Housing Bubble in Arizona?

Question

In Arizona, the prices of homes have slightly dropped due to many homes on the market for sale. Homes in Arizona appreciated about 50% in the last two years but now it's overflooded with homes for sale. What do you think will happen? I still see it going strong 2-5 years from now.

Answer 1

Unfortunately POP is looking at a blogger from San Francisco. In the Phoenix area we are seeing an influx of around 500 families per month. What we are experiencing is a market correction. Yes, prices have increased at an alarming rate over the last couple of years, and yes there are many people who have taken out adjustable rate mortgages, but we shall see what we shall see.

What I can tell you for sure is that as of this very second there are 42,728 active listings in the Arizona Regional Multiple Listing Service. Which is about a tenfold increase from two years ago but the average price on a 3 bed 2 bath home in the active listings is $459,614 with an average of 75 days on the market. So the bottom hasn’t fallen out yet. I think that prices may continue to drop as the temperature goes up.

Overall I think the best advice that I can give you is don’t panic.

Answer 2

Yes. A bubble exist. How do I know you say? Markets such as AZ have seen artificial demand do to investors. I have associates who have purchased 10 to 20 home in the past year with the understanding that each would appreciate $4 to $5 grand per month. Each home was purchased with 0 down and and 80/20 loan. The rent covers only 50% of the mortgage. They are bleeding approx. $1 grand per month per home. The market valuation has stopped or has reversed itself in the past 3 months. This trend will continue for the next 5-10 years most likely. Look at other markets such as Sacramento. I toured model homes a week ago. Builder reps couldn't give the homes away. $20 - $50 grand off the selling price, 42" plasma TV, appliances etc. But despite these incentives no one was buying. In fact no one was even looking for that matter. If you are in contract to buy get out. You'll be able to get a much better deal in the next 6 - 9 months. The same can be said for most markets.