February 20, 2006

Phoenix housing meltdown to take local real-estate-based economy down with it

With over 40% of the ENTIRE Phoenix economy tied to housing and home-building, guess what happens now that the bubble has burst?

We lost an American city earlier this year with Katrina and New Orleans. I think another American city - Phoenix - is about to lose their economy. Well, the good news is at least the illegal Mexican immigrants who build the houses will go home now.

People used to ask me what people in Phoenix did for a living. I said they sold houses to each other.

Not anymore.

Las Vegas has gambling. Detroit had the auto industry. Phoenix has housing.

A recent forecast for home building from a prestigious panel of Phoenix builders is sending shock waves through the real estate industry. At an Urban Land Institute conference in January, developer Francis Najafi of the Pivotal Group called for as few as 35,000 new homes to go up Valley-wide this year. That would be an almost 45 percent drop from 2005's record 63,000.


Anonymous said...

Pace yourself Kieth. It's a long way down, you and your readers are geting tired

Grinch34 said...

35,000 homes are still a lot of homes. Although I see that number potentially being drastically reduced in 2007.

Anonymous said...

I believe when this summer came and home sale number keep falling then real panic will set in. Price will begin to fall quickly. Buyers better to wait then to jump in after all you control the market. Those buyers hurry to buy will end up hurry to bail out.

Anonymous said...


Developers will keep building until they don't make any more money. They will build to just break even in order to take care of their subcontractors.

Once they can't even build without losing money is when you will see the local economy collapse under it's own weight. It's a long long way down.

blogger said...

actually, anon #1, it's realtors, flippers, mortgage bankers and trolls getting tired it looks like

had a good run. but now they're running (the smart ones) - even selling at a loss if they have to.

Anonymous said...

There is allot of money out there. These things take time. The great depression only started in 29, it took years to hit bottom.

Pace yourself. It's a long way down.

Anonymous said...

Developers build just to break even....that's hilarious, I'm sure they reallllly care about subcontractors. You've been in america long enough to know it's all about the money, get back to reality.

foobeca said...

Builders will even build houses when they're losing money for the same reason that GM loses money on every car they sell.

It's preferable to sell cars at a loss than to have idled factories and workers. For a builder it's better to sell some houses at break even or even at a loss than to have a bunch of empty lots sitting not doing anything for you causing you to have to pay interest to the lender for the land. Basically, even if you sell for a loss, if it helps you recoup some or all of the fixed costs, then it's preferable to going out of business.

Nathan said...

40% of the economy in Phoenix is tied to RE? Can you provide a link for that statistic?

Also, the last time Phoenix had around 35k total permits was 1995, when migration to the area was a lot lower than it is today and the population was smaller.

In order to support a growing population, homes need to built

Anonymous said...

To Nathan
I live in PHX for the last 15 years. Used to work for Chamber of Comerce now I am in mtg biz. The bigest employer is the state of az, next tourism and RE. This place is waaaay overprice. No good income here. Now we have inventories of 35k houses according to MLS, probably another 20 -30 k fosb and abot 30k houses by builders. No buyers whatsoever.This place will be a bloodbath soon.

Anonymous said...


A major builder in Prescott (no names here, I live/work in this town) which is north of Phx and has been red hot, in pace with Phx, has had NO sales in the past 30 days. None. The inventory in the Prescott area is increasing at the average rate of 65-70 NEW listings per day and about 8 closings per day...that's for a population of about 120,000 for a tri-city area. There are 1300 real estate agents. Many many construction workers.
Boom. Here, there, everywhere.
No where in this state is immune to the coming implosion.

blogger said...

in the arizona republic the other day they asked a realtor what they thought of the local real estate market. their reply?

What real estate market?

As in, nothing is moving

Anonymous said...

That's actually quite to form of how the most extreme trading bubbles end. There are simply no bids.

Anonymous said...

Sweet! I love it. Finally this shithole PHX will implode. Nice.

azfamdeals1 said...

Phoenix, AZ.: "There is no there, there".
For strivers who can't afford a big house in CA., and whose value system is sq. footage and nothing more.

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