The latest sales numbers are in, and the news is encouraging. Closed sales and pending sales are up rather dramatically and the listing inventory is sub 40,000 (37,000 and change at last glance) for the first time in recent memory. The underpinnings of the Valley Real Estate market have been statistically improving steadily with each passing month.
Is the bloom returning to the rose?
All signs seem pointed towards a market poised for recovery. Said recovery may, in hindsight, prove to already be well under way. Of course, bringing supply back in line with demand is the most tangible proof we have of a recovering market, but it doesn’t answer the question we Realtors can’t escape. We hear it in the line at Starbucks and when cornered by someone three martinis deep at cocktail parties:
“When are prices going to bottom out?”
That, my friends, is the 2 trillion dollar question. Let me preface my forthcoming opinion with the following. Anyone who tells you definitively where this elusive “bottom” is probably derived their opinion by studying flow charts, statistics, MADD Magazine and cutting the head off of a live chicken under the cover of midnight prior to the winter solstice.
My voodoo is no better than their voodoo.
That said, when I consult the astrological charts and the Arizona Regional MLS data, I am left with two distinct impressions. First, it is self evident that the house of Apollo will be foreclosed upon prior to the arrival of the harvest moon. Secondly, that the cocktail question cannot be properly answered in its current construct.
Here’s the way I see it. A segment of the market has already bottomed out. Not just any segment, mind you, but the primary driver of the past year’s Real Estate activity across the greater Phoenix and Scottsdale area. Of course, bank owned property is to what I am referring. With a disproportionate number of actual consummated transactions involving foreclosure properties at present, it is my humble opinion that the banks have already crashed their values through the floor. Attracting multiple offers and bidding situations in many instances, they would be hard pressed to erode pricing further now that demand is lined up around the corner in the form of cash laden investors.
The next part of the equation, though, might be difficult to swallow for Valley homeowners (A + B = oh Crap!). With foreclosure properties really driving pricing, few traditional sellers have been able to compete. Foreclosures have sold at record clips while resales have lagged behind their typical share of the market. As such, a gulf has opened up between the bank properties which are selling and the non-bank owned homes that are collecting dust at non-competitive prices. For the market at large to officially “bottom out” in my opinion, resale prices still need to fall further to decrease the gap. Buyers need a reason to start buying resale homes again, and that reason is all wrapped up in pricing. Most folks would prefer to buy a well maintained home from a mom and pop seller than an abandoned bank owned property, but not if it is priced a couple hundred thousand dollars higher.
Synopsis: I think the lowest prices that the Valley will see are presently or very nearly at hand because there is a great deal of demand for these homes. There will be good values still to come as resale prices drift further down, but don’t expect the bank owned bargains you are seeing today to get substantially better in the coming weeks and months.
As the title suggests, I think the summer will tell the tale of our market’s health. The spring is always our most active season, so I want to see how the market reacts when the seasonal buyers leave town. Will we retain the momentum from a brisk spring or will we recede back into the doldrums as the mercury rises? I predict the former, but again, that’s just my voodoo.
It wouldn’t be a Real Estate post without a call to action, so I’ll leave you with this. Wherever prices are next year, interest rates are highly unlikely to be in the 4’s like they are presently. If you’re asking me, and even if you’re not, I think it’s time to buy. Last call for bargain shoppers is looming.
Now, about this chicken …