Price appreciation over last year was higher than in bubble years 2004 to 2006 … and it’s currently rapidly increasing.
Is the metro-Phoenix housing market “real”? Are the trends sustainable?
As a base point for the answer, the current metro-Phoenix Housing Market status is clearly illustrated here.
Where is the current market compared to its history?
The price increase over the last year was higher than in the Bubble years, and will be even higher when computed for May.
But … has the metro-Phoenix Housing Market gravitated into a Bubble?
In the late-2004 to 2007 period, speculators, primarily from California then too, were the driving factor in this housing market. Focused on new construction to profit from the appreciation over the six to eight month construction time, speculators would contract for properties with reckless abandon. Loan underwriting was nonexistent. Speculators would put up the minimum-possible down payment, then sell the property as soon after completion as possible … never making more than a couple monthly loan payments, if any. The strategy worked like a malfunctioning ATM spewing cash … which effectively is what it was … until it didn’t.
As soon as the market shifted so that the sale couldn’t be made for several months, speculators “walked” from the deals … simply elected not to pay. Of course, the lenders couldn’t then get the foreclosed properties sold timely either, and they couldn’t just “walk”. This was a major part of the banking crash in 2008.
The current situation is grossly different. The bulk of the new population is moving into those purchased homes … and putting down a LOT of cash to buy the homes … they have to because the appraisals are coming in way below the sales prices and sellers aren’t budging on the price.
This situation has really intensified since early March. The down payment percents have skyrocketed right along with the prices. Folks now making offers based on “regular” financing are in a near impossible situation.
Not a Bubble! But could it become one?
The current metro-Phoenix housing market is absolutely NOT a bubble.
But could it become one?
The driving factor to the current housing market is the volume of in-migration verses the volume of construction of new dwelling units. New construction is increasing but actually falling behind the increases in population.
Until the in-migration slows down, the shortage of supply verses demand … the basic economic situation … will persist, intensify actually in the near term.
There is no bubble in sight.