Marc Brodeur, Grayhawk Scottsdale Realtor

This past year I have largely worked as a buyers agent. For a number of reasons that I won't get into but I noticed a huge change this past month whie out in the field. I had been advising a number of astute buyers that the best time of year to buy was December as very few buyers would be out between Thanksgiving and Christmas. The logic is with such few buyers, motivated buyers will be even MORE likely to accept lower offers. I believe I had 10 buyers in town between Thanksgiving and New Years. What I noticed as we got closer to Christmas was that I was running into more and more Realtors in homes with other buyers. When interest rates were slashed by the Fed in early December, the number of buyers exploded.

It was very rare this past year in Phoenix for me to see Realtors in homes with other buyers. On Dec 22 I was in 5 homes in the Ocotillo Lakes part of Chandler and we had other buyers in 3. I had never seen that before. The next day in Scottsdale when I was with another buyer we saw 4 homes in a row with other buyers in them. Based on this I decided I would follow the sales numbers more closely to see what was going on. I have ALWAYS posted in my own spreadsheet the number of monthly sales (see below). What I noticed caught my attention. December sales were up over Novembers final numbers and we still had 8 days left in December!

I noticed on Jan 1, 2009 we had roughly 5600 homes pending (5621) to be exact. I also noticed that December sales were up almost 30% from Novembers (5606 vs 4307). Ironically though I had so many buyers in December our offers were starting to hit a wall. We had more and more buyers competing with us and we were encountering multiple offer situations 80% of the time.

As of Monday of this week I started to track daily changes in pending numbers as that is the best indicator of where the market is headed.

I was shocked. Pending sales on ARMLS went from:

5621 on Jan 1, 2009 to

6227 on Jan 12, 2009

6420 on Jan 13, 2009

6534 on Jan 14, 2009......this trend is phenomenal!!

If this trend continues for the next few months we will have explosive growth in the number of closed sales and the inventory will dry up very quickly. Today I read the Fed plans on keeping its key interest rates between 0 - 0.25% which so far in this market, looks like it will do the job.

Below are sales I compiled from ARMLS for Metro Phoenix since Jan 2000 (this is only residential housing, no lots, rentals, commercial, industrial etc is included)

I hope not. Have you looked at the Nikkei index? They have been in a deflationary cycle since the late 80's. 20 years. Yikes. That is a long time!

The Nikkei is down almost 80% in the past 20 years and their federal bank rates have been close to 0% almost the entire time, and it has been at 0% since 1999!!! The Dow hit those kind of down numbers only in the great depression and we are making those kind of cuts to the fed now too. It makes one wonder about "bubbles."

We all know about the recent commodities bubble this summer that has popped. Oil is down from $150/barrel to $50/barrel. It was one of the few bright spots in the stock market this year (if you owned oil and gas stock), but not so at the gas pump. We are still at the bottom of the bubble for real estate that popped the last few years.

The tech bubble popped in 2002 I believe it was. Tech is still in a funk, although parts of it like Apple have done well recently.

And the poor Japanese have still not recovered from their insane real estate bubble of the 80's. That is scary.

Am I the only person tired of bubbles? My daughter loves to play with them. Who would have thought they could be so dangerous!

But that is just fear right?

Howard Hughes became a billionaire due to a lot of the investments he made in the 30's during the depression. It takes fortitude to buy in a market where there is so much fear. Wall Street is paralyzed by fear right now. But who do I see buying right now? Besides first timers and people moving up, the most I am seeing are the wealthy. I have had only 2 out of my last 12 buyers use a loan. The rest paid cash, which gives them leverage in negotiations in a buyers market. Interesting.

Fortunes are being made right now by buying at the bottom. Buy low, sell high. Who would have thought it was so hard to do? Join the Arizona gold rush. It is in real estate right now!

Marc

Fortunes are being made currently. Large buyers are out here in Metro Phoenix in a big way. Small buyers are swarming all over the place. Large buyers are buying everything from broken condos, single family homes, multi family complexes, dirt, medical commercial, everything, even luxury. Some of these buyers are backed by Billionaires. How do I know this? I have been contacted by a number of these buyers. If they are buying, shouldn't you be buying?

This market (Metro Phoenix) has dropped the farthest, the fastest in the nation. And the value buyers are here with the demographics that make Arizona so desirable. Maricopa County had over 100,000 people move here in 2007. The fastest growth rate in the nation. Our unemployment is under 5% and demographics of the baby boomers wanting to get out of the cold along with economic growth is expected to make Metro Phoenix's population go from 4 million to 7 million in the next 25 years. Arizona is expected to bounce up faster than most other hard hit areas in the nation because of its growth and climate.

Arizona is not prone to inclement weather, earthquakes, tornadoes, hurricanes, etc. Arizona has a large number of very large data storage facilities because of this. It has low unemployment. It has low property taxes, and we just passed into the state constitution a ban on real estate transfer taxes.

If you are a serious real estate investor, you must consider Arizona. It doesn't get much better than this. Fortunes are made at the bottom of the market, not the top! Now is the time to buy. December is always the slowest month with the fewest buyers making it the ideal month to pick up the bargains of a generation.

Fortitude is required. This is not for the fearful. Be fearful when everyone is greedy, be greedy when everyone is fearful.

Marc

First I tell the client. Nobody knows when the bottom of the market is, that is something we can only see in hindsight a quarter or two after. Nobody can time the market and if they tell you they can, and I don't care what type of market it is, money, bond, financials, real estate, commodities, etc, they are a) full of hubris b) full of ignorance, or most likely c) both.

I simply tell my clients. Real estate prices are down 30-50 % depending where you are in Scottsdale or Phoenix, and I tell them in some local markets we have hit bottom based on new listings, sales and prices. In others, notably the higher residential market, the bottom is still to come as sales numbers are dropping in the higher end month after month. I cant predict the future but based on what we are seeing, this is as good a time to buy as any.

I do tell them with prices where they are, the number of homes on the market, and the number of sales currently occuring monthly, that the market is shifting under 450k and now is especially the time to buy at that price point. If they are spending over 500k they have even more opportunity to come in low with sellers as that inventory is moving the slowest but they can probably take their time as there is less urgency in that part of the market.

If you have money, now is the time to buy.

Be greedy when most are in fear, be in fear when most are greedy.

That is the adage to buy by.

Sales were up in Sept. Way up. But it is just the gift programs right? Wrong. The first half of October is 15% ahead of the first half of September sans gift programs. January of 08 was the bottom in sales numbers. Less than 3000. That was the lowest number in over a decade. 10 years ago we had more than 1 million fewer people in the valley so that tells you something right there! In Sept we were over 6000. A big turn from January. Every month since May has been over 5000.

Based on absortion rates, we had a 19.83 month supply in Jan 08. As of Sept we had an 8.83 month supply at current absorption rates. We only had 6000 fewer homes on the market but the number of buyers had more than doubled. Anything over 7 months supply is considered a buyers market. Which we are definitely in. But a buyers market with 8.83 months supply is not the same as one with 19.83 months supply.

If we segment the market by price, it is even more extreme. Below 400k, homes are moving very, very quickly. Over 500k they are not. Queen Creek is actually no longer considered a buyers market right now according to the number of homes on the market, coming on the market and sold. It has bottomed. Anyone local in Arizona knows Queen Creek is probably the least expensive (and most distant) part of the city. Buckeye is a close second. The west valley's sales are up over 400% since January. WOW! Now let us look at the other end of the market.

Scottsdale is one of the local markets where sales numbers are DECREASING every month unlike the rest of the valley. The reason for this is the price point is much higher in Scottsdale and Paradise Valley. Over 500k in Scottsdale and well over 1 Million in P.V. North Scottsdale currently has a 4 years supply of inventory. Paradise Valley's is well over 2 years and rapidly climbing. Nothing is moving in Paradise Valley. The luxury home builders bought up older homes and tore them down left and right in 05 and 06 and they are now finishing them and there is a huge glut.

So what does this mean?

It means the luxury market is where the real bargains can be had right now. Where low balling and finding distressed properties is the name of the game. The rest of the valley was in that spot last fall. At that time the high end market was doing better than the low end. Not anymore. With Wall Street in the dumper, I wouldn't expect the lux market to turn for a while.

Essentially it comes down to once again, Real Estate is local. My block, or yours, is not the same as the one two blocks over.

Right now you can low ball all day long over 500k in Scottsdale and you will be successful. Over 2 million in Paradise Valley, or especially over 5 million in Paradise Valley. The blood is now flowing in the McMansion and Mansion neighborhoods....rather than in the average man's neighborhoods as it was last year.

Marc