Scottsdale Real Estate Undervalued?

The prices of Phoenix, Scottsdale real estate and Paradise Valley had risen over 50% in 2006. As the bubble pushed prices to levels well above the historic trend, likewise the housing crash coupled with the harshest recession since the Great Depression has pulled prices down well below economic value and historic trend. The Housing Indexes of Case-Shiller and ECRI recognized a national bottom in April of 2009. Michael Douville, a Wall Street Real Estate Columnist says,”Now is the time to buy property. An opportunity of this magnitude presents itself once in a lifetime. The adage ‘Location, Location, Location’ used to describe real estate investing needs to be changed to ‘Timing, Timing, Timing’. “ Phoenix housing, including real estate in Scottsdale Arizona, is undervalued in my opinion, and an incredible opportunity exists.

Demand appears to be re-entering the housing market. In February of this year, 12 parcels were sold to builders for new housing developments, an event not seen for years. The University of Arizona Economic and Business Research Center, as reported by The Arizona Republic is predicting a doubling of new home permits from a little over 13,000 in 2009 to over 28,000 in 2011; growing to 35-40,000 in 2012 to 2016 as Arizona's demographic trend re-asserts itself. Phoenix's population is projected to increase by 1,000,000 in 9 year's time. Many of the prior forecasts have been too conservative, and some are predicting a population increase of 800,000 through the next 5 years, as climate, life style, and a continued shift to a service based economy support growth.

The speculators of 2005-2007 were doomed to failure. The over-valuation scenario was stretched to extremes and the investments had no chance of success. The resulting calamity has also stretched valuation models to extremes; the drop did not stop at fair value though, but continued tumbling again to extremes. Prices in Metro Phoenix continued to decline in many opinions past fair value, and have over corrected dropping 30%, 40%, 50%, and even over 60% from the highs. Locally, The Cromford Report has indicated the overall market bottomed in April 2009; the year-over-year pricing of the market segments show a recovery in place. The largest segment, and most impacted on the downside is the City of Phoenix, which leads the recovery with a 27% appreciation from April 2009 to April 2010. Scottsdale, still suffering from tight financing and correcting prices, shows an 11% decline. However, appreciation from the beginning of 2010 for the greater Phoenix Metro Area is reported by The Cromford Report to be over an 8% annual pace. Scottsdale real estate and Paradise Valley are showing improvements as old inventory is being cleared. IHS Global Insight, a respected economic forecasting group, in its 4th Quarter 2009 Update projected Phoenix, Mesa and Scottsdale Real Estate as over 22% undervalued. Has the market corrected from extremely overvalued to extremely undervalued? If so, then timing is again the real estate investor's friend.

 

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