While rummaging through my coffee table drawers recently, a headline surfaced from a past newspaper I saved from 2004. Imagine the memories flooding back from the roller coaster housing market we’ve all experienced. Reading the comments gives pause to the results and the predictions from this article.
Immediate memories of our 2004 housing market included hopeful home buyers hitting open houses in droves, houses selling quicker, and a new-found optimism amongst the public. New home subdivisions were flooded with buyers, tents erected in the parking lots, and builders releasing lots by lottery. What a comparison to todays’ housing market timing!
Saving this newspaper from October 8, 2004 seemed like a wise thing to do given the October 19, 1987 newspaper in my same drawer about the stock market free-fall. Having been in that industry formerly, the 2004 newspaper seemed like an interesting item to save at the time.
Perusing this newspaper issue it appears the writer is cautiously optimistic but warns of a pending real estate disaster. Most people in 2004 thought this was the beginning of something everlasting. Ha, not for long.
In October, 2004, home sales were 25% higher than the year before and the article reports of an over-heated market. Still, buyers kept buying. No one has a crystal ball, but market signs were there and the frenzy continued.
It was reported in that article that Phoenix had increased only 9% in appreciation, much less than other markets and that general concern wasn’t included for our market as we hadn’t increased as much as others. However, I remember specifically in 2006 that our market had increased 48% year over year, so the previous years’ numbers were low by comparison. An over-heated market for sure!
Real estate is always local, but similar sentiments could be heard around the US during that time frame. I can remember the rush in real estate to buy homes, increasing construction jobs, and the “irritational exuberance” that existed at the time, phrase coined by Alan Greenspan.
Our local market was fueled by investors, both big and small. Regular homeowners became investors to take advantage of the profits, but smaller ones soon learned that they were too little too late. Borrowing from equity was a big mistake and loads of folks suffered the consequences.
Home builders worked to eliminate “investors” buying real estate, but falsifying registrations was an issue. Vacant subdivisions showed up in record numbers thereafter. Showing homes today I still see some of those abandoned subdivisions in hard hit areas.
In 2004, our median home price was $165,600. Today our Phoenix median home price is $260,000. A big increase; however, home prices over $500,000 are still down 5%.
Reading further, the article goes on to talk about what to expect in the housing market and why. Predictions of a possible downturn included:
Significant price increases; 25% increase in sales volume; investor purchases doubled; and rental home listings increased dramatically.
If we can learn anything from past experience it’s that real estate makes a great investment, but in my hmble opinoni, all things are good in moderation. Extreme price increases, the strain on the market by newby investors, and fog a mirror financing are all things of the past. Those signals from this former banker were sure signs of a run away market.
Given the past housing market, the current rise in median home prices, and the modest interest rates, it’s unclear if and when a market correction will take place. The government seems to have a stronghold on market conditions with consistent low interest rates; however, that’s not a stable condition.
We all have long memories of past housing mistakes and the securities that undermined the housing industry, including a lot of other factors. Outside influences are unsteady currently. If a housing market delcine is going to happen, we’re ripe for a market correction, but who knows when that will happen.
If you’re looking to buy or sell a home and want a trusted advisor, give me a call.