Microsoft Online's Real Estate "Editor's Pick" today is an article by Marilyn Lewis titled, "The Riskiest Housing Markets".
Data from PMI's Summer 2007 US Market Risk Index Model (previously discussed at length here), shows the Phoenix real estate market has a 64.6% chance to see a decline in housing prices over the next two years. Given the staggering appreciation rates we've had in the recent past, and the large amount of resale and spec inventory we're currently seeing in Phoenix, a continued decline isn't beyond the realm of possibility. How much that decline may be (if any) is the subject of much speculation and is not covered in the PMI report.
I enjoyed talking to Marilyn Lewis about this report and the Phoenix real estate market. She was the consummate professional. In her article she said:
"There's no question that our housing prices are declining here," says Jay Thompson, an agent with Century 21 Aware near Phoenix. "Our appreciation rate was 54% average at one point in mid-2005-2006, so it is no surprise to anybody here … that prices were going to go down."
That isn't exactly what I said (note the ellipses in the quote…). What I recall saying was that is should have been no surprise to anybody here that appreciation rates of 50%+ could not be sustained, and that a price declines after a run up like that are not uncommon. The ellipses in my quote cover about 15 minutes of conversation with the reporter. To Marlylin's credit, she didn't twist the conversation completely out of context as sometimes happens with reporter translations of the spoken word.
It's a pretty good article and summary of the PMI report. Worth the read… I'm still trying to find old PMI reports to see how accurate they've been in the past. Economic prediction models are notoriously flakey, it'd be interesting to assess the accuracy of this one.