As you can see through the absorption rate statistics I've been posting for the last several weeks, very little has changed in the Phoenix Arizona/Maricopa County real estate market. We have had and still have about a seven-month supply of homes, which means the market is oversaturated with inventory. And this doesn't include the builders' inventory of to-be-built and spec homes.
Add that to the impact of the calendar on real estate ... the kids are back in school and the holidays already are closer than you think ... and the question becomes, is the market going to improve before it gets even worse and, if so, when?
I can't give you a date for the market turning but I'm fairly certain of what conditions will need to prevail. And it all starts with the builders. With homes still being built and builders offering a series of incentives to sell the homes already in progress, the builders have played a significant role in slowing the resale market. In Sonoran Mountain Ranch in north Glendale, for example, sellers are discovering they lack the equity (and also the desire) to slash their prices to the level of the builders' prices post-incentive.
It's something of a Catch 22 ... the builders have inventory. Many of the homes were purchased by current home owners who needed to sell their property before they can move. If these would-be buyers are unable to buy, their new home gets added back into the inventory and the builders soon will need to add additional incentives to sell these homes.
So where does it end? Simply put, when the builders' inventory dries up. And in some areas that's already happening. At Taylor Woodrow's Thompson Ranch development in El Mirage, a planned fourth phase is on hold while phase three is sold. Presumably phase four won't begin until the market improves (or so we sincerely hope.)
Once the builders' inventory diminishes, the resale market will be the primary option. And sellers will be able to price their homes according to resale values rather than being forced to match the builders' bargain-basement pricing. And once the resale market again is the primary market, that inventory will slowly diminish and the market should return to a more normal balance.
For those insisting on a timeframe, my broker has been quoted as saying he believes the resale market will start to gain traction again in January. I'm not as willing to commit but I remain optimistic that such a timeframe is possible.
I'm not as shy in saying that I believe once the market begins to gain traction, the improvement will come quickly. Buyers who have been waiting on the sidelines will have a higher sense of urgency to enter the market once priced start to creep upward instead of down. (And creep is the operative word, as I don't expect to see a rise such as we had the past two years anytime in the near future.) Add in uncertainty about interest rates, and I feel once the inventory starts to move it will move somewhat more briskly than we've seen over the past several months.
And make no mistake, inventory is the issue. True, sales are slower than they've been in several years. But the market still wouldn't feel as soft if there were one-third less homes on the market.
(c) Jonathan Dalton, 2006 / Jonathan Dalton's Arizona Homes | 
