I’ve known for six months or more that there was a sweet spot on the horizon for investors and other highly-solvent buyers. That event was delayed by the first-time home-buyer’s tax credit. Today’s news about declines in the number of pending purchase contracts is a symptom of the market returning to an unstimulated level of demand. I watched the dropoff reflected in today’s news as it happened last fall. Lenders cut off new applications for first-timers and, just like that, price pressure eased, available inventories started to rise and it came to be a lot easier to get a house under contract.
We’re all waiting for the other shoe — the shadow inventory — to drop, but the supply of the homes I want most for my investors has almost doubled since mid-October, from around 350 units then to just over 600 today.
Here’s even better news for buyers (not for banks): Prices are going down.
This is the Cliff’s Notes for the last four months, as reflected in the BloodhoundRealty.com Market Basket of Homes:
September: +3.15%
October: +2.14%
November: +2.22%
December: -8.03%
That’s a huge drop for December — giving back almost everything we’ve gained since April, 2009. But, interestingly enough, the ratio of sales price to list price was positive. In other words, there is still competition for listed homes, but list prices are dropping.
I don’t know how it is by you, but this is the perfect storm for investors in Metropolitan Phoenix. The homes are in much better condition than they were this time last year, and the prices are at hovering just above the 2009 low.
Are we at the bottom? Feels like it — but we’re going to be here for a while. Positive cash flow is easy, but cash flow is all there is right now. If you’re not a buy-and-hold investor, Phoenix is not for you. I’m sure that’s true in most rental markets.
But if you’re thinking of buying a rental home anywhere in the South or Southwest, reflect on this: This could be the coldest winter in 25 years. Whether they can afford to or not, people are going to move. When they do, they’re going to need a place to live.
James Boyer says:
Great post Greg.
I do think that Northers New Jersey will be doing better then the market as a whole, with Wall Street doing better. What makes me think this, well I have already talked to 2 different prospective home buyers who are looking now because they got or are getting fairly large bonuses this year.
January 5, 2010 — 8:02 pm
Greg Swann says:
> I have already talked to 2 different prospective home buyers who are looking now because they got or are getting fairly large bonuses this year.
Oh, good on ya! I feel bad for the people who got hurt in this mess, but buyers can get a lot of house for the money right now.
January 5, 2010 — 8:53 pm
Brian Brady says:
I love the index. Have you considered promoting it to the local MSM?
January 5, 2010 — 9:56 pm
Marta says:
Hopefully the Phoenix market will turn around. Great facts and views in this post! Thanks.
January 8, 2010 — 12:02 pm