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Perspective on the Real Estate Market

Perspective on the Real Estate Market

Here is a little graphic presentation that I ran across in yesterday's Wall Street Journal. It was part of a larger point the author was making about the credit markets and corporate leveraged buy-outs. I've cut the piece related to the housing market. To me, this demonstrates that things aren't as bad as one would think from listening to the radio or reading the newspapers. It's bad for those short-term arbitragers who made risky bets in the last couple of years.

For the average homeowner, in the "market" (also known as one's home) for the long-term, it's looking pretty good:

Existing home sales volume and price

The median price graph looks like a hump with a normal correction, still trending upward, to me. This rise in median prices is national and, therefore, does not reflect the well-known axiom "all real estate is local" - and in Flagstaff, these graphs look even better. The volume of sales appears still to be slightly above 2002 -- did we think the world was ending in that market?

Sources per the Wall Street Journal: Inside Moody's Finance, Moody'sEconomy.com; National Association of Realtors; Dealogic.
(I suspect this part of the larger table came from the NAR, the most trusted source of real estate stats on the national level.)

See the whole article here: "Behind the U.S. Mortgage Mess - WSJ.Com"

For advice about the Flagstaff real estate market, or to buy your Flagstaff Home, contact: Team Heitland at RE/MAX Peak Properties

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Posted by Ann Heitland, Associate Broker, CRS, GRI , ABR ~ Flagstaff Real Estate/Community on 08/11/2007 01:24 PM

Comments (8)

market reports

Originally posted at: Flagstaff Blog - Real Estate and All Things Flagstaff: Perspective on the Real Estate Market

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8 Comments on Perspective on the Real Estate Market

AUG

2007

Neat!!! Thanks for sharing!!! :=)

Ann,

In the stock market, a good strategy is always to buy relative strength and not the stocks that broke down. Woul the same apply to the RE market, thus to buy into a market which held up better (for example Flagstaff in comparison to Phoenix)?

Thanks, Joe

The Phoenix market inflated 42% in one year -- the "hottest" market in the nation. Anything that goes up that fast seems unreal, doesn't it? The fundamentals are there (in Phoenix) -- strong job market, low taxes (in spades), population growth. The problem is that the market got ahead of itself with overbuilding (in my opinion). That didn't (and can't) happen in Flagstaff because of the lack of land for development.

AUG

2007

Did the RE market in Flagstaff not jump up similarly to the one in Phoenix? - In other words: was there a norrowing in median prices between Phoenix and Flagstaff in recent years?

As you can see I am actively observing the Flagstaff market hoping to buy there some time in the future. One thing I have to agree - Flagstaff is very attractive and charming. Making a living to afford housing there is another story.

Joe

Joe:Phoenix prices remained lower than Flagstaff's -- as they have been for many years, but Flagstaff did not jump at the same rate as PHX, so, as you said, the gap in prices narrowed in 2004-2005. While Phoenix slowed in late 2005, Flagstaff kept going up. Then we held steady for many months and started to drop in late Spring. There was a lot of "seller resistence" to overcome here before prices could begin to drop. For the most recent year/year comparison see this post.

Flagstaff is indeed one of the less affordable areas in the country (wages/housing costs). This reflects the fact that so many homes are second homes and retirement (or semi-retirement) homes so owners are not making the living here, but enjoying life from the living they are making, or have made, elsewhere. There are some higher wage jobs, primarily in esoteric scientific fields, and for those who can "telecommute" with employers based elsewhere. No judgment implied here -- just the facts.

AUG

2007

getting financing to purchase a home anywhere in the U.S. including Flagstaff has changed in the last few weeks. Qualifications to get a mortgage loan are becoming more strict and down payment requirements are increasing. Loans for first time buyers will be harder to get depending on high credit scores and documented income. So with higher rates on jumbo loans, the so-called affordability index will even become more of a challenge as RE prices and values supposedly hold. Also, demand for 2nd homes in Flagstaff from buyers in Phoenix and Southern Cal who are losing equity can't help the market here. A 2nd home is a discretionary purchase that can be put on hold.

What's happening now in the RE and credit markets may be bad for more than 'the short term arbitragers who made risky bets in the last couple of years'. Insolvency not just a liquidity problem has hit many mortgage companies who have closed their doors. Builders such as Beazer Homes have lost 85% of their stock market value. Construction jobs are declining. Millions of homeowners are in jeopardy of losing their homes because of insolvency or the inability to catch up and continue making their mortgage payments. Investment companies and banks are facing mounting losses that have required emergency loan discounting from the Federal Reserve. There's a flight by investors to the 'safety' of Treasury bills because of the uncertainty of this unfolding subprime, Alt-A, and even prime credit and derivative meltdown. So this is bigger than the plight of the 'short term' arbitragers. This credit crunch has spilled over to the general economy regardless of what RE industry pundits and experts have said. The best investment strategy now even here in Flagstaff is keep your fingers crossed and hope for the best.

Given the predictions for the overall economy and the mess our government is in, your some of your words (hope for the best) are unfortunately right on target. Investors are starting to move into the market -- a la Bank of America's investment in Countrywide yesterday, which may indicate we've hit the bottom of the trough on the credit crunch, but I wouldn't say that for the overall economy.

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What does the graphic say?