Meaningful Market Update: Information You Can Trust!

The supply of homes for sale is now unusually low below $400,000 and it is clear that pricing can no longer be held down by negative sentiment. Consequently prices are rising at an accelerating rate and unlikely to stop rising until a significant additional supply can be found from somewhere. Where this will come from is not yet clear. The developers can only build a relatively low number of new homes in the near term, constrained as they are by the scarcity of experienced construction employees. The banks are receiving only a fraction of foreclosed homes from the trustees, and REO listings are being added to ARMLS at the slowest rate for almost 5 years. More than three quarters of short sale listings are already under contract, leaving only a couple of thousand of short sale listings unspoken for. Bidding at the trustee sales by third parties is intense. During March we expect 2 out of 3 trustee sales to go to third parties. Prices at the trustee sales are rising fast and many long term professionals are getting outbid by newcomers.

Normal listings are still relatively plentiful, but are being added to ARMLS at much lower rates than usual, so are not even close to making up for the low supply from elsewhere. The only potentially significant new source is if the banks have been holding back sending foreclosure notices to a large number of delinquent homeowners. If this is the case, then the market is telling these lenders: "now would be a good time". There is no shortage of demand to absorb them. Some lenders, notably Wells Fargo, Bank of New York Mellon, US Bank and Green Tree Servicing were indeed stepping up their foreclosure notices in February, but the overall rate of new notices is still considerably lower than in 2011 and unless many other lenders follow suit we cannot expect a significant increase in REOs coming to market.

January had the lowest number (9,908) of new Greater Phoenix listings we have seen for any January since we started counting in 2001. Even 2005 had 10,415 and in those days new builds and FSBOs were numerous but rarely listed on ARMLS.

February had the lowest number (8,695) of new Greater Phoenix listings we have seen for any February since we started counting in 2001. 2005 had 9,282.

March is not looking any better so far from a buyer's perspective. So we conclude that constrained supply is going to be a severe problem throughout the near to medium term.

We currently count 7,259 sales in February across all areas & types in ARMLS. This is up 1.4% from February 2011 and the second highest February total in the last 12 years. Nothing weak about demand there.

There you have it. The Greater Phoenix area is becoming desperate for new listings under $400,000 in almost all areas. (The only market that is still plentiful is the age restricted or the luxury market.) Prices are rising at the low end due to the competing offers and shortage so the prediction is that prices will continue to rise through March. We are seeing appreciation and expect that to grow through April. Remember, we are talking about the $400,000 and under price range here!

As always, if you want us to do an evaluation of your neighborhood, just let us know. And if you have equity in your home and have been waiting to sell, now is the time!