For certain, the Phoenix real estate market has seen both sides of the emotions; either a rapidly declining market fueled by negative economic news, a downturn in employment or rising interest rates, or an increasing market pushed on by available money and eager buyers. Is there a middle ground for a normal real estate market? Some say yes, but that lasts almost as long as an ice cube on the sidewalk in Phoenix in July. (About 5 minutes).
In reality, Phoenix is most often a stable market, either on a moderate rise or a gentle pull-back. Rarely do we see the markets we saw in 2005 and 2006, when builders could not build them fast enough, lenders were pushing money to anyone who literally had a pulse, and sellers who saw their values increasing by the day. That was an oddity and most likely will not occur again for quite some time. Contrast that to a market we have been in for the better part of 2 years with an increasing inventory due to foreclosures, lenders pulling back and not making loans and sellers seeing a rapid decrease in values. The fuel to that fire is the fact that many borrowers in 2005 and 2006 obtained teaser rates at 3% or lower, paying only interest. Often, buyers ended paying less for a mortgage for a big house than they were paying for rent on a small apartment. That was very attractive. They never projected that they could not re-finance in 24 months when the rates changed. Lenders promised to refinance as the values would continue to increase 20 – 30% a year. Well, we all know that the values went in the opposite direction, and many of those borrowers have subsequently lost their homes.
So, where are we now, in the middle of 2009, and most likely at the beginning of the climb out of the bottom.
Here’s why we feel we are climbing out…
May, 2009 saw 9760 sales in the Phoenix Metropolitan area. That was the 3rd highest sales month in 5 years. (Sales are contracts in escrow waiting to close)
May, 2009, the existing inventory in the MLS system was 44,772 on May 31. It was 55,904 on January 1.
Some caveats to the improvements in the market.
- We expect an increase in foreclosures through the summer and into the fall. Lenders sat back after the moratorium last winter and started the process up again in the spring.
- Stricter FNMA and HUD regulations have slowed the lending process, causing frustration among buyers and sellers and causing deals to cancel.
- Government regulations such as the HVCC laws (Home Value Code of Conduct) have hamstrung appraisers, lenders and agents with a bevy of convoluted regulations that befuddle many buyers and sellers.
- Local statutes or regulations, such as revisions to a statute here in Arizona that relates to mortgage deficiencies, can cause confusion and in some cases panic among homeowners. While good intentioned, the net result is a law that places an unfair burden on homeowners in default.
Thus, we are cautiously optimistic, seeing more lenders willing to loan, more buyers ready to buyer, foreign investors buying with cash and available inventory for them to buy. Lenders who have foreclosed have become more realistic in pricing, willingness to do repairs and incentives to the buyers. We are confident that we are climbing out of this hole and will return to a normal, stable market by the spring of 2010.
