A colleague of mine has developed a scoring model, where he has taken hundreds of different factors, entered them all together and what he looked at is that this model can actually call the top and bottom of the real estate market. With this model he was actually able to call the top of the real estate market in Phoenix, Arizona six months before it happened. He was working on creating a national model, but due to all the government intervention, the model is no longer accurate. No longer accurate because the 'Free Market' is being so heavily influenced by the government.
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What we're seeing today in the building numbers is that they came out really bad. And there was something on Zillow the other day that said that Americans have lost trillions of dollars in real estate value. And its easy to get all emotional about this especially if you're one of those people who are losing their homes, and you are one of the people in trouble, but eventually we will get to the bottom market again. Hopefully by then government will be out of the market and we will be able to warn people that we think it's going to be the bottom of the market.
I always joke about, you know it's the bottom of the market when something happens called "capitulation". When essentially everyone has given up, and if you'll recall when we were at the top of the market back in 2005-2006 you couldn't go to a party without having at least 10 people tell you about all the real estate that they were buying, and all the millions of dollars that they were making.
And now my definition of when we're going to hit the bottom is when you go to a party you tell someone you are going to buy some real estate and they all take you out back and slap you around because they think you've gone crazy. And that's how you are really going to know that we have hit the bottom. Because you are not going to know we have hit the bottom until long after we have.
So I think that right now is the absolute fabulous time, especially for first time home buyers to jump in there. My brother went out the other day and picked up a couple of repos for like $30,000 apiece. One of them, he moved tenants into a week later. It was broom it out, paint and carpet, and put the tenant in the house.
Now, to tie this all back into the economy lets look at the jobs market. One of the things that still sticks out in my mind is housing sales in Maricopa County as compared to this time a year ago, and what those numbers represent. That number has actually increased pretty significantly.
And when I looked at and started thinking through the process of what that means in terms of the marketplace, the real estate market specifically, there is a number of positive influences that the media sure is not going to sell any papers with. That's why it's become such an important discussion.
One of the things we look at is year over year home sales. In the last six months we have seen home sales increase from '07 to '08, in some cases, 30 to 40% per month, the home sales have gone up. And at the same time we're seeing the median home price come down to the $150,000-$160,000 range.
Now we're definitely in a place where the median income family can go out there and afford to buy that house. When you have 78% of the houses selling for less than $250,000, virtually every family in Maricopa County can afford to buy one of those houses.
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