Hi Dave… Concerned!

Well, what do we have here… apples and oranges? You bet. Am I upset? No way!

I used to get all bent out of shape about these damn stats. I really don’t care anymore. It has become too big for the TAR® to stop through stat manipulation.

Home prices will revert to the mean. period. A 40% shaving off the price of homes across the board would be a good start. Will it happen anytime soon? Probably not. Again, I don’t care right now because its going to happen regardless of what the sellers think their stucco boxes are worth.

Is this doom and gloom? Nope, It never was. Any farmer in Marana will tell you that this market was out of control. You know what “they” call that? Common Sense.

The mortgage market is absolutely imploding all due to devices of their own making. Ironic? Perhaps, but I think its comical because so many people claim to be surprised and taken aback.

The writing has been on the wall for a LONG time. Shame greedy Wall St., Shame on Imprudent lenders, Shame on buyers that live beyond their means.

The city and Pima county continue to show an astounding depth of ineptness when it comes to infrastructure.

Ooooh, yeah, I’m aware of these attitudes…;-) And yet they were perfectly happy with their homes’ values in 05, weren’t they? I think they should take Economics 101 or just the old saying “you can’t have your pie and eat it, too.”

You mentioned the water. I read that no new development can be started unless it’s proven that there’s water available for at least 100 years. Don’t know if it’s true. I look at it this way: either we’ll run out of water and somehow new sources will be found, or we’ll run out of water for further growth and the property values will go through the roof if people keep wanting to be in the sun.;-) I think both alternatives will work for the crying babies.

Yeah, I totally agree about the speculators. Investing presumes long-term plans. Flip-flopping houses is no different than day trading.

P.S. What happened with bobbie joe…?;-) Long time, no see.

The builders didn’t start the no investor policy soon enough, I know because I used to process all of this data for a realty company and many “investors” I still call them “speculators” were putting contracts on 3 or 4 homes expecting to flip them by the time they were built. NC sales practices during 05 were to raise the price $5,000 every 5th home sold. So speculators figured they could sell those homes at a profit and still be under the builders price at the time construction was completed. But like a pyramid scheme, it all comes apart if the market changes, the market changed.

Infrastucture does need to change, but honestly I don’t expect it to. There are a lot of people here in Tucson that don’t want to see it grow no matter the indicators. About the only hope they have is cry “WE ARE RUNNING OUT OF WATER” and “RAISE THE IMPACT FEES” to try and hold back the tide of growth coming to Tucson.

The city and Pima county continue to show an astounding depth of ineptness when it comes to infrastructure.

Yes, absorption rate tables are completed, I’ll be posting that shortly. : )

Well, yeah, it is the other way around. There’s so little NC because the market’s in a slump.
As to CA completely different dynamic.

I was asking about CA in the context of prices. You said:

This might sound crazy to you, but our Tucson Housing boom probably helped keep this to a minimum because even a subprime borrower has to be able to make a payment of some kind and the high cost of buying a home in 05 and 06 meant a lot of people couldn’t even afford to buy anything in Tucson.

How come so many people did it in CA, at much higher prices? After that Californians came here, too. Granted, the incomes in AZ don’t match CA, but a lot of investors from CA and later from NV came here.

Seattle is another of those unique markets due to its ties to the computer and software industries. It is very difficult to apply any kind of national formula to local markets.

I don’t disagree with the idea of the markets being local. I was just trying to say it might be too early to count our chickens and Seattle was just an example.

The Tucson Real Estate Market is my main focus, is it impacted by the National trends, yes to some extent but more so by its own local dynamics. It isn’t the infrastructure, or the urban renewal, or the possibility of light rail. It is the weather and the mountains. It is also a very desireable place for those that bike, play golf, and are interested in astronomy as well as being where their friends are in the winter. No hurricanes or tornadoes, no alligators in the backyard, low humidity, (except monsoon of course). These are factors for our local market.

Hmm… if the place continues growing like this and nothing is done about the infrastructure, primarily the roads, a lot of people eventually WILL get sick of it.

I’m glad to see NC slowing, it needed to. As I’ve mentioned before two things that happend in the boom that were good.

They’ve got no choice. They’re not idiots. Seems like Tucson got lucky. Since it took part in the last wave of insanity, the builders maybe already had hints of the slowdown in other markets and stopped on time. Phoenix seems to suffer a lot more in this department.

1. Builder’s stopped selling to investors only people that intended to live in the home for at least 1 year after completion. This limited the number of new homes that would have come back and flooded the market even worse than it was.

I know that’s how it is in theory, but I have my doubts if that’s how it works in practice. I’ve seen way too many “for sale” signs in new subdivisions… Hard to believe all these owners have been there for longer than a year. It’s possible, though… I’m just speculating on this one.

2. Many HOA would not allow investors to buy homes in their neighborhoods. You had to live in the home, not buy and rent.

That’s good to know.

Working on the absorption rates, Dave?!;-) Am I pushing my luck.;-)

I think it helps the health of the market if NC is down for the very reasons you mention. Too many new homes on the market hurt resale. That was exactly my point.

As to CA completely different dynamic. Tucson as you have mentioned flies under the radar because of our uniqueness as a place to live. We see a huge swelling of population in the winter months because of all the winter visitors and boomers are expected to continue this trend. There aren’t very many cities in the nation that have as many homes empty half the year as Tucson.

Seattle is another of those unique markets due to its ties to the computer and software industries. It is very difficult to apply any kind of national formula to local markets.

Maybe at one time this was possible, but in the last decade we find more and more economic indicators being pulled back to the local level due to the high specialization of local economies as a part of the global economy.

The Tucson Real Estate Market is my main focus, is it impacted by the National trends, yes to some extent but more so by its own local dynamics. It isn’t the infrastructure, or the urban renewal, or the possibility of light rail. It is the weather and the mountains. It is also a very desireable place for those that bike, play golf, and are interested in astronomy as well as being where their friends are in the winter. No hurricanes or tornadoes, no alligators in the backyard, low humidity, (except monsoon of course). These are factors for our local market.

I’m glad to see NC slowing, it needed to. As I’ve mentioned before two things that happend in the boom that were good.

1. Builder’s stopped selling to investors only people that intended to live in the home for at least 1 year after completion. This limited the number of new homes that would have come back and flooded the market even worse than it was.

2. Many HOA would not allow investors to buy homes in their neighborhoods. You had to live in the home, not buy and rent.

If those two things hadn’t happend when they did, the impact on the Tucson Real Estate Market would have been worse.

I would disagree with that. New construction may not be your focus, but it does affect the resale market. What if the builders were to continue building like crazy and kept slashing prices… this is not going to have an impact on resale…? How many people would want an old dilapidated house if they can have a new one at the same price be it in the outskirts?

Pinal county had far more subprime loans and defaults than Pima. This might sound crazy to you, but our Tucson Housing boom probably helped keep this to a minimum because even a subprime borrower has to be able to make a payment of some kind and the high cost of buying a home in 05 and 06 meant a lot of people couldn’t even afford to buy anything in Tucson.

I have no doubts Pinal county is in much worse shape, either, but don’t quite relate to the second part of the sentence… How was all this damage done in CA then? It’s possible there are other factors involved there. Just today saw a list from HUD of minor lenders going down (didn’t save the link). They were predominantly CA lenders. Maybe most of ours did have some ethics and common sense… Let’s hope so.

I don’t focus much on new construction. It is what it is. I certainly don’t use anything happening in NC to guage the health of the market. It does effect jobs and growth, but if someone doesn’t buy a new home so be it.

The resale market is where individuals and families make loose or break even on buying and selling. I’ve never heard of someone being foreclosed on because they didn’t buy a new home.

As to bottom, that is a nebulous point depending on where you look. If you look at the statistics coming out of MLS we are pretty much there. This is what I’m refering to as convergence. The point at which the dropping figures from last year cross the raising figures of this year. If you look for bottom to be Year Over Year figures that started a month ago and should be complete with August or September numbers. If you are looking at just month over month figures the upward trend started in January 07 putting bottom at December 06 which is about a year ahead of what is called and probably about right.

Pinal county had far more subprime loans and defaults than Pima. This might sound crazy to you, but our Tucson Housing boom probably helped keep this to a minimum because even a subprime borrower has to be able to make a payment of some kind and the high cost of buying a home in 05 and 06 meant a lot of people couldn’t even afford to buy anything in Tucson.

My own son moved to Arizona City almost three years ago because even in 2004 he couldn’t find anything he could afford here. He went to Arizona City and bought a brand new home 3 bedroom 2 bath with a tile roof and granite countertops for $100,000.

Back to the commercial sector, they know the projections for our continued population growth and they are building for the future. Now for the corny conclusion, “If they build it they think someone is coming”. So do I.

I was thinking we might’ve hit the bottom, but it doesn’t appear to be true… It’s not surprising. I’ve been reading the builders’ reports and projections, and I believe they’re the ones who should know best (and they have cut new developments substantially) if they wanna save themselves. The most optimistic one was projecting bottom at the end of 2007, the next one – mid 2008, the rest wouldn’t even say much. Of course, that’s on national level. Most of them do better in Arizona than anywhere else. Or is it for now…? I may be digressing a little bit since new construction is not reported here, but those guys with vested interest and big-time falling stocks would be doing good marketing research, I’d imagine. I recall Money magazine projecting bottom for Tucson in mid 2008 long time ago, but didn’t believe them at the time. Everybody expects these reports with his/her own little agenda and selfish interest. The perception all depends on what the results personally mean to them. I’m in this kind of unusual position of not knowing what to wish for…;-), so I’m kind of neutral, even though I’d rather see the market pick up, I guess.

As far as foreclosures go, the percentage of subprime loans may be miniscule in the big nation-wide picture, but they’re heavily concentrated in some areas and AZ is one of them.

http://matrix.millersamuel.com/?p=1132

I did see a map showing the percentage is much lower in Tucson than in Phoenix, but it was still significant. Besides, since we were late to the party, most of them haven’t even reset yet:

In the Sun Belt, the subprime mortgage mess will take many months to work through as the many borrowers who took out 2/28 and 3/27 ARMs during 2005 and 2006 will hit their reset points this year and next.

http://tinyurl.com/2lnwxs

Btw, IMO Alt-As are not any better and should’ve never existed… not only during the boom, but ever. This reminds me AZ ranks pretty well on the mortgage fraud list, too – 7th. Read somewhere that we’re champions not only recently, but have a history of it.

Back to the numbers – the sales activity really doesn’t look bad. It’s very comparable to the normal years back. Slow months are coming up, though, and this huge inventory is not going to disappear any time soon. Besides, it’s anybody’s guess how high it’ll shoot after the resets start here. I personally find even the existing foreclosure numbers quite alarming. Still, for now Tucson’s inventory is not at least going straight up as in Phoenix. Of course, a good portion of the problems in Phoenix involve the far outskirts. Judging by your last report on absorption rates, the problem appears to be the same here. The established neighborhoods didn’t look too bad. Some of them, as you pointed out (North and East), had an inventory which would be considered appropriate in a neutral market.

On the bright side, yesterday I saw a short list of recommended cities for business development and Tucson was on it. Then today there was an article in AZ Daily Star about it. Didn’t have time to read it, but they were talking about a boom in this area similar to the residential boom of 2005. Hope we don’t end with abandoned business buildings next… Doubt it, though. The long-term forecast for AZ looks promising.