What started out as a trickle is now becoming a very steady stream of price reductions in the Phoenix metropolitan area. Admittedly, some of these homes were overpriced to begin with, but the cold harsh reality is that prices will come down as supply now exceeds demand.
So who, or what, is driving the steady fall of prices. The same folks who helped fuel the dramatic increase of the last year, or so; "investors". In many communities in the greater Phoenix area a very large percentage of homes are owned by "investors". In many cases they have seen a 50% increase in the homes value in the last 18 months and now they want to cash out. As quickly as the prices ran up, that's how quickly they could go down again. Remember, as eagerly as these "investors" trampled over each other to overbid prices on the way up, that's exactly what they will do to each other on the way down. It's going to be a dog eat dog world for a while on the way back to normalcy.
Yesterday, I read of a couple who, having already purchased a larger home, were not getting anywhere near the interest they thought they would on their currently listed home. They decided to wait it out. I would have to say that is a very brave decision. Plus the fact that area rents remain relatively low, it is also an expensive decision as these homes will not carry themselves financially.
What does it all mean? Well, genuine owner-occupiers will be giving back some of the equity they have earned, although I would be very surprised if we see wholesale price plummeting. More likely, if you picked up 40-50%, you might give back 10-15%, but in the long haul (say 5-10 years) you will be fine. For buyers it's good news. They will benefit from lower, and steady prices, with more choices and a bit more time to make their decisions. Now, they will have the luxury of being able so sleep on a decision without pressure.
What of the "investors" I hear you cry? Let's hope they don't get burnt. Too badly.
