That's right. I'm about to slam someone for spreading news about doom and gloom for the Phoenix market.... It just seems so 2008. Meanwhile, in 2010, we have the power of good information and can take pleasure in the art of nuance and differentiation.
Here's the article, which gets it all wrong, in my opinion, with NY-based writers relying on an unnamed real estate professional from the Phoenix market. Unfortunately, this "professional" does not know how to look up any of the available data sets about his market. For if he did, he might choose to highlight the Phoenix area's lopsided housing prices, consumer spending, debt levels, employment information, retail trends, and other vital statistics for our vast metro area.
But he does have one thing right, which is that it's not as easy any more bringing in wealthy Canadian retirees and convincing them to speculate on high priced winter homes anywhere in the sunny burbs that an incompetent agent wants to sell them. Beyond that silver lining, this guy's viewpoint illustrates little more than his own ignorance and self-defeat, since I'm sure that he once was the mortgage broker who could never say no.
He says there is no recovery. In fact, the recovery/non-recovery in Phoenix is very uneven, favoring more established and unique neighborhoods with jobs/services nearby, while it remains far out of reach for others.... And if this guy thinks that the distant suburbs' fundamentals support a rise in prices to where they were before our housing ponzi scheme fell apart, then he's an absolute idiot (and I think this is the first time I've resorted to name calling -- but I had to, since he's unnamed). That said, it's interesting to see that builders are in fact returning to some "infill growth areas," as I call them, like in where I live in Laveen; but as a side note to a tangent, the only ones I see building tracts are the national companies, which are probably operating at a short-term loss.
Here's the simple problem: New houses were severely oversupplied in the Phoenix market in the last 5-7 years, as home ownership rates rose within the existing population (meaning that more traditional renters suddenly could buy instead) and amongst newcomers (they practically received houses when they stepped off the plane, like receiving leis in Hawaii). To make matters more perilous, virtually no one had any skin in the game because of the drunken sailors who sold and underwrote their mortgages. Meanwhile, the economy remained almost entirely tied to our real estate industry, so that when jobs started evaporating from the market like dew drops in July, many nice new neighborhoods quickly became more like ghettos. Some people left the state/country in search of better opportunities and others just stayed and floundered. Still others are doing just fine, as always -- and this is the silent majority, by the way.
Not to mention, the people who "live" in many of those neighborhoods worst affected and on the outskirts don't really live there at all, except to sleep at night, and so the smart ones are leaving. Think about it: what if you put $10,000 down on a McMansion in Queen Creek, Apache Junction, Maricopa, Suprise, or Buckeye, and then paid between $1,500 and $3,000 per month on it for the last five years, maybe even experiencing a huge spike in your monthly payment in the last year or two..... Now jump forward to today, when you owe nearly double the market value of that house, you've hardly invested any of your own money into it, and your neighborhood is crumbling all around you.... Top it all off with the fact that market rents are cheap, and I mean really cheap, and you're legally protected against deficiency if you hand your keys to the bank and walk away. What would you do? Rent the identical floor plan across the street for half what you're paying? Move closer to your job, if you still have one?
The answer is or at least should be simple to many people in such an extreme situation, as I've previously written here. This also accounts for our much discussed surplus housing inventory and empty strip malls, shopping centers, and offices. They are generally located in suburbs outside of the city core -- especially in the boom towns of 2005-2006. Meanwhile, the historic urban cores of Phoenix and Tempe are showing great signs of renewed vitality that hadn't been seen in 30+ years prior to now, and other areas are adjusting to a new normal or moving forward with long-delayed infrastructure plans and maybe even adding services.
So you tell me. Do we really stand to gain any more by discussing the downturn at this point? It seems to me that we should instead be carefully studying the fundamentals of specific markets and preparing for their recovery or re-characterization, whichever is most realistic and appropriate for a given area. Those that can offer a more compelling reason that people should stick it out and invest in their communities will weather these times well, while the places offering nothing but big cheap houses may now want to reconsider their strategy. Just as this is true nationally, it is true within our market too -- just on a smaller level.