Once considered to be at ground zero of the housing market collapse, Phoenix has orchestrated a dramatic turnaround in recent months and has considerably outpaced other distressed markets such as Las Vegas, Riverside-San Bernardino and Sacramento. Phoenix was one of the hardest hit housing markets during the bust, with home values declining 57% from 2006 through mid-2011. But since the middle of 2011, the housing conditions in Phoenix have markedly improved and prices have begun to rise.
I think they missed the biggest reason for the turnaround in the Phoenix real estate market – prices haven’t fallen in over a year in most places.
Nothing scares the hell out of potential home buyers than the fear of future home price declines. Affordability has been spectacular for years but no one wanted to potentially “catch a falling knife.”
Slowly as we got more and more months under our belt without any price declines, consumer confidence in buying Phoenix homes increased and once we started to see actual home price increases in many Phoenix areas, the remaining fear really started to fade fast.
There’s nothing like increasing home prices to make people want to buy a home. Don’t over-think it. It’s not rocket science.
After the Arizona real estate boom, the only way to get increasing home prices was for home prices to first reset at more economic levels and for prices to remain there long enough that the fear of future falling prices diminished.