Is my crystal ball still cloudy? Locally, the residential real estate industry took a real nose dive in the 4th quarter. Our stats were no exception. For a comparison, in 2006 we had 405 closed escrows and in 2007 that number was down to 370. Our volume was off even more: we slid from 105 million in 2006 down to 80 million in 2007. Our volume was down by almost 24% – and most of that slide occurred just in the 4th quarter. Why am I telling you this? Was I hoping for sympathy? Hardly. That “awful year” was the 2nd best year we’ve had. For the real estate community in general, 2007 was the 5th best year ever – both locally and nationally.

Was there anyone who seriously thought they could buy a house in Phoenix for about 150k and the price would just continue to climb until it was worth a couple of million dollars? Was the plan to sell it then and retire? Were the prices supposed to continue inflating past the point where any normal person could even afford to buy one? Out of control inflation isn’t “good” for any area, certainly not for the people who live and work there. So now we are experiencing a market correction – getting back to where we should have been all along. Are we experiencing a recession? What exactly is a recession? What if we are in one? Will houses still sell? We may or may not “be in one” right now.  (“Recession” doesn’t have just one definition) Houses are not only selling, but business has already picked WAY up. Correct.  I don’t want to pretend to completely understand why – but our pending business has already rebounded. People are listing houses and people are buying houses – all over town. The buzz from mortgage companies is the same. Terrible 4th quarter but their January – February business is already heading north. Don’t worry; you might be able to read about this in the Republic in a short 5 to 6 months.

Does this mean that the market will soon return to “normal”? No. There is way too much current inventory for that to happen anytime soon. But even in December, the worst month of the worst quarter of the “really bad year” there were about 6,000 closings (about half new builds and half resales).

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There are a few other things worth mentioning too. First and foremost, if you know anybody who has an adjustable rate loan (of any kind) who plans on staying in their current home for the next few years – please pass this along to them: REFINANCE INTO A FIXED RATE LOAN NOW. Banks prefer to make adjustable rate loans, as it shifts the risk of inflation away from them, so when rates go up they can pass along the increase to the borrower. Long term rates are under 6% and that is a bargain. It is a certain bet that long term rates will not stay at this low level indefinitely.

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Last and this probably should have been first: the new Chompies Deli at Paradise Valley Mall is finally open. I stopped in on the first Saturday they were open and at 1:30 PM it was an hour wait to get a table. I got a seat at the bar right away. The sandwich – as usual – was fantastic. I’m pretty sure there is no recession going on there!

Russell