Buyers market.... really? (Phoenix, Scottsdale, Chandler: HOA, first time home buyer, taxes)

[sh9730]

I see the Monthly ARMLS data came out today also....less new listings than this month last year (but not by much), more sales than last month and SIGNIFICANTLY more than last year. The prices are down of course, but still above 2003 levels overall.

Me personally....and yes I know there are a bunch of people who disagree here...I think we are bouncing along the bottom now....wont go down much more, but also wont spike up much for awhile....

[ArizonaBear]

Originally Posted by markas214

I hope you're being sarcastic. I have my house and an afforable 30 year fixed mortgage @ 6.25%. I qualified for triple what I borrowed. I did not wish to be house poor. I believe all those who over loaned and over borrowed should go under even if it takes a decade to recover. No more tax money for fools or speculators. People need to learn to live within their means.

No sarcasm here.

Note though I am only referring to homeowners who can actually afford the monthly payments but cannot qualify for conventional financing due to credit, etc. issues.

As for Uncle Sam bailing out those who cannot afford the monthly payments (if the APR was low)...........I do agree with you------------that should not be our problem.

[moughie]

[quote=Captain Bill;4902037]Here are some stats some may be interested in:
/QUOTE]

I assume those stats are for single family homes. How does the townhouse market look?

Oh, btw, we "declined" the sellers list of improvements since it did not address the 3 main concerns and cancelled our contract. So back to square one of house hunting in Tempe.

Anyone have any observations on the Tempe housing market? I have been looking for 3 month now.

Thanks to all those who attempted to answer my earlier questions!

[ArizonaBear]

[quote=moughie;4910662]

Originally Posted by Captain Bill

Here are some stats some may be interested in:
/QUOTE]

I assume those stats are for single family homes. How does the townhouse market look?

Oh, btw, we "declined" the sellers list of improvements since it did not address the 3 main concerns and cancelled our contract. So back to square one of house hunting in Tempe.

Anyone have any observations on the Tempe housing market? I have been looking for 3 month now.

Thanks to all those who attempted to answer my earlier questions!

Tempe seems to declining less compared to either Mesa or Scottsdale...........perhaps due to ASU?

[Captain Bill]

I assume those stats are for single family homes. How does the townhouse market look?

Yes, those are all single family homes.



Here are Townhouses in Tempe (all price ranges)

• Active 212
• Pending 26
• Sold 38 (last 30 days)
• Months supply 5.5

Tempe Single Family Residence (all price ranges)

• Active 532
• Pending 69
• Sold 88 (last 30 days)
• Months supply 6

[moughie]

Thank you!

[LesterBurnham]

Originally Posted by Captain Bill

It's up to each individual to do their own interpretation of these numbers, and to do their own forecasting. In my opinion, one should also be searching for the answers to these questions.

1. Why did the inventory drop from 18 months supply in December 2007 to around an 8 month supply today?
2. What will the supply be in January 2009?
3. As the supply drops below 6 months in each price range, what will happen to prices?
4. How much of a drop in purchase price will it take to offset a 1% increase in interest rate, if the rates continue to increase?

Bill,

Thanks for the useful data, I always respect your opinion and appreciate you taking the time to provide so much information and expert opinions.

I'm not entirely a doom-and-gloomer, indeed I'd like to buy as soon as possible, but before I do I want to understand the market. I have some questions though that I'd appreciate your insight on. I'll introduce my questions by giving some possible answers to those you posed:

1.- (Why the drop in inventory from 6 mo ago?) Mainly because it's summer. April, May, June, July to a lesser extent August are always strong in sales (per the graphs at ARMLS). Sales in Sept thru Jan are almost certainly going to be down. Note that we haven't really cut into the absolute inventory which is still near a record high.

2.- (Inventory in Jan 09?) I don't know. I'd guess 10-14 months for entire Metro. I expect absolute inventory to grow slightly and sales to take their standard seasonal drop. I suspect it will look better than Jan 08 but will still look like a market in free-fall.

3.- (What happens under 6 mo inventory?) Good question, I wish I knew the answer. First, I suspect there will be few areas or price ranges which stay under 6 mo of inventory until maybe April 09 because of the seasonal effect.
When < 6 mo inventory of lower-priced homes does come about, it will be very interesting to see what happens. Of course the first inclination is that prices will start to go back up. But I'm not so sure it's that easy for any market segment to decouple itself from the market in general. If the seller of a house at 200K today keeps his/her house at 200K because the inventory is low and the seller of today's 300K house down the street drops the price to $230K, will the demand still be there for the 200K house? Or will the seller have to drop to maybe $160K in response?

4.- (Interest rate increases?). Fairly simple calculation, from a monthly payment perspective 1% interest rate is about equal to 9% drop in amount financed. However the savvy buyer who is not tightly cash-flow constrained would always prefer a cheaper price at a higher interest rate. Smaller down payment, better tax writeoff, theoretically lower taxes & insurance and if interest rates ever drop, the buyer can refinance. Once you've paid a high price for your house, you can't get out of it.

Fear of rising interest rates is, in my opinion, a pretty poor reason for someone to rush to buy a house. Interest rates may indeed go up, but if they do, it will shrink the pool of buyers and how much they can pay even further, and hence pushes home prices even lower.




Ok, so now you know where I'm coming from, so my inventory related question is:

Where are all the foreclosures?



Sure there's bunch on the market and a bunch selling and according the NAR they are now "dominating the market". But as far as I can tell it's only the tip of the iceberg. And I'm not talking about the predicted defaults still coming on Alt-A's and other exotic loans, I'm talking about the foreclosures that have already happened. It's hard to get good statistics, but the best I've been able to come up with is that around 1000-2000 foreclosures are selling a month right now and supply is growing only slightly. But 2000 foreclosures per month is the number of foreclosures we were seeing about a year ago. Perhaps that makes sense as it takes the banks a year to get the house back on the market.

But if that's the case, this year we've see foreclosures grow from 3000/month early in the year to 4000/month in the spring to around 6000/month currently.

When these do come on the market, probably in '09, how are we going to absorb all this inventory? It seems we'd need a doubling of the sales numbers back to peak 2005 levels just to keep the inventory from growing and record breaking sales to actually reduce the inventory.


There doesn't seem to be anybody talking about this, so maybe my thinking is off and I'd appreciate your opinion.

[moughie]

"4.- (Interest rate increases?). Fairly simple calculation, from a monthly payment perspective 1% interest rate is about equal to 9% drop in amount financed. However the savvy buyer who is not tightly cash-flow constrained would always prefer a cheaper price at a higher interest rate. Smaller down payment, better tax writeoff, theoretically lower taxes & insurance and if interest rates ever drop, the buyer can refinance. Once you've paid a high price for your house, you can't get out of it.

Fear of rising interest rates is, in my opinion, a pretty poor reason for someone to rush to buy a house. Interest rates may indeed go up, but if they do, it will shrink the pool of buyers and how much they can pay even further, and hence pushes home prices even lower."

Excellent post and excellent points!!

[ArizonaBear]

Originally Posted by moughie

"4.- (Interest rate increases?). Fairly simple calculation, from a monthly payment perspective 1% interest rate is about equal to 9% drop in amount financed. However the savvy buyer who is not tightly cash-flow constrained would always prefer a cheaper price at a higher interest rate. Smaller down payment, better tax writeoff, theoretically lower taxes & insurance and if interest rates ever drop, the buyer can refinance. Once you've paid a high price for your house, you can't get out of it.

Fear of rising interest rates is, in my opinion, a pretty poor reason for someone to rush to buy a house. Interest rates may indeed go up, but if they do, it will shrink the pool of buyers and how much they can pay even further, and hence pushes home prices even lower."

Excellent post and excellent points!!

Myself:

I would rather pay 10% interest on a fixed rate loan for an $80K home in an older section of town (if otherwise safe, etc) which would be about $800 a month for a 30 year mortgage simply for the reasons that moughie stated.

Besides: inflation would effectively 'drop' the monthly payments as wages, etc. go up-----------and, I woudl pay an additional $100 a month which would probably knock about 10 years off the life of the loan.

[JoePAz]

In Anthem I estimate a 5.6 month supply.

There are 451 homes listed in AMLS and 80 were sold in July. In Anthem the months fo May, June and July have shows resales being more in each of these months than any time in the last 2 years.

The listed homes have been showing declining trend and sales have been up. Pending sales are also hold strong up dramticly from the past couple years. Prices are down significantly from the prior highs and it is still to early to determine if prices have stablized or not. What is clear however that demand is stronger now than any time in the past couple years. Inventory is down to the lowest levels in the past couple years. This has been the pattern for the last few months so it is not an odd ball spike. Has the Anthem market turned the corner? Maybe. Is this just a Seasonal demand? Probably not given the 2 year highs in sales, but it will be interesting to see if sales hold through the fall and winter.