This article on MSN.com discusses the viewpoint of a report from Moody's Economy.com regarding what the future of the national housing market holds. Although this report seems to be a bit contradictory on a couple of different points, I wanted to touch on a couple of topics in the report. First, it talked about the expected price declines that some of the major market should expect to see. Arizona, California, Nevada & Florida were areas that the report specifically mentioned that should expect to see significant price declines. From the numbers that I pull on a weekly basis on Maricopa County single family residences, from the peak of $194.76/square foot in May of 2006 to November of 2007 at $165.91/square foot we've seen a decrease of 14.8%. Are we going to see the 15% decrease that the report talks about or are we going to see more. My thought is that the Phoenix real estate market downturn is not yet over and I would be willing to bet that we'll see even further declines in real estate values in the coming months. Would I like it to be over? Absolutely! I think everybody would, but with the inventory levels where they are currently and foreclosures flooding the market, I see things getting worse before they get better.
Secondly, the report mentions the inventory levels as one of the main contributing factors to the housing slump, which I completely agree with. We've said it before here at the Butterworth Group blog, and it's something that I continue to believe. With the inventory levels in the MLS as a whole at about 56,400 as of Monday, 12/11/07, and at about 39,700 for Maricopa County single family detached homes alone, the supply side of the supply and demand equation is what is causing home values to decrease. What we've experienced is that current homeowners who would like to move, either downsizing, upsizing or moving laterally (maybe to a different part of town), simply cannot because selling their home is proving to be quite a challenge due to the competitive environment. For almost all of our listings, once the seller is able to sell their home, they will be purchasing another, thus becoming a net effect of two inventory units. Now imagine if the seller of the next home was to buy another and so on the down the line. One sale could have a net effect on the inventory level of 3, 4, 5, or maybe even more units. It seems that we've got a distinct level of pent up demand that, once released, will have a profound effect on the market as a whole.
I always find it fun to read these types of reports and then watch to see just how accurate they were. To date, I don't think I've read any that predicted the extent of the housing slump that we've currently seen. Hopefully this report is accurate in that the downward trend in sales and prices will begin to stabilize next year and begin to get back on track in 2009.
[tags] Phoenix Real Estate Market Forecast, Desert Ridge Real Estate, Inventory Levels [/tags]