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Arizona Housing Market Outlook... Not So Dour?

By
Real Estate Agent with Keller Williams Arizona Realty

There is a silver lining to the "dour" Arizona housing market and economic outlook reported yesterday by the AZ Republic.

I have to put my two cents' worth into the discussion on the Housing Market after a misleading headline appeared on the front page of the AZ Republic 12/6/07.

The headline reads: "Housing market hit harder than analysts predicted".

Last week I attended a seminar given by one of the economists quoted -- Elliot Pollack. I'm sure he wasn't thrilled that his 120-screen powerpoint presentation was boiled down to the following quote: "There is no quick fix.  We have a long way to go. Boy, it's a mess."

So here are my qualifying comments:

The "hard hit housing market" refers to the fact that new home housing permits are down 30% instead of the forecast 17.7%.  Certainly this will have an effect on the overall economy, but it is only one of 10 major factors. Most of the others are up due to increased exports (due to the falling dollar), and commercial and industrial projects going up all over the Valley.

But this drop is actually a good thing.  The reduction in "new starts" will help reduce the supply-and-demand gap in the current housing market that has created an 18-month inventory Valley wide. (The inventory is currently at 10 months in Tempe.) As supply goes down and buyers realize the sky (homes prices) is not falling, sales will pick up. What Pollack was referring to when he said we have a long way to go is that it may not be until late 2008 that we see a turn around, and 2-3 years before we get back to normal.

Foreclosures may decline:

Another unknown factor and potential cause for concern just became a little more hopeful. Foreclosures could increase the supply side of the housing inventory, but the number of foreclosures may slow down if today's news (December 6) is correct. President Bush will be outlining a plan to freeze the interest rate hike on sub-prime and variable interest loans.  

Another glimmer of hope:

For the market to get back to "normal" (pre 2004-2005 prices and conditions), the inventory of homes for sale needs to come down from the current level of 58,000 to approximately 35,000.  For the last 3 months (September - November) the inventory has not increased, suggesting that, if the rate of foreclosures does not increase, we may see a steady decline in the inventory after the seasonal holiday slow down. The other important favorable indicator that will help lower the resale housing inventory is that the job and population numbers are still putting Arizona in the top 5 markets in the nation.

Stay tuned.... Weighing in on the media spin of the housing market (i.e., whatever will sell papers) may become a regular feature of my blog.  Be sure to visit my website for more information about the changing market in Tempe, Arizona.

Comments (3)

Matthew Ricker
Keller Williams - Portland, OR
Interesting Patrick!  It is good and necessary to hear a little bit of positive news regarding some of the markets around the country.  I'm not exactly buying the doom and gloom that the papers are selling either.  On the other side of the "slump", it is really a great time to buy a home.  When things change, it takes one to look at the situation a little differently.  Well written and informative as usual! Thanks.
Dec 10, 2007 08:02 AM
Anonymous
jeff
stories like these come from anyone who is a realtor.  Of coarse they want to portray a positive outlook. It directly effects their pocket book!  Realtors and mortgage brokers are both causes of the over inflated boom we had a few years ago. THEY CREATED A FALSE SENSE OF DEMAND.  Towards the peak of the boom, realtors pressured clients into houses they didn't even want, saying "who knows if the prices are ever going to stop?" Brokers preached new loan styles allowing more people to buy.  When you allow more people the ability to buy the same house ... prices go up. 
Dec 24, 2007 02:41 AM
#2
Anonymous
katie
Jeff, demand is created by the consumer.  This seems like a pretty naive and angry view.  If you felt pressured by a realtor or broker, you might chose a better one next time or take the time to do your own research.  Pressuring clients into a house they didn't want?  These aren't children Jeff, you would hope that people are capable of making their own choices.  If a person can't make their own decision about whether or not they want to buy a home, well I don't think that is the problem of the Realtor or Mortage Broker.
Dec 24, 2007 05:53 AM
#3