What's Going on With This Wacky Phoenix market?!

As I meet people inevitably what they end up asking me is "how's the market?" As I try and get a feel for the person's situation I formulate an appropriate response. But more often than not people seem to be curious and want to be in the know, more than they are thinking about making some kind of move themselves.

Recently Arizona moved to the 2nd highest foreclosure rate in the US, behind Nevada. We still have a long way to get through all of this, as the foreclosure pipeline is quite full (50,000 statewide from what I understand). We had a slight dip in foreclosure notices in September which is good news, but this has happened to us in the past without the lasting trend, so it could go either way.

That being said there "may" be some stabilization coming to the market. Foreclosure notices have been down for the previous 2 months, however there is alot of "pent-up" foreclosure activity - owners sitting in limbo and trying to stretch out there foreclosure date as much as possible, so we have a potential looming inventory issue at hand as well.

This next statement may contradict what I just wrote, but is in fact true. MLS sales are very healthy and we only have about a 4-month inventory of homes. We have averaged about 8,000 sales a month in Maricopa County vs. the 5,000 a month sales we were seeing just 7 and 8 months prior. Prices have increased month-over-month since April.

The bulk of the action is in the under $150k price point (starter homes). Affordability has never been better, and the government has given first-time home buyers all the more reason to step out on faith, to the tune of an $8,000 almost-immediate cash-back incentive (first-time buyer defined as not having owned and lived in a primary residence in the previous 3 years).

There has been much talk about extending and expanding the credit. Recently the credit was expanded for military personnel until November 2010. Whether the credit will indeed be extended past the 11/30/09 deadline remains to be seen, however my opinion is that it will be extended.

Homeowners getting behind on payments are being taken more seriously by their lenders than ever. More and more short sales are going through (and in less time) and loan modifications are becoming the word of the day, with mortgage companies offering more than reasonable restructured payment options to keep the mortgage afloat and paid. Lenders are wising up and realizing it's simply too expensive to foreclose on the home and resell it at a dramatic loss