The weather has been great in Phoenix for months, but even so, the housing market is slowing down. Nick Timiraos, Real Time Economics from the Wall Street Journal, has an article today that presents the Phoenix housing market as the canary in the coal mine. If the housing market in Phoenix cools down, then other housing markets will too.
“the number of homes sold in January fell 17% from last year, the sixth straight month in which sales have fallen from a year earlier.”
““Demand is really getting quite low. Each month it seems to get a little worse than I expect,” said Mike Orr, a real estate director at the W.P. Carey School of Business at Arizona State University.”
“After 25 straight month-over-month gains, prices have now stayed flat or fallen in each of the last four months.”
“Last year, the problem for builders was that they were running out of homes to sell. “Their biggest problem now is not having enough people coming through the sales offices with good credit,” says Mr. Orr.”
“Rising prices and big declines in foreclosed properties being offered for sale have led investors to lose interest. Investors accounted for just 19% of homes sold in December, according to Mr. Orr, down from a peak of nearly 40% in July 2012. Demand from Canadian buyers has also cooled as the exchange rate becomes much less favorable compared with a few years ago.”
“Mr. Orr says demand from entry level buyers is weak, and that younger households seem more inclined to rent, either because they can’t afford to purchase, they can’t qualify for a loan, or they simply aren’t interested in ownership. “There’s no shortage of rental demand,” he said. “Any rental that is reasonably priced is getting multiple people applying.”
Investors are backing off. Now the market depends more on regular ordinary people who on balance receive low labor share of income.
Sidenote: I continue to foresee consumption by aggregate capital income decreasing thru 2014.