( This slow down is nothing new )
It is kind of like the stock market : Cyclical, and just seems to happen every ten years. The market ( especially in Phoenix ) will be back with a vengeance within a few more months. We have the weather that most other states would
cherish . Not to worry !

————

Enough already with comparisons to last year. Last year was a convergence of factors, low interest rates, low prices, low inventory, and a frenzy of activity. That is in the past, but most sellers, and sorry, their realtors too, think that their homes are worth more than the market indicates. That means correction. Like the earlier post, markets are cyclical, but like the stock market, it does go down, too.

—————————-

 Having spent 23 years in the real estate industry, what we experienced in the last year is more of a price equalization to equivilant markets. We have always been below the markets similar to us, now we are on par with them. The next thing needing to rise in Maricopa County is salaries. If this can increase and interest rates stabilize then we will be right where we need to be. This has needed to happen here for a while.

———————————

With a record number of investors these past 2 years (read: speculators, since these are not primary residences), financing with a record number of Adjustable Rate Mortgages, what is going to happen as these ARMs get Re-Set 2% higher in 2007? Or, possibly 3% higher by 2008? Translates into an additional $5000/year in interest payments for the average Phoenix house, unexpected.

What happens when these rentals - now with Negative Cash Flow - hit an already soft real estate market? What happens when stuck buyers must then punt by the end of calendar years to at least get tax-losses, will there be floods in 4th quarters?
——————————

If prices begin to fall, it will enable people who have been priced out of the market, to buy. I believe that there are many potential homebuyers out there…so if there is a price drop, it would be temporary. Falling prices would help to dry up the vast inventory of homes. This would reverse the market, creating another sellers market. Prices do not have to fall too dramatically to have this happen. In some cases, homes are overpriced by ten percent. This ten percent is enough to outprice first time buyers. If a seller really wants to sell….he can create a sale by adjusting his price..if his property is desirable. In any case….in the future when interest rates fall someday…the market would surely pick up then. If people can’t sell their homes in other places…they cannot buy a home here.

———————————