Derek Jarr, managing partner of Green Street Realty in Phoenix… “The sales reduction is a result of the fact that you don’t have as much distressed inventory in the market anymore,” Jarr said. “There aren’t as many people that have to sell … now it’s people who want to sell.”
Or maybe home sales are down because prices are up about 70% from 2.5 years ago and buyers are less enthusiastic about buying homes at these prices versus the prices of 2.5 years ago.
The fall in distressed sales caused Phoenix home prices to rise but it was the rise in prices that caused the slowdown in the number of homes sold.
If we had zero distressed sales now but prices were the same as 2.5 years ago, Phoenix home sales would still be booming.
3 Responses to Why home sales have fallen in Phoenix
Another super important factor determining demand for homes – more important than current home prices, in fact – is what people expect home prices to be in the future.
That explains why so many people paid so much for homes in 2005 and 2006 – they thought home prices would be even higher in the near future.
I 80% agree with you! If prices were still as low as 2.5 years ago, we’d still have tons of sales. (assuming the rental market didn’t collapse)
BUT I see a few other reasons that are not as bad for the market, incorporated into our new lower sales numbers:
1. Far less flips. 2 years ago, you could get a bank to give you a short sale for tons less than it was worth; Buy it, minimal fix, and sell it… BUT that means that many homes went through TWO SALES before they were really sold. So 2.5 years ago, when 9000 homes closed a month, in terms of homes permanently removed from the market, that probably only really equated to 7000 homes. Today, when 7000 sell a month, it is probably 6500 done and gone; Thus the true demand drop is not as drastic as it seems.
2. Short sales and bank owned homes are now priced relatively competitively, compared to way lower a few years ago; The past 7 months, we’ve had flat pricing, so broker opinions come in at market, not at the market a few months back; Thus, they sit on the market. Despite large drops in distressed loans, we oddly have just about as many listed short sales and bank owned as we did 1.5 years ago; They kind of sit there, forever, and make the inventory supply look a bit worse than it should.
August of last year, I predicted we would enter a “lull” with sales slowing dramatically, but prices not dropping by any serious amount. Five months in, i believe that is still accurate. Now, it comes down the economy generally to predict the future of the market: add jobs, and it will improve, go into another recession and it will get hit.
You can read my historical blog posts if you choose:
Check out this video response I made to Roberto’s comment.
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