Here in Phoenix, we had a lousy real estate market for years. Developers could always build a new stucco tract home in the desert right next to the one you bought, so appreciation was about the rate of inflation.
Then the investors came. And boy did they.
At one point, the republic reported that in some areas over 40% of homes being bought were being bought by flippers. Even detailed one 23 year old kid from Vegas who had bought 10 new homes. The new day trader.
But now, there's investor panic (good for them). Which has caused a tripling of listings in just 12 weeks. Like cockroaches when the light comes on, they're scurrying out.
But now what will the locals say and do? Everyone here talks about "the new paradigm" (sound familiar). They talk about the new demographics, the baby boomer rush to Phoenix, the hurricanes in Miami. They talk about 50% appreciation in 1 year being OK.
But the investors are gone. Never to return. So who'll buy the houses?
And in Phoenix, the Arizona Republic estimated that 40% of all jobs are tied to housing. We don't have companies here - real ones, Fortune 500 ones. We make our money building homes and selling them to each other.
So what will Phoenix do, now that the investors have fled?
Here's an article from this spring about the investors in Phoenix. Seems so long ago...
Out-of-state buyers and investors are purchasing nearly one out of every four homes sold in the Phoenix area, a rate that has doubled in two years. The pace shows no signs of slowing, according to an Arizona Republic analysis of sales records done with Infocom.
Valley residents and even local investors often can't compete with out-of-state investors. Barbara Bowers has lived in the Valley for several years and always looks for real estate investments. Lately she is getting beat out by out-of-state buyers with connections.
"I am so frustrated," said Bowers, a former public relations executive who lives in north Scottsdale. "I can't even get on the list to buy in some new developments. I have to buy from an investor who got in early and is making a big profit on a property they may never even see."
December 06, 2005
Now that the investors are fleeing, what will Phoenix do?
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here's phoenix listing #s - every day, another few hundred added to the rolls...
Tracking Phoenix/Maricopa & Pinal Counties
Population 2005: 3.8 million
Listing per population ratio 7/20: 1:353
Listing per population ratio 11/10: 1:150
7/20: 10,748
7/30: 11,656
8/10: 13,099
8/20: 14,321
8/30: 15,042
9/10: 16,716
9/20: 17,516
9/30: 18,799
10/10: 20,073
10/20: 21,806
10/30: 23,770
11/10: 25,387
11/20: 26,616
11/30: 26,811
12/3: 27,170
12/5: 27,352
Money flows from outside investors blew up the Phoenix market, and made it very difficult for the locals to buy a home. Now the investors are liquidating their properties and leaving a market that has no place to go but down. It’s outrageous!
When this ponzi scheme ends, congress needs to enact legislation that prevents or at least hinders this non sense from ever happening again.
Another point, real estate agents should have to follow the same guidelines as a securities rep. They should have to obtain a series 6 & 63 securities license. That would prevent them from making unrealistic comments to would be buyers about the future of real estate values.
This is going to make the tech bubble look like a speed bump, and it could have been prevented.
Excellent points anon....
This whole real estate market is one big ponzi scheme that is being inflated the most by people with the most flesh in the game.
If I owned TGT stock and tried to pump it up and dump it I'd be charged with securities fruad.
Yet a realtor and broker can talk up housing all they want when they know damn good and well it's not true.
classic pump and dump in phoenix - but this time with highly leveraged houses, and nothing illegal
amazing it took this long to figure out how to do this scam... in the end it was the easy access to credit that put fuel in this fire
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