We can now declare January 22, 2011 to be an official pricing bottom for the overall ARMLS market (all areas and types), with average sales price per sq. ft. at a low level ($80.74 per sq. ft.) we are unlikely to see again. Those waiting for the second bottom just missed it. At the moment we are looking at a W shaped recovery pattern and prices are starting to move up the second upward leg.
We should point out that the sales price per sq. ft. for lender-owned homes is still making fresh lows this week. This is not bringing down the overall $/SF because lender-owened homes are gradually falling as a percentage of the total while normal sales are taking a greater share.
Those looking for bargain buys among the single family detached REOs should note that the list price is now $71.22 per sq. ft. up from its low point of $68.77 per sq. ft. just six weeks ago on March 21. Short sale and pre-foreclosure single family detached list pricing has held steady for several months at around $79 to $80, while normal list prices for these homes have surged from $185.96 on September 26 to $196.53 today.
The recent increase in average sales pricing was quite sharp and was emphasized by greater participation from the luxury market. It is a little known fact that $/SF pricing for homes above $300,000 has been moving gently higher since October/November 2010 and ssales volumes are on the rise. e should expect increased price volatility over coming months as the mix of sales varies. Remember that August is historically a weak month for pricing.
In the world of foreclosures, the big news is the rapid fall of new notices of trustee sale. April delivered only 4,418 new notices in Maricopa County of which 4,200 were residential. This is the lowest monthly total since December 2007, nearly three and a half years ago. Completed trustee sales in Maricopa County fell back from the March high as expected, but at 4,709 (4,513 of which were residential) they far outstripped the new notices for the first time ever. This signals a significant phase change in the foreclosure tsunami as the activity starts to decline more rapidly. We are now seeing huge reductions in the pending foreclosure counts, with active notices at the end of April reading 32,203 which contrasts with 51,466 at the end of 2009 and 41,478 as recently as the start of 2011.
It is the continued reduction in supply that is most encouraging and inventory now stands at just 3.5 months. If you are buying right now, do not go out there expecting to find the widely reported "glut of foreclosed homes for sale". That disappeared several months ago.
The big question ow is: will higher prices lead to weakening of demand or will the sharp reduction in supply cause buyers to get more aggressive in their offers to ensure they don't miss out on the last chance to capture homes at bargain prices?
For the answer - stay tuned to our blog!
(c) 2010 Cromford Associates LLC
The data used to create the Cromford Report(TM) 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 expressed, implied or statutory, as to the accuracy of the data used or the merchantability or fitness for any particular purpose.
Third parties buying at trustee sale made a new record with 1,379 purchases (26.4% of the auctions). This is by far the largest number of properties ever purchased at trustee sale. Another 3,842 properties got no bids and went to the beneficiary to become REO inventory. This may help slow the fall in the REO inventory listed for sale of ARMLS.
Lenders seem to have noticed the enthusiasm of buyers and having allowed the average list $/SF of REOs to fall between April 1, 2010 ($87.56) and March 20, 2011 ($68.84), they are now increasing them again and the average list $/SF has popped up 3.5% in just the past 2 weeks. Asking prices for short sales and pre-foreclosures seem to have stalled at around $79 to $80 per sq. ft. Normal listings have been increasing in list price for some time, reaching a low of $185.93 on September 24 and rising by 4.5% over the last 6 months to hit $194.37 today. While average sales prices are slightly higher in March compared with January and February, there is still no clear sign of significant trend forming. The median sales price has been stuck at $110,000 for three months now, again with no sign of a major move either up or down over the short term. With the balance between supply and demand changing quite quickly for the better over the last four months, we are down to an overall inventory level of 4.2 months based on the monthly sales rate. This can be regarded as a "normal" reading for the time of year (it is below the 4.5 we measured in 2002 at the same point in our last "normal" year). This goes a long way towards explaining why prices have stabilized once again. Currently the trend is for supply to fall further and demand to increase, and if this continues then at some point it is likely to lead to prices moving higher. How soon and how much, it is too early to say. However, it is not too early to say that prices are unlikely to fall to any significant degree while this situation persists. Last year the disappearance of the tax credit at the end of April caused the market to deteriorate suddenly in May and pricing fell sharply between July and September. At the moment we see no indication of a similar interruption to the recover process that is now under way. (c) 2011 Cromford Associates LLC The data used to create the Cromford Report(TM) 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 expressed, implied or statutory, as to the accuracy of the data used or the merchantability or fitness for any particular purpose.
Grayhawk Golf Club - Scottsdale, AZ
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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.
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Looking to the newspapers or internet for your real estate information? Tread carefully. What news pundits call “new” when it comes to real estate information is anywhere from 30-120 days old! Factor in that these articles are reflecting the averages for the entire city or the entire county, not your zip code or your neighborhood. A report of an average of $120,000 for a Phoenix home is misleading. It averages together the areas hardest hit by foreclosures and short sales with areas of Scottsdale and Paradise Valley. It is too broad a picture to carry real meaning for the individual home owner. We look to The Cromford Report for an excellent city picture as that is the focus of those who contribute to its reports. We can narrow to a zip code and then, through the MLS, narrow to a subdivision or within a mile of the home. No broad strokes here!
There is no question among the leading real estate professionals that the distressed market is defining our market today. Home prices are being impacted by the foreclosures and short sales in neighborhoods, some areas more than others. However, there are signs that the residential market in Phoenix is coming to life!
A leading indicator is the drop in delinquencies. In some areas this drop has become a stabilizing force, especially true in the homes priced above $400,000. According to The Cromford Report, when we study the ups and downs since 2004, it is clear that the bottom fell out of the market in 2008 and that the bottom for prices probably hit in 2009. However, this is not true for all areas of town. Any area that still has more foreclosures than normal sales will continue to decline. Areas where foreclosures have nearly disappeared are stabilizing. That being said, be aware that prices are a lagging indicator of a market change; they are the last indicator to go down and will be the last one to come up!
The newest thinking is that we will see significant appreciation (over 4%) in 2014. Since most areas of the valley dropped in value 40-50%, it tells us how long it will take each area to come back. But it will come back! There is a reason that Warren Buffett is buying land all over the country; locally, Fulton Homes is buying; DMB is buying. Real estate is still considered one of the best investments we can make.
2011 is predicted to be the Year of the Buyer! Low interest rates, artificially low prices that are below what a home costs now to build, and a huge supply of inventory make this a perfect buyer’s market at every price point! As supply is depleted and price per square foot begins to rise and as interest rates rise, the market will shift. There are high numbers of pending sales right now and normal sales are increasing. The luxury market is seeing a slight shift from a buyer’s to a seller’s market and some areas are beginning to see a rise in multiple offers on properties.
Here’s an eye opener: with the drop in home prices and the low interest rates, buyers are saving more money now than they did during the Home Buyer’s Tax Credit surge!
What does this mean for you? If you would like to move up the home market ladder and find your dream home, now is the time. If you want to downsize, do it now. If you have been waiting to buy your first home, now is the time. What you might lose in the sale of your current residence will be offset by a bigger gain on the buy side. Loans are available now and the jumbo loan (over $417,000) is available again.
If 2008-2009 was a perfect storm for a crash in housing, 2011 is predicted to be the perfect storm for the buyer and some sellers. If you are considering a new home or have been waiting to buy or sell, call us. We can tell you the current value of your home, connect you to a lender who can make it happen for you, and find you a fabulous home in your price range!
