Plusses and Minuses for the Phoenix Housing Market Today

Plus #1: Demand is still high relative to supply. Today, there are 15,600 homes for sale, and in the past 30 days, 8033 have sold. We have less than 2 months total inventory, a historically very low number. Under $200K in single family homes, 4987 are available, with 4471 sold in the last 30 days. Barely a single month’s inventory,

Plus #2: The number of homes in foreclosure continues to drop. Last month, nearly 1500 more homes LEFT the foreclosure pipeline, then entered it. (In AZ, an NTR or notice of trustee sale must be filed 90 days before foreclosure. By counting the numbers of foreclosures, cancelled foreclosures, and notices filed, it is possible to track this number) At its peak, Phoenix had over 50,000 homes in foreclosure, today the number is around 18,55. Under current trends, we are on pace to literally end the foreclosures in a year.

Plus #3: Loan delinquencies are declining. Between the Q1 2011 and Q1 2012, this declined from around 7.5% to 6% for Phoenix, a rate that is still higher than the national average. At its worst, the rate was above 12%. However, since this time, we have had two changes to the Phoenix market I’ll detail below, price increases, and harp 2.0 refinancing.

Plus #4: 30 to 50% price increases. Market wide, Phoenix has seen roughly 30% price increases in the past year, in some areas, the increase is over 50%. That is likely to have a huge effect on the market going forward, as fewer home owners are underwater, and those that are, are much less underwater today, then they were a year ago. This is a big enough increase to begin to lower mortgage default rates.

Plus #5: Harp 2.0 refinancing. Recent changes to mortgage refinance rules are allowing many more underwater homeowners to take advantage of today’s lower rates. And they are, anecdotally, lenders tell me they are simply swamped with refinances. People who are going to default don’t generally go to the trouble and expense of refinancing their loans. Additionally in Phoenix, you could be far underwater, and at 3.5% rate on a 30 year loan, STILL paying less than rent. When your mortgage is less than rent, you have some incentives to stay current even if you are underwater.

Minuses #1: Inventory is climbing. Today, there are 15,600 homes for sale, just 3 months ago, there were only 12,500. Buying seems to be rising to meet the supply, but nevertheless, an increase in supply is a negative.

Minus #2: rental vacancies trended up between Q1 and Q2. From roughly 9% to 12%. An increase over the summer in Phoenix is not unheard of (lots of seasonal residents leave for the summer, after all who the hell wants to be here when it is 115?) but it has to be noted. At its worst in this recession, vacancy was well over 15%.

Minus #3: The fiscal cliff. It is altogether possible that the teaidiots refuse to negotiate, and drive the economy right off a cliff next spring. Some economists estimate an impact of -3% to GDP instantly, but the entire effect can’t be known in advance.

Minus #4: an ugly end to the European financial crisis. This would certainly impact US economic growth.

Predictions? I predict prices will continue to climb in Phoenix. The factors pushing the market up are simply stronger than the few small current headwinds. The rest of the minuses are purely speculative at this time.


About robertoaribas

Math professor, Realtor. 12 years of buying, selling, investing and managing rental properties. rock-climbing and salsa dancing.
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8 Responses to Plusses and Minuses for the Phoenix Housing Market Today

  1. Of course prices will continue to go up! They aren’t making any more land, you better buy now or be priced out forever, house prices only go up, etc.

  2. David Kinkaide says:

    Do you have any qualifications to predict market fluctuations? I thought you were a part time home salesman.

    • I am a mathematics professor, I did my graduate work at U C Berkeley, in Applied Mathematics, particularly applied to economics… The Phoenix market price is up 30% year over year, in your world, is that a “fluctuation?”…

  3. We are thrilled that the market is improving, but we feel that an increase in livable salary wages would help strengthen the housing market and the economy as a whole.

  4. Realtors Are Crooks says:

    The Realtor says prices where he buys and sells house will go up. LMAO

    • I back up everything I say with facts and data Outside of a snideness, what precisely do you have? Incidentally, this same analysis led me to sell my investment properties in 2004 and 2005… So, I’d say my track record is looking pretty good at this point!

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