We're almost there. And I predict 100,000, yes, 100,000 may be achievable during this meltdown. And prices will fall more than 30% in Phoenix, possibly 50%. This market will be devastated, and their housing-based economy will be in shambles. It is what it is.
Holdouts clog up housing market
Stubborn home sellers holding out for big money are clogging metropolitan Phoenix's housing market.Too many of these homeowners haven't shaken off the hangover of last year's home-buying binge, when sellers could name their price and get it.
Market professionals say many owners continue to believe that the neighbor who sold for top dollar last year set the market price, not the other neighbor who cut thousands from the listing price before selling last week.
"People are unrealistic about what their homes are worth," said Brooke Castaneda of Keller Williams Northeast Realty. "A lot of sellers thought their homes would have these phantom profits. . . . They're not accepting that that isn't the case anymore.
"The Valley's housing market is unrecognizable from a year ago, when there were about 9,400 houses on the Arizona Regional Multiple Listing system in May and buyers were paying top dollar just to get a home even if it wasn't exactly what they wanted. Now, the figure exceeds 43,000, a record
Motivated sellers are beginning to drop their prices, in some cases by tens or hundreds of thousands of dollars.
June 12, 2006
Phoenix passes 49,000 listings, most sellers are still dreaming, and a devastating meltdown is underway
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36 comments:
So now the realtors are saying prices are too high? That isn't the tune they were singing last year.
The interesting thing about this meltdown is topic isn't even mainstream yet. When it becomes a watercooler conversation, then the real fireworks begin. Right now, most people think things are fine.
people said you were crazy when listings were at 15000 or so to predict 50000
they'll say you're crazy to predict 100,000
the crazy ones were the ones who bought last year at the high, or the ones who are still out buying
what would you do if you were closing on one of those new condos in scottsdale in the next few months, or had recently put a deposit down?
what would you do if you were closing on one of those new condos in scottsdale in the next few months, or had recently put a deposit down?
if it was a small deposit and you had the money anyway, i would walk away, unless of course there was some sort of clause in your contract where you get the deposit back. Otherwise i would sit and wait it out. things are just happening way to fast. as we speak the DOW is headed downward.
And the rent to own ads are piling up. Empty brand new houses with houses being built next to them. More inventory, more rentals more FBs.
I realtor.com'd zip code 85050 for 325-350k houses.
26 to choose from. I couldn't tell much difference although if I cared I'm sure I could.
I wouldn't dare to submit 26 seperate offers of 200-225k for fear some may be accepted.
This is the definition of a free fall.
the market here will collapse before 100K listings, and another investor boom will start.
most people aren't yet worried, because most people aren't selling. the professional investors are long gone, and the amateurs are left, with their toxic financing, and they'll face ruin.
i live near downtown, and i have watched list prices plummet on some high-rise condo buildings. case in point, there is a penthouse for sale in the regency house. it started at 949K, and is now at 829K, and the fair market value is probably around 600K, tops. clueless seller with even more clueless realtor.
tapestry is only 30% complete, and yet there are 32 flips for sale.
on palm lane, by me, an infill condo just dropped from 649K to 525K. stupid seller, again, does not realize that the exact unit next to him/her is listed for 499K after dropping from 549K. they both paid over 400K for 1400SF. hah!
too many people drank the kool-aid.
can't wait to buy when we bottom out.
I disagree that the pros are gone, there are true pros and there are wanna be pros. Three reasons: 1 the majority of pros have never seen this type of market. 2 no market has ever seen this speed. 3 margins have never been so low. This last affects all participants but pros typically use the absolute least amount of their own money and are thus more exposed.
The true pros were disembarking Jun-Oct 05. The cyclical, patient and timers were sweating and selling their tickets Nov 05-Jan 06 to others and the nimble rats were running down the mooring lines Feb-Apr 06 no matter what the cost. People that "thought" they were pros are stuck. People that were pros even last time are stuck as well.
There's no investor boom this time. There isn't enough money left in the US economy to do that. In the past a massive price decline would make for buying but this time there isn't any money. Thus the price tends lower over a long period of time.
crime increasing in major cities.
a precursor?
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"Burning Down the House"
suitable for the mood
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update on Old Town Scottsdale... for the past 4 months:
- stable prices
- stable inventory
- surprisingly strong condo market
In other words: no change. just hovering with slightly lower activity than last year. Houses and condos have been moving, just more slowly.
However, I'm beginning to notice some weakness over the past few weeks.
1. Inventory in far south Scottsdale/Tempe (an iffy area but is popular with investors who want to revamp the area) has been rising. Condos and house inventory has increased significantly. Sales volume has slowed to a trickle. Something changed last month.
2. Further north in Old Town, condo inventory has been rising over the past few weeks. Condos have been strong up until last month; something has changed.
3. No appreciable change in housing in Old Town yet.
I believe outlying areas fail first and the trend reaches the more stable neighborhoods last.
Old Town is probably the most desirable area in the valley and has been holding solid over the past few months in the face of the rising inventory throughout the valley, but signs of weakness are beginning to appear. My feeling is it's about to get ugly very quickly.
Hi,
We are relocating to Phoenix and are looking to buy a home. Have been renting quite a while. What strategy do you guys suggest I adopt? Buy inventory home, or one of those that has been sitting for few a while on the MLS or simply try and lowball the sellers?
Also, work will be near the Sky Harbour Airport. Which area should I look at? Heard Ahwatukee is nice. But deep inside I like to live in a brand new community.
I appreciate any constructive input.
Thanks!!
Sonee
Thesis: Unlike highly liquid stocks which "crash" by having a huge surge in trading volume with declining prices in a single day or week, housing markets have a huge surge in listings, while actual volumes dry up.
In stocks, they don't post peoples limit orders that don't trade in the market data, while with housings we do since the listings are public. Also since housing is a longer lead time, higher transaction cost asset, you have a longer cycle of listing, waiting for a bid, waiting, etc. With a stock, its just so easy to say 1/2 way through the day "just get out..."
So I would argue that the listing volumes is == to the trading volume in a stock market downturn.
Anyone else think Phoenix is going to be the arson capitol of the U.S.?
Sonnee-
If you are seriously thinking of buying at this time, look for the best deal you can find, then lowball by 50%.
Looks like you'll have PLENTY of opportunities to buy in Phoenix.
Phoenix already is in trouble, not need to wait another six months. Just like the frog in a pot of boiling water, many home owners are clueless and just now starting to get scared. When we sold our house in Phoenix last March 2005 our friends thought us nuts (and ragged us that the price went up another $100,000 by mid-summer) and keep telling us their homes are now worth $75,000 more than ours sold for (even though our home had $100,000 more in upgrades in a better neighborhood) and though me nuts to say that my mid-summer 2006 the market in Phoenix would be a blood-bath. Still, other friends are just now buying in to what I told them last summer and have now changed their tunes to, "I saw this coming."
I don't think 100,000 is too far off base. There is still product coming online, not to mention all those condo conversions, and with even 10,000 people laid off you can expect a 1/3 to try to sell.
We bought last year after we sold in Phoenix a home in Austin. Things are booming here, some investors (who will get slaughered as they don't understand this pychotic market in Texas and the killer property taxes and their impact on affordability) and the homes around me are selling for upwards of $150,000 more than we paid. We don't intend to sell as we bought to LIVE in this house.
We also cashed out of all our 401 money early this year as we felt the market would decline and would rather have the cash and pay the tax, better to have a known # than wait for the skimmers to take our money in the market.
Doomsday? Don't think so but I remember the market in 82 and 89 and things were hard in a lot of places...and eventually bargains.
Ultimately stick to buying a home not an investment, stay at or below $100 a sq foot in the better neighborhoods and don't get foolish financing and you still will be fine since you can't build a descent home in most of the desirable areas for $100 a sq ft.
Meltdown where? 1) Phoenix, 2)All of California 3) Florida 4)NY and Boston.
Florida and California do have one "out"....disasters to mop up excess supply. Phoenix? Not much chance when prices fall and make it more affordable to live in more desirable areas.
We left Phoenix because all of the benefits vanished, uncrowded, not L.A., affordable homes..not just in the burbs but downtown! Now too expensive, crowded, polluted to put up with the hot summers.
Also as always, I don't understand all those who make comments as anonymous since if you believe in your comments then link them to an identity instead of being lumped with how many anonymous bloggers?
I was looking a bit into your market here.
The truth METOR Phoenix. Not Phoenix.
Those that sold in Scottdales and down size to Phoenix seem to be doing alright.
Sonee...do NOT, I repeat, NOT buy ANY house in Phoenix at this time.
DO NOT BUY!
You will be buying at the very BEGINNING of a multi-year real estate crash. If you buy now you will be watching the value of your home go down every month for probably several years.
There should be MANY MANY beautiful new homes for you to get a great rental deal on.
RENT...DO NOT BUY! please...
But if I dont buy now, I can never afford one in the future as interest rate is rising. I need a home to stay and will not sell it.
So its a battle between rate and home prices.
HELP!!!!!!!
Sonee - there is absolutely NO reason, none whatsoever, to buy a home in Phoenix right now. Rent for pennies on the dollar and escape a wicked downturn. Wicked.
Even rents will collapse as hundreds of thousands of newly unemployed homebuilding-related jobs move away in search of work.
If you buy today, you'll be bankrupt or significantly underwater three years from now.
Hold out, be patient, rent, and the time to buy is when the cost of ownership is less than the cost of renting a similar house, and the declines have stopped.
That's my take. Good luck. Phoenix is in serious, historic trouble.
i agree with you guys but interest rate could rise to 10% in the next 2 yrs. So even if prices are tumbling, whats the use? I cant afford them due to the potential rising rate. So how? Can you address that interest rate issue for me pls.
thanks a billion guys!!!
Sonee
i gotta respond...i live here, i know the market, i made a small fortune (sold 3 last summer, bought 1). you have to look at the whole picture. sure, there are a lot of screwed people in phoenix. too many (110,000) bought homes in a crazy market. now almost 50,000 of them are for sale again, and there are greedy sellers floating their homes to see if they can get a good price.
how is it a crash if the prices simply return to "normal"? the way i see it is once the sellers get a grip on reality, they will lower their prices or pull the listings, and the inventory and price will go back to where it was in 2004.
anyone who quotes data from 2005 is just looking at part of the picture.
and one last thought, phoenix is still far more affordable than any western city except salt lake city. once the price levels, after it drops, and it will drop, more people will come into the market.
and just go to the DMV to see 50,000 people a year move here from california. easy stat to check, since the state tracks change of address and vehicle licensing from other states.
we'll survive once sanity returns. but there is no doubt that lots of people will lose money.
and i totally agree with other posts...if you're going to buy, lowball. if the seller is offended, too bad. just make an offer on the house next door, or the one next door to that. remember, there are 49,000 to choose from.
my two cents.
To the poster about the 401k. You don't need to cash it out, to move it out of stocks. I move mine around. Some are easier to move than others. I have all my money sitting in a money market part of the 401k. Next fall, which should be the bottem for stocks, I'll move the money back into stocks. I do this regularly to maximize profits. I love the stockmarket. It is fun to play with.
Yo 2 anons ago.. i drove by the DMV on Paradise lane and Scottsdale rd... the parking lot was only 1/4 full. and, data showed last year that for every 5 people moving here, 2 move out. that could swing to even. remember, the reason everyone moved here for is gone. i am thinking of blowing out of here too. just no stinking value. every house is a lame cookie cutter stucco box and it will be 112 tommorrow. my AC has been running for the last 2hrs nonstop in a 2bd apt. F this place
Hey 3 anons ago:
If you buy at a low price and high interest rate you can always refi into a lower rate if one comes along. If you buy at a high price and a low interest rate, well you got the best deal you are going to get my friend. Once you overpaid you overpaid forever. "Irrational Exuberance" took this market to places it should never have gone and I truly believe we have a very good chance to see the next Great Depression. It will get a new name of course like "The Mammoth Depression" or some sheite like that. Well unless you ask David Lereah over at the NAR, he will call it a cooling of the economy. But in any case this stuff that has been going on is not "normal" even according to the NAR. They say that a normal market increases with inflation plus 2% or so (that is a lie by the way). So I really think you need to ask yourself why did all this happen??? There is only one real answer and that is speculation. The loose money or whatever else does not really matter beyond that. Speculation is what caused and what will kill this market period.
Out of every 5 carpetbaggers from Hell moving into Phoenix, 3 (three) leave. (Not 2!)
I am here for the long haul (house in Coronado north of downtown). But I think 100,000 houses for sale at the bottom is way too conservative if you're including the "greater" metro area with Anthem and Queen Creek and all that.
Forget about listings - I predict more than 100,000 houses in the exurbs abandoned and bulldozed before it is over. There will be nothing to drive growth once the real estate economy takes a dive.
Life here would be sustainable if they had started installing solar panels on all the houses during Carter's second term. Say thanks to all the guys at GM factories who voted for Reagan. Now 25 years down the road it is much too late.
Buy gold and learn Chinese.
I was trying to buy a house to live in for the past week. But none of the sellers accepted my lowball offers and they weren't even that low. Some were actually looking for full asking price! So countered with 5k or 10k off asking price. They have no clue and I bet they'll be calling me back next month. But by that time it will be too late cause I will be renting by then.
Someone mentioned a few posts back that if interest rates drop "you can always refinance"
this MAY NOT BE TRUE in the future..
the incredibly lax lending standards we have become used to will most likely vanish
when banks owns thousands and thousands of properties, all worth way less than the loan amount, they will get REAL CAREFUL about making new loans..if they can make any at all!
this is a piece of the crash I don't see addressed much here...it will get MUCH harder to get a loan in the future...unless the gov't steps in, which of course could happen
REGARDING HIGHER INTEREST RATES IN A COUPLE OF YEARS
I personally expressed this concern to my financial planner last week. I mused that it would be nice to lock in a loan now at a lower rate then buy in a year or two when prices drop (the best of both worlds). I know that is is not possible, but he suggested a different approach for someone who is considering buying in two years, but afraid that mtg. rates might rise. I did not understand his suggestion well enough to fully describe it here, but essentially he advised, purchase options on 10yr treasury bonds, (hedging against increases that will effect mtg. rates). Maybe someone else here could clarify and offer advice.
"when banks owns thousands and thousands of properties, all worth way less than the loan amount, they will get REAL CAREFUL about making new loans..if they can make any at all!"
Those very banks will give you loans to take it off their books, of course they will be more careful than before but you will get the loan. The banks aren't REITs.
As for another poster..my advice, buy homes when rates are high, sell homes when rates have bottomed. That way you get the most profits.
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