As someone who skews heavily Extropian, I tend to be very optimistic about the future. This, in spite of being brought up by a paranoid (though otherwise intelligent) guy who always seemed convinced that a catastrophic economic collapse was imminent. In the '80s it was hyperinflation and thermonuclear war. In the '90s it was Bankruptcy 1995, followed by Y2k. Nowadays it's global warming (somehow we've managed to skirt around the issue of Peak Oil). All the parental paranoia helped to cultivate in me a healthy skepticism (though it got to me just enough to unfortunately keep me out of the stock market for far longer than I should have been).
So, my optimistic/skeptical attitude has been keeping me up-beat about the real estate market in Phoenix - at least until recently. Given the way things have been going - neatly summarized by the two graphs on the right - a combination of factors now have me a little worried about
the next year or so, at least.
As I have argued elsewhere, Phoenix housing prices are too high. There's no reason to buy houses when you can rent them for a lot cheaper (and you thus can't make any money with them as investment properties, either). As you can see from the Appreciation graph above, even though houses are overpriced, as of the last data point on the graph we were still seeing a 10% appreciation over last year. Even the quarter-over-quarter line is still in the positive. I have to believe that we're going to be seeing a strong reversal of that trend in the coming months--or else we'll see whatever drove that crazy spike (in the second graph above) manifesting itself in some other area of the economy.
Then there are those pesky notices of foreclosure [in the graph below, the blue line is monthly notices, while the orange line is the yearly moving average].
As I have argued elsewhere, Phoenix housing prices are too high. There's no reason to buy houses when you can rent them for a lot cheaper (and you thus can't make any money with them as investment properties, either). As you can see from the Appreciation graph above, even though houses are overpriced, as of the last data point on the graph we were still seeing a 10% appreciation over last year. Even the quarter-over-quarter line is still in the positive. I have to believe that we're going to be seeing a strong reversal of that trend in the coming months--or else we'll see whatever drove that crazy spike (in the second graph above) manifesting itself in some other area of the economy.
Then there are those pesky notices of foreclosure [in the graph below, the blue line is monthly notices, while the orange line is the yearly moving average].
In spite of the fact that, according to some analysts, we haven't seen most of the interest-only ARMs kick into their higher payments, yet, we're already seeing an alarming uptick in notices of foreclosure (an indicator of people who've already been in serious financial difficulty for at least 5-6 months). February saw a total of 1577 trustee sale notices filed. That's off a bit from January's 1623, but when you consider that January had 21 business days for recording documents, against only 19 for February, there really was no slow down at all.
In fact, as you can see from this graph,
February 2007 had the highest average daily recordings (83/day) of all months for which I have data. It beat out January of '03 by 0.24 recordings/day. If the trend continues then this month should see over 1900! This may be good news for all the mythical short sale foreclosure investors, but it's bad news for pretty much everybody else.
We're at the halfway point of the month and our current tally is 794.
ReplyDeleteIt would seem that 1588 trustee sale notices for March would be a safe bet. Not a record, but certainly an outlier.