If you haven’t read this article about the future of Phoenix real estate, you should; it’s interesting (if not a bit on the alarmist side).
Right now so many people are looking for answers about what is going to happen to the value of their homes. People who bought investment properties in the last few years are wondering if they’re ever going to see a return, or even break even, or if they should just cut their losses and walk away. People who refinanced when their houses were shooting up in value are now worried that they’re stuck in their houses forever because they can’t sell for what they owe. People who bought in 2005 and now want to upgrade, or just need a change of scenery are underneath their loans and and wondering if they will ever have any other options.
Lots of industry experts are making lots of different predictions. Some are saying we’ve hit the bottom, and others says the bottom is still 6 months to 2 years out. Ultimately, I think it’s important to remember that none of these experts is a fortune teller. If they really could tell exactly what is going to happen to house values in Metro Phoenix, then they would have sold in 2005 and rented until now. Roughly five people actually did that, and I’m pretty sure it was a fluke.
What you can depend on, are the cold hard facts of what is actually going on right now. Here is what we’re seeing right now:
1. We are still in a state of extreme oversupply. There are currently 54,906 properties on the market. This is more than an 18 month supply of homes.
2. Foreclosures and short sales make up as much as 50% of the market in places like Queen Creek and Maricopa that were so popular with investors back in 2005. Rock bottom prices on bank owned properties are forcing all houses on the market to lower prices to compete.
3. Buyer activity has started to pick up. Buyers looking for a deal have started to smell the blood in the water.
4. The majority of the activity we are seeing right now is in the $150K – $250K price range. People who couldn’t buy in the last two years are now finding things more affordable. People who would typically buy in price ranges higher than that most likely have a house they would need to sell first, and are more hesitant.
So basically, #3 and 4 are what we need to have happen as the first step to a recovering market. #2, however, is an unknown entity. The ARM debacle in the mortgage industry may lead to many more foreclosures in the next year, and if it does, they will continue to push prices down until it is resolved.
Right now, it’s a wait and see situation.