The luxury market is the one that takes the biggest hit over the summer (along with the over-55 and vacation homes). People with lots of money tend to find somewhere else to be other than Phoenix. We can see this clearly - in May there were 13 sales of homes over $3,000,000. In June, there was only 1. This is quite normal. The Canadians prefer their summer weather to ours.
Active listings are up slightly but still low: 15,692 versus 12,935 last year - up 21.3% - and up 1.5% from 15,466 last month. We have just 2.2 months supply, including UCB (under contract - backups accepted) listings. If we exclude those UCB listings we have 1.9 months of supply.
We had 8,068 sales in June which can be split up as follows:
- 184 were HUD sales
- 512 were REO sales
- 1,082 were short sales
- 6,290 were normal sales
Clearly the trend is for the market to go back to predominately normal sales.
The average days on market for active listings is still up at 109 days, which tells us that the inventory of active listings still contain many homes that are unlovable or over-priced. Attractive homes at realistic prices are few and far between and usually last only a few days before they go under contract.
The number of new listings added in June 2013 was slightly less than June 2012. However, from July through November we should start to see the number of active listings grow. But so far the higher prices have done absolutely nothing to motivate more sellers to emerge. Supply remains very low.
There are no promising sources of new supply and here is why:
- Delinquent Borrowers - already back to normal levels of delinquency
- Pre-Foreclosures - dwindling fast
- Banks - not going to happen (they hardly have any left)
- Investors - not going to happen (most homes are leased and appreciating nicely, no good reason to sell now)
- Ordinary Sellers - many still underwater and those who aren't are scared they won't be able to find a new home because of the short supply
- New Homes - permits are still being issued at only one-third the normal rate.
We are now seeing what happens when the whole country under-builds dwelling units by about 3.6 million homes over 5 years. The creation of new homes is vastly exceeded by the creation of new households. The disturbance to the market is going to be large and doesn't seem to have been widely appreciated yet. Only the home builders themselves, a few specialist housing analysts and isolated individuals seem to be aware of the enormity of the situation. The general public appears to be focused on relatively minor issues like interest rates, the foreclosure inventory, high unemployment and (especially) investor-owned homes. These may slow down price rises in a few areas, especially those that have no population growth or have been slow to handle their delinquent loans, but most of the country is in for a shock. The home building industry will grow from around 900,000 a year to over 1,500,000 a year just to stop the home shortage situation getting more extreme. That is probably not even feasible with the current construction labor shortages.
Although we will see a relatively quiet period for the next 3 months, there is still immense upward pressure on pricing due to all the homes that were never built between 2008 and 2013. This effect is starting to hit in areas other than Arizona, especially those with strong population growth rates. California is only just behind Arizona in its speed of clearing up the foreclosure mess and in the urban areas like San Francisco, San Jose, San Diego and Los Angeles they are already starting to see eye-popping appreciation, even greater than the 18% we currently have in Phoenix. We will just have to get used to not being in the spotlight. Our time at the top of the Case-Schiller(R) chart is coming to an end, but home price appreciation is not.
If you have been considering selling your home, let us run the numbers for your neighborhood. You may be pleasantly surprised to see how much equity you have! With the shortage of homes in all areas, you will be able to sell!
