annual increase from April 2011 to April 2012 of 14%.
Not only is Phoenix on the "verge of turning the corner on prices", the data shows that it has sharply turned.
We have to consider one factor that many are overlooking. In the Phoenix metro area, 52.5 percent of 486,466 residential properties with a mortgage had negative equity. In addition a large number are just above negative equity. ..
But that is just idle conjecture. There is no way that 52% of 486,466 homes are going into foreclosure.
The better measure is how many homeowners are delinquent; and we know that number, and know that it is declining. I discussed that in an earlier post.
[quote=oldtrader;23888512]We have to consider one factor that many are overlooking. In the Phoenix metro area, 52.5 percent of 486,466 residential properties with a mortgage had negative equity. In addition a large number are just above negative equity. These numbers are only beat out by Nevada.
Until these potential foreclosures (many people are expected to give up, and just walk away when they owe a lot more than the home is worth) numbers start to go down, it is making many people nervous about buying a home as half the homes are worth less than the mortgages, and the potential of a lot more foreclosures going on the market over the next year or two is out there.
[quote]
That figure includes homes that are even a dollar "under water" when "appraised" by a zillow-esque model.
The investors who blew up the market fled years ago - the people who are "underwater" today still need a place to live - and not everyone lost their income & can't afford the payment they agreed to.
Every single person who buys a new car or even a pair of shoes is "underwater" - most of us still make the payments.
[quote=Zippyman;23891747][quote=oldtrader;23888512]We have to consider one factor that many are overlooking. In the Phoenix metro area, 52.5 percent of 486,466 residential properties with a mortgage had negative equity.
Quote:
The investors who blew up the market fled years ago - the people who are "underwater" today still need a place to live - and not everyone lost their income & can't afford the payment they agreed to.
Every single person who buys a new car or even a pair of shoes is "underwater" - most of us still make the payments.
Zippyman: I think you hit several good points here.
1. Those who had to default on their homes due to economic emergencies have already. The unemployment rate has been trickling down for years now and the income-loss shock wave was done after 2008-2009. People who default now are doing so for "strategic" reasons.
2. The urge to default strategically will fall rapidly once people perceive their homes to go up in value. The vast majority of underwater properties are at the low end and with moderate amounts. As the market increases by thousands per month in this segment the reason for defaulting disappears very fast for the vast majority of underwater-owners.
3. The number "52.5% underwater" has probably already declined significantly and will continue to decline rapidly at the current appreciation rate. This has been the case for my property as well. . The RE group with the zip code newsletter says that "Yes Virginia, you can sell your home". In other words they encourage sellers to come on the market so the supply shortage may be tempered down. Of course, they make their income by transactions so any imbalance in the market that hinders the maximum sales potential is a problem for them. Their phrasing clearly shows they are desperate for sellers so they can make more transactions = income. This is where the imbalance in the market is now. IMO it is better for any seller to wait and let the appreciation roll into their pockets rather than some buyer of their property. But that is obviously not what the realtor wants.
So, stipulating that you don't have a crystal ball so you obviously can't predict the future, and also stipulating that no great disasters, wars, interest rate changes, etc., occur....can you guesstimate what the sale price/sq ft will be around late summer/early fall 2013? I know it's a ridiculous question, but I'm curious what you think. Specifically, I'm curious about the southeast Gilbert area. A friend who owns a few investment properties told me the other day that it's feeling to him like it felt at the beginning of the last "bubble" (early/mid 2000's), with prices increasing, and he thinks it's going to continue through next year. At the rate it's increasing now, it would seem that by next fall, prices in SE Gilbert could get back up to 120/sq ft, like they were 5 years ago, yes?
Again, I know you can't say for sure, and a lot can happen between now and then....
Quote:
Originally Posted by Captain Bill
We are fairly certain that sales are down because of the limited supply. The fact that almost every home that comes on the market has multiple offers, with people having to make up to and more than 30 offers far above list price before they are successful,is a confirmation for those of us in the field that the buyers are still looking to buy.
Of course there is no concrete way for the media to document the multiple offers.
We also see the price increases trickling up, and more traditional sales being sold, which may be telling us that since there are no REO's or short sales, that buyers are turning to traditional sales. They are probably also adjusting their target price upward. That's how we get the trickle up effect.
What will probably happen now, where people in some of the higher price ranges from 400-600k are hoping for price declines, is they may be unpleasantly surprised to learn that they may begin to lose out on a purchase because they drug their feet and the house got sold, or the price actually increased.
I own a home in a large community and have been waiting for prices to increase so I can get it back on the market. There are only a few homes Active in that community now, and they are on at around $130/sf.
Early last year I delayed getting it on the market and the market dropped. I knew that prices had to start increasing soon, so I decided to eat the carrying costs and hold it off the market and wait for the increase. At that time I couldn't get over $90/sf.
Today I could sell it quickly for $100/sf, but if I wait until June when some of these homes close, I should be able to sell it quickly for $110/sf at a minimum. I'm waiting.
I have a listing in the 400+ range and another home, same model, came on the market down the street. They listed 25k below ours because they have a smaller yard; and a good listing technique is to go in below the competition. Both homes have a lot of interest, with good feedback from showings. However, we suspect that some of the potential buyers are hoping for price reductions.
I told my seller that if we lower our price, then we will trigger the other house to lower their price. Any potential buyers who are watching these listings will think "Ok, we've got a price war going on, so let's wait longer before making an offer".
So we're holding tight because we know the house is desirable, in a great community, and priced right. Plus we have the inside information from the Cromford Report, and know what prices are doing in these ranges. We know that (barring any national or world disaster) time is on our side!!!
When people find out what's happening by losing out on offers, then they learn to take quicker action.
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. The RE group with the zip code newsletter says that "Yes Virginia, you can sell your home". In other words they encourage sellers to come on the market so the supply shortage may be tempered down. Of course, they make their income by transactions so any imbalance in the market that hinders the maximum sales potential is a problem for them. Their phrasing clearly shows they are desperate for sellers so they can make more transactions = income. This is where the imbalance in the market is now. IMO it is better for any seller to wait and let the appreciation roll into their pockets rather than some buyer of their property. But that is obviously not what the realtor wants. 
