Does anyone have any strong opinions about the state of the Phoenix real estate market?

Asked by Babysteps, Phoenix, AZ Wed Aug 8, 2012

On the one hand, I can believe that it has bottomed and is in the process of a strong rebound. Not only are prices up a lot from lows (albeit very depressed lows), there just isn't a lot of supply.

On the other hand, I can shake the bubble era attitude of real estate agents at open houses projecting "at least 10-15% appreciation during the next year." That may very well happen, but it's foolish to throw that around with any certainty. Plus, the most troubling thing is the saturation of flippers. Most put into some great refinishing before putting in a substantial markup, but I've also seen a few houses relisted for sale two weeks or less after the deal closes with little evidence of remodeling.

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Jennie Miller…, Agent, Phoenix, AZ
Mon Aug 13, 2012
This is a great question and it is on everyone's minds right now. The lowest point for prices in the Phoenix Metro market was in February 2010. If you fast forward to today, these are some of the lowest inventory levels that we have ever seen. The market is flooded with buyers since interest rates are good, prices are low, and the condition of homes is much better than it was at the bottom of the market. Real estate investors see an opportunity and that is why there are many investors flipping homes. While everyone is entitled to their opinion about the market, in the long term, real estate has been one of the best investments you can ever make.

My strong opinion about the market---We are starting to return to a normal real estate market with prices increasing 8-12 % depending on property type and location.
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Sean Heideman, Agent, Phoenix, AZ
Thu Aug 9, 2012
Hi Babysteps,

It is nearly impossible to predict the long term direction of any market but with you knowledge of macroeconomics you can make an educated guess regarding the best time to buy or sell. I provide the below information to my clients to help them make an educated guess regarding when to buy and sell:

Vital Sign Indicator #1 : Interest rates.
Interest rates act on property values the same way gravity acts on physical objects. The higher the rate, the greater the downward pull. In other words, rising interest rates have a depressing effect on real estate prices . . . while falling rates tend to raise prices.

Vital Sign Indicator #2 : Home sales.
Home buyers are a dominant force that drive real estate prices higher . . . and lower. It's simple supply and demand. When the number of buyers are increasing, more homes sell . . . and prices go up. When buyers are more scarce, less homes sell . . . and prices tend to go lower.

Vital Sign Indicator #3 : New home building permits .
New home builders respond to the market place according to demand. When demand is strong, they "pull" more building permits so they can build ~ and sell ~ more homes. When demand is weak, they pull fewer building permits so they won't be stuck with a lot of unsold homes in a softening real estate market.

Vital Sign Indicator #4 : Loan Defaults
Homeowners who default on their mortgage loans are generally having money troubles. This is a sign of a weakening economy . . . which soon translates into a weakening real estate market. When homeowners are defaulting less on their mortgage loans this is a sign of an improving economy and real estate market.

Vital Sign Indicator #5 : Foreclosure Sales
Property owners who default on their mortgage loans – allowing their homes to be sold at a foreclosure sale – are generally having severe money troubles. Like loan defaults, therefore, the number of foreclosure sales is a clear measure of the health of the economy. This determines whether real estate prices are likely to rise ~ or fall.

Interest rates are at an all time low, more and more buyers are entering the market, the supply of homes are decreasing, builders are starting to build more houses, loan defaults are decreasing and foreclosure sales are doing down. Therefore, the Phoenix residential market will continue to see appreciation unless any number of these vital signs change quickly.

If you have any additional questions regarding real estate investments, then please feel free to give me a call.

Sean Heideman, Broker
Position Realty
Office: (480) 213-5251
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Sonny Shriva…, Agent, Goodyear, AZ
Thu Aug 9, 2012
Babysteps, would you have bought a house in 2009 as an investment? Probably not, right? I have a client who purchased two homes in Anthem in 2009, both properties have increased over 50% in value since then. I have a client who bought a house in Buckeye in 2010 that is now worth 26% more than what he originally paid. All of this while the media says we officially "bottomed out" last year.

The point of the above examples is that nobody - NOBODY - can tell you where this market is going. Historic markers have no bearing here, as we have never had our real estate market turned upside down like this in recent memory. Another point to keep in mind - Arizona was #2 in the country in May and June for new foreclosure filings. That's #2 in May/June when in the six months prior we were closer to #20. The foreclosures are coming back, we will see more of them later this year.

I sell foreclosures from the bank and we have seen a strong uptick in assignments in the last month. If this is a sign of things to come, and I believe it is, more foreclosures = more inventory = stabilizing or lowering of prices. However, we are nowhere near the volume of foreclosures that we have seen in prior years. My opinion - if you find something you like, go for it! You will never be able to buy a home if crippled with analysis paralysis.
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Doug McVinua, Agent, Gilbert, AZ
Wed Aug 8, 2012
Inventory is expected to run low for the next few years in Phoenix, while depending on the economy we should see good demand.

It is still a great place to live, houses are cheap relative to many ares and less than replacement cost. Interest rates are low!

No one I know can accurately predict appreciation, we are pretty good at hindsight but not so good looking forward. Most of the experts feel good about the market based on basic principals.

The person that knows the election results in November, the debt crisis, the world economic situation etc is the one to ask. I would like to meet that person!!

Do you need a house? Want one to make into a home? Paint it your colors, landscape it, have kids in schools for years? Questions for you?
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Jason Rush, Other Pro, Phoenix, AZ
Wed Aug 8, 2012
While I believe there is an exception to all rules; when we look at the historical data things seem to be lining back up. Data experts such as the Cromford Report (Michael Orr: Oxford mathematician and direct of RE studies for ASU) show strong signs of recovery.
There will always be ignorant agent/people throwing around numbers and stats they know nothing about or nothing more than it sounds good and make help secure a closing.
Based on build prices, current prices, decreased building over the last couple years and "where" RE prices should be at; I believe we are viably heading in the right direction.
The Phoenix real estate market is still recovering but has made significant steps towards this.
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