Realtors Freddi Paulsrud and Rosemary “Rosie” Lamberson of Russ Lyon Sotheby’s International Realty are seasoned experts in Flagstaff’s dynamic real estate market. The two have endured the roller coaster of extreme home buying and selling cycles, watched as neighborhoods have waxed and waned in popularity and survived the housing market collapse of 2008. With 80 years of experience between them, Paulsrud and Lamberson are generously sharing their valuable knowledge with FBN readers each month as “The Golden Girls of Real Estate.”
Rosie: This month we want to offer insight into the real estate market from Mike Orr at The Cromford Report.
Freddie: The Cromford Report provides a good history of the past downturn and why today’s situation is different.
Excerpt from the Cromford Daily Observation, March 18, 2020:
A number of people seem to assume that we are heading for a recession and that home prices will fall. The first assumption is quite reasonable. The second assumption is based on fear and has little analytical data to back it up. Obviously, anything can happen in an uncertain and disrupted world, but a fall in home prices is still looking very unlikely from today’s numbers.
In 2005, the housing industry started to sicken because homes were being used as speculative commodities not for places to live. In 2005, I met a man in his early 20s who owned 12 homes in the Phoenix area, all with no occupants. How had he been able to buy them? 100% loans from unscrupulous lenders who went bust between 2007 and 2010. The housing industry (and more particularly the lending industry within it) was the cause of the 2008 recession. Phoenix was a hot spot for the cause of the problem, as was Las Vegas.
In 2020, housing is an innocent bystander to a probable recession caused by a pandemic. It has supply at extremely low levels and most homeowners have a large amount of equity. Even if they lost all their income and could no longer pay their mortgage, they could quickly find a buyer to release that equity. There is little likelihood of them facing foreclosure because the lender can be paid off with the sale proceeds. Only when demand collapses do the banks have to foreclose to get their money back. At the moment demand is still well above normal and has only shown very tiny signs of easing. In 2006 demand fell off a cliff yet home builders continued to build even more new homes because lenders continued to write ill-advised loans in huge numbers.
In 2020 builders are probably going to have to build fewer homes than they wish because of shortages of labor and materials. We are unlikely to see a glut of homes on the market for a very long time. A successful vaccine for the novel coronavirus is more likely to appear before a surplus of homes could possibly develop.
Because the virus has not been contained yet, except in several parts of Southeast Asia, we are likely to see a lot of people out of work. We do not yet know how long it will take to get control of the pandemic in Arizona, but many people may be out of work for quite some time. These people are more likely to be renters rather than homeowners. Landlords may find it much harder to collect rents and the yields from their portfolios are likely to fall. Some may decide to evict tenants and sell their properties. At the moment the extra supply would be welcomed and receive multiple offers, even in these troubled times. The evicted tenants still exist and therefore still represent demand for shelter of some sort. There will be hardship, but not a flood of homes with no-one to live in them.
Housing demand is created by the existence of people and increases when more people turn up and decreases if they go away. In 2005 the people we were building new homes for were largely imaginary. In 2020, they are very real and migration trends have been very favorable with families and individuals moving to Arizona from other parts of the USA.
Rosie: We hope you find this information informative and relevant to you.
Freddie: And in the meantime, play some music. Love the ones you’re with. Dust off those old game boards and puzzles, and know that we are all in this together! FBN
By Rosemary “Rosie” Lamberson and Freddi Paulsrud
Freddi Paulsrud is an associate broker with Russ Lyon Sotheby’s International Realty. Her office is located at 219 N. Humphreys St., in Flagstaff. She can be reached at 928-853-3737 or firstname.lastname@example.org.
Rosemary “Rosie” Lamberson is a real estate agent with Russ Lyon Sotheby’s International Realty. Her office is located at 1750 S. Woodlands Village Blvd., Suite 200, in Flagstaff. She can be reached at 928-853-3626 or email@example.com.