Sandy and Bill Goodheart, the Realtors who for years have dominated my part of town (Bill Goodheart actually built a fair amount of the neighborhood), send out a sporadic real estate newsletter to their clients. For many a moon, the news has been pretty glum. This month, though, they report some indications that real estate in the hard-hit Phoenix area may be starting to look up.
Here’s the good news:
We believe the market has bottomed out. In just the last ten weeks, we have gone from a 10.4-month supply of listed homes for sale to a 7.5-month supply. This has been accomplished by a 6% reduction in the number of homes for sale and a 30% increase in the number of homes sold…
We feel prices are stabilizing, although at a much lower price than last year. This new, lower floor will last for all of 2009, then we can expect an average 3-5% increase for the next several years.
This cheer is based on fairly scant evidence: in the past four months, Realtors in our area made only nine sales. Average sales price was $247,000, and it took an average of 156 days (over five months!) to sell. While this comes under the heading of “the bad news”—it represents a 12 percent drop in prices over the past year—it’s better than the overall market, which has dropped 35 to 40 percent.
Dave’s Used Car Lot, Marina, and Weed Arboretum sold for $247,500. That’s $15,500 more than I paid for my house five years ago, and $77,500 more than the speculator paid to buy the arboretum from the bottom-feeder who bought it out of bankruptcy. That place is two square feet larger than mine, on an identical lot with a similar size and quality pool, freshly out of foreclosure, and not renovated as nicely as mine. The people two doors down from Dave are asking $300,000 for the best model in the tract. It’s potentially a nice house (given a few tens of thousands of dollars in fix-up), but they’re original owners and the house is advertised as “lovingly cared for,” meaning everything in it still dates back to 1971.
In the past, the Goodhearts‘ observations have been pretty accurate. About 18 months or two years before the bubble peaked, they sent out a letter advising their clients to sell and move into rentals, then buy new real estate at what they expected would be greatly depressed prices.
They predicted the bust that much in advance, and in fact, Mr. B*** (the predatory landlord) made a nice little killing by following their advice: he sold his rentals in the neighborhood at the top of the market. Their timing was a little off—they jumped the gun by a few months—but their assessment of the market and where it was going was right on.
Their prognostication for the future:
Our best advice is to wait if you can, because time is now on your side. Ideally, when we have a 3-6 month supply, that is considered a balanced market and is the better time to sell. We do not see prices going up this year.
Define “up,” though: in terms of a traditional increase, absent the bubble, the increase on houses that have not been in foreclosure has been unimpressive but not unacceptable. A house similar to mine sold for $280,000. Assuming that five years ago it was worth about what I paid for mine, a 3 percent annual increase would have put its value at $268,950. So if you think of what it ought to be worth instead of what it might have been worth, its value has increased by a little more than 4% a year.
The rapid drop in inventory is a positive sign. Around here, a three-month supply is considered about normal. If this trend continues, we may begin to approach sanity somewhere near the end of the year. After that, we should begin to see prices rise at a stately but respectable rate.
My first official commute to the Great Desert University on the new light-rail trains was a great success!
