In Phoenix, where we saw 55% home price appreciation in 2005, people actually still think their homes are worth that much. They got to believe, so certainly, so strongly, that their homes were worth so much more than they were just a few months before
Demographics! Weather! No more land! Cheap versus California! The New Economy!
It was all just a mirage. It was flippers descending into town and scooping everything up, driving down inventories while driving up prices. Then it was the locals becoming flippers themselves. Then the music ended. And the locals are holding the (overpriced) bag, while the flippers flee.
So now we get to go back to 2004 (or worse) price levels. In Phoenix, that means a 40%+ haircut. And it also means hundreds of thousands of people left unemployed, families destroyed, and an economy in shambles.
All because people believed their homes were worth 50% more than they were just a few months before.
June 26, 2006
The Great Mirage: People actually BELIEVED their homes were worth 50% more than they were a year ago
Posted by blogger at 6/26/2006