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Housing market could bottom out in six months, survey says

The Business Journal of Phoenix - 11:47 AM MST Monday Oct 30, 2006

The housing market could bottom out during the next six months, according to Metrostudy's latest report on local real estate markets.

"Cutbacks in new production, aggressive incentives by sellers, the exit of the majority of investors and the fundamental demographic support for housing demand are positive indicators for a housing turnaround by mid-2007," said Mike Inselmann, president of the Richmond, Texas, company.

"The Federal Reserve has ended its series of rate increases, and mortgage rates have dropped notably in the last few months," he added.

Phoenix continues to have one of the nation's strongest economies, said Ben Sage, director of Metrostudy's Arizona division. Even though job growth declined from a peak of more than 100,000 new jobs for the 12 months ending Sept. 30, 2005, the 91,900 jobs posted at the end of September 2006 puts the state at the top of the nation, he said.

The Phoenix area posted an annual rate of 54,747 home starts at the end of the third quarter, a decline of 12 percent from the record 62,000 starts recorded at the end of the first quarter of 2006, according to the firm's latest quarterly report.

Closings remain strong, however, totaling 49,489 units for the 12 months ended Sept. 30. That indicates a decline in housing inventory declined -- the first since 2003, according to Metrostudy.

"Builders' efforts to liquidate inventory have been successful, but starts are likely to continue dropping until inventory declines further," said Sage.

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