September 5, 2012
During August we continued the market's three month wind-down following its springtime frenzy. The basic numbers for September 1, 2012 relative to September 1, 2011 for all areas & types across ARMLS are:
• Active Listings: 14,405 versus 19,216 last year - down 25% - and up 7% from last month
• Pending Listings: 10,125 versus 11,508 last year - down 12% - and down 3% from last month
• Monthly Sales: 7,573 versus 8,470 last year - down 11% - and up 3% from last month
• Monthly Average Sales Price per Sq. Ft.: $97.45 versus $79.64 last year - up 23% - and down 0.7% from last month
• Monthly Median Sales Price: $145,700 versus $109,900 last year - up 33% - and up 0.6% from last month
The average price per sq. ft. for sales is up 23%!! The luxury market has had its usual quiet summer which means pricing has taken 3 steps back having taken 26 steps forward between September 2011 and June 2012. (The luxury market controls pricing at all levels; when luxury sales go up, prices go up and vice versa.)
Greater Phoenix REO sales are once again below 14% of the monthly total. At their peak on February 11, 2009, they constituted 71.1% of monthly sales. Although it will take some time for them to disappear completely, REOs are no longer a major factor in the market.
In contrast, short sales comprised 30.4% of all sales in Greater Phoenix in August.
Normal sales have risen from 55.3% to 56.1% of sales.
Supply continues to increase gently, in line with seasonal patterns, though supply is increasing much faster in locations like Queen Creek and Maricopa. In contrast the luxury market areas have seen supply declining or steady. Overall we still have nowhere near enough supply for a housing market the size of Greater Phoenix.
Those looking for bad news to celebrate can rejoice in the increased rate of completed foreclosures, but from our perspective this has no real long term significance. It is just reducing the pool of pending foreclosures much faster than in the first 7 months of 2012, and eliminating delinquent loans faster than they are arising. This is because the new notices of trustee sales are down from 3,389 to 3,344. This looks like a small decline at first sight, but remember that August had 2 extra working days over July so the daily rate declined more than 10%. It seems that Bank of America has realized that with REOs easy to sell and prices rising, taking them into inventory is not such a bad idea. At present no other lenders seem to have followed suit. However, Bank of America represents some 25% of the foreclosure pipeline and investors on the courthouse steps are no doubt dismayed by the reduction in buying opportunities.
The result will be a small increase in REO inventory (about 15%). Do not get too excited: no doubt there will be at least 10 offers for most of properties listed.
The short supply will probably feel slightly less of an issue during the rest of the year when demand is relatively low, but if we enter next year's spring buying season with our current level of supply, we are likely to see fireworks again between February and May with rising prices. It will be interesting to see how much the new home builders are able to gear up for this opportunity. If they can increase capacity this might put more homes into the supply and limit the upward pricing pressure. However, they currently face a constrained supply of vacant lots under developer ownership and very limited number of trained and available tradespeople in most of the key construction disciplines.
After a relatively quiet summer spell, the next 9 months are going to be very interesting to follow!
Source: The Cromford Report, Michael Orr
