Everybody who knows me know how much I love hockey. I’m a Canadian so it is a genetic issue, I still play twice a week, and I watch every game I can on the NHL Center Ice channels. But I never thought you could analogize my favorite sport to real estate.
But according to our local real estate guru, Elliott Pollack, the CEO of Elliott D. Pollack & Co., a real estate and economic consulting firm, we are headed for a “hockey stick’ recovery”. Although the real estate business does hurt as much as a slash on the legs right now, what he really means is that home prices will spike after a long flat spell.
According to an article by Inman News, unmet demand could spark another rapid rise in metropolitan area Phoenix real estate prices. But first our single-family homes market has to recover. According to the statistics accumulated by our local Multiple Listing Service, the average sale price has declined from $362,067 in June of 2007 to $184,312 in May of this year.
The reason for decline is the continuing number of unsold homes. Although the unsold inventory in as reported by MLS is only approximately 4 months’ worth as of May, Pollack estimates there are 40,000 to 50,000 surplus homes in Phoenix alone. He also noted that utility hookups are at their lowest in 50 years. Homebuilding activity can be expected to stay near record lows, which will limit the amount of new inventory.
But there are a large number of homeowners who want to sell, and will put their homes on the market as soon as they have enough equity to do so. Those sellers had been forced to take their homes off the market due to a lack of offers will re-list their properties as soon as possible. In addition, there is still some evidence that lenders will continue to release foreclosed homes continually in a measured way over the coming months and years. I believe that this pent up inventory will continue to keep enough homes on the market and will squelch home price appreciation for the foreseeable future.
But eventually the inventory overhang will be whittled away. According to the article, Pollack predicts that it will be 2012 or 2013 before Arizona sees growth in demand for the construction of new housing. Sometime around then the resale market will also start to run short of homes.
Once those homes are gone, markets such as the Phoenix area will react “like a hockey stick,” with prices jumping suddenly after the flat period, because builders won’t be able to move fast enough to meet demand, Pollack said. We can only hope he is correct, and that the market will get back to being as satisfying as tucking the puck under a goaltenders out-stretched leg pad.
In the meantime the good news is that this means properties will continue to be available to buyers for a reasonable price. The bad news for sellers is that any decline in the number of homes on the market will be slight, meaning prices aren’t going to dramatically increase due to limited inventory, anytime soon.
For more real estate information, go to www.inman.com, “where real estate and technology connect”. You can find more economic analysis and data on Arizona’s real estate market on Elliot Pollack’s website, www.ArizonaEconomy.com. And if you would like to discuss your real estate situation or the current market, contact us at 480 675-0112 to take care of all of your real estate needs.