Evidence piling up that the Phoenix Arizona Housing Market is in big trouble.

Pending sales are down some 20% across the board, since the tax credit ended.
Today: 10,000 down from 12,000 last quarter. (keep in mind that many short sales sit in pending status for a long time, they aren’t as likely to close, or to drop out, so we could see an even greater drop in sales than this pending number suggests]
Prices are down nearly 9% on a per square foot market wide basis, in just over three months.
Median price has dropped some $13,000 (this actually caught me by surprise. I would have thought with record low interest rates, people would simply buy bigger and more desirable homes with their approved amounts. So, value would fall without the median actually dropping)
Bankowned (REO) homes on the market are up to nearly 8000 from 4500 in April, and listed short sales have climbed several thousand as well.

I have never seen a market turn so fast, from stable to completely imbalanced in just over three months. Now, we enter the traditionally slower fall/winter season with near record foreclosures ongoing, distressed inventory piling up on the market, and a big drop in buying.

All of these factors point to home price declines the rest of this year. What would stop it? We need to see a BIG as in really BIG pickup in buying, and it is very hard to see where that might come from: we burned up the potential first time buyers with bribes/incentives, the economy simply isn’t creating that many jobs… If investors buy all the distressed homes to rent, the rental market will quickly saturate and go down in flames.

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About robertoaribas

Math professor, Realtor. 12 years of buying, selling, investing and managing rental properties. rock-climbing and salsa dancing. robertoaribas@gmail.com
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4 Responses to Evidence piling up that the Phoenix Arizona Housing Market is in big trouble.

  1. Steve says:

    Rob. Thanks for the overview. The September trends are looking very bleak.

    I’m from a Northern state so I don’t know the Phoenix monthly demand trends. I would expect a lot of demand from the snowbirds (Dec-March). No??

    • Actually, demand drops in the winter here, just like everywhere else. Though it is certainly a more pleasant time to look at homes, most buyers still buy during the summer months, when their children are out of school.

      Here is a link to prior years sales, and you can clearly see the fall/winter drop off.
      sales history armls

  2. Craig says:

    Your last sentence has so much value in it. Realtors are always giving the public some version of “look at all the smart investors coming in, you dumb fence sitting buyers are sitting around while they’re snapping up all the great deals”.

    Well if the number of rental houses doubles because of all these investors converting what used to be primary residences, what is that going to do to rental prices? I mean, what happens to the price of anything if you double the supply?

  3. currently, rentals on the mls are just over 6000, so less than 1 month’s sales. This is actually down from a couple years ago, when it was always 8000 to 9000, but part of this may be attributable to craigslist being a more effective and cheaper route to find a renter.

    So, if any sizable percentage of buying is for long term rentals, it could upend the much smaller rental market very quickly.

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