NAR Sees Cooling Trend

Here is an exerpt from a fourth quarter 2005 report from a National Assocation of Realtors economist focused on the Phoenix area.

While it is from December 2005 figures, it illustrates rather well what happened ( and is still happening) to the Phoenix market since we left the "boom days" of earlier in 2005.

Richard


Trends
But What Does a Slowing Market Mean?
Ken Fears, Economist

Newspaper pundits have been harkening a bubble in the housing market for years. For the first time the markets are actually starting to show signs of slowing. Sharp increases in prices in 2005 and a fifty basis point increase in the 30-year fixed rate mortgage in the fourth quarter of 2005 eroded affordability conditions leading to this cooling.

But the data indicates that it is just that; the market is cooling based on fundamental
factors. Days on the market have increased in roughly half of the metropolitan areas that NAR® Research monitors.

With affordability declining demand will shrink and homes will sit on the market longer. Compounding the problem, the stock of homes for sale will begin to build up. Consequently downward price pressure will develop forcing sellers to make concessions, causing a decline in the ratio of sale price to list price, in order to meet buyer’s ability to finance their purchase.

However, are we there yet? There are several reasons that may explain an increase in the concession. First, Realtors® may be listing prices high in an attempt to boost up the sale price by listing well above comparable sales prices and accepting a slightly lower selling price that is still above the current comparables.

Secondly, the market may be changing and Realtors® who are used to a certain quarterly increase can no longer use this guide for pricing. For example, a year ago when pricing a home a Realtor® may have taken a recent selling price and asked 3% more assuming prices where continuing to rise, but with demand flattening, only the recent selling price is realized, creating a 3% concession from the inaccurate list price.

Finally, if the market is truly oversaturated and has been stagnant for a protracted period, the only way to move homes may be to accept prices below recent realized sale prices…this last scenario is one in which there is a true concession.

Phoenix Housing Market Update for January

In January we were once again treated to a variety of headlines in the local press concerning our Phoenix housing market.

Chief among these was from a week ago where it was reported that the new-home market was staying on a "fast track". Noted local housing analyist, RL Brown, said that population growth, increasing number of jobs, relative affordability, moderate mortgage interest rates, available land, warm weather and retirement buyers all were positive influences that fueled the local housing market.

About the same time as Mr. Brown's predictions was an article indicating that, statewide, Arizona added 97,500 positions in 2005, the largest boost in the past 10 years. This places Arizona among the top states in the country for job growth.

Did you notice the article on the insurance company that is adding 1100 jobs at its headquarters here?

About the only thing that could seriously threaten the housing market here is a strong rise in interest rates. The Fed just raised their interest rate another 1/4 point yesterday but that is predicted to be the last increase for a while now that Alan Greenspan is stepping down as head of the Federal Reserve.

So far, so good for 2006. I'll keep you posted.

Richard

Ameriquest Mtg. customers due refund

According to a newspaper article last week, Arizona customers of Ameriquest Mortgage who took out loans with the company from 1999 to 2005 may be eligible for compensation to receive more than $600 each.

This results from a consumer protection legal action against Ameriquest alleging that the company engaged in several deceptive loan practices during the period in question that cost their customers additional money.

They are using company records to contact consumers who might be eligible to participate in the settlement. If you think you might be entitled to part of the settlement or you have recently done business with Ameriquest , you can contact the Arizona Attorney General's Office in Phoenix to check. Ask about the Ameriquest settlement.

Ameriquest is instituting new lending policies as part of the settlement.

Richard