Teetering on a Bust in Phoenix
"For Sale" signs dotting the landscape, home browsers holding back offers, sellers dropping prices.. sound familiar? Well it's currently taking place in Phoenix, a market that hit its peak late last year. Although the situation isn't dire yet, many signals point to the start of a drop. Housing "experts" in the region remain vigilant, though, proclaiming that Phoenix is still a "very strong" market this year. You decide...
The Arizona Republic
May. 13, 2006 12:00 AM
May. 13, 2006 12:00 AM
Home sales are plunging in metropolitan Phoenix, even as record numbers of people decide to put their houses on the market.
For now, the median sales price is holding firm. But with the number of for-sale signs dotting yards across the Valley, no one expects that to last.
"Buyers think, 'Why should I buy today? It will be less expensive in a month or three weeks.' Every listing agent I talk to is getting ridiculous lowball offers," said Diane Watson, a Realty Executives agent in north Scottsdale.
For now, the median sales price is holding firm. But with the number of for-sale signs dotting yards across the Valley, no one expects that to last.
"Buyers think, 'Why should I buy today? It will be less expensive in a month or three weeks.' Every listing agent I talk to is getting ridiculous lowball offers," said Diane Watson, a Realty Executives agent in north Scottsdale.
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Through the first four months of 2006, the number of existing houses sold in the Valley is down 46 percent from last year and 12 percent from the same time in '04, before the region's real estate market took off.
Last month, there were 38,206 homes for sale, a record high. Agents say they are seeing more prices being cut, and there is the persistent question of whether the crucial summer selling season will be strong enough to rescue the year.
Neil Brooks, a Century 21 Arizona Foothills agent in the north Valley, said the clock is ticking on resales in metropolitan Phoenix. He expects a 10 to 15 percent price reduction Valley-wide if summer selling doesn't chop inventory.
"The next 60 days are crucial for Arizona real estate," he said.
That also is the opinion of Jay Butler, who heads the Arizona Real Estate Center at Arizona State University Polytechnic. Figures released this week by his office show that last month was the weakest April since 2000 but that the month's median home price of $264,900 was just $100 below the record.
Butler said the slack demand and firm prices reflect the fact that move-up buyers dominate in a more-expensive market.
Last month, there were 38,206 homes for sale, a record high. Agents say they are seeing more prices being cut, and there is the persistent question of whether the crucial summer selling season will be strong enough to rescue the year.
Neil Brooks, a Century 21 Arizona Foothills agent in the north Valley, said the clock is ticking on resales in metropolitan Phoenix. He expects a 10 to 15 percent price reduction Valley-wide if summer selling doesn't chop inventory.
"The next 60 days are crucial for Arizona real estate," he said.
That also is the opinion of Jay Butler, who heads the Arizona Real Estate Center at Arizona State University Polytechnic. Figures released this week by his office show that last month was the weakest April since 2000 but that the month's median home price of $264,900 was just $100 below the record.
Butler said the slack demand and firm prices reflect the fact that move-up buyers dominate in a more-expensive market.
Market still healthy
Valley real estate watchers will be keeping their eyes on the quarterly survey of markets across the country by the National Association of Realtors. It is due out Monday.
A spokesman said an early look shows that even though home appreciation has cooled recently in the Valley, the area is still high on the list for metropolitan areas with the biggest gains because it compares housing prices during the first quarter of 2006 with the first quarter of 2005.
Home prices shot up almost 50 percent Valley-wide last year but have been relatively flat since October.
Although Butler said the Valley's home-appreciation heyday was over sooner than many people expected, national experts aren't ready to write off the Phoenix market. Tim Sullivan of San Diego-based Sullivan Group Real Estate Advisors said there is a four-month supply of homes on the market in metropolitan Phoenix. Anything below a six-month supply of homes for sale signals a healthy market.
"Phoenix's housing market hit the sky last year," he said. "It hurts a little now because the market was so good last year, but it's not like prices have fallen and no one is buying. People are still buying in Phoenix, they are just taking their time."
In April, houses took nearly two months to sell, on average. Last year, they sold in just under a month, on average.
Erin Middleton and her husband have been trying to sell their house in Cave Creek for about a month. They tried selling it themselves, then hired an agent who has been marketing it hard and holding open houses.
Several people have walked through, but no one has gotten serious, even though they spent $8,000 on new paint, carpeting, kitchen appliances and countertops. They dropped the price Monday to $429,000 from $435,000 and are second-guessing their decision not to list the house last year when demand was strong.
"You can't sell regardless of the price," she said. "Nobody's looking. The market's not where it used to be."
Jim Sexton, owner of John Hall & Associates in Phoenix, said job growth and rising population (housing fundamentals) are still in place. He doesn't expect a price collapse.
"The market is far from falling apart," he said. "You're going to talk about real estate falling in a lot of other markets before you start talking about it here."
A spokesman said an early look shows that even though home appreciation has cooled recently in the Valley, the area is still high on the list for metropolitan areas with the biggest gains because it compares housing prices during the first quarter of 2006 with the first quarter of 2005.
Home prices shot up almost 50 percent Valley-wide last year but have been relatively flat since October.
Although Butler said the Valley's home-appreciation heyday was over sooner than many people expected, national experts aren't ready to write off the Phoenix market. Tim Sullivan of San Diego-based Sullivan Group Real Estate Advisors said there is a four-month supply of homes on the market in metropolitan Phoenix. Anything below a six-month supply of homes for sale signals a healthy market.
"Phoenix's housing market hit the sky last year," he said. "It hurts a little now because the market was so good last year, but it's not like prices have fallen and no one is buying. People are still buying in Phoenix, they are just taking their time."
In April, houses took nearly two months to sell, on average. Last year, they sold in just under a month, on average.
Erin Middleton and her husband have been trying to sell their house in Cave Creek for about a month. They tried selling it themselves, then hired an agent who has been marketing it hard and holding open houses.
Several people have walked through, but no one has gotten serious, even though they spent $8,000 on new paint, carpeting, kitchen appliances and countertops. They dropped the price Monday to $429,000 from $435,000 and are second-guessing their decision not to list the house last year when demand was strong.
"You can't sell regardless of the price," she said. "Nobody's looking. The market's not where it used to be."
Jim Sexton, owner of John Hall & Associates in Phoenix, said job growth and rising population (housing fundamentals) are still in place. He doesn't expect a price collapse.
"The market is far from falling apart," he said. "You're going to talk about real estate falling in a lot of other markets before you start talking about it here."
Soft landing predicted
Some cities around the Valley did see their median home values dip slightly last month. Tempe and Surprise, for example, posted small corrections. Other cities were flat, and Mesa was up slightly.
Margaret Dixon, broker and owner of Prudential Arizona Properties, thinks prices could drop 10 to 15 percent in areas hit hardest by speculators.
Typically, she said, outlying neighborhoods would "adjust first and adjust the most." She said areas closer to jobs and transportation are less susceptible to corrections.
"The core of the market is very strong," Dixon added. "It will be a soft landing."
Through April, there were more than 23,900 existing homes sold in the Valley. That's down 33.5 percent from last year and also below the 2004 figure of 26,710.
Higher interest rates have the potential to slow housing more.
Rates retreated from their march toward 7 percent during the past week but are still expected to hit that psychological plateau for buyers.
The average rate on a 30-year, fixed-rate mortgage dipped slightly to 6.58 percent this week from 6.59 percent last week. David Lereah, the National Association of Realtor's chief economist, predicted that long-term mortgage rates would hit 7 percent by summer.
Margaret Dixon, broker and owner of Prudential Arizona Properties, thinks prices could drop 10 to 15 percent in areas hit hardest by speculators.
Typically, she said, outlying neighborhoods would "adjust first and adjust the most." She said areas closer to jobs and transportation are less susceptible to corrections.
"The core of the market is very strong," Dixon added. "It will be a soft landing."
Through April, there were more than 23,900 existing homes sold in the Valley. That's down 33.5 percent from last year and also below the 2004 figure of 26,710.
Higher interest rates have the potential to slow housing more.
Rates retreated from their march toward 7 percent during the past week but are still expected to hit that psychological plateau for buyers.
The average rate on a 30-year, fixed-rate mortgage dipped slightly to 6.58 percent this week from 6.59 percent last week. David Lereah, the National Association of Realtor's chief economist, predicted that long-term mortgage rates would hit 7 percent by summer.
