I can always count on Mike Orr at the Cromford Report to make his way through the numbers and make sense of what is really going on in our Phoenix real estate market. Here’s his review of the Yahoo News post that I blogged about yesterday, “Phoenix-Mesa-Scottsdale Real Estate in 2012?” :
Business Week Forecasts Phoenix Home Prices Will Rise
A Business Week article dated June 23 and titled “What Your Home Will be Worth in 2012″ by Prashant Gopal and Diana Holden attempts to forecast what the median price might be in 2012. They cover the 50 largest metro areas, but we are only really interested in the Phoenix-Mesa-Scottsdale metro. Their analysis for this metro is as follows:
- What a Home Will Be Worth in 2012: $141,859
- Q4 2008 price: $169,000
- Projected price change by MSA: -16.1%
- Projected price change by state: -17.2%
The prices are stated to be median sales prices. $169,000 was the monthly median sales price for “all areas and types” on October 18, 2008, so that matches up nicely. What is mysterious is why they would start with a price that is so ancient as the comparison point. Since this article was also featured prominently on Yahoo’s home page, it is likely to have been seen by a large number of people. I wonder what their overall impression was – that prices would go down? In fact the article is saying that the median home price will increase quite significantly from today’s level.
The projected price change by MSA is -16.1%. However monthly median sales prices already fell twice as far between October 18, 2008 and April 30, 2009 to $115,000, a change of -32%. The forecast median sales price of $141,859 requires an increase of 23.4% over the coming 3 years from the April 30 level to meet their forecast.
The median sales price for “all areas and types” has risen $10,000 or 8.7% in the two months since the end of April, so we have covered more than a third of that increase already. The Business Week forecast now requires a further increase from $125,000 to $141,859 – a change of 13.5% over three years, which is pretty close to a “normal” level of home price appreciation.
It is strange that Business Week expressed their forecast as a drop in prices from Q4 2008 when it actually represents a substantial increase from today’s price levels. I would have thought that would make a more interesting story, but never mind. It’s all in the presentation, I guess.
Quite a different perspective, isn’t it?
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