A More Complete Analysis of Current Market Conditions

Implications: While the Arizona Republic quotes an economist from a respected local consulting firm and a housing analyst from Arizona State University, its Tuesday, September 13th "Prices of houses slip again" article misses the mark. As is the case all too often with newspaper and magazine articles, the data presented is limited, and the conclusions drawn from the data are incorrect.


Analysis: While the Arizona Republic quotes an economist from a respected local consulting firm and a housing analyst from Arizona State University, its Tuesday, September 13th "Prices of houses slip again" article misses the mark.  As is the case all too often with newspaper and magazine articles, the data presented is limited, and the conclusions drawn from the data are incorrect.

The article suggest that resale housing prices are just coming down- for "the first time since...late 2004" in some areas of metro Phoenix.  Jim Rounds, senior economist with Elliot D. Pollack & Companies, suggests "new-home price reductions are right around the corner".

News Flash: Both new and resale home prices have already taken a significant downturn.  The data may not show this decrease, or perhaps it is just starting to show the decreases, because data releases lag what has already happened in the marketplace.  Any analyst visiting industry professionals, talking about the current state of the market would firmly understand this reality.

The truth is listing price data, as quoted in the article, is not indicative of the value of homes.  These prices communicate what people think their home is worth, not what it is actually worth.

Sales are down significantly- about 30% (new and resale)- according to the latest quarterly data.  Resalers currently expect too much for their homes, and thus, homes are not selling.  And, homebuilders are struggling with high cancelation rates.  New home prices have already declined in nearly all Phoenix metro area submarkets- by 10% to 20%.  New home data does not show these declines because the available data only tracks base home prices.  Concessions, at generally less than 3% until the end of the first quarter 2006, are not included in the new home data you read about in the newspaper, or typically, even in the data that you can purchase.  In a study of approximately 200 subdivisions in metro Phoenix conducted at the end of the second quarter 2006, Belfiore Real Estate Consulting found "stated" incentives ranged from 9.8% to 17.5%.  These incentives lower the price of a new homes, yet you won't read about them in many newspaper articles, including this one.

Recognize this article for what it is: limited information, incomplete analysis, and misinformation.  If you are following the Phoenix Housing Market, or any other U.S. market, I encourage you to dig deeper.  Attain all of the data available and speak with those in the marketplace- consultants, appraisers, brokers- to understand the current conditions of the market.  You will decrease your risk significantly by seeking out the details not included in the newspapers.