NO! The sky is not falling in Phoenix real estate

A home buyer recently asked me for my perspective on the Forbes list of 13 Cities Where Home Prices Are Falling Dangerously, where Phoenix is listed as one of the “13 cities that suffered relatively big home price hits this year with more projected through the next 12 months.”

From what I’ve been seeing in the market statistics and experiencing in my day-to-day life as a working Realtor, my first response was “No way!”. I’ve written about pre-foreclosure shadow inventory being on the decline and buyers having a hard time finding a houses to buy, so this perspective on the Phoenix real estate market just didn’t feel right to me.

I contacted Mike Orr at the Cromford Report to see what his take was, and he shared that he’d just written his response in his Daily Observations.

December 10 – Another media article with a very misleading view about Phoenix home prices can be found here: Cities with Dangerously Falling Home Prices. Sourced from Forbes Magazine, It claims that the home price drop for the Phoenix/Mesa/Scottsdale MSA from October 2010 to September 2011 was -13% and that prices will change by another -3.3% through 2012. It quotes the average price as $152,000. Well the monthly average price for all areas & types in ARMLS at the end October 2010 was $162,904 and at the end of September 2011 it was $153,784. That’s a decline of 5.5% (rather than 13%). What’s more significant is that the monthly average as of today is $163,024. That is not only 6% higher than in September 2011, it’s actually just a tad higher than in October 2010 as well. So if buyers are expecting prices to be 13% lower than a year ago they will be very disappointed when they check out the market. Based on current trends, sales prices will also be rising over the next several months. Let me state this clearly. The idea that average Phoenix home prices are falling is a myth. The price bottom occurred on September 15, 2011. For almost three months now they have been on a strong and clear upward trend, and any suggestion that sales prices are flat or falling is based on a misunderstanding or misreading of the data. This is not something exclusive to ARMLS sales data. Tom Ruff of the Information Market, who spends his time buried in county records, is seeing the same trend in the prices filed at the county recorders’ offices. With supply at historically low levels Greater Phoenix is in no danger of suffering any significant fall in home prices over the next three months. Stability is certainly a possibility if demand subsides, but if it continues at current levels or higher a significant rise in prices is far more likely.

And as I read through more of his notes, I found another reference to the Phoenix real estate market and its potential, continuing decline:

December 6 – A headline in today’s Phoenix Business Journal reads “Arizona Home Prices Continue to Fall” quoting CoreLogic. They are using October 2010 to October 2011 comparisons and state a 6.7% annual fall for Phoenix. This is not really new news, but reflects the bad patch we came through about 2 to 3 months ago. From our latest appreciation chart you can see that since July there has been a significant improvement in the monthly appreciation rate using ARMLS sales data from -11.2% to +0.9%. We don’t expect CoreLogic to be reporting the positive appreciation until February. This reporting delay is one of the reasons it takes the public so long to realize that prices have turned around. It is also the reason we report here on a daily basis. By reading these notes you can stay better informed on what prices are doing today rather than 2 months ago.

The appreciation chart that Michael mention is posted above and you can see that we are approaching zero percent appreciation for the first time since July of last year. Looking at the long-term appreciation chart, ranging from 2001 to 2011, you can see that maybe, just maybe, Phoenix real estate is coming out of that double dip that was projected.