No Freefalling in Metropolitan Phoenix

All the home sellers who have been biting their nails and holding their breath can relax. A couple of articles recently came to the same conclusion – the Phoenix area has escaped much of the fallout from what many called the real estate bubble. Around here, it was more like a bump in the road, and it appears the worst is over.

The Arizona Republic reported that home prices in Arizona were up 10% in the fourth quarter of 2006 compared to the year before. The percentage of increase varied by area, naturally, but even the Valley’s home prices climbed 3%.

To put this in perspective, metropolitan Phoenix led the charge in home price run-ups during 2005 with an almost 50% increase, higher than any other area in the country. After that wild ride it was only natural that things would have to cool off. It was just a matter of time, and 2006 was that time.

The Business Journal of Phoenix agrees, saying that perhaps that real estate bubble isn’t going to burst after all. Home prices are holding up even as total sales have declined and inventories have grown. True, there is a six-month inventory of new homes to be sold, and more than 40,000 single family existing homes for sale. But remember that “six-month inventory” is an average, and averages don’t really tell you much. Some houses will sell faster than others. They are the ones that show well and are priced right. Others will take longer, perhaps because they need work, are unrealistically priced, or are not represented by a real estate professional.

Market corrections are never fun, especially if you happen to be buying or selling at the time. Just like the stock market, home prices will fluctuate but values continue to increase over the long term. Based on the latest information, the media are backing away from the often-hyped stories of real estate gloom and doom. Arizona, it seems, has avoided the deepest chasms and is in likely position to begin recovery.