The Phoenix/Maricopa County area is larger than San Diego County (30% more houses and condos) but similar in bubble fever.  These are thoughts given at a Phoenix realtor conference, highlighted by the REO count in the middle – excerpted from moderntimesmagazine.com:

“Nobody saw the housing crisis sooner, talked about it more vigorously, or was more right about the housing bubble than Dean Baker,” Holtz-Eakin said.

So where does the soothsayer who predicted the crash in 2007 stand on the current state of the Phoenix housing market?

“The idea that we are going to get back to the prices at the height of the bubble is just ridiculous. What we can expect to see is moderate price increases of around 3 or 4 percent. But the general direction is going to be upward,” Baker said. “We have turned the corner, but we still have a lot of issues going on and we are far from saying everything is good.”

Better news to be sure, but not exactly what the crowd wanted to hear.

Michael Orr, who, like most Valley wonks, is ‘too-close-for-comfort’ cozy with most builders and real estate brokers, was a bit more enthusiastic, and said fears of banks dumping thousands of homes on the market and causing another precipitous drop are unfounded.

“The direction is very positive and there is no sign of a large addition supply coming in. Almost everybody has this fear that banks are going to flood into the market. I actually count these homes, everyday,” Orr said. “They don’t have a very large number and even if they do dump them it will have very little effect on the market.”

Orr said banks own about 5,700 homes in Maricopa County right with 2,700 of them in the midst of being sold already and the other 3,000 are being prepped for sale.

What those in the real estate industry need to be worried about, Orr said, is delinquencies. There are still many out there who remain dangerously close to foreclosure thanks to the bubble or that they qualified for a loan they would never be able to afford long-term.

Stagnant income growth is a big reason for that, Holtz-Eakin said.

“We need better income growth and we have had bad income growth in this recovery,” he said.

One thing they all agreed upon, though, was that without the influence of deep-pocketed investors which have descended upon the Valley to swoop in and grab the foreclosed homes, things could have been much worse.

“They were the only people willing to catch the falling knife,” Orr said.  But their positive influence appears to be waning as a full recovery will only be realized when a better balance is reached.

“I think we have bounced back faster than most areas, but the situation that concerns me the most about the current state of the housing market is that investors have the upper hand. Without investors are market would still be down, but it would be nice to get a better balance so private buyers could compete effectively,” Orr said.

Baker said what could happen is something akin to a mini-bubble where investors artificially drive sales prices up as the competition begins between private buyers.

“What I worry about in in regards to investors is that a lot if investors are plucking up properties with the expectation that they will be able to flip them at profit and you could see a lot of up and down which is not a great story,” he said.

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