What The Academics Say
This market wisdom from academics, who will be the first to tell you they are the smartest people in the room. Free markets determine the value of homes and to simply dismiss market activity because you don't like the type of buyer is, well....less than smart.
From ASU-RSI: Artificial Market Hard to Predict
Published: December 17, 2009 in Knowledge@W.P. Carey
"The Phoenix real estate market began to turn around in 2009, but the improvement was driven by foreclosures and by investors drawn to the resulting low prices, according to the latest ASU-Repeat Sales Index (ASU-RSI) report.
"While some measure of price stability is returning, Phoenix remains an artificial market because of the large number of foreclosures and the significant presence of investors," writes real estate Professor Karl Guntermann, who compiles the ASU-RSI with the assistance of research associate Adam Nowak. "Uncertainty about the timing of recovery in the local economy coupled with new foreclosures, even if at a slower rate, makes it difficult to predict the trend of house prices in 2010 with much confidence."
The ASU-RSI compares current house prices to the value of the same houses a year ago. The combination of recently rising house prices and the low prices of a year ago suggests that prices will likely "turn positive" around the middle of 2010, Guntermann says. He added that it doesn't necessarily follow that the appreciation will continue, however, because of the nature of the market.
"The return of more normal housing conditions, which could lead to increases in house values, would depend on improving economic conditions that both reduce foreclosures and increase confidence among future buyers," Guntermann writes.
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