Is the Phoenix Metro Area Market Making a Turn?

The subject article may be just a bit late; Phoenix metro area home builders have known buyers have the upper hand for several months, and, in response, have been significantly discounting homes during the last 9 to 12 months. It is true that builders’ response to the slowdown was late, as the slowdown was well underway by the end of 2005; thus, speculative supply continued to grow through November 2006. As base prices dropped and incentives grew, buyers waited on the sidelines. A change, though, may be underway.

Belfiore Real Estate Consulting (“BREC”) reported late December surveys reflected an unusual uptick in traffic, and stable supply conditions. We hypothesized that the change may be due to the Regional focus -North and Northeast submarkets- and that one month of positive feedback hardly signaled a change in overall market conditions.

BREC analysts are now collecting January data, though, and it appears as though conditions may be trending in a positive direction. With 50% of surveys completed, we believe our February report may have a much more positive tone. Preliminarily, it appears:

• Builders have successfully begun decreasing speculative supply, the first necessary step in turning the market around
• Overall and same store pricing has decreased in the East Valley when compared with data collected in late September- but price decreases have slowed significantly (compared with mid-to-late year decreases)
• In some subdivisions, pricing, net of all incentives, has actually increased
• Traffic is up significantly in in-fill areas; in some subdivisions, traffic has doubled since late September

Buyers do indeed have the upper hand today, as reported in the article, but if speculative supply is indeed in retreat mode, the heavy discounts currently being offered may retreat rapidly. Buyers would be wise to take advantage of current offers. Stay tuned for future reports.