Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Just got done with a Zoom Meeting for the Cromford report. Again, some great info!
What is your definition of a market crash? Price? Number of sales? If it's number of sales, then yes, we could be looking at a crash. The Phoenix area is 45.2% below since the end of February. Southeast valley is down 39.7%
If you are saying price is your definition of a market crash, we aren't there yet. 28% of closings in March and April have been for over asking price. We are seeing appraisals being more of an issue. Could we see 5% in a price adjustment? Yes. But that won't necessarily be considered a market crash, by Cromford terms.
One thing to keep in mind is this is not a permanent situation so it's hard to predict. Supply and demand are still very far apart for the general Phoenix area so that's a very good sign.
Honestly, it's probably going to take a good 6 months or more before we know what our housing market will be doing. For now, I'm going to stay positive!
I used to sell real estate and I know the types of meetings you're having. In fact, I sold houses during the previous crash. You're being fed straight propaganda from people whose job it is to communicate a rosy picture for you to better sell us on a rosy picture.
What they're not telling you is what that picture will look like in a few months to a year when the market and people's overall picture of their wealth catches up with these events. They're also not telling you of the economic bubble the country was sitting on prior to these current events. This is a multi-pronged event and people like you and me aren't expected to be everything to everyone. We can't be economists, small business owners, mathematicians all at once. So if you're just narrowing your focus on past and current numbers, it might not look so bad. I don't think we'll be saying that in 8 months and I wish you the best in your career.
The one thing I will say is that this is not relegated to real estate, unlike the last recession which was caused by housing.
This time housing is strong, and people need homes to live in more than ever with this shelter in place, preferably a nice bigger home in a suburb to work from home, and be in it for extended periods of time. Most Phoenix homes fit this criteria.
So if real estate falls, everything else pretty much falls as much if not more - cars, tech, construction, etc etc.
So I believe that housing will be the one constant factor that people will depend on to make it through this crisis, literally. So if there is a sign of a recovery, housing (especially in AZ) will be back on the rebound faster than other aspects of the economy, in this situation.
I used to sell real estate and I know the types of meetings you're having. In fact, I sold houses during the previous crash. You're being fed straight propaganda from people whose job it is to communicate a rosy picture for you to better sell us on a rosy picture.
Sorry. You cannot apply your experience to others. Sure, if the guy running the meeting was Lawrence Yun (economist from National Association of Realtors) I'd be right alongside you laughing. Yun had pompoms on during the last recession: I think he did the splits and had a ponytail too. lol That guy was a joke! But Mike Orr told it like it is. I'm not saying he is right 100% of the time, but to assume he is "feeding propaganda is a massive leap. I found his words to be spot on during the last round.
I know two friends who got laid off and the companies they worked for already had to file bankruptcy.
File BK? I suspect they would have anyway. A biz that doesn't have 3-4 months of reserves or at least the means to stay afloat is probably already insolvent. Regardless, that's very unfortunate.
Sorry. You cannot apply your experience to others. Sure, if the guy running the meeting was Lawrence Yun (economist from National Association of Realtors) I'd be right alongside you laughing. Yun had pompoms on during the last recession: I think he did the splits and had a ponytail too. lol That guy was a joke! But Mike Orr told it like it is. I'm not saying he is right 100% of the time, but to assume he is "feeding propaganda is a massive leap. I found his words to be spot on during the last round.
Maybe the word propaganda wasn't right one. I mean, it is exactly what it is, but there might be a connotation that it's inherently incorrect information. The information is probably correct.
For instance:
PHOENIX--
ACTIVES- 11,554 (last week 11317)
TOTAL PENDINGS--8113 (last week 8158)
CLOSED last 7 days—1145 (last week 1723)
PENDINGS w/in 7 days-- 1335 (last week 1471)
NEW TO MARKET—1416 (last week 1779)
This is feel-good industry nonsense that won't pertain to any of our experiences in 9 months. I didn't like that about the industry then and I don't like it now. Just follow the giddiest real estate agents you know on Linkedin, IG, or Facebook. My experience is that it's pervasive.
Maybe the word propaganda wasn't right one. I mean, it is exactly what it is, but there might be a connotation that it's inherently incorrect information. The information is probably correct.
For instance:
PHOENIX--
ACTIVES- 11,554 (last week 11317)
TOTAL PENDINGS--8113 (last week 8158)
CLOSED last 7 days—1145 (last week 1723)
PENDINGS w/in 7 days-- 1335 (last week 1471)
NEW TO MARKET—1416 (last week 1779)
This is feel-good industry nonsense that won't pertain to any of our experiences in 9 months. I didn't like that about the industry then and I don't like it now. Just follow the giddiest real estate agents you know on Linkedin, IG, or Facebook. My experience is that it's pervasive.
I agree, that those #'s are not good news. But you reading Pam's words that were wrapped around the numbers. Maybe (notice I underlined it) she is doing the spinning to keep he mind sane for taking a 42% hit in pay (assuming her sales dropped by the same average). I don't know. In other words, until you read Mr. Orn's words or listen to his interviews, you are unfairly guessing. I'm telling you that the last round of the RE meltdown, I was reading his words very closely. It's why I waited until early 2011 to buy. Back then, he was "selling" data and took the liberty to put it in context: it was the reality. When the 1st time buyer program was initiated, he didn't say it was the savior. He just presented the numbers and while I forgot his words, I read it to mean stay on the sidelines for my goals.
Big picture, what we all thought was going to happen in January changed in February, etc. There is no way he or anyone else can extrapolate what is going to happen. If we stay in lockdown for another month, all bets are off for the RE market as well as the entire health of the economy. What seems like a 5 years ago is 4-6 weeks ago. Not long ago, it looked like we were opening back up at Easter. So he is only as good as his data which is a moving target. Having read 100's of pages of his words over the years, he's not a cheerleader. And I understand that too many people in positions like his very much are. Just because it's pervasive in an industry doesn't mean you can suggest someone else who you don't know or read is doing it. So no, not all used car salespeople are dishonest. Nor are all chiropractors quacks etc. Just most of them.
Last edited by MN-Born-n-Raised; 04-17-2020 at 06:11 AM..
Maybe the word propaganda wasn't right one. I mean, it is exactly what it is, but there might be a connotation that it's inherently incorrect information. The information is probably correct.
For instance:
PHOENIX--
ACTIVES- 11,554 (last week 11317)
TOTAL PENDINGS--8113 (last week 8158)
CLOSED last 7 days—1145 (last week 1723)
PENDINGS w/in 7 days-- 1335 (last week 1471)
NEW TO MARKET—1416 (last week 1779)
This is feel-good industry nonsense that won't pertain to any of our experiences in 9 months. I didn't like that about the industry then and I don't like it now. Just follow the giddiest real estate agents you know on Linkedin, IG, or Facebook. My experience is that it's pervasive.
Of course the nature and interest of most agents is to take the optimistic view. This is an unprecedented situation so it's anyone's guess what will happen in the next year. Worst case scenario is the virus spirals out of control nationwide and the world and we go into a major depression and housing prices fall with it. Best case is the latest treatment and summer kills the virus and life returns to what is was a few months ago. I'm a realistic idealist and think the odds are, things will get better soon.
Here is some more information from the Cromford report. It's off of a ladies site (and available other spots). It's worth the read. Note: The high-end homes are suffering/sitting the most. I'm not surprise. Some were in denial about this possibility a while ago in other C-D conversations. Pandemic Puts Housing in a “Pinch” - Eric Karlene
As a Realtor who mostly works the East Valley, I can tell you the market has stayed very strong in this last month. I did have one buyer cancel, 3 days prior to closing, on one of my listings when the stay at home order came thru. Put the home back on the market and it sold 3 days later. I've written a number of offers on homes in all price ranges, but maybe not as high at $900K, in the last few weeks, and have dealt with multiple offers on all of them. Still writing in escalation clauses too.
Re the Cromford Report, yes you do have to pay for it. The lastest info I got on it was to expect the market to stay strong. This is what I shared with a lot of my clients in mid March:
Getting a lot of questions on what I think the market is going to do. Read this. They have been great predictors in the past
Real Estate Market Update - Cromford March 2020
Here are some words written by ASU economist Michael Orr on the market outlook for real estate in Arizona. It’s a pretty interesting read, and explains the differences between the housing collapse 10-15 years ago and what’s going on today:
March 18 - A number of people seem to assume that we are heading for a recession and that home prices will fall. The first assumption is quite reasonable. The second assumption is based on fear and has little analytical data to back it up. Obviously anything can happen in a uncertain and disrupted world, but a fall in home prices is still looking very unlikely from today's numbers.
In 2005 the housing industry started to sicken because homes were being used as speculative commodities not for places to live. In 2005 I met a man in his early 20s who owned 12 homes in the Phoenix area, all with no occupants. How had he been able to buy them? 100% loans from unscrupulous lenders who went bust between 2007 and 2010. The housing industry (and more particularly the lending industry within it) was the cause of the 2008 recession. Phoenix was a hot spot for the cause of the problem, as was Las Vegas.
In 2020, housing is an innocent bystander to a probable recession caused by a pandemic. It has supply at extremely low levels and most homeowners have a large amount of equity. Even if they lost all their income and could no longer pay their mortgage, they could quickly find a buyer to release that equity. There is little likelihood of them facing foreclosure because the lender can be paid off with the sale proceeds. Only when demand collapses do the banks have to foreclose to get their money back. At the moment demand is still well above normal and has only shown very tiny signs of easing. In 2006 demand fell off a cliff yet home builders continued to build even more new homes because lenders continued to write ill-advised loans in huge numbers.
In 2020 builders are probably going to have to build fewer homes than they wish because of shortages of labor and materials. We are unlikely to see a glut of homes on the market for a very long time. A successful vaccine for the novel corona virus is more likely to appear before a surplus of homes could possibly develop.
Because the virus has not been contained yet, except in several parts of Southeast Asia, we are likely to see a lot of people out of work. We do not yet know how long it will take to get control of the pandemic in Arizona, but many people may be out of work for quite some time. These people are more likely to be renters rather than homeowners. Landlords may find it much harder to collect rents and the yields from their portfolios are likely to fall. Some may decide to evict tenants and sell their properties. At the moment the extra supply would be welcomed and receive multiple offers, even in these troubled times. The evicted tenants still exist and therefore still represent demand for shelter of some sort. There will be hardship, but not a flood of homes with no-one to live in them.
Housing demand is created by the existence of people and increases when more people turn up and decreases if they go away. In 2005 the people we were building new homes for were largely imaginary. In 2020 they are very real and migration trends have been very favorable with families and individuals moving to Arizona from other parts of the USA.
All the indicators for the Central Arizona housing market remain very healthy at the moment and we will report any change as soon as we spot one. There is no cause for panic and if you are delaying a purchase because you think the price will come down, you are probably making a poor decision.
Michael Orr
The Cromford Report.
This is very interesting. I remember house prices were much lower in Phoenix before I moved to FL in 2002. Chandler was actually "very inexpensive" compared to Scottsdale. But now even Chandler prices have gone up.
The statistical analysis in the post above and current economic news bring the following observations:
(1) Demand for Phoenix houses has not gone down despite the horrifying economic turmoil of layoffs, furloughs, etc.
(2) There are sectors and demographic groups that have been hit hard by layoffs: retail, travel, cafes, auto dealers, tc.
(3) There are sectors and demographic groups that have not been affected as much by layoffs. I work in software engineering, and the "work-from-home" option gives some flexibility in surviving a layoff for us. There are niche groups in industry not affected by layoffs as much like medical device companies that build ventillators, pharmacy companies that focus on influenza treatment or related comorbidities, etc.
This means that Phoenix housing market has evolved to focus on niche groups that are relatively wealthy and "white-collar" - pricing out much of the local demographic groups that are looking for starter homes: young families, recent college graduates, blue-collar jobs, etc. If the housing market had been focused on those groups, demand would have fallen rapidly in layoffs.
So, modern Phoenix is no longer like it was in the 90s or before when young families, recent college graduates, or blue-collar workers could actually afford a home. The "niche" groups have kept demand alive and prices high. No wonder homes are being built east of Gold Canyon or west of Surprise or south of Ahwatukee.
I think the rental market will collapse first. It will mostly be low wage workers who are unemployed, even after the economy reopens. These people tend to combine households for economic efficiency, either by getting roommates, moving in with an SO, or moving back in with parents. There are also a lot of vacation rentals in this area that will be hit hard. I am looking to take a vacation later this year, but I won't book an airbnb or vbro because there is just no certainty that my trip will happen, and hotels are offering free cancellation while privately owned vacation rentals generally do not. Some of those owners might try to convert their airbnb units into long term rentals, putting even more pressure on rents. The buy/rent ratio in Phoenix was about even before this (or at least last time I did the math, which honestly was probably a year ago), but I think its going to turn in favor of renting.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
