It’s officially a record in my book. Buyer demand in the Phoenix real estate market, as measured by the number of properties currently on the market that are under contract, has soared to levels greater than that seen in 2005 during the market high.
This isn’t the only positive development I see of late. The Washington Independent reported at the beginning of the month that Fannie Mae’s and Freddie Mac’s moratorium on foreclosures ended on March 31st (”Fannie, Freddie Quietly Lift Moratorium on Foreclosures“). Why I find this a positive development is due to my concern for the ‘hockey-stick’ curve that we have been seeing in the buyer demand curve.
I have been in business a long time and worked in the high-tech arena both in a start-up and with established players such as Compaq Computer (now HP) and Intel. My experience is that when there are expectations for a new product to ramp much like the hockey-stick curve, these expectations mostly fell flat. Put it this way, if your product is the new ‘iPod,’ then you have something. If your product isn’t as cool as that, then one better tamper down sales outlooks to a more realistic level.
Coming back to the article, I see the following as a healthful sign as well:
“A ban on foreclosure sales and evictions from houses owned by mortgage giants Fannie Mae and Freddie Mac, which began as a high-profile effort just before the holidays to keep people in their homes as the government tried to come up with homeowner rescue plans, is over…Fannie and Freddie have repeatedly extended the ban, which was originally expected to expire on Jan. 9″
Being a student of the business cycles out there, the hockey-stick curve in my opinion tends to be a harbinger of imbalance. It’s not a sustainable curve. The further strength it develops, the more imbalances take form and the more the market takes on a certain artificiality like what we have seen in the past. Given the level of buyer activity in the marketplace right now, I would say that an easing of the curve would be a healthful development as a potential easing consistent with annual patterns would be smoother and less severe.
Now, there has been a lot of discussion that Fannie Mae has been deliberately pricing properties low so as to generate multiple offers on a property. Fannie Mae and Freddie Mac certainly have power to alter market forces to one degree or another. Whether this tactic and the moratorium were part of a broader strategy to slow down foreclosures and allow for the purging of inventory through sales before another wave of foreclosures hits is a question some have on their minds. Regardless, the timing of the end of the moratoriums should relieve pressure that many believe has been building based on a belief that a possible large-scale flood of foreclosures was coming and would be so great as to cripple the market.
Having said that, I am very happy that buyer demand appears show such robustness at the moment. It has succeeded in reducing inventory by nearly 7,000 to 8,000 Phoenix area homes since the beginning of the year. It’s just that further strengthening creates additional concerns for what unknown effects it might be having. Nonetheless, combined with the termination of the moratorium, I am looking forward to seeing what happens with the Phoenix real estate market in the coming few months.
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