Posted by Joseph Y. Calhoun, III
Phoenix was one of the hardest hit real estate markets during the recent bust, but the market may be turning (via the LA Times):
After four years of renting because they were priced out of the real estate market, Jamia Jenkins and Scott Renshaw concluded the time had arrived for them to buy.
They saw that home prices had dropped so fast here — faster than in any other big city in the nation — that mortgage payments would be less than the $900 they paid in rent. The city is littered with foreclosed houses, so the couple figured they could easily snatch up something in the low $100,000s.
Three months later, they’re still looking.
They have submitted 13 offers and been overbid each time.
“It’s just pathetic,” said Jenkins, 53. “Investors are going out there and outbidding everyone.”
Phoenix’s housing bust has turned into a quasi-boom, a sign that its market may have hit bottom and a sneak preview of what a national housing recovery could look like.
More homes are selling than at any time since 2006. Prices are slowly stabilizing. Buyers are once again finding themselves in frantic bidding wars — only this time over foreclosed houses selling at deep discounts rather than ranch homes listing for vast sums.
Inventories, even in the boom/bust states like AZ, FL, CA and NV are coming down as buyers emerge at lower prices. At the current sales pace, Pheonix has about a 7 month supply of inventory. CA is down to about 6 months supply. FL is still in the worst shape and South Florida is the worst local market in Florida with about 20 months of supply. But at least it’s moving in the right direction.
One wild card is the so called shadow inventory. Banks have ended their moratoriums on foreclosures so expect more bank owned properties to come on the market. In addition, there are those who wanted to sell but either can’t or won’t at the current prices. If prices start to rise, every tick up will bring a new set of sellers to the market.
The government has taken extraordinary measures to stop the decline in the housing market. The Fed has held mortgage rates down. Fannie Mae, Freddie Mac and FHA are backing and/or buying loans. Tax credits are subsidizing first time home buyers. With all that effort to direct capital into housing, it would have been news only if it didn’t find a bottom. And it seems to be working - in the short term. As for the long term, one has to wonder if we aren’t making mistakes similar to the ones that got us in this mess. Are we wasting more capital on non productive assets?
