Phoenix Pricing Holdouts Clogging up The Market
The Arizona Republic printed a great article yesterday about the state of the market in Phoenix. Where there were 9,400 houses on the Arizona MLS last year, the number now stands at a record 43,000. Houses sold in an average of 29.6 days in April 2005, compared with the 57.5 days in April this year.
Much of the problem, agents and others say, is that sellers simply haven't adjusted to the new pricing reality and are pricing their houses as if it was 6 months to a year ago. This is the main driving force behind the glut.
Another point:
Some of the sellers must maintain their price points even if they are too high because they tapped into their home equity with various credit lines, [incorrectly] assuming that last year's big gains in appreciation would continue. Of course, they have not, and with interest rates going up, the cost of their credit lines has followed in lockstep.
The owners must now sell for a certain price to pay of the debt. Some of them have already signed contracts on new home purchases and are expecting to make a target amount on their current home to keep their new mortgages affordable. These owners are stuck in an "equity trap."
