Phoenix, Arizona is often cited as a city that is coming back from the brink of disaster in its real estate market. Unfortunately, according to a new study by Capital Economics, that “recovery” may be smoke and mirrors instead of a permanent state of affairs. The data firm recently released a report indicating that “above-average” price gains in some states, including Arizona, are likely “unsustainable” and “investor-fueled” rather than indicative of a true recovery. Capital Economics surveyed seven states (Arizona, California, Florida, Idaho, Nevada, North Dakota, and Utah) and the District of Columbia for the study, and concluded that five of the eight markets are in a true recovery. However, Arizona, Nevada, and D.C. were of “particular concern” to the researchers. In Arizona, prices have recovery 20 percent from their trough; in Nevada they are posting 12 percent gains. D.C. prices have skyrocketed 23 percent from bottom [2].

The issue in these areas is not the dramatic gains, but the pricing relative to median incomes in these areas. Capital Economics predicts a “period of underperformance” in Arizona, D.C. and Nevada because housing is overpriced at this point relative to income. Arizona and Nevada have the added handicaps of low builder confidence and a “below-average economic recovery”. At time of publication, construction activity in Arizona and Nevada was at a third of its usual level.

Do you think that this is happening here ion Florida?