Phoenix is now at 50,000 unsold listings and gaining. Sales volume is plummeting. Builders keep delivering new unsold units to the market, while slashing prices and adding huge incentives. Yet homeowners keep their houses on the market at last year's price. This scenario repeated in cities across the US.
Well, the question is not IF this situation will change - it's a question of WHEN the standoff will end. The smart folks in the room will lower their price NOW - take anything they can get and get out, even at a steep loss. The stupid and greedy ones? They'll hold out and hold out until they lose everything. Having felt they "deserved" the price their neighbor got last year, or that their realtor/appraiser/lender/Zillow told them their house was worth.
There'll be interesting negotiations and decisions taking place throughout the country, where upside-down owners have to consider offers that will leave them with a debt to pay off for years. There's folks out there who just bought - in the past 12 months or so - that today are thinking of getting out already.
There are some renters who think FINALLY - let's go jump into this cold market with lowball offers - only to buy a house that keeps depreciating like the falling knife it is.
You'll see condo developers slash their prices, getting sued by the current depositers who'll be underwater when or if they close. You'll see Bob Toll selling more stock before it hits $0.
Feel free to get on record with your guess of price declines. Catherine Reagor, the lazy Arizona Republic writer, made up an unsourced number of Phoenix falling 10% from the peak. I'll stick with 33% minimum as we get back to the mean.
Price declines - the next stage of the bubble. We predicted the euphoria stage, we predicted the exploding inventory, we predicted the denial, now comes the panic and significant price cuts.
June 24, 2006
Posted by blogger at 6/24/2006