Tucson Real Estate Floatsam and Jetsam
May 18, 2007
Post Tags: Tucson-Homes-For-Sale , Tucson-Housing-Market-2007 , Tucson-Real-Estate-Trends
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Almost everyday I find Google searches with the phrases:
- Tucson real estate market 2007
- Tucson housing market 2007
- Tucson housing market down
- Tucson housing report
- Tucson housing bust
- Tucson real estate market
People want to know what the market is like this year compared to the last two years.
Sunday May 6th the “Arizona Daily Star” published a front page article that I wrote about Tucson record number of unsold homes flood the market. I took issue with their example of a home that isn’t even built yet and has been on the market for 5 months and hasn’t sold. It is a poor example to use to describe our current Tucson Real Estate Market.
The term “Flooded” is a loaded term.
- I have an inch of water in the basement, it is flooded
- There is water coming under the door, it is flooded
- The first floor is under water but the second floor is dry
- I am standing on the roof of my house, it is flooded
When someone says the Tucson market is flooded with unsold homes, I would put it in the basement has an inch of water category, not the we are standing on the roof waiting for rescue.
How did the Tucson Real Estate Market get here?
Two primary causes written about in earlier posts can be summarized as the flotsam and jetsam flooding the Tucson real estate market.
Flotsam
1. the part of the wreckage of a ship and its cargo found floating on the water. Compare jetsam, lagan.
2. material or refuse floating on water.
Based on the Random House Unabridged Dictionary, © Random House, Inc. 2006.
The flotsam in the Tucson Market comes from the sub-prime borrower section of the market. It fits under the heading of wreckage floating on the water. These are homes that are on the market because those that bought them can not afford to make the payments. This is actually a small portion of the homes available in the Tucson realty market. Even though foreclosure figures are up it is important to note that 85% of sub-prime borrowers have never missed a payment.
A detailed look at this issue is found at Tucson Foreclosures and Sub-prime Buyers.
Jetsam
American Heritage Dictionary - Cite This Source jet·sam n.
1. Cargo or equipment thrown overboard to lighten a ship in distress.
2. Discarded cargo or equipment found washed ashore.
3. Discarded odds and ends.[From earlier jetson, alteration of Middle English jetteson, a throwing overboard; see jettison.]
Our Jetsam sectors comes mostly from would be investors or speculators. I differentiate between the two in this sense
A would be investor
Someone that saw people making money on real estate and decided to dip into savings and buy a home to fix up or rent assuming it will go up in value in time. Maybe they would try flipping in after some fixing up and make a little profit to add to their savings.
A speculator
Someone that intended to buy as many homes as they could with the idea they would put a minimum of investment into the place and flip it as quickly as possible to make a profit. They might have bought 2 to 6 homes all in the space of a couple of weeks.
As an aside, the real investors pulled out of the Tucson market on 05 and 06. They knew it was time to sell. They are the seasoned investors who understand markets and when to buy and when to sell. The differences are described in Tucson Housing Market 05 06 Run-away Auction.
The Power of Perception
When I was younger and life made more sense I believed the truth and facts were what was important. Now that we have moved into the Postmodern world there seems to be no truth and the idea of a fact seems conjecture.
I was living in Japan in the summer of 1987. One morning I opened the English version of “The Japan Times” There on the front page of the paper was the prediction there could be a shortage of toilet paper in Japan at some point.
Nobody had predicted a shortage, there was no hard evidence there was or would be a shortage, but someone putting together is string of If this were to happen, and If this were to happen, there would be a possibility of this happening which could produce a shortage of toilet paper.
By the end of the week, there was a shortage of available toilet paper in Tokyo. There were pictures of people with entire closets full of toilet paper, “just in case”. There was such a run on toilet paper you couldn’t find a roll or sheet anywhere. Even gas and train stations were having the toilet paper stolen because of the coming shortage.
I think much of the same perception vs reality is going on in real estate markets all across the country.
I saw this Google search term yesterday. “when will housing prices increase in tucson“?
Sale Prices of Tucson real estate have been steady and increasing all along depending on location. Asking Prices also called List Price have been coming back to the market for almost a year.
The newspapers and media are in the business of selling newspapers. They do a good job of selling perception, not reporting reality. The unfortunate side effect in to many cases the perception becomes reality when people read just headlines and panic.
Stocking up on too much toilet paper is one thing. Deciding to buy or sell a house based on the headlines is not a good approach to real estate or housing decisions.
Tucson Real Estate Market Summary
- There are a lot of home on the market in Tucson
- Sale prices are moderate with a slight increase over last year depending on location
- Asking prices are coming back down to the market
- It is a strong buyers market
- 25.1% of homes listed sell in the first 30 days
- Single Family Residences average sale price is around $300,000
- Some homes are on the market just to “Test the Waters”
- If you need or want to move to Tucson it is a much better time to purchase that it was in 05 or 06.
- Despite what the media reports as News Tucson homes are selling and there are buyers in the market.
May 18th, 2007 at 12:02 pm
What about the huge price run-up in 2004 - 2006? What was the media doing then? Cheerleading it higher and higher and more detached from the fundamentals.
What about the NAR: “Buy now or be priced out forever!” during the boom?
What about…
What about…
May 21st, 2007 at 6:27 pm
I like your flood analogy. Language can be such a loaded thing - it helps to clarify that while things aren’t great, they’re not hopeless either.
May 27th, 2007 at 1:36 pm
Look at these graphs: http://housingdoom.com/2007/05/26/tucson-housing-apr07/
May 28th, 2007 at 10:44 am
Here is another word for you to define for us: doldrums.
These are Tucson housing market charts from Judy Lowe, president of the Tucson Association of Realtors.
[link removed same as previous comment]
watcher
May 28th, 2007 at 1:53 pm
watcher,
actually the charts are from housingdoom not Judy Lowe. Judy’s charts aren’t that pretty.
The link provided is the same as bobby joe above.