March 25th, 2009 by Michael Oliver

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More evidence that the real estate markets across the nation maybe bottoming came out today as New Home Sales stats reported a 4.7% increase to a 337,000 annual pace. This increase in sales is the highest increase in 10 months (April of 2008) and it also goes along with the increases seen in the existing home sales numbers, and new home starts.

Even though the sales pace increased prices still have declined pretty heavily. New home prices across the US have come down 18.1% from a year earlier the Commerce Department stated. I think the price declines are very understandable since new homes have been getting crushed due to the foreclosure home competition most builders face in every market in which they build heavily in. I also think though that this is a little more proof that the real estate markets are getting “better” vs. worse. Over the past 3 years of this sever and much worse then expected real estate downturn this is the first time I can remember that we have had 3 reports come out and all of them point towards things getting better then worse. That should mean something, however I would not recommending calling a bottom right here because we need to see a new trend emerge and with just one months worth of sales increases a “trend” would not be the word to use yet. Possibly if these sales increases continue for the next 3-6 months then statistically speaking one could argue a real estate bottom has been reached.

Now even if a bottom is reached (or has been) reached real estate is still a very local and specialized asset class. Even in Tucson (like all places) different areas of town and even specific neighborhoods have different sales rates, price appreciation (or decline) rates, and in general just different supply and demand levels. So just because you see reports that “Sales are up” I would still be very skeptical of it and investigate much closer as to if your independent market looks promising or still over bought. I think in Tucson prices are still somewhat in a mild decline, good deals are bought quickly and they sell for over full price a lot of times but everything else seems to sit. Mostly our market is REO (foreclosure properties, and new homes that are prices incredibly low) I would rate the Tucson market as very close to a bottom however as I have seen demand pick up pretty quickly in the last several weeks. If this demand level stays constant inventory levels should come in line and by the end of the year it is possible to see an active listings (inventory) number in the low 6000’s. In my mind for Tucson a “balanced” market is somewhere between 5000-6000 active listings for sale.

Other markets that I believe still will be falling much lower would be NY, NY with the economy really hard pressed up their and prices very high, NY,NY should see declines for the next little while. I also think Phoenix and Las Vegas while sales numbers are up (sales are up a lot actually) the markets are still very heavy on supply. Possibly by early 2010 (think second quarter) I could see Phoenix bottoming. Now as a side note the City of Phoenix has made a major step in the right direction by setting up a $15,000 grant to get people to step up and buy a foreclosure home within the city limits, this is a HUGE thing to help themselves stabilize the Phoenix market sooner rather then later.