By Mike Bodeen · 11 April 2017
As you can see by our historic median sales chart, the Phoenix Metro residential real estate market goes up and it goes down. In fact it has gone way up and it has gone way down. Just like most of the rest of the country, the summer of 2006 peaked for our pricing at $260,000.00. Five years later, we bottomed out at about $110,000.00. The rise and fall of that dark time was sharp.
http://www.cromfordreport.com/member-only/analysis/by-topic/spsf/spsf-annual-all-types-long-term.html
Can it happen again? Yes, it can happen again. Will it happen again? All things are possible. But there is a big difference this growth time around. In the last epic crash of 2007-2008, sales got out of control with unqualified buyers obtaining loans in record numbers. Appraisals were virtually “rubber stamped” regardless of questionable practices (even fraud). For more information about this dire period of our country’s financial history, I refer you to the book or movie, “The Big Short.” Or, the following article about the same: (warning; the book and movie are not for the faint of mind)
http://www.investopedia.com/articles/investing/020115/big-short-explained.asp
The government which seemingly lacked proper oversight allowing the problem to happen, then initiated massive reforms which were needed to stem the tide of bank failures. This is where the Dodd-Frank legislation came into play. I contend it was needed for the time.
A question that has been often asked since, is will we see the peaks of those prices again?
Yes. In some areas of the Valley they have already approached those values again, but it’s taken a decade. In other areas, especially the higher priced luxury market, we’re still a ways off. We have slowly and successfully been climbing back and this time it has happened at moderate growth including better mortgage business practices. On the whole it seems healthy.
There are warning signs, however.
There are some warning signs, however. As we’ve been reporting, the market is heating up. The mortgage rate increase at the beginning of the year has not seemed to make a dent in buyer desire. Buyers no doubt are smart enough to know that 4.5% for a 30 year mortgage is still a bargain – and it is!
Where we’re subjectively seeing this market crank up is in the field. Multiple offers are now more common with properly priced homes. More offers are happening above asking prices, homes are selling more quickly with reduced listing times.
For a quick infographic of where our market is compared to a year ago:
http://www.cromfordreport.com/member-only/news/Phoenix%20Metro%20Infographic%20-%202017-04.jpg
Market data referenced in this article comes from The Cromford Report.