About the Market
The simple fact is, the market is MUCH better than it was.
Despite the best efforts of the media and others trying to continue to paint a bleak picture of the real estate market, the simple fact is although it is not the best it has ever been it is by far not the worse it has ever been either.
The simple facts:
In 2005 and 2006 the market experienced a peak which if you truly research the market is fairly typical of 20 year trends. However, unlike previous trends this market experienced a unusual amount of speculation and for lack of a better explanation “amateur hour”. Everyone was a real estate investor, or at least they posed as real estate investors. Few had the true resources to actually be invested in real estate. Three forces combined to create what we now know was a disaster. Bankers found new ways to loan to those who should never been able to borrow, building materials were in short supply causing a new home shortage and thanks to media hype, speculation caused real estate to be purchased with reckless abandon. Like every bubble, the media alerted everyone that if they don’t hurry up and get on the train it would leave the station without them.
In late 2004 approximately 35,000 homes were listed for sale on the multiple listing service in the greater Phoenix market. By mid 2005, the media had seen fit to encourage every “investor” to purchase all but 10,000 of these homes, which is where the market remained for about one year, 10,000 available homes with 10,000 buyers each month. Because of the speculation, an artificial shortage of homes was created and the new “investors” drove the price up like never before seen.
In late 2006 the market began to slow and inventories began to rise. Despite this fact, sellers were slow to get the news and buyers never saw any reports and unlike most times when supply begins to meet demand, the market still demanded top dollar for homes. This remained the case until late 2006 and early 2007 when the market peaked and prices began to fall.
There is a ton of speculation as to what happened next. From my experience, it appeared that “investors” who were over extended began to drop prices to attract buyers for quick sale. In the greater Phoenix area this method for the most part worked and despite small decreases in values homes in these areas continued to sell. The outlined areas of Phoenix were not as lucky. Homes located in communities where building was still able to continue saw “investors” walking away from their real estate transactions with little or no consequence other than a dip in their credit report.
This started a wave of foreclosure activity in the outlined areas, which eventually caught up to the greater Phoenix area. As home prices fell more rapidly and the “investors” ceased to exist, inventory levels began to rise sharply and as a result more foreclosures took place as the new home market crashed and burned.
We all know what happened then. As banks failed because of foreclosures, prices fell even faster and inventory began to explode. In fact, in early 2008, over 50,000 homes were on the market and less than 10% actual sold.
The fact is, today the market has stabalized and has been for some time. Inventories have remained high however banks have found ways to lend and borrowers are buying. In fact, over the past few months over 9,000 homes have been sold each month, which is very close to the 2005 levels, however, unlike 2005 inventories remain high to control prices.