This is me this week in the Arizona Republic (permanent link):
If you assume the worst, what can you do to get your home sold now?
The bay-trees in our country are all wither’d
And meteors fright the fixed stars of heaven;
The pale-faced moon looks bloody on the earth
And lean-look’d prophets whisper fearful change;
Rich men look sad and ruffians dance and leap,
The one in fear to lose what they enjoy,
The other to enjoy by rage and war:
These signs forerun the death or fall of kings.
— William Shakespeare, Richard II
I am too familiar with my own ignorance to credit other people’s predictions for the real estate market. People who think they can foresee the consequences of billions of choices years in advance are fooling themselves — although probably not as completely as they are fooling their audiences.
Even so, a would-be home-seller listening to all the doom and gloom predictions on the news may by now be in deep despair, crying, like King Richard, “I wasted time, and now doth time waste me.”
I don’t believe any of this, but let’s stipulate it for argument’s sake. In reality, so far, resale prices for some of the hardest hit residential communities in the Valley are down around 16.4% from the December 2005 peak. This means those same homes are still up 54.1% in value from December 2003.
If we anticipate the worst — mass foreclosures, with lenders dumping properties for pennies on the dollar — what can you do now to escape ruin?
The answer? Price your property to sell.
If you live in an archetypical suburban Phoenix home, your house is worth today just about what it would have sold for in April or May of 2005. If you’re priced higher than that, you may be priced too high to sell.
Here’s another way of arriving at a reasonable price. Take the sales prices of truly comparable homes that sold last month in your neighborhood and subtract at least 3%.
This can’t be happy news, considering how much you might have gotten two years ago. But if there is worse news to come, this is the happiest news you may hear for a while.
Technorati Tags: arizona, arizona real estate, phoenix, phoenix real estate, real estate, real estate marketing
Las Vegas Guy says:
Good advice that I’m sure some home owners don’t want to hear. But like you said, homes prices from 2003 are still up. That’s great, unless you bought less than four years ago.
September 14, 2007 — 8:52 am
Greg Swann says:
> That’s great, unless you bought less than four years ago.
Check. Two-and-a-half years, anyway. But, even so, if you presume that values will continue to decline, your best out is still right now. Eventually things will turn around, so if you have no need to move, get your house off the market. But if you do, bucking the market will probably get you even less money later.
September 14, 2007 — 9:45 am
Chris says:
You guys are getting hit really hard compared to us. My city is down 5%, maybe, mostly its just flat.
I want to pick up a bunch of forclosed multi families during this, so forclosures arn’t all bad…
September 14, 2007 — 11:42 am
Tara Jacobsen says:
What is your absorption rate in Phoenix now? We are having to have some hard talks about “only 5-6% of the homes are selling each month”!
September 14, 2007 — 1:03 pm
Greg Swann says:
> What is your absorption rate in Phoenix now?
The homes under discussion in the article are a particular subset that we have tracked for years. These houses tended to go up faster than the market as a whole, and they have also gone down faster. Right now, the absorption rate for those homes is 11.036 months, but inventories have actually been declining for months. Sales have been declining, too, alas.
For the entire Greater Phoenix MLS, absorption is at 13.04 months. That can be misleading, though. If you take only single-family homes in MLS area 206 — North Central Phoenix — the absorption rate is 11.516 months. Still high, but better. For single-family homes in MLS area 409, the “Ranches” area of Scottsdale, absorption is 10 months on the nose.
Chris, negative and positive appreciation is also widely varied across the Phoenix market. In my particular neighborhood of North Central Phoenix, prices have been a lot more stable than other areas.
Finally, to understand inventory and absorption rates in Metropolitan Phoenix, you have to take into account our many, many insanely over-priced properties. In the subset of properties we track, if we take the average-sized home, plus or minus 50sf, we get a range of prices from $175,000 to $365,000. Average sale price for those homes in August was $227,612. Out of 284 active listings, only 125 are offered below that price. A total of 23 of those homes sold in August, so it’s plausible to argue that the absorption rate for rational sellers of those homes is 5.435 months. For irrational sellers, the absorption rate is infinity.
September 14, 2007 — 1:34 pm
Chuchundra says:
I like quoting Shakespeare too, although I think the current real estate market more calls to mind one by Santayana. I’m pretty sure you know the one.
Anyway, anyone who things the real estate market is going to “rebound”, if by rebound you mean that prices will begin heading north again, next year or the year after that or the year after that is kidding themselves.
We’ve experienced the longest, largest run up in housing prices in history. Housing prices are still far out of whack from any reasonable fundamental analysis; price to rent, affordability, what have you.
History shows us that in the wake of a housing bubble, you get a year or so of actual price declines followed by several years of price stagnation as inflation brings the value of housing down even more. Then prices start up again.
If a homeowner is going to take their house off the market now in hopes of getting more more for it when the market rebounds in the spring, they’re making a serious error.
September 14, 2007 — 5:19 pm
Robert Kerr says:
This means those same homes are still up 54.1% in value from December 2003.
Then there’s still 25% to 30% residual distortion that will have to bleed off before the market completes its reversion to mean.
Another 15%-20% drop over the next 2-3 years would be sufficient to burn off the remaining distortion.
September 15, 2007 — 7:42 pm