Although pricing was generally quite weak, most indicators were giving us very positive signals of better times ahead, but not in all areas or price ranges. Let us look at some of the key measures:
Sales: We usually expect to see very low sales volumes in January and after a very busy December, we saw sales across all areas and types total 6,522, down 21.8% month to month. However, this total is 15.0% higher than for January 2010, so it's still a fairly strong performance.
Pending Sales: These rose 19.4% from January 1 to February 1, an unusually large increase suggesting strengthening demand and a busy buying season ahead. The total of 10,565 is 0.8% lower than 2010 when we were heading into the expiration of the tax credit at the end of April.
Active Listings: These usually rise strongly between January 1 and February 1 as people gear up for the spring, but in 2011 this number declined by 1.8%. This weakening of supply is somewhat surprising as well as welcome to sellers.
Sales Pricing: Dropped from $83.29 per sq. ft. on January 1 to a low point of $80.64 on January 21, recovering slightly to end at $81.44 on February 1. This is behaving very much as predicted by our pricing model.
The Cromford Market Index™ has risen quickly from 100.8 on January 1 to reach a healthy 110.9 on February 1. The slower sales rate of the last month means the demand will have to make another strong move ahead if we are to see much improvement beyond 110. If it can hold at or near, 110 then downward sales price pressure will dissipate quite quickly except in areas with unusually weak demand or unusually strong supply. At the moment these areas are those most affected by population declines.
Segmenting by price range, we still see the greatest weakness below $100,000 where supply is very high and additional REO supply may be looming as trustees process the backlog from Bank of America's hiatus last quarter. Even here the situation is much improved because buying activity has accelerated as the pricing has fallen. The strongest price range is currently $400,000 to $800,000 where sales prices have stabilized and even moved very slightly higher over the last four months when measured by price per sq. ft. Activity is still below normal at this level, so any recovery is very fragile.
After the unusually low numbers in November and December, foreclosures reverted to more "normal" levels with 6,783 new notices and 4,585 trustee deeds recorded. The net effect was to reduce the number of pending foreclosures to fewer than 40,000 for the first time since March 2009. REO inventory is slightly down compared with one month ago and back down to the level of mid-September 2010.
The period from June to October 2010 was one of unusual demand weakness but that is just a memory now. The pricing change it caused is now with us. We dropped from around $90 per sq. ft. last spring to around $80 per sq. ft. now, but this fall was signaled well in advance and it was easy to predict. There are no obvious market pressures that would cause this overall $/SF number to drop much further despite variations from area to area. REO pricing remains weak (because so many of the sales take place in the weakest sector of the market) and short sale pricing also looks poor. However, normal pricing is holding up quite well and as we leave January we should see normal sales gain market share which helps to stabilize the price averages. We do not anticipate any significant average price gains just yet, but at least it's nice to report that we don't anticipate any further major falls over the near term.
Of course, the market sometimes changes quite quickly so we advise our readers to check back and see if we have changed our opinion when we do the mid-month pricing analysis in a couple of weeks.
© 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.
