According to a recent Arizona Republic article, The Arizona deparment of unemployment saw a surge in activity through December. Though final numbers have not been released, some weeks saw as many as 10,000 applications per week for new unemployment benefits. This followed on the heels of steep pickups in october and november.
I spent a little time on the bureau of labor statistics website, but honestly its hard to make head or tails from their data: 1. the data are seasonally adjusted. Well, I'm not sure this season things are going according to the typical patterns. 2. They get their data by interviewing a few companies employment increases/decreases. Then, they assume new companies are being formed/dying at the same rate as usual. Now I ask you, sliding into a recession, do you really think as many people are quitting jobs today and starting their own succesful business as say two years ago? Well nevertheless, the data showed some increasing job losses in Arizona up till November, the latest months they had data for.
So instead, lets use a few pieces of data that are a bit clearer: 1. umemployment applications have gone throught the roof, and 2. state income tax receipts have nosedived by about 10%. So clearly, some bad things are happening in the employment realm, though it may be a few months before we have the most accurate headcount of the damage.
How does this affect housing? Well, lets take the 60,000 or so new unemployment benefit applications from october to december. 70% of phoenix residents own homes, and though we can't be sure that 70% of those losing jobs owned homes, its as good of a guesstimate as any. So, we have 42,000 home owner without jobs. Now, obviously, some of these home owners have sufficient spousal income to manage the debt, some will get other jobs quickly. But, without exaggeration, given the extreme economic situations we see today, it would not surprise me if 1/3 to 1/2 of them are forced into home liquidation by the job loss.
14,000 to 21,000 new 'must sell' homes coming on the market. Coming onto a market which in 2008, prior to job losses, had 40,000 foreclosures. (and this in only counting the job losses from the last quarter of 2008) A market that had 60,000 sales, to give some reference for the signficance.
In Arizona, it takes 3 missed mortgage payments for the bank to file an NTR (notice of trustee sale) and then another 3 months from that date for the foreclosure auction. BUT, a homeowner doesn't generally miss a payment the first day they lose their job, using savings etc, most will make payments for several months. I'd guess it will be at least a year from job loss till the average foreclosure, and maybe more.
So, clearly, the Arizona real estate market, and Phoenix in particular have some fairly strong waves of bad impetus coming.
Don't believe the hype that a bottom is forming or near. Nobody ever said the drop would be crisp and linear. I'll bet our new lower prices bring out more buyers this spring than last spring, only for these recent homeowner to be dismayed as prices begin dropping steeply again from the end of summer through the winter.
Next post will be on the combination of Option Arms, new lower FHA rates, and the near certain death of the over $300K market (plus pressure on $200k to $300k)
If you have a specific quetion about our Phoenix market, and want analytical answers rather than trite industry responses, feel free to contact me from my profile.