Third Quarter Market Evaluation

The Valley wide statistics that were recently released by ASU Realty Studies indicate that there was little significant change in the marketplace in September as compared to the traditionally slower summer months and what change there was, was not particularly positive.

Foreclosures have continued to dominate the marketplace and, in fact, actually accounted for 46% of the sales valley wide last month. Although the picture in Scottsdale was somewhat better at 36% that differential wasn’t large enough to impact the most confounding aspect of the market -- the fact that values are still eroding.

The folks at ASU believe that the biggest immediate issue is the uncertainty in the market as a result of the evolving problems within the foreclosure process which could potentially impact moratoriums, availability of title insurance, the willingness of people to purchase foreclosed properties and the public perception and acceptance of the entire home financing process.

Personally, I think that’s like looking at an elephant and describing it as made of Ivory. It’s unquestionably part of the problem but, although it’s not a positive development, its impact should really be transitory and relatively minor. The real problem is still a combination of economic fundamentals and lack of consumer confidence.  

A strong move-up market is the key to any recovery and we simply won’t see that until there’s more optimism about our economic future and the first step to effecting that change is for the political parties to stop bludgeoning each other to death with gloom and doom assertions about debt, deficits and the economy. It may be an effective path toward gaining or retaining power but it’s forcing the public deeper into their financial foxholes and dramatically delaying the possibility of a recovery.

The truth is that any changes that occur after the election will likely be relatively minor. Sadly enough, our problems won’t be dramatically improved if we manage to trim a 100 billion or so here or there from the budget or elect to maintain our current tax levels.  However, the simple lowering of the political thermostat may actually offer some degree of relief.

Quite frankly, in past recessions when the political outcry was considerably more restrained the availability of mortgage rates as low as those we have now and the opportunity to acquire homes at fire sale levels would have been enough to jump start the economy. It’s confidence in the future that we are lacking. And that extends to all facets of our financial environment.

I know that explanations and observations like this won’t please any technically oriented readers but markets are as much about “crowd psychology” as they are about yield curves and tax breaks.

Let’s hope that we can lower that thermostat quickly enough after the election to improve the retail climate for the holiday season.