By Randall White President Mind's Eye Marketing
According to various experts in the U.S., prices may continue to drop for an indeterminate time to come.
"...Market watchers don't think the market has hit bottom ..."
- AZcentral.com
"Migration to Arizona from other states declined 34% last
year."
- Phoenix Business Journal
"... Foreclosures are going to keep climbing ..."
- Arizona Dream Realty
"...They owe more than it's worth and can't sell."
"... The future is likely to be more of the same ..."
- Jay Butler, Morrison School of Management
"...analysis estimated the Phoenix region to be (still) 35% overvalued..."
"...Markets determined to be
overvalued by 30% or more are considered 'at risk'."
- Global Insight and National City Corp
As of April of this year, there were 52,870 listings in Arizona versus only 9,000 in April, 2005 - a stunning increase of almost 600% combined with the current decrease in demand.
You don't have to be Adam Smith to know that the current supply/demand ratio does not bode well for equity maintenance or growth in the foreseeable future.
Clearly the Arizona market has not reached the bottom of its current value spiral. Where is the bottom? No one knows, but it is obvious that the superficial analysis of value that holds that "if it is cheaper than before, it's a good deal" does not hold true.
Sophisticated investors know that value is based on market demand balanced with restricted supply. With the massive oversupply in Arizona combined with dramatically decreased demand, where will the equity rebound come from? The foundation of both equity growth and rental income are driven by user demand, not speculation.
What drives demand?
Lifestyle ... Weather ...
Activities ... The Beach ...
Great food ... Great fishing ... Great Diving, Snorkelling, Swimming ... Ocean breezes ... Sunset cruises ... World-class spas ... Dancing at the beach ... Quality of Life!
When you evaluate resort/recreational real estate opportunities, consider the fundamentals: Who is the end user? Why will they drive demand (whether rental or equity growth)? What are the income projections based on?
If I don't actually get the returns promised by the promoters, is this a place where I will want to spend time with my family and friends?
After all, the reason you feel safe with your home investment is that it is fundamental to the quality of your life.
Consider stability ... Consider weather ... Consider lifestyle ... Consider supply/demand ratios ... Consider travel time ... If you don't want to spend your time there, why will the marketplace? Invest in a solid marketplace.
Invest in the quality of your life.
Consider Cabo San Lucas, "The Monaco of Mexico."
For more information or to discuss the above questions and opinions, email info@portuscanada.com.
