Until recently, most of the news has been super negative about house price stabilization in Phoenix, AZ. Now this might be true of other parts of the country, but I need to speak with what I know-Phoenix, AZ and it suburbs! Seems that in slower times where credit is not as ample, negative experts spring up everywhere with a negative outlook. In school, we use to call this "jumping on the bandwagon."
Well I am "jumping off." In the last 24 months, we have seen home prices free fall while gas and commodity prices have taken a 90 degree jump. This has not been easy on consumers pocket books.
However good news is beginning to sprout, in June house consumption rose in Phoenix meaning house sales were higher than the two previous years. Additionally, the Arizona Republic Newspaper recently wrote that the Phoenix market is down to a 7 month inventory for homes under $350k. Now given homes over $350k have an inventory of 17 months.
Nevertheless, the question I get from buyers and sellers every day is "Will house prices rebound in 2009, 2010 or will it be 5 yrs?" That is not an easy answer. Some areas will rise back to within 10-20% of the home prices in 2006. This might take place by late 2009 or 2012. Who knows?
There are a few critical factors that will affect house prices here on out in my view. Homes that are close to trains and buses, (aka alternative transportation) can expect an increase. If we look at energy projections for the next few years, gas prices will rise and fall to very high levels. If gas is 5 or 6 dollars a gallon in Summer 2009, the empty nesters, the single yuppie or young couple will decide to buy an older home closer to these forms of transportation. Secondly, if gas is at 5 or 6 dollars, that transportation cost of materials will have an effect on the cost to build homes. Generally builders try to pass that cost on to consumers. Lastly, if the demand for new homes is down, less homes will be built causing supply to drop. This will raise prices too.
So yes we will continue to see foreclosures but not as many. Additionally, if gas prices rise in 2009, you can expect homes that are closer to work destinations as well as alternative transportation to rise in price. Supply will not be ample with these homes.
