If you’re going to make your debut on a widely-read website, what better way to do so than with a bold prediction ”¦ I boldly predict that inventory here in the Phoenix real estate market will not decline by more than another 7,900 homes over the next millennium.
What’s striking is such a prediction, timeframe aside, would have been laughable back in 2007 when there were more than 40,000 single family detached homes for sale across Maricopa County.
Oh, for those halcyon days of yore. For now, as we slowly creep toward the second half of 2012, there are fewer than 7,900 detached homes for sale in Maricopa County, an area (as both readers of my own blog know by heart) roughly the size of New Jersey. Or even Macedonia, for our more worldly readers.
Granted, large portions of Maricopa County are inhabited only by ground squirrels and cacti, but the general idea still holds ”“ there’s just not a whole lot available right now.
And that leads to the current great debate in real estate, or at least one of them ”“ the existence of shadow inventory and the coming next wave of foreclosures.
If you’ve heard anything at all about real estate or the economy over the past while, you’ve likely heard that there’s a mass of shadow inventory ”“ homes that have been foreclosed upon and never put back on the market, or homes that should have been foreclosed upon but weren’t ”“ looming in the wings, ready to swamp the real estate markets and crush the burgeoning appreciation we are seeing.
What you may not know is there has been a predicted second wave of foreclosures for more than four years running, ever since inventory dove and sales started to pick up in March 2008. And yet, this wave never has reached the market, not after four years of solid doomsaying. The numbers also suggest the wave may not be what some believe it to be.
There are factors that have led us to where we are, with less than 1,000 bank owned homes on the market, most significant the so-called robosigning scandal where banks were foreclosing on homes that they shouldn’t have (in theory) that then caused said banks to stop foreclosure proceedings.
With robosigning firmly in the rear-view mirror, there should be an increase in foreclosures and thus an increase inventory.
That covers the supply side of things.
From a demand perspective, it’s damned hard to get an offer accepted on a home priced under $100,000 these days. Most buyers are discovering they are but one of a dozen or more potential suitors for these rare finds, which means all but one of the dozen or more walk away without a home.
Even with negligible inventory, sales in the Phoenix market are about what they were a year ago when there were nearly three times as many homes for sale.
All of which is a long way of saying that there’s sufficient demand in the Phoenix market to handle an increase in inventory ”“ a significant increase, even, up to an additional 10,000 homes ”“ without much of a blink. (With the assumption the homes hit the market pre-Labor Day versus post-Labor Day, when they would languish a little bit longer.)
For now it’s just a matter of waiting to see if and when these other homes get added to the inventory. And, in the interim, we can watch the shrinking inventory secure in the knowledge that there’s a definite hard floor to the number of homes available ”¦ zero.