The Arizona Republic had a big front page layout yesterday on the struggling real estate market in the town of Maricopa, Arizona and growth in Pinal county.
The communities on the outskirts of metro Phoenix like those in Pinal county were expected by many, including me, to get hit first and hardest by any real estate slowdown.
[By the way, my father owned a cotton farm near Maricopa when I was in high school. I became interested in agriculture, earned a Masters degree in agricultural economics and eventually became an Agricultural Attache at the American Embassy in Paris before returning home to Phoenix. Paris via Maricopa!]
• Keep in mind that most home sellers in Maricopa aren’t going to lose money. They just aren’t going to make as much money as they once thought.
• Many home sellers had, and continue to have, wildly unrealistic expectations of their home’s value. (I had a call recently from a homeowner in Johnson Ranch who thought her home was worth $640,000, although she would be willing to price it at $620,000 to sell quickly. In fact, I would be surprised if she could sell it for what she overpaid for it at the top of the market last August, $475,000.)
• High gasoline prices hit the communities on the outskirts hard. On the other hand, the median home price in the city of Phoenix has been quite strong, up $18,000 from January through May.
• Median home prices may decline in outskirt communities while the median home price for metro Phoenix as a whole increases. The town of Maricopa, for example, represents less than 1% of metro Phoenix home sales.
• The oversupply of homes for sale in the town of Maricopa may be corrected relatively quickly thanks to new home builders who have cut production. The print version of the Arizona Republic articles above came with a lovely table full of numbers that showed that new home permits for the town of Maricopa in 2006 are projected to be less than half the number issued in 2005.
• Home buyers can now find, with some work, motivated sellers and excellent prices on the outskirts.