The Phoenix Housing ‘End Game’
By Michael James McDonald, a stock market forecaster, real estate consultant and author.
Three months ago I wrote Signs of a Phoenix Housing Recovery Good for Homebuilders, which presented evidence that a Phoenix, Aris., housing recovery would start next year. Data flow over the last three months continues to confirm this forecast. This has made us look more closely at a possible Phoenix “end game.” The “end game” is the specific sequence of events that should occur as the Phoenix market transitions from distress into recovery. The transition should not be a gradual change but events should occur very rapidly and in a particular sequence. We think this is important for investors to know.
Why Phoenix was Chosen
Phoenix was chosen for this study for two reasons:
We believe Phoenix is a proxy for many distressed markets throughout the country and so what’s happening in Phoenix is probably a good indicator for other regions.
The depth of data needed to completely analyze and wrap one’s mind around the problem is available. In this I have to thank Cromford Associates LLC, licensed by ARMLS to provide subscribers and all 30,000 agents with detailed resale and foreclosure data, the “Information Market”, which counts and categorizes on a daily basis the status of every piece of distressed property in Maricopa County, and Corelogic, which also provided vital distressed market data.
The Probable Sequence of Events of the Phoenix “End Game”
Using this data we think the following forecast and “end game” is highly probable for Phoenix:
- The inventory of distressed homes in Phoenix should deplete to normal levels by sometime next year – probably by mid-summer.
- At that time sales of distressed homes should fall off rapidly leading to an almost immediate 20% rise in the median home price.
- This sudden price “pop” should not happen everywhere or at the same time. It should occur intermittently, region by region, throughout Maricopa County as distressed inventory is depleted at different times for each region. This price “pop” should begin first with less expensive homes and then move upward.
- This price rise should drop the number of homes with negative equity, further slowing strategic defaults and unfreezing thousands of marginal equity homeowners. This process – price rise and unfreezing – should become “self-sustaining” and help fuel the recovery and broaden the market.
It all starts with distressed inventory depletion. Read the Entire Article