The media seems to be full of positive outlooks for the national housing market. Fannie Mae states that the housing market has turned the corner and a sustained recovery is under way. The CEO of JPMorgan Chase says that every single thing about housing is flashing green. As far as Greater Phoenix is concerned, our market has been flashing green for some 14 months.
We have reached a point where the market is less frenetic but the outlook is still positive. At some point, higher prices tend to put a brake on buyer’s enthusiasm. That is what they are supposed to do. If higher prices increase buyer enthusiasm then you have irrational exuberance taking over like it did from April 2003 through October 2005. That is your first clue that the market is entering a bubble phase. That is not happening now. Buyers are behaving rationally.