January 2 - Market Summary for the Beginning of 2012

Market Summary for the Beginning of 2012

2011 went out with a flourish because December's ARMLS sales totalled 8,107 for all areas and types. This is 16.3% higher than November and the highest sales total since August. It is not quite so impressive when compared with December 2011 when 8,241 sales were recorded, but remember that last year at this time we were remarking about how surprisingly high that total was.

We must also express caution about this sales number. It includes 2,642 short sales and pre-foreclosures for Greater Phoenix and we do not believe that number is going to survive close scrutiny. Many agents enter a date like 12/31/2011 as the planned close of escrow date and if a listing is in pending status and its close of escrow date is passed, the flexmls system automatically changes the status to closed. This practice, probably invented when short sales were scarce, means that we probably have between 100 and 300 "closed sales" that didn't really close escrow. Short sales are particularly prone to late or canceled closing. Only when the deed records do we find out what really happened. If no deed records we may not find out for quite some time that no sales occurred. For December 2010, 137 sales had dropped out by the time the dust settled.

You may not realize this, but to ensure we are providing accurate statistics and insight, we perform a reconciliation between what the ARMLS data tells us about sales and what actually ends up with the county recorder. This takes us a few weeks, but the data gradually improves in quality as we complete this work. For the four month period between August 2011 and November 2011, which has been fully reconciled, we found and corrected for Maricopa County alone:

• 2,196 ARMLS records with the wrong sales price
• 9,617 ARMLS records with the wrong close of escrow date
• 412 ARMLS records with the wrong parcel number
• 93 closed ARMLS sales transactions that we know for certain did not close escrow
• 351 closed ARMLS sales transactions that have no corresponding recording at the county, so probably didn't happen in real life

If you are deriving statistics directly from the ARMLS data on flexmls, please be aware of this problem.

The majority of the sales that probably or definitely did not happen were unsuccessful short sales that the ARMLS data shows as successful. Weeding these out takes some time. What results from the process is:

• the sales count goes down
• the market share of short sales goes down
• the average price and average $/SF goes up

Among the 8,107 sales we currently have are 2,174 REOs and 3,219 normal sales for Greater Phoenix. There were also 72 out-of-area sales. The normal sales count is the strongest since June and very impressive. The short sales count at 2,642 is the highest ever in history, but as we said, we don't yet have a great deal of confidence in that number. The REO sales count at 2,174 is slightly up from November, but otherwise the weakest since May 2008.

We can safely conclude that demand remains strong, because not only do we have a good sales count, but our pending listing count is the highest it has ever been for the beginning of January. These two effects have caused the Cromford Demand Index™ to start rising again after a flat period over the last few months. In addition, the active inventory has started to fall steeply again, down 7% in the last month and down 42% compared with this time last year. When demand strengthens and supply falls, the market gets tougher for buyers and better for sellers. This can be seen in the Cromford Market Index™ chart.

Pricing

Average sales pricing per sq. ft. has been on an upward trend since September 15, but is taking a breather at the moment. The effect is due to a large batch of low priced short sales in the last 2 days of December. With REO prices going up and short sales prices coming down, this change in the mix is to be expected, especially with new REO supply very limited. The 5.7% rise in average $/SF over the 3.5 months since September 15 is not a pace that can be sustained without more positive public sentiment towards housing. However if that positive sentiment change does occur, it is possible that this could create a feedback loop generating another rapid rise in pricing. There is very little supply to meet any increased demand from ordinary owner occupiers.

Foreclosures

A temporary rise in completed trustee sales saw 2,848 recorded in Maricopa County in December, an 11% increase over November. This rise is of no statistical significance and is due to the one-time bump in Countrywide loans that were noticed en-masse by Recontrust (a Bank of America subsidiary) in August. No doubt this increase will get plenty of comments in the media when it is reported elsewhere in a few weeks. The 15% drop in new notices of trustee sale is of more significance, 3,539 being the lowest number recorded in Maricopa County since November 2007. I wonder if that will get reported anywhere? If it does it will be a sign that sentiment is at last starting to improve to follow the technical market improvements that started 13 months ago in December 2010.

December 15 - Mid Month Pricing Update and Forecast

Mid Month Pricing Update and Forecast

Each month about this time we look back at the previous month, analyze how pricing has behaved and report on how well our forecasting techniques performed. We also give a forecast for how pricing will move over the next 30 days.

For the monthly period ending December 15, we are currently recording a sales $/SF of $84.47 averaged for all areas and types across the ARMLS database. This is 2.9% higher than the $82.35 we now measure for November 14. Our forecast range was $83.09 to $86.49 with a mid-point of $84.79. The actual figure fell just below the mid point of our forecast range, so we are very happy with our accuracy over the last month.

The current price level is 1.4% higher than last year on December 15. I probably need to say that again to let it sink in. The average price per square foot is now 1.4% higher than it was 12 months ago. This is what used to be known as "appreciation". Today it is known as "that can't be right".

But it is.

And since we forecast it last month we can't feign surprise this month. In fact we now predict that we will be reporting positive annual appreciation from November 29, 2011 onwards unless something very unusual happens to the market.

On December 15 REO sales across Greater Phoenix (all types) averaged $65.06 per sq. ft. (up 4.1% from November 15). Pre-foreclosures and short sales averaged $69.71 (down 3.1%) while normal sales averaged $106.79 (up 2.1%). Normal sales gained market share in a big way, moving from 36.5% to 41.1% of sales, while REOs were the big losers, moving from 34.9% to 29.5%. Short sales and pre-foreclosures advanced once again this month, moving from 28.7% to 29.4% - but note that many short sales closed on ARMLS get reversed later when it turns out they didn't close escrow as planned, so this percentage is probably somewhat over-stated.

On December 15 the pending listings for all areas & types showed an average list $/SF of $81.97, 1.4% above the reading for November 15 - so pending $/SF has moved upwards again and is now at its highest level since May 31, 2011. Among those pending listings we have 30.7% normal, similar to last month, a declining 26.0% REO and a steadily growing 43.3% in short sales and pre-foreclosures. The average pricing for pending listings on December 15 in each category was: $111.66 normal, $68.42 short sales & pre-foreclosures and $64.11 for REOs. All of these are higher than they were last month. Together with the changing mix this tells us we are likely to see a further rise in sales price per sq. ft. over the next month.

Our new mid-point forecast for the average monthly sales $/SF on January 15 is $85.66, which is 1.4% above the December 15 reading, and we have a 90% confidence that it will fall within ± 2% of this mid point, i.e. in the range $83.95 to $87.37. A substantial change in the mix can still have a significant effect on the average price per sq. ft. and we are seeing considerable variation from day to day. However even the lowest point in our forecast range is only slightly below today's reading.

It is now obvious that September 15 - now measured at $78.83 per sq. ft. - will remain the $/SF pricing bottom over the near term. The lowest monthly average sales price is $151,000 and this was measured on August 25. However the record low monthly median sales price is still standing at $107,000 and this record was set ten months ago on February 24. Our current monthly median sales price is back up around $116,000 and we will not be seeing $107,000 again anytime soon.

Karl Stauffer's Real Estate Market Update

Phoenix Real Estate Market Analysis    ©2011 Karl Stauffer

As of the end of November, 2011 WE STILL HAVE A MAJOR PROBLEM, THERE ARE NOT ENOUGH HOMES TO SELL! There is a serious lack of quality inventory. This reality is just starting to show up in the local media. Reports are starting to acknowledge this fact while many of us have been pointing this out for months. THIS ALSO CONTINUES TO EXPOSE THE MYTH OF THE "SHADOW INVENTORY"   If it is out there, bring it on! Yes, I said myth because there is no huge lump of inventory waiting to be dumped on the market. There never has been. It is a scary headline to sell newspapers. There are homes in various stages of forclosure that will come on the market when they are ready but it takes time.   These market dynamics will eventually bring about price increases which is the next step in recovery. When the news finally gets out there, and buyers get past being scared, we will see more healthy activity and this will give as a fairly robust price recovery. I feel this will happen through this next year and by the end of 2012 we will see some solid pricing increases.   The available inventory of homes for sale continues to drop, however, some of the markets are seeing an increase in inventory. This is a goof thing because levels have been so low that we need more homes to sell. The available inventory for sale is at 15,173 SFD homes, 3% below the last report.   There were 6075 SFD closings in Novemebr. That gives us a market supply of only 2 1/2 months. Pending sales continue to surpass the total available supply of homes.    Phoenix is searched as a single entity.  West Valley is Surprise, Peoria, Sun City, Glendale, El Mirage, Youngtown, Litchfield Park, Avondale, Goodyear, Buckeye, and Tolleson.           NE Valley is Scottsdale, Paradise Valley, Fountain Hills, Cave Creek, and Carefree. SE Valley is Tempe, Mesa, Gilbert, Apache Junction, Queen Creek, and Chandler.   The comparison of current active listing change is based on the previous reports' inventory. Supply numbers are based on the number of closings in the previous month, divided in to the total number of active listings. This data is for Single Family Detached homes only and does not include patio homes, condos, or town homes.

MLS Market Statistics Breakdown by Area

Overall Market. Inventories are down 3% from the last report. Total of 15,173 active listings with 6075 closings in the last month. About a 2 1/2 month supply. Phoenix. Inventories are down 15% from the last report. Total of 2761 active listings with 1553 closings in the last month. About a 1 3/4 month supply. West Valley. Inventories are up 4% from the last report. Total of 3716 active listings with 2081 closings in the last month. About a 2 1/4 month supply. NE Valley. Inventories are up 12% from the last report. Total of 2578 active listings with 432 closings in the last month. About a 6 month supply. SE Valley. Inventories are down 11% from the last report. Total of 2817 active listings with 1518 closings in the last month. About a 1 3/4 month supply.  Scottsdale over $1M. Inventories are up 16% from the last report. Total of 562 active listings with 28 closings in the last month. About a 20 month supply. Scottsdale under $1M. Inventories are up 7% from the last report. Total of 1200 active listings with 295 closes in the last month. About a 4 month supply. Paradise Valley. Inventories are up 19% from the last report. Total of 286 active listings with 30 closes in the last month. About a 9 1/2 month supply.