| | Current Market Conditions Scottsdale is in a Buyer's Market! Now is the time to BUY! For more current information please see my monthly newsletters. Click on this link>>  <<click here.  <<click here Data Link for Scottsdale Reports from 1990 to date: http://www.armls.com/stats_scottsdale.html ********************************* **  **  Mortgage Rates > snapshot 3/20/08 via Bankrate Scottsdale activity - February - All types in all price ranges. 
North Scottsdale areas are 401 and 407. *************************************************************************************** Statewide Data - LISTINGS 
Statewide Data - SOLD 
Trend Analysis  * 
*********************** Featured Listings ******************* LOST CANYON - Gated/Guarded $1,349,000 4.39 Acres Lot 29  Call me for more information!
************** Historical Return on Investment as of 2007 ******* ************  2005 was the year!
 All Chart Data Courtesy of the AZ Republic 2008
 
By Zip Code 
**************************** A BUYER’S MARKET - Defined Our definition of a “buyer’s market” is when an over-supply condition exists, causing supply to have a greater impact on the market than demand. The characteristics of a buyer’s market are: - Inventory level is high - Demand is not keeping pace with the inventory level - Time-on-market is increasing or high - Sales price is decreasing |
************************************************************* Housing slowdown still causing major problemsExperts: Sluggish rebound to boost prices, hurt jobsSara Murray
The Arizona Republic
Jun. 7, 2007 12:00 AM Arizona's lagging housing market likely won't recover until next year and will continue to hinder job growth until it rebounds, state economists said this week. Although houses continue to sell, inflated prices and stockpiled inventory will cramp the industry a while longer.
"Most buyers, I think, now realize that housing prices are not declining, they've simply leveled off," said Marshall Vest, director of the Economic and Business Research Center at the University of Arizona's Eller College of Management. "Houses are still selling, they've just come off of those peaks that were driven by the mania that ripped the market there for a while," added Vest, who gave his midyear economic report on Wednesday to business leaders in Tucson.
Vest's comments were underscored by Dennis Hoffman, a Valley economist who said the amount of money changing hands in real estate sales has dropped about 18 percent, to $6.9 billion, from the first quarter of 2006 to the first quarter of 2007. Hoffman is a professor of economics at the W.P. Carey School of Business at Arizona State University. Nationwide, about 50 percent of economists agreed it will be the end of 2007 or beyond before the market recovers, according to a survey by the National Association for Business Economics Outlook.
Still, it is possible Arizona could take longer because its prices were so over-inflated, Vest said.
Sales of existing homes have stabilized, and 10 months' worth of housing inventory is stocked up, Vest said. Normally, inventory is about four to five months' worth. Sellers are cutting prices to move homes, but that process needs to continue a while longer before the market can rebuild, Vest said. "We'll clearly see a recovery, but it's not going to go as quickly or surely as high as it did," he added.
The slowdown in the housing industry, Vest and Hoffman agreed, will continue to create a drag on Arizona's employment and retail numbers. While non-farm employment grew by about 108,000 jobs in metro Phoenix in 2006, Vest projects it will grow only by 66,000 in 2007. His prediction for 2008 also is grim: just 36,500 jobs being added.
In recent years, the construction industry created about 25 percent of new jobs in the Valley, Vest said. Removing that major source of growth has had a ripple effect on everyone from real estate agents to mortgage bankers to inspection crews, he said.
Hoffman said the loss didn't have as much of a negative impact as expected. He said that people still view Arizona as an attractive place to live and to open businesses, which will help the economy in the long run. "The challenge," Hoffman said, is to figure out how this downturn in residential real estate "will affect the rest of the Arizona economy and how long-lived those effects will be."
Vest said retail sales also slumped, showing essentially no growth since last year. "The slowdown in sales has to do certainly with high debt levels," Vest said. "We've been using our houses as an ATM machine, extracting large amounts of cash to support our spending. "That door is closing."
Wages, which are increasing about 4 percent, and small gains in job growth still can drive consumer spending, Vest said. The difference is that spending will have to track current income more closely instead of relying on external sources of wealth, he said.
On a national scale, about 40 percent of economists surveyed by the National Association for Business Economics Outlook say they believe a 25 percent to 33 percent chance exists that the United States will go into a recession within the next year.
Although a recession would further strain Arizona's economy, the losses probably wouldn't be severe, Vest said. "If a recession does develop, most people think it will be short and mild," he said, "and it will be followed by a strong rebound." Average Current Market Rating: 2.1 (43 ratings)
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April 2007 trending Average Current Price Trend: 2.9 (43 ratings)
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Scottsdale, Paradise Valley and Carefree/Cave Creek. These communities contain the highest-priced homes in the Valley. Paradise Valley not only has the highest median resale price at $1,656,000 but also the largest median size at 3,545 square feet. The new home market was at $3.2 million and 6,135 square feet. Carefree had the second largest resale homes with a median size of 3,020 square feet and a median resale price of $875,000, while Cave Creek stood at 2,185 square feet and $505,000. While these two areas have relatively small housing markets, Scottsdale is the third largest in the Valley with a wider mix of housing styles, types and prices. The median resale home price was $595,000 (2,295 square feet), in comparison with $525,000 (2,235 square feet) in 2005. The new home market stood at $904,080 (3,570 square feet) versus $716,670 (4,150 square feet) in 2004. Because higher-priced homes tend to experience greater rates of appreciation, the 16.5 percent rate in Scottsdale would be expected. For North Scottsdale, the median rate of appreciation 16.7 percent, while it was also 16.7 percent for South Scottsdale. The median resale home price improved from $600,000 in 2005 to $682,000, while it moved from $280,000 to $320,000 in south Scottsdale | TABLE 2 | | | | | | | | | MEDIAN RATE OF APPRECIATION | | | By Geographic District | | | | | | | | Percent Change Per Year, Single-family Only | | | | | | | | | | | | | | | | | | | District* | 1981– 96† | 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 1981–06† | | North Scottsdale | 2.7 | 3.9 | 4.3 | 5.0 | 5.9 | 6.3 | 5.7 | 6.4 | 11.2 | 16.0 | 16.7 | 4.7 | North Scottsdale | South Scottsdale | 1.8 | 4.4 | 5.3 | 6.6 | 7.1 | 7.0 | 7.8 | 7.5 | 9.2 | 15.5 | 16.7 | 7.2 | South Scottsdale | Paradise Valley | 2.5 | 3.8 | 4.1 | 5.2 | 5.9 | 6.3 | 7.9 | 8.2 | 10.8 | 15.2 | 16.4 | 5.9 | Paradise Valley |
http://www.poly.asu.edu/realty/studies.html For more information.  Historical
 Historical
 Historical
 Historical
Statewide Data - LISTINGS 
**************************** New Home Spec permits are Down...a good sign for the resale market. 
****************************** Scottsdale ranks as number 7 in the Nation as Money's Best Places to Live in 2006 ************************** SCOTTSDALE ************ WINNER 2006 Scottsdale, AZ Top 100 rank: 7
Population: 226,000
Compare Scottsdale to Top 10 Best Places
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| | City stats | Best places average | Median family income
(per year) | $84,747 | $76,893 | Family purchasing power
(annual, cost-of-living adjusted) | $59,639 | $68,109 | | Sales tax | 7.95% | 6.55% | State income tax rate
(highest bracket) | 5.04%* | 6.46% | State income tax rate
(lowest bracket) | 2.87%* | 2.74% | Auto insurance premiums
(Average for the state) | $2,588 | $2,207 | Job growth %
(2000-2005) | 8.75% | 10.97% | |
| | City stats | Best places average | | Median home price | $370,000 | $259,566 | Home price gain
(2004-2005) | 25.40% | 9.26% | |
| | City stats | Best places average | Colleges, universities and
professional schools | 15 | 8 | Junior colleges and
technical institutes | 1 | 0 | Test scores reading
(% +/- state average) | 34.6% | 13.3% | Test scores math
(% +/- state average) | 37.5% | 16.9% | % students attending
public/private schools | 90.0/10.00 | 88.4/11.59 | |
| | City stats | Best places average | Air quality index
(% of days AQI ranked as good) | 22.2% | 71.9% | Personal crime risk
(100 is nat'l average; lower is better) | 52 | 45 | Property crime risk
(100 is nat'l average; lower is better) | 120 | 74 | Personal crime incidents
(per 100,000) | 209 | 228 | Property crime incidents
(per 100,000) | 4,011 | 3,105 | Median commute time
(in minutes) | 21.5 | 20.8 | % population with commute
45 mins. or longer | 11.3% | 13.4% | |
| | City stats | Best places average | Movie theaters
(within 15 miles) | 34 | 22 | Restaurants
(within 15 miles) | 3,822 | 2,268 | Bars
(within 15 miles) | 241 | 127 | Public golf courses
(within 30 miles) | 134 | 74 | Libraries
(within 15 miles) | 45 | 43 | Museums (accredited by AAM
within 30 miles) | 5 | 7 | | Ski resorts (within 100 miles) | 0 | 10 | |
| | City stats | Best places average | Annual precipitation
(inches) | 11.97 | 36.00 | | Clear days | 211 | 107 | | High temp in July ° F | 105.2° | 87.7° | | Low temp in Jan ° F | 39.9° | 23.5° | |
| | City stats | Best places average | Has health plan
(% of residents) | 84.9% | 88.2% | Body mass index
(avg. for residents) | 26 | 27 | Cancer mortality
(per 100,000, age-adjusted) | 182.6 | 191.3 | Cardiac mortality
(per 100,000) | 187.3 | 202.0 | |
| | City stats | Best places average | | Median age | 39.9 | 34.5 | Completed at least some college
(% of residents) | 73.8% | 63.9% | | Married | 53.7% | 54.3% | | Divorced | 12.5% | 9.3% | Amount spent on vacations
(domestic and foreign, household avg. per year) | $8,272 | $7,549 |
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***************************** Spec homes are down from 5000 to about 4000 units. A BUYER’S MARKET (PHOENIX) Our definition of a “buyer’s market” is when an over-supply condition exists, causing supply to have a greater impact on the market than demand. The characteristics of a buyer’s market are: - Inventory level is high - Demand is not keeping pace with the inventory level - Time-on-market is increasing or high - Sales price is decreasing |
Below is the supply and demand evidence that supports the introductory BUYER’S MARKET sentence. Supply The reality of today’s market is that supply is at a record level: Resale listings are at a RECORD level. 2007 46,798 VS 2006 32,806 New Home specs are at a RECORD level. 2007 4204 vs 2451 in 2006 but new permits are down. Demand The reality of today’s market is that demand has fallen 40% from last year to a level below the demand level in 2003. Resales = 4389 Jan 2007 vs 5257 in 2006. 2005=6632 and 2004 = 5118 Time-on-market The reality of today’s market is that time-on-market is increasing monthly. Note that as of October 2006, this measurement has now reached a record high. (single family homes) Jan 07 = 94 Dec 06 = 87 Nov 06 = 80 Oct 06 = 77 Sept 06 = 73 days Building permits are down, for now. Time-on-Market Analysis The Average Days-on-Market reached a new record high in January. When the Phoenix market was in equilibrium, this number was typically between 60 and 70 days. Average days-on-market is the average number of days houses that have been sold were listed. The graph below illustrates the drop in this number as the market began to gain sales velocity about June 2004. It bottomed out about August 2005 and has climbed steadily since. It has now shot right past the normal range to a current all time high of 94.8 days. Scottsdale activity - February - 10% sales to listings - in all price ranges. January and February Data for North Scottsdale (average days on market is over 150 days) Property Type | Area | New | Avg LP | Pending | Avg LP | Sold | Avg SP | %SP/LP | Avg CDOM | RES | 401 | 737 | $1,150,908 | 203 | $974,327 | 161 | $897,069 | 95.46% | 152 | RES | 407 | 695 | $1,158,359 | 272 | $1,056,996 | 211 | $1,012,497 | 94.78% | 155 |
Historical information below. Greater Phoenix August Resale Market Housing Price Increases SlowWednesday, September 14, 2005
MESA, Ariz. — The local resale home market improved slightly in August 2005 with 10,700 recorded sales, while it was 10,200 sales for July 2005. It was, however, below last year’s 11,275 sales. In 2005, there have been 78,935 sales, in contrast to the 2004 year-to-date of 68,020 sales. The median home price set another record at $258,700, in contrast to $255,000 for July 2005. While this was a 46 percent increase over last year’s $177,500, it did represent a slow down for the month-to-month changes in 2005 from 4.4 percent to 1.5 percent. Even with some slowdown in the monthly growth rate, affordability remains an issue. The average 30-year mortgage for August 2004 was 5.6 percent, while it was 5.5 percent for August 2005. Based on an 85 percent loan-to-value, the monthly mortgage payment for the median price home a year ago was $865, while it would be $1,250 for August 2005. The ever higher home prices tend to sustain optimistic growth assumptions about the market. Thus, both investors and owner-occupants seem to be buying on future expectations about continued appreciation to provide for profit and/or re-financing opportunities. Even with lower interest rates, the higher home prices are seriously impacting affordability, especially for young and minority households working to purchase their first home to enter the housing game and to start moving up in housing. Further, there is increasing concern that teachers, policemen or firemen can’t afford to live in the communities where they work. In searching for affordability, people are moving to the outer fringes where commutes are becoming increasingly expensive in light of higher gasoline prices and longer commute times. According to Jay Butler, director of the Arizona Real Estate Center at Arizona State University’s Polytechnic campus, with declining affordability, there has been an increased reliance on creative mortgage financing to allow people to buy, both owner-occupants and investors. The available instruments run the gamut from low interest rate adjustable mortgages, to interest only mortgages, to ones that allow people to select how much to pay each month (the option payment plan). "While there is nothing inherently wrong with these atypical instruments, they tend to rely on a steady economic environment, stable interest rates and growing housing market," says Butler. "If any of these conditions should change, homeowners could have difficulty in fulfilling the conditions of the loan and could end up loosing their homes." Since the Greater Phoenix area is so large, the median price can range significantly from $630,000 in North Scottsdale to $121,250 in the Sky Harbor area of the city of Phoenix. For August 2005, 20 percent of all recorded sales were for homes priced from $125,000 to $199,999, 38 percent for $200,000 to $299,999 and 36 percent for homes priced over $300,000. With 1,975 sales for August 2005, the resale townhouse/condominium market also improved slightly from 1,905 sales in July 2005, while it stood at 1,885 for August 2004. The 2005 year-to-date is 14,805 units, while it was 12,665 for 2004 year-to-date. This housing form has become popular with investors and households looking for an affordable entry into the housing market. This popularity has driven the median home price from last year’s $114,000 to the current August 2005 $159,000. The median square footage for a single-family home recorded sold in August 2005 was 1,640 square feet, which is smaller than the 1,700 square feet reported a year ago. In the townhouse/condominium sector, the median square footage was 1,105, which is smaller than the 1,135 square feet reported a year ago. - In contrast to August 2004, recorded sales in the city of Phoenix increased from 2,990 sales to 3,050 sales, while the median sales price increased to $206,000 from $143,500. Since Phoenix is a geographically large city, the median prices can range significantly such as $121,250 in the Sky Harbor area to $320,000 in the Union Hills area. The townhouse/condominium sector improved from 540 a year ago to 615 sales while the median price increased from $103,000 to $136,200.
- While the Scottsdale resale home market declined from 1,050 to 780 recorded sales, the median sales price continued its upward movement by increasing from $376,000 a year ago to $555,000. The median resale home price is $667,450 in North Scottsdale and $291,500 in South Scottsdale. The townhouse/condominium sector in Scottsdale also declined from 400 to 365 sales, but the median sales price increased from $171,640 to $245,125.
- The Mesa resale housing market decreased from 1,415 to 1,290 sales, while the median price increased from $160,000 a year ago to $240,000. The townhouse/condominium sector also declined from 330 to 325 sales, but the median home price increased from $96,500 to $138,000.
- Glendale decreased slightly from 860 a year ago to 855 sales, but the median sales price increased from $163,810 to $240,000. The townhouse/condominium sector grew from 75 to 100 sales, while the median sales price increased from $85,600 to $115,500.
- In comparison to a year ago, the Sun City resale market slowed from 175 to 155 sales, with the median sales price increasing to $193,600 from $138,700. Resale activity in Sun City West also declined from 80 to 75 recorded sales, but the median sales price increased from $160,000 to $234,000. The townhouse/condominium market in Sun City decreased from 105 to 85 recorded sales, while the median home price increased from $85,450 to $138,450. In Sun City West, activity decreased from 30 to 20 sales, but the median sales price increased from $122,500 to $160,000.
- The resale market in Gilbert decreased from 765 a year ago to 665 sales, but the median sales price increased from $210,000 to $309,950. The townhouse/condominium market grew from 25 to 45 sales as the median sales price increased from $137,000 to $196,500.
- For the city of Chandler, the resale market slowed from 830 to 780 recorded sales, while the median sales price increased from $190,000 to $289,600. The townhouse/condominium market improved from 75 to 100 sales and the median sales price increased from $112,250 to $164,375.
- The resale market in Tempe decreased from 280 to 270 sales, with the median sales price increasing to $266,000 from $185,000 a year ago. The townhouse/condominium sector increased from 130 to 140 sales and the median sales price increased from $121,000 to $176,500.
- The highest median sales price was in Paradise Valley at $1,276,000 with a median square foot house of 3,225 square feet.
- In the West Valley, the following communities represent 11 percent of the resale market, while it stood at 9 percent a year ago.
- Avondale grew from 255 to 280 sales, with the median price moving from $163,000 to $253,000.
- El Mirage improved from 155 sales ($132,500) to 200 sales ($219,340).
- Goodyear was stable at 195 sales, while the median price increased from $191,500 to $283,250.
- Surprise increased from 400 sales ($159,950) to 450 sales ($258,345).
The Arizona Real Estate Center is associated with East College at Arizona State University’s Polytechnic campus. The center collects and analyzes data concerning real estate in the greater Phoenix metropolitan area. The center is a comprehensive and objective source of real estate information for private, public and governmental agencies. Its director, Dr. Jay Q. Butler, may be reached at (480) 727-1300 or e-mail him at Jay.Butler@asu.edu.
CONTACT(S): Jay Q. Butler, 480/727-1300, jay.butler@asu.edu
Christine Lambrakis, 480/727-1173, 602/316-5616, lambrakis@asu.edu
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***************************** 2005 Housing Market Forecast: Mostly Sunny, Partly Cloudy
Realty Times
A barometric pressure reading of the air surrounding the housing market would reveal dense levels of uncertainty. The housing market, especially the second and vacation home sector, is poised for yet more growth, but it could also crumble under the pressure of higher interest rates that push over-leveraged homeowners into the poor house. The nation's housing market received a mixed forecast from the Urban Land Institute's annual Emerging Trends In Real Estate® 2005: "The Race Is On Between Improving Fundamentals and Rising Interest Rates," a study now in it's 26th year. The study, co-produced by PricewaterhouseCoopers LLP, provides an outlook for real estate capital markets with forecasts for a host of realty sectors, including commercial, retail, office, apartment, research and development, hotel and others. This year, for the first time, the study provides a detailed outlook for the residential sector. After enjoying more than a decade of growth, the study says, the housing market faces uncertainty in the face of rising interest rates, a sluggish economy and weak job and income growth. "Can real estate supply/demand fundamentals improve enough in 2005 and 2006 to offset the potential negative impact of rising interest rates on property values and pricing? Make no mistake, the race is on," says the report. "For 2005, it all comes back to interest rates, the economy and job growth." Emerging Trends first tracks the success of the residential real estate market, fueled by low interest rates that have driven the home ownership rate to an unprecedented 70 percent. The demand has spurred record levels of new home developments springing "out of the ground like weeds wherever builders can muster entitlements." The study says homeowners in the past decade have enjoyed not just a roof over their heads, but an investment yielding spectacular returns far beyond those from stock market portfolios, retirement funds and other investments. In many cases, homeowners have helped fertilize industry growth by plowing their earnings right back into real estate, buying home improvements and second homes to keep them and their investments well sheltered. A proven cornerstone of the nation's economic foundation, housing also has helped keep the retail sector sailing while many other real estate sectors floundered, the report says. Homeowners use "their homes as giant ATMs." Unfortunately, right now, indicators point to a market at a cyclical peak. Analysts who contributed to the report say, at the very least, rising rates will knock some young buyers out of the market. Prices will adjust as interest rates go up, they say. Over-leveraged homeowners will suffer most. While it won't be a bloodbath, losers will surface. More optimistic analysts say interest rates won't rise quickly and that will sustain the housing market, which remains the most promising sector in all of real estate. Infill development and the reverse flight from the suburbs back into downtowns remain trends with growing popularity. Other home buyers are willing to pay premiums for smart growth planning going into master planned suburban and new urban-ist communities, the report says. Based on the residential real estate market's strengths and weaknesses, Emerging Trends also provided the following prognosis for the residential real estate market. Interest rates are key. As long as rates remain affordable, Americans will continue to buy starter homes, they will move up to bigger quarters and they purchase second homes as vacation, retirement and investment properties. Real estate remains "Americans' number-one investment asset and almost a national imperative." First-time buyers who used no- to low-down payment mortgages, bargain basement adjustable-rate mortgages and mortgages with interest-only payments, who are also stretched to the limit on car payments and other household bills, are most at risk. Higher health care, energy and interest rate costs, combined with flattening wage gains and slow job growth could wipe them out. If first-timers are hit hard, the starter home industry could likewise feel the pinch -- if only temporarily. Affluent baby boomers are less vulnerable. Many of them have already diversified into the second home market and take with them time-honored lessons in frugality. They've been snatching up smaller, less-expensive homes nearer urban and resort centers at such a pace many of the areas have become exclusive enclaves where the locals have difficulty buying. Baby boomers will also pad their equity with income from the new light-work lifestyles of today's aging Americans who put off retirement or take the part-time work route. The housing market appears to be in a solid supply/demand balance and most study analysts do not expect mortgage rates to advance enough to stop buyers from buying and builders from building. Again, it all hinges on the cost to buy and build. NORTH SCOTTSDALE and surrounding areas AZ Republic's June 16th's edition The North Scottsdale, North Phoenix, Carefree, Cave Creek & Anthem areas are accelerating in value. We are still in a high seller's market with the surge of first time home buyers, investors and second home resident buyers. On the front page of the AZ Republic's June 16th's edition, the headline read, "Home buyers race for re-sales." They quoted that used home sales shot up 67% in May, a new monthly high - it's turning into a stampede. Every month has continued to outperform last year's record sales. July was a little slower than other months in 2004, but overall it still generated and outperformed July, 2003. The inventory of resale homes still remains low. Areas like Terravita (Del Webb community), Legend Trail, Tatum Ranch & Anthem are selling homes within hours or a day of putting them on the market. In recent sales in the Tatum Ranch area, homes are selling for at least $8,000 to $12,000 more than the listing price with multiple offers bidding on the homes (much like the CA market). It is getting extremely difficult to find homes under the $300,000 price range in these areas, thus driving the prices in the low $200,000's, upward. It should also be noted that new home builders are selling homes by picking names out of lotteries. There is still so much demand for buying here in the Valley that this is the only way they feel it is fair to keep up with the demand. It is not unusual for new home builders to increase their prices at least 3% every couple of weeks. Homes for sale in the North Scottsdale area are scarce and they sell quickly. The area is basically built-up, with almost no new subdivision development. Where there is, basic prices start at more than $500,000, then add a lot premium of $50,000 or more and custom features often exceeding $150,000. This 'built-up" condition together with high demand is pushing prices higher too quickly. The average sales price of a re-sold home in the very nice zip code 85262 has increased from $450,000 a year ago to about $560,000 now. Our prices, however, are much lower than those in most of Southern California. The market here continues to be a strong seller's market!
Houses are selling quickly. Homes in very good condition sell at or above list price.
The North Scottsdale area is becoming more desirable as custom building sites closer in are mostly gone and land for new subdivisions is very scarce. Homes south of Bell Rd. and north of Shea blvd. are selling very quickly at increasing prices. Neighborhoods are nice, schools are very good, commuting is tolerable and nearby shopping is great. Prices are likely to increase in the next year by 6% to 8%.
Commercial development is at it's peak and has made commuting a quick trip for many people, and the new retail developments along the new Hwy 101 has brought stores much closer to the North Scottsdale area. We have all of the shopping you desire within minutes of your desert retreat. It is difficult to predict if rising interest rates will slow this market down. While some states are already experiencing a slowdown, the Arizona market still remains very, very strong. Recently, I had one client who built their new home and upon completion discovered that it had doubled in price. They have agreed to certify this in writing, for me. Although this is not typical, they are extremely satisfied with the expertise I provided them, in making their home purchase decision. In this case, building a new home was the answer to their location questions and it paid off. Finally, there are still some values in the Scottsdale, Carefree and Cave Creek areas and I know where they are! Give me a call, anytime, at 480 - 585 - 2904 >  <<click here for secure e-mail We, in Arizona, feel that we are extremely lucky to live in this beautiful desert area with great temperatures, no earthquakes, tornados, hurricanes, floods, volcanoes, leaves to rake, grass to mow, or snow to shovel! We also have 6 lakes within a short distance (not to mention the Colorado River and Lake Powell) snow skiing an hour away and excellent mountain views to enjoy! Truly a great place to live and retire. That is why, each year, we add another 120,000 Arizonan's to our great state, not to mention a business climate that is hard to beat!
| A city-by-city snapshot of the market comparing November 2003 sales and median price with those of last month in 2004: |  Source: Arizona Real Estate Center at Arizona State University |
I’ve been hearing all this talk lately about a “housing bubble”… In fact, it’s all over the news, in the paper, and on the Internet. What’s the straight scoop? Answer: While it may sell newspapers and boost TV ratings, the “housing bubble hype” is a bit overblown, no pun intended. A housing “bubble” implies that home prices and values are so over inflated that they will soon “pop”, and decline dramatically. Could such a decline really be in store? Let’s look at the facts.
Historically, housing prices and values have always been very closely tied to local job markets. Previous major declines have been tied to large increases in unemployment – California is a good example. The last time California saw a decline in home prices, it was a 13% drop between 1990 and 1995, which coincided with a 35% increase in unemployment during that exact time period.
The last time the nation overall saw a drop in housing prices was during the Great Depression, when unemployment was over 25%! And remember, February's Job’s Report (2005) showed unemployment at a tame 5.2%, even lower than expectations. That being said, while the US economy added 2.2 million jobs during 2004, not all states have participated in the party. Some states and regions are struggling with job losses – especially in the manufacturing sector – so it follows that in those areas, home values may be more vulnerable during the year ahead. And it is also quite likely that across the board, appreciation will taper off and reduce to a much more modest – and normal – rate of 5-7%, down from recently higher levels in many parts of the country.
If you want to see how Arizona homes have appreciated, check out this link: http://www.ofheo.gov/HPIState.asp?FormMode=Summary Housing Price Index Now here’s another interesting point. Some folks are even saying that the “pin” which could cause the bubble to burst would be interest rates, implying that higher interest rates would cause homeowners to stop buying and values to plummet. But let’s be realistic – even if rates were to spike two full percentage points, an unlikely event in any scenario, the impact would be nominal. If this were
to occur, the average increase on a home loan payment would be about $32 a week after tax considerations. Now $32 a week is not enough of a deterrent to prevent a home purchase…but back to the jobs issue, if you felt like you were at risk of losing your job, you might hold back and reconsider the wisdom of a buying a home at that time.
And speaking of monthly payments, in 1980 the average home loan payment
to gross income ratio was 31%. In 1990 it was 22%, and today the average
is 19%! So although there has been a huge rise in home prices, creative
programs and rising incomes have kept monthly housing expenses
comparatively affordable.
Further, Frank Nothaft – Chief Economist at mortgage giant Freddie Mac
– recently said that 2005 home sales were expected to be only a measly
1-2% lower than record-setting 2004…and his past predictions have been
quite accurate. So while it’s always wise to carefully evaluate large decisions like purchasing a home, don’t get too caught up in the “housing bubble hype”.
Instead, talk to your trusted mortgage professional, or ME, your trusted real estate advisor. I will help you evaluate the alternatives and choices, and give you the information you need to make a home buying decision you feel good about. Be advised that market conditions can change, given the current events of the day, but I am in a position to know the Scottsdale area market. So, give me a call, anytime for advice. |
