Is now the time to buy a house in Arizona?

I have recently considered purchasing a new house in AZ and I took time to analyze the market.  Hopeful this post will help provide some insight to other people who are wondering if now is the time to buy a house.  I use Tempe, AZ in my example since this is the area that I would prefer to move to.  I have consier other areas as well Chandler, Mesa, Gilbert, Phoenix, and Scottsdale.  However, since Tempe is centralized I figure this is a good enough example to base these nearby cities off of.  All these charts are customizable so you can use them to create your own graphs for your area.

The first thing to consider is the law of supply and demand, basic economics here.  If the supply of houses increase the price should go down and if the supply decreases the price should go up.  So naturally let us first begin by using Trulia to determine the supply.  I realize this is a crude way of determining the supply but I’m looking for something simple.  I don’t feel like logging into ARMLS to pull these numbers.  In the box below if you click on the “Inventory” tab towards to bottom right you can see the trend is going upwards(1/26/2010). 

Tempe Real Estate – Trulia.

If you mouse over the end you’ll see it’s at 689 compared to a year ago at 516.  This tells us that there are more houses on the market now than a year ago.  According to this trulia graph almost 25% more.  Therefore we should conclude that until this supply starts to come down you should not consider buying a house.

Here is a shorter term example.

Next let’s take a look at raw prices of houses over the last year in this area.  This is the same graph as the one before except we’re not going to click on the “Inventory” tab.  Instead we’re going to leave it on the default of “Price”.

Tempe Real Estate – Trulia

You can see from this graph that prices are on a downslide.  Until this graph starts to turn upwards I would not considering buying a house.  Some people argue that if you wait until it starts to turn around then you’ll be too late and have to pay more.  This mentality will do nothing except get you in trouble.  Sure you may be right and call the bottom of the market.  But look at the downside if you’re wrong.  What if the property drops another 25%?  Some “experts” said the market would not move lower when it was still close to its highs in 2007.  Where would you be today if you bought a house then?  Do the right thing and wait for this graph to start an upward turn.