Each month about this time we look back at the previous month, analyze how pricing has behaved and report on how well our forecasting techniques performed. We also give a forecast for how pricing will move over the next 30 days.
For the monthly period ending January 15, we are currently recording a sales $/SF of $82.16 averaged for all areas and types - down 1.3% from $83.20 on December 16. Our forecast range was $80.67 to $83.97 with a mid-point of $82.32. The actual figure is just 16 cents below the mid-point of the range, so last month’s projection was unusually accurate.
Today the pending listings for all areas & types show an average list $/SF of $82.77, a weak figure suggesting further falls in sales prices ahead. We expect to see greater weakness in sales pricing over the next month and our mid-point forecast for the average monthly sales $/SF on February 15 is currently $80.71 and we have a 90% confidence that it will fall within the range of $79.10 to $82.32.
It is clear that we have now fallen below the April 2009 levels and overall prices are trending lower still. However the detailed picture is more complex.
Indeed, pricing for normal sales has actually strengthened over the last three months, from an average of $106 per sq. ft. in October to around $112 in January. This improvement in normal sales pricing has little effect on the overall average because normal sales only constitute 28.4% of sales. The other components of sales consist of 50.4% lender owned properties and 21.1% short sales and pre-foreclosures. The pricing of short sales and foreclosures has been particularly week in the last six weeks, falling from $82.78 on November 30 to $77.45 on January 16. That's a 6.4% drop in just 7 weeks and is the primary cause of the overall fall in prices. Sales pricing for REOs has remained virtually unchanged at $63.70 over the same 7 weeks, but this also negatively affects the averages because REO market share has increased from 47.6% to 50.4% in the same period.
The high market share for REOs has an exaggerated effect on the median sales price, which has dropped 8.5% from $120,000 on November 1 to $109,850 on January 16. Note how poorly the median sales price reflects the underlying change in average price per square foot which fell only 2.1% over the same time. This supports our view that average $/SF is a superior guide to pricing when a large quantity of cheap REOs are flooding the market.
Price behavior also varies by dwelling type. Over the last six months we see the following:
| Monthly Average $/SF for: | July 16, 2010 | Jan 16, 2011 | Change |
| Single Family - Detached | $89.98 | $81.85 | -9.0% |
| Apartment Style / Flat | $94.69 | $88.94 | -6.1% |
| Townhouse | $80.72 | $73.26 | -9.2% |
| Gemini / Twin | $69.05 | $65.74 | -4.8% |
| Patio Home | $121.47 | $102.21 | -15.9% |
| Mobile / Manufactured | $34.99 | $33.66 | -3.8% |
Unfortunately, we see a generally gloomy picture for sales pricing and no sign of any improvement in the next four to six weeks. In fact we see continued deterioration. We do not get too concerned about this however, since sales pricing is a TRAILING INDICATOR of the market and is the last thing to show any turnaround. When we look at other measurements things are not so gloomy. This is because lower pricing results in increased demand which is certainly making its presence known at the moment.
Since the beginning of December, the Cromford Market Index™ has been moving higher and is now well over the balanced figure of 100 which is a positive signal. The current monthly sales rate and the number of pending listings are both very strong for the time of year while active listings have declined over the last two months. All of these suggest a strengthening market. This gathering strength is still unlikely to be reflected in sales prices for several months, but it does look as though the spring buying season will be very busy in 2011. It will take more than one spring season to generate a market recovery. However, it does mean that the downward pressure on pricing is starting to ease.
© 2010 Cromford Associates LLC
The data used to create the Cromford Report™ is obtained from public records and obtained under license from the Arizona Regional Multiple Listing Service, Inc (ARMLS). Cromford Associates LLC and ARMLS expressly disclaim and make no representations or warranties of any kind, whether express, implied or statutory, as to the accuracy of the data used or the merchantability or fitness for any particular purpose.
