The Valley Cools

Author:	Lucas Jones
Source:	Homes Discovered
Date:	April 7, 2006

The Phoenix metro area real estate market began 2005 very strong but tapered off towards the end of the year.  In the first half of the year most homes sold immediately throughout the valley.  In the second half of the year investors became skittish and bailed out as more and more homes were put on the market as asking prices exceeded appraisals. In September the market started slowing down and in October, home prices dipped. This year, metro Phoenix's existing home prices slowly dropped. Selling times have increased dramatically and sellers are frustrated at getting fewer offers.  They have had to drop asking prices as well.  Buyers are being more cautious as the market slows. Buyers are beginning negotiations by offering sometimes $40,000 less than the asking price. Since there are so many homes on the market now, it is the buyers who are being aggressive, not the sellers as it was last year. The Phoenix home market is just changing to a more stable one after the rediculous home increases of last year. Now, sellers have to be more realistic and realize that their homes will not be sold in a couple of days , for much more than they are worth. The days of bidding wars over unseen properties with offers well above asking prices, and appraisals, are gone for now.  The home inventory is way up and a more realistic real estate market has taken hold where buyers can negotiate on price, terms, and seller contributions on closing costs. The slowdown has effected the new-home market also.  A year ago, builders that were overwhelmed with buyers now have to offer freebies such as thousands off spec homes, free pools, and price cuts on upgrades to attract the buyers back. As the population and new jobs continue to increase some think the market will increase while others say the market will decline dramatically.  There is worry that less demand, higher costs for materials, labor, and city-approvals are driving new-home prices higher than most mass-market buyers, which volume builders rely on, are comfortable with. Some see the slowing market as a positive change.  Many investment buyers are leaving, which made up at least a quarter of home purchases last year. Home prices are not expected to decline but increase at a slower, more reasonable, rate.  Investors were a major reason the Phoenix housing market boomed the way it did last year. Since sellers are not getting over-asking price bids as they did last year, some are trying to sell by owner to save on realtor commissions. Home prices in outlying areas of Phoenix will fall more than in the core areas of Scottsdale, Tempe, and most of Phoenix. The market is still very strong but homes will not appreciate they way they did last year as sellers can no longer over inflate their prices anymore.

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