Prices generally fell faster in July than in previous months with only 6 of the 20 cities reporting home price gains. New home sales data indicates that the higher-priced homes were harder hit. Jumbo mortgages are proving to be hard to get at reasonable rates. Going from a $400,000 mortgage to a $425,000 jumbo mortgage will push your payment up by $500 per month for a 30-year fixed rate. That's hit home prices in the more expensive coastal areas, but the desert has a different set of problems.
Arizona and Nevada saw tremendous population growth in recent years. That helped fuel a housing boom. But the torrent of people headed to the desert, has dried up in recent months. Phoenix area schools show no increase in enrollment this year compared with last. Tucson school enrollment is down by 2%. So is enrollment in Flagstaff schools. Phoenix, in particular, has thousands of foreclosed and vacant homes. The following graph shows the historical price pattern and my expectation through August of 2009.
1 comment:
Thanks for the update.
If you do a search for "california expected population growth" there is all sorts of interesting info.
Projections for CA shows we are expected to go from about 37M to 60M people in the next 40 years... about my projected lifetime.
My bet has been and continues to be that this will put an upward bias above inflation for housing prices in the top areas where home prices have fallen far less than they have in the areas that are converted farmland.
Once inventory is gone, the floor on housing prices for single family homes is the cost to buy farmland or desert, convert it to buildable land with water, electric and sewerage then the cost of labor and materials to build a house. People forgot this and were speculating on houses by adding $200,000 to $400,000 over the replacement costs, especially in Central CA and other areas remote from the quality land.
The quality land with good schools, trees, nice weather, shopping, etc. such as the SF Peninsula where I live or the nice parts of Southern CA like Malibu.... the land is most of the value plus the replacement cost for the home on the land.
From past CA real estate bear markets, the bottoms often comes when you can buy the remote stuff at a 50% discount if you bargain and the top stuff can be 15 to 25% off the peak. We're getting pretty close to that now.
Thanks again for the real estate update. I enjoy reading them.
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