No housing bust in sight
“None of the experts are forecasting another big drop in Valley home values anytime soon.
But Tina Tamboer, senior housing analyst with Cromford, expects home prices to appreciate much more slowly and potentially flatten out this year.
She said Phoenix-area home prices could even dip next year, but only slightly.”
“It’s not a tu-mah!” It’s not a bubble! Really.
For the last few months I’ve had several discussions and heard quite a few opinions about the housing market with clients and friends:
- Are we in another bubble? No. The fundamentals are good: down payments, stable home values, good homeowner equity, balance in terms of owner occupants & investors. They weren’t over a decade ago.
- I hear prices are going to drop over the next six months between $10,000 to $30,000. NO. That kind of granularity is almost impossible. Meteorologists have better odds and really they’re not that good. Have you seen LA Story?? We can’t nail market pricing that specifically. There are too many factors & real estate is hyper-local. If you buy or sell a home with me, you’re probably sign a form saying exactly that during the transaction
- I’m going to sell now & rent until prices drop again. Good luck with that… Have your priced a rental lately? Paradoxically, there have been so many new apartment communities built a few landlord clients finally opt to sell properties because there was too much competition from nearby apartment communities. Their rents actually started falling due with the principles of supply & demand.
I understand the concern, particularly from those who got burned. For the record, I also get a little nervous if prices, demand or supply rise or fall too quickly. It’s probably PTSD from watching our market melt down. I saw the devastation to families across the socioeconomic spectrum first-hand when I listed foreclosed properties for Fannie Mae from 2009-2013.
My answer to “how the market is doing” is based a lot on math & a only little on what I see on the streets.
We can see the changes in the stats as they’re happening. Unfortunately, I’ve seen folks make emotion-based moves instead of calculating the specifics because of their grade school-level anxiety about math. BIG MISTAKE. You CAN calculate how a sale or purchase will affect you financially. It’s easy to do with trends and statistics. They guide how we move forward when the housing market starts shifting.
Now is no exception. I featured Tina Tamboer’s quote because I trust her & Mike Orr most of all our industry analysts. Plus they’re local and they’ve been FAR MORE accurate than the rest of the yahoos talking. Mike was one of very few who correctly predicted the bubble & bust.
I had NO IDEA that trudging miserably through statistics, economics, and basic business principles would be so relevant to my career- this one, not the investment banking one I had planned on! Thank God I learned something!!
I’ve known Tina since about 2009 or 2010. She’s one smart cookie who unknowingly reminded then that what I learned in college WAS useful. My son hates me for saying I use [geometry, algebra, etc.] at work all the time after he complains “I’m NEVER going to need this later.” LOLOLOLOLOL #yesyouare
In spite of having these skills and a solid arsenal of data from the Cromford Report, I spend lots of time crunching numbers to guide my clients. My secret is out- I am a closet nerd. No one gets why I get so excited when I emphatically advise them to do or not to do something based on some chart I present that they don’t want to see. In fact, I think they try harder to avoid me. I promise- I’m not crazy, trying purposely to bore you or make you miserable. I go underground and canoodle with the numbers even more when the market shows transition signs.
Seriously though, we look for patterns and clues in the numbers. There are many signals, but these are usually the most telling at face value:
- Pending sales- # homes under contract
- Active listings- # homes for sale
- Closed sales- # of actual sales, not what’s under contract
- Days of inventory- how long homes stay on the market before they sell
- The Cromford Index- A factor of supply & demand
None of it’s sexy, but it works.
The bottom line:
The next time you’re tempted to make a real estate decision and your urges comefrom internal statements like:
- It feels like everyone else is…
- The local news reporter said…
- The national news reporter said… [I just threw up a little in my mouth]
- I just want to…
My response is likely to be: “let’s talk about that.”
You have to do the math…
And we’ll walk through basics like how this decision will impact you once it’s done, financially & whether or not you can weather some unforeseen complication before finally trying to sum up the big picture with a thumbs up or thumbs down.
Again, real estate is hyperlocal. Because your colleague in Carefree or Cave Creek experiences something in Cave Creek, you may not see the same in Tempe or Gilbert. It’s all relative. If you’re still not sure and want to talk about it, call or text me. I can usually put something to bed really quickly.
Have a great week!
Here’s the full article from the Arizona Republic published 8/3/18: “Phoenix-area home prices surpass 2006 peak to set record” https://azc.cc/2LZia4R