By Mike Bodeen · 27 December 2023
A Merry Christmas Post Two!
I could have written this to have it ready to publish on or before Christmas Day, but I figured most of you wouldn’t read it, and good for you! Like me, you had way more important things to do. But here we are Christmas Post Two.
In keeping with my attempt to somewhat chill today, I’m bringing you a Michael Orr Cromford Report article he wrote a few days before Christmas. He explains well and humbly, I believe, why the local real estate data they provide, and much of which you receive from of us, is to be more trusted than many of the so-called experts out there, especially for those who have been calling for a “crash” in the Phoenix market.
Take it away Mr. Orr:
“Dec 23 – The monthly average price per sq. ft. across all areas & types in the ARMLS (local Multiple Listing Service) database is up 6.4% from 12 months ago. $266.78 has moved to $283.87.
Many of the so-called real estate pundits on YouTube and elsewhere were predicting a massive crash of up to 70% (yes, seriously) for Phoenix housing. They did not do this because they have a deep understanding of how the housing market works (obviously). They did it because predictions of disaster catch people’s attention, generate views and therefore advertising revenue for Google and the video publisher. There is no shame involved.
You may be wondering what these pundits do when their older videos are proven to be so massively wrong by the real world. They just delete their older videos and publish the same predictions for the next year. Repeat again and again. Some have been doing this for many years and there always seem to be enough new viewers gullible enough to keep watching their crazy predictions. Being consistently wrong for several years does not seem to dampen their enthusiasm for making videos. They must like the income I suppose. By deleting all their videos more than 3 months old, they hide how appalling their forecasting ability has been shown to be. In the wider economic world, there are many book authors in the same mold who sell lots of books but get their predictions wrong year after year. Harry Dent springs immediately to mind, but there are lots more.
The Cromford® Report market commentary is based on actual data, careful statistical mathematical calculation and over 20 years of experience measuring the Phoenix market. We never delete any of our materials. You can check what we said against what actually happened. During the first quarter, several subscribes wrote to us and said we might be too optimistic, but the numbers never lie to us. The housing market has survived intact and is now in better health price-wise than it was this time last year, though admittedly we could all do with a lot more transaction volume. These emails were valuable to me because I took them as a signal that public perception was much worse than reality, even for experienced and highly competent professionals.
The last 200 years have shown us that for home prices to go significantly down, we have to have an excess of homes for sale chasing too few buyers. Right now, buyers are indeed thin on the ground, but we still have overall supply well below normal and heading lower. For a housing crash we would need a flood of new homes for sale. The reason it might occur is not important, but without this flood, price will remain stable at worst.
Supply is going down, but this is normal for December every year. The important stuff will happen in January. Will more than the usual number of buyers emerge due to falling mortgage rates, or will we see a surge in new listings. The balance between these two measures will determine the direction of prices in the first quarter of 2024 and anyone who tells you they already know what will happen is selling you a lie. The future is largely unknown, but at least we can understand the present properly.
The Cromford® Market Index is in the balanced zone around 105 and increasing slightly. To conclude we have any credible evidence of an imminent crash would be simply illogical.”
-Mike Orr from the Cromford Report
Market data referenced in this article comes from The Cromford Report.