July sales stats from the Tucson Association of Realtors just came out. This is what our president of the MLS had to say (abreviated & edited):
"July was a very good month - Our listing inventory dropped below the 8,000 mark for active listings, not seen since March of 2006. New listings are also down by 19.86%.This is just another sign that we are continuing to see a market improvement. July has historically been a slower month with sales decreasing from June. Last year the drop was 21.72%. This year the decrease was only 9.53%. There is virtually no change in the median sales price, it appears to have stabilized currently at $199,900"
To read the entire narrative as well as see all the stats & graphs: http://www.tucsonrealtors.org/tar-v2/stats_july.pdf
As we know, Real Estate is local. If we want to get a sense of where the Real Estate market in a geographic area is headed, we know to look for the employment figures as a key indicator.
So how are we doing in Tucson ?
Pretty good - the roof is not caving in and we are well below the latest July figures for the entire U.S. that averages 5.7% unemployment - see below link for Tucson stats.
http://www.workforce.az.gov/admin/uploadedPublications/2053_tucue.pdf
Too see how the different sectors in Tucson are performing:
http://www.workforce.az.gov/admin/uploadedPublications/1173_TUCgraphs.pdf
Notice how "Natural Resources and Mining" are forecast to add jobs in the double digit % - fairly well paid jobs.
Conclusion: The Tucson Real Estate market is undergoing a slow recovery. The job market has slightly cooled but the numbers are well within the envelope, since 2000. Our economy is not relying on auto manufacturing or finance services. Instead We are first and foremost a place to where boomers retire - besides our predominant industries are well centered in research and development within aerospace, medical and other high tech venues. Add to that an established Airforce base employing upwards of 12.000 on a federal payroll as well as a major university, currently with the highest number of enrollments ever: https://admissions.arizona.edu/profiles/2011/default.aspx
Expect some slowdown in the Real Estate market as the slower fall/winter season kicks in. Prices may fall a couple of percent, but this is no longer something to wait for as "well below market" deals are abundant.
All the best - Tom Nielsen
Wednesday, August 13, 2008
Wednesday, June 11, 2008
Real Estate Briefing: Tendency Upward.
Before a flight in bad weather, the pilot will carefully analyse various weather briefs and aerodrome forecasts. Hidden in all the lingo between "vertical visibility" and "broken clouds" will be some very important words: "Tendency upward" or "Tendency downward".
There is no doubt - the recovery and re-balancing of the Tucson market is in motion:
Change from May 2007 - 2008
1) Median price is down 10% - Homes are getting cheaper.
2) Pending contracts are up 25% - So, people are buying them.
3) Inventory is down 12% - As a result fewer homes are for sale.
Now, everything is not fine and dandy, the total sales activity is still down and the time to sell a home is currently 77 days on average vs. 62 a year ago. But the key numbers are on the right track, whereas a year ago all parameters were, Tendency Downward.
The bottom has not yet been reached, and there are some serious jokers in the game including an unfolding recession and the constrained credit markets affecting Real Estate all across the country.
Tucson however - fares pretty well for being part of the sunbelt boom. Foreclosure rates, a vital measure of health in a real estate marked, - are only up 16% year over year vs. 100-300% in many CA, FL and NV markeds. Meanwhile we continue to draw snowbirds & retirees from Canada to New England, some of them originally headed for the the gulf states, but unwilling to pay exorbitant flood insurances. California is pricey at best, so the logical choice for many remains Arizona & New Mexico where low housing cost paired with abundant sunshine and recreation awaits.
BUYER:
Although the median price in the Tucson market will continue a controlled descent for another 5-10%...there are currently plenty of individual properties selling far below market value. It should no longer be a "Waiting for prices to fall game", but instead a "find the right property at a bargain price game"
SELLER:
The sea rises and sinks all boats - you may sell for less than "yesterday" but you will be a thrilled buyer for your next home with so many great deals out. The key is realistic pricing and exceptional presentation.
Your Tendency Upward analyst, Tom Nielsen
There is no doubt - the recovery and re-balancing of the Tucson market is in motion:
Change from May 2007 - 2008
1) Median price is down 10% - Homes are getting cheaper.
2) Pending contracts are up 25% - So, people are buying them.
3) Inventory is down 12% - As a result fewer homes are for sale.
Now, everything is not fine and dandy, the total sales activity is still down and the time to sell a home is currently 77 days on average vs. 62 a year ago. But the key numbers are on the right track, whereas a year ago all parameters were, Tendency Downward.
The bottom has not yet been reached, and there are some serious jokers in the game including an unfolding recession and the constrained credit markets affecting Real Estate all across the country.
Tucson however - fares pretty well for being part of the sunbelt boom. Foreclosure rates, a vital measure of health in a real estate marked, - are only up 16% year over year vs. 100-300% in many CA, FL and NV markeds. Meanwhile we continue to draw snowbirds & retirees from Canada to New England, some of them originally headed for the the gulf states, but unwilling to pay exorbitant flood insurances. California is pricey at best, so the logical choice for many remains Arizona & New Mexico where low housing cost paired with abundant sunshine and recreation awaits.
BUYER:
Although the median price in the Tucson market will continue a controlled descent for another 5-10%...there are currently plenty of individual properties selling far below market value. It should no longer be a "Waiting for prices to fall game", but instead a "find the right property at a bargain price game"
SELLER:
The sea rises and sinks all boats - you may sell for less than "yesterday" but you will be a thrilled buyer for your next home with so many great deals out. The key is realistic pricing and exceptional presentation.
Your Tendency Upward analyst, Tom Nielsen
Wednesday, March 26, 2008
A New direction
Prices are finally begining to come down in the Tucson Real Estate market. During 2007 the first real "Hangover" year after the boom, prices kept holding ground while inventory kept climbing. The new direction we see now are prices declining along with inventory as buyers are beginning to realize the noticeable cheaper prices in Tucson (approx. 12% down from the peak of late 2005/ early 2006).
The snake in paradise holding back what seems to be the beginning of a classic Real Estate recovery is a constrained creditmarked amidst the double whammy of an unfolding recession. A sizeable portion of "yesterdays" buyers can no longer qualify for a mortgage.
Foreclosures, although not the heavy hitter in the* Tucson market will continue to put some upward pressure on inventory levels and vice versa on prices. The majority of Adjustable Rate Mortgages were issued during 2004 and 2005, with rates typically locked for 3-5 years (including an option to pay interest only), - as the ARM's come due during '08 and '09 we will continue to be impacted. Keep in mind that Real Estate is local - even within city limits - areas like the southwest and some areas in the northwest along I-10 experienced more boom than the rest of Tucson. It was here land was available and builders poured out homes to the eager consumption of speculators - many now headed for foreclosure.
* The Tucson foreclosure rate is down as number 46th when compared to the 100 largest real estate markest in the nation:
http://money.cnn.com/2008/02/12/real_estate/realtytrac/index.htm?postversion=2008021306
By the end of 2008 we should have had the worst of the foreclosure wave pass. The credit markeds will not be fully recovered but much of the panic and uncertainty will be flushed out of the system. By the end of 2008 we will also know more about the recession and the extent of it, as the american people will know who the next president will be. All in all there will be more certainty and confidence paving the way for a slow recovery.
The snake in paradise holding back what seems to be the beginning of a classic Real Estate recovery is a constrained creditmarked amidst the double whammy of an unfolding recession. A sizeable portion of "yesterdays" buyers can no longer qualify for a mortgage.
Foreclosures, although not the heavy hitter in the* Tucson market will continue to put some upward pressure on inventory levels and vice versa on prices. The majority of Adjustable Rate Mortgages were issued during 2004 and 2005, with rates typically locked for 3-5 years (including an option to pay interest only), - as the ARM's come due during '08 and '09 we will continue to be impacted. Keep in mind that Real Estate is local - even within city limits - areas like the southwest and some areas in the northwest along I-10 experienced more boom than the rest of Tucson. It was here land was available and builders poured out homes to the eager consumption of speculators - many now headed for foreclosure.
* The Tucson foreclosure rate is down as number 46th when compared to the 100 largest real estate markest in the nation:
http://money.cnn.com/2008/02/12/real_estate/realtytrac/index.htm?postversion=2008021306
By the end of 2008 we should have had the worst of the foreclosure wave pass. The credit markeds will not be fully recovered but much of the panic and uncertainty will be flushed out of the system. By the end of 2008 we will also know more about the recession and the extent of it, as the american people will know who the next president will be. All in all there will be more certainty and confidence paving the way for a slow recovery.
Expect home prices in Tucson to continue a controlled descent to the tune of an additional 5-10%, hitting the bottom late 2008 or early 2009, from then on a slow motion recovery not fully engaged until 2010.
For a sobering take on the housing market I highly recommend John Mauldins newsletter on the housing market: http://www.frontlinethoughts.com/gateway.asp
All the best, Tom Nielsen
Thursday, December 27, 2007
2008 - what to expect ?
Most recent sales stats from the Tucson Association of Realtors shows that The market is moving along without any drama. In fact the key numbers are almost identical looking back 12 month indicating that the downward trend beginning late 2005 has finally plateaued:
-910 New Contracts opening escrow compare with 891 in November 2006.
-Active Listing inventory of 9,234 is slightly fewer than the 9,238 in November 2006.
-New Listings coming on the market of 2,224 were also fewer than the 2,380 in November 2006.
The Median price in Tucson has dropped 2.3% in the past year - much better than most other retirement and resort destinations such as Las Vegas (-10.7), Phoenix (-10.6), Miami (-12.4) and San Diego (-11.4) - Source: Money.cnn.com
The reason Tucson fares much better is due to the fact that we didn't join the housing boom until late in the game, 2005 vs. 2003 for some of the most overheated cities. Tucson simply flew under the radar as investors with cashed out 401K's initially flocked to Miami and Las vegas.
Other reasons why we wont see plummeting prices include:
1) Lots of baby boomers out there are looking for reasonable priced retirement homes without spending horrendous amount on property insurance (hurricanes, earthquakes) or property taxes (AZ ranks the 15th least taxed state)
2) Lots of sunshine and a healthy dry desert climate combined with Natural beauty and wilderness in abundance.
3) AZ is the 2nd fastest growing state in the nation. (2.8% increase during 2007)
An interesting trend we currently see in Tucson are Canadians buying up vacation homes at what seems like bargain prices to them as their dollar has gained relative strength to ours. All things considered, the Real Estate climate in Tucson will resemble that of a January day at these latitudes: Neither too hot or too cool. If you are in the market to buy a home the waiting game should be over - finding the right home at the right price will at this point be time better spend than simply waiting for significant price drops and not taking action.
-910 New Contracts opening escrow compare with 891 in November 2006.
-Active Listing inventory of 9,234 is slightly fewer than the 9,238 in November 2006.
-New Listings coming on the market of 2,224 were also fewer than the 2,380 in November 2006.
The Median price in Tucson has dropped 2.3% in the past year - much better than most other retirement and resort destinations such as Las Vegas (-10.7), Phoenix (-10.6), Miami (-12.4) and San Diego (-11.4) - Source: Money.cnn.com
The reason Tucson fares much better is due to the fact that we didn't join the housing boom until late in the game, 2005 vs. 2003 for some of the most overheated cities. Tucson simply flew under the radar as investors with cashed out 401K's initially flocked to Miami and Las vegas.
Other reasons why we wont see plummeting prices include:
1) Lots of baby boomers out there are looking for reasonable priced retirement homes without spending horrendous amount on property insurance (hurricanes, earthquakes) or property taxes (AZ ranks the 15th least taxed state)
2) Lots of sunshine and a healthy dry desert climate combined with Natural beauty and wilderness in abundance.
3) AZ is the 2nd fastest growing state in the nation. (2.8% increase during 2007)
An interesting trend we currently see in Tucson are Canadians buying up vacation homes at what seems like bargain prices to them as their dollar has gained relative strength to ours. All things considered, the Real Estate climate in Tucson will resemble that of a January day at these latitudes: Neither too hot or too cool. If you are in the market to buy a home the waiting game should be over - finding the right home at the right price will at this point be time better spend than simply waiting for significant price drops and not taking action.
Tuesday, October 02, 2007
DRIVING IN THE FOG
Have you watched any financial news lately? - Real Estate representatives will argue that we are through a correction and the worst is behind, with expectations for steady improvements during 2008. Most Economist will on the other hand expect we are in for a long painful recovery with prices still to fall 10-15%. However, both will agree that Real Estate is local. This is key to understanding the Tucson market. We'll get back to that later.
But first lets gauge the big picture. Things don't look well by most standards: Consumption that are the main driver of the U.S economy has for the last 5-6 years been on steroids fueled by an environment of easy credit and cheap money creating unparallelled appreciation in most asset classes, particular housing. One cannot underestimate the effect financially and psychologically when upwards of 200 million folks throughout 5 years see significant increases of the Real Estate they hold title too AND act upon it by cashing out for consumption. This has spurred a strong growing U.S economy, albeit largely funded by consumer debt.
Since homes were a significant source of cash generation and since this trend has plateaued and are set to reverse - the economy will slow in quarters ahead like the rings from a stone in the water. This is however not the biggest problem - just part of a natural housing /economic cycle.
The more tricky part is the nearly frozen up credit markets and the lack of confidence in the entire credit system. As you may be aware big investment banks sold U.S sub prime mortgages domestically and to the rest of the world repackaged through financial alchemy into prime debt with a much higher credit rating than there was cover for. Surely the sub prime market is a relatively small part of the entire "loan balance sheet", but the confidence in the credit markets has been severely battered. Eventually these issues will be resolved through regulation for transparency and some major law suits, but expect more problems and turmoil during the first half of 2008 when the bulk of adjustable mortgages will reset and the foreclosure situation get worse - dragging more banks, not to mention homeowners through the mud.
The Tucson real Estate market has so far shown remarkable resilience. It is clear by now that Tucson is not as hard hit as Miami, Las Vegas and Phoenix - also we did not appreciate as much. (the higher you fly the deeper you fall). It is important to understand that Tucson is a resort town, a place to where people retire, meaning we have a steady influx of people wanting to buy property here. The reason they'll keep coming besides intristic values such as weather & beauty, are cheap property taxes, and relatively inexpensive housing compared to other resort/retirement destinations.
I predict the Tucson Real Estate market will continue to limb along at a somewhat sleepy pace, not far off from the pre boom years. During the next 12 month the news will be on the gloomy side but prices wont plummet, sales will slow further and during that time prices will drop up to 5%, once adjustet for inflation. In the big 10 year picture, the time to buy will be during this slowdown. Homes in Tucson will resume a solid appreciation and in 10 years, people at a cocktail party will say: "..oh year we were lucky and bought during the slowdown back in 07/08"
But first lets gauge the big picture. Things don't look well by most standards: Consumption that are the main driver of the U.S economy has for the last 5-6 years been on steroids fueled by an environment of easy credit and cheap money creating unparallelled appreciation in most asset classes, particular housing. One cannot underestimate the effect financially and psychologically when upwards of 200 million folks throughout 5 years see significant increases of the Real Estate they hold title too AND act upon it by cashing out for consumption. This has spurred a strong growing U.S economy, albeit largely funded by consumer debt.
Since homes were a significant source of cash generation and since this trend has plateaued and are set to reverse - the economy will slow in quarters ahead like the rings from a stone in the water. This is however not the biggest problem - just part of a natural housing /economic cycle.
The more tricky part is the nearly frozen up credit markets and the lack of confidence in the entire credit system. As you may be aware big investment banks sold U.S sub prime mortgages domestically and to the rest of the world repackaged through financial alchemy into prime debt with a much higher credit rating than there was cover for. Surely the sub prime market is a relatively small part of the entire "loan balance sheet", but the confidence in the credit markets has been severely battered. Eventually these issues will be resolved through regulation for transparency and some major law suits, but expect more problems and turmoil during the first half of 2008 when the bulk of adjustable mortgages will reset and the foreclosure situation get worse - dragging more banks, not to mention homeowners through the mud.
The Tucson real Estate market has so far shown remarkable resilience. It is clear by now that Tucson is not as hard hit as Miami, Las Vegas and Phoenix - also we did not appreciate as much. (the higher you fly the deeper you fall). It is important to understand that Tucson is a resort town, a place to where people retire, meaning we have a steady influx of people wanting to buy property here. The reason they'll keep coming besides intristic values such as weather & beauty, are cheap property taxes, and relatively inexpensive housing compared to other resort/retirement destinations.
I predict the Tucson Real Estate market will continue to limb along at a somewhat sleepy pace, not far off from the pre boom years. During the next 12 month the news will be on the gloomy side but prices wont plummet, sales will slow further and during that time prices will drop up to 5%, once adjustet for inflation. In the big 10 year picture, the time to buy will be during this slowdown. Homes in Tucson will resume a solid appreciation and in 10 years, people at a cocktail party will say: "..oh year we were lucky and bought during the slowdown back in 07/08"
Sunday, July 15, 2007
JUNE MARKET UPDATE
Latest sales stats from the Tucson Association of Realtors showed some good signs for the month of June: Inventory dropping, median price up over 12 month and days on the market in check. Such figures would be expected for the "hot" month of June during a normal cycle - but what makes it interesting is that comparing to the June of '06 we seem a little better off. For instance did the inventory in 06 continuously climb during spring/summer, whereas we this year have seen a solid drop in listings from 10.3K - 8.6K (APR-JUN)
Median price stands 1.77% higher than in June '06 - and days on the market currently 64. Although 64 is well above the 46 in June 06, we must look at the tendency. 06 began with 44 days on the market in January and ended with 46 in June. Same figures in 07 have shown a decline from 68-64.
So where are we at ? - possible to a slow recovery, where prices stay check once adjusted for inflated, meanwhile inventory will slowly work its way down to a balanced level (5-6K). With the slower fall season on the horizon, temporarily subduing the emerging good signs, expect 08 to be the first year since the roaring 05, where the recovery will be in full motion.
Looking to buy: Fall/winter of 2007 will be prime time.
Looking to sell: Spring/summer of 2008 will be better if you can wait.
Factors to watch: Interest rates + Tucson net immigration and local economy.
Enjoy the summer !!
Median price stands 1.77% higher than in June '06 - and days on the market currently 64. Although 64 is well above the 46 in June 06, we must look at the tendency. 06 began with 44 days on the market in January and ended with 46 in June. Same figures in 07 have shown a decline from 68-64.
So where are we at ? - possible to a slow recovery, where prices stay check once adjusted for inflated, meanwhile inventory will slowly work its way down to a balanced level (5-6K). With the slower fall season on the horizon, temporarily subduing the emerging good signs, expect 08 to be the first year since the roaring 05, where the recovery will be in full motion.
Looking to buy: Fall/winter of 2007 will be prime time.
Looking to sell: Spring/summer of 2008 will be better if you can wait.
Factors to watch: Interest rates + Tucson net immigration and local economy.
Enjoy the summer !!
Thursday, June 07, 2007
Consensus on flat prices and longer recovery
The Arizona Republic reports that Arizona's lagging housing market likely won't recover until next year and will continue to hinder job growth until it rebounds. "Most buyers, I think, now realize that housing prices are not declining, they've simply leveled off," said Marshall Vest, director of the Economic and Business Research Center at the University of Arizona's Eller College of Management. "Houses are still selling, they've just come off of those peaks that were driven by the mania that ripped the market there for a while," added Vest, who gave his midyear economic report on Wednesday to business leaders in Tucson. Vest's comments were underscored by Dennis Hoffman, a Valley economist who said the amount of money changing hands in real estate sales has dropped about 18 percent, to $6.9 billion, from the first quarter of 2006 to the first quarter of 2007. Hoffman is a professor of economics at the W.P. Carey School of Business at Arizona State University. Sales of existing homes have stabilized and there is about 10 months worth of housing inventory, Vest said. Normally, inventory is about four to five months' worth. Sellers are cutting prices to move homes, but that process needs to continue a while longer before the market can rebuild, he added. "We'll clearly see a recovery, but it's not going to go as quickly or surely as high as it did," Vest added.
NOTE from Thomas Nielsen: "Recent articles I've posted on the AZ economy including the above excerpt supports the notion that 1) Prices in AZ/Tucson are likely to stay flat. 2) The recovery will take longer than initially expected.
http://www.azcentral.com/business/articles/0607biz-vest0607.html
NOTE from Thomas Nielsen: "Recent articles I've posted on the AZ economy including the above excerpt supports the notion that 1) Prices in AZ/Tucson are likely to stay flat. 2) The recovery will take longer than initially expected.
http://www.azcentral.com/business/articles/0607biz-vest0607.html
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