The Cromford Report™ Monthly Market Review April 2011 The Kennedy Group is pleased to provide this Mid-Month Market Report. The latest real estate trends and statistics are delivered each month in our Market Report as a complimentary service. Our business is built around the concept of educating and providing the personal service that our clients have come to depend upon. It is with this philosophy that we offer select data from the Cromford Report to our clients, associates and friends. It is intended to keep you informed on critical market trends that affect the Real Estate profession. Greater Phoenix – Single Family Detached Market Headlines
Overview Active listing counts are moving down even faster than in February while sales and pending sales increase rapidly. Sales volumes through ARMLS are at their highest level for March except for the bubble year of 2005. Average sales pricing reached a new low point in January and again in February, but has moved gently upwards since, and with the significant improvement in the overall market dynamics there is now little chance of significant reductions in price over the near term. The resumption by Bank of America of its trustee sales has had only a minor effect on REO supply, with demand proving more than capable of absorbing the surge in trustee sales. REOs above $400,000 are getting scarce and competition for them is getting stronger. Above $800,000 we recommend that bargain hunters with patience consider the far more numerous short sales as their pricing has actually been lower than REOs for several months in this luxury price range. Foreclosures New notices of foreclosure were unusually low in February and March will no doubt end up with a higher count, but still far fewer than in the past two years. Trustee sales volume is up in March and likely to be the highest for many months as trustees process the backlog from Bank of America’s moratorium. As a result of these two factors, the inventory of pending foreclosures is falling extremely fast. Contrasting Price Ranges The market can be divided into price ranges, each of which has its own characteristics. We analyze five distinct price ranges below, contrasting March 26 numbers with those of three months earlier - December 26, 2010: 1. Homes under $100,000
Summary: Extremely strong demand and falling supply. Prices rose between February and March. Although sales pricing is 1% lower than in December it has risen 1.2% in the last month. February 2011’s pricing ($41.68 per sq. ft.) was almost the same as the previous low of April 2009 ($41.66 per sq. ft.) suggesting we may have just passed the second V of a W shaped price curve. Pending sales are priced at $42.97 per sq. ft., lower than last month, so the gains are still tentative. However the market dynamics are improving each week. Demand is strong with sales up 38% over the same time last year and pending sales up 34% to a record level of 4,919. This looks likely to develop into a feeding frenzy as investors fight over a diminishing supply of bargain properties. Despite the best efforts of lenders and trustees, supply of active listings is now falling, down 15% in the last quarter and almost 10% in the last month alone. This supply has shifted away from REOs (down 14.2% in one month) towards short sales (down only 6.8% and now more than twice as numerous in this price range). Normal listings are also down 12.4%, and many of the latter are flips – former foreclosed homes that have been acquired by investors then fixed up and offered for resale. REOs constitute only 28% of the supply, but 66% of the sales in this sector. Normal sales grew from 12% to 15% of the market between February and March while short sales and pre-foreclosures edged up from 19% to 20%. Average pricing per sq. ft. for closed REOs in this price range was $40.42, down 17c from February. Short sales and preforeclosures rose 16c from $42.88 to $43.04, while normal sales gained 60c from $48.68 to $49.28. Inventory now stands at 135 days measured using the annual sales rate (26,058), a big improvement over 154 last month. The market distress index has fallen slightly from 86.8 to 85.8 and the contract ratio has jumped from 74.4 to 98.4. Both of these changes are positive signs although the distress index remains stubbornly high indicating how far we have to go to return to true normality in this price range. Prices are likely to rise before we return to normality since they are highly overcorrected now, in some places below the levels of 15 years ago. Active list pricing fell during the month but by only 0.2%, and during the last week of March they started to move upwards as lenders start to inch REO pricing upwards again. With demand rising strongly and supply sharply down, the market below $100,000 has improved enormously since November. Depopulation is still a major factor suppressing demand in certain geographies, particularly the older inner city areas. However, taken as a whole, the recovery in this price sector is now under way again. The areas showing the fastest reduction in distressed supply include many of the outermost locations such as, Maricopa (city), Queen Creek and Buckeye. The most active ZIP codes for sales in this price range were Buckeye 85326, Maricopa 85138, San Tan Valley 85143, El Mirage 85335, Phoenix 85041, Peoria 85345, Phoenix 85037 and Phoenix 85029. 2. Homes Between $100,000 and $200,000
Summary: Supply down and demand strongly up. Pricing stable and likely to get firmer going forward. Having peaked in October, supply has fallen another 8.3% in the past month and down 19.8% when compared with December. Lender owned active listings are down by 34% since December while short sale listings are down 18.3% and normal listings down 12.5%. Demand has also strengthened a little over the last month with pending listings up 2.9% and monthly sales up 3.26%. As a result months’ supply dropped from 4.4 to 3.9 months. When measured against annual sales (31,167), inventory fell from 127 to 116 days over the same period. This inventory level is consistent with a normal market. Between February 26 and March 26 REOs fell from 42% to 41% of monthly sales while normal listings increased from 34% to 37%. Short sales and pre-foreclosures declined from 24% to 22% of sales. The market distress index improved from 65.4 to 63.5 and the contract ratio advanced from 70.9 to 83.1. All of these are positive signals. Average sales pricing moved 1.1% lower during March to $69.20 per sq. ft., revisiting the same level as in December 2010. 2.5% compared with January but down 0.6% from September. The average price for pending sales was $69.98, still pretty similar to the levels recorded for the last 8 months. Average sales price per sq. ft. in this sector is below the low-point of $70.86 set in March 2009 but has remained in the range $68.21 to $70.67 over the last 8 months. Active listing pricing is now moving upward slowly. With the improvement in the supply position and an increase in demand, the outlook for this sector remains positive. The most active ZIP codes for sales in this price range were Maricopa 85138, Surprise 85379, Queen Creek 85142, Gilbert 85296, Phoenix 85086, Goodyear 85338 and Laveen 85339. 3. Homes Between $200,000 and $400,000
Summary: An improving balance between supply and demand. Recovery is under way. Green figures in all rows indicate a market doing well. The supply of single family homes priced between $200,000 and $400,000 dropped by another 5.9% between February 26 and March 26, and is now down 10.8% over the last three months. Over the last month REO supply dropped by 13.7%, short sales and pre-foreclosures fell by 7.5% and normal listings by 3.7%. The reduction in supply was coupled with an increase in demand. The monthly sales rate rose by 6.1% between February 26 and March 26 causing months’ supply to fall from 5.7 to 5.0. The annual sales rate held fairly steady at 14,821, but the fall in active listings meant that when measured on an annual sales basis, inventory has fallen from 156 to 148 days. REOs fell from 27% to 24% of monthly sales, and short sales from 22% to 20%. Normal sales gained share moving from 51% to 56%. These changes caused the market distress index to decline from 44.8 to 41.2 and the contract ratio improved significantly from 50.5 to 57.2 over the last month. Average sales pricing rose 3.7% over the last month to $102.87 per sq. ft., the highest level since July 2010. List prices for active listings are also slightly higher at $111.85 per sq. ft. while the average list price of pending sales dropped back a little to $101.74 per sq. ft. between February and March. This reading is still higher than it has been for 6 of the last 7 months. This sector remains very stable and the short term outlook is positive, particularly for homes over $300,000. The most active ZIP codes for sales in this price range were Chandler 85249, Scottsdale 85254, Phoenix 85086, Peoria 85383, Sun Lakes 85248, Goodyear 85395 and Gilbert 85298. 4. Homes Between $400,000 and $800,000
Summary: Supply gently falling and demand gently rising. Not much excitement but sales prices are increasing! We now see five green figures in our table and this sector continues to do fairly well. However it is has not improved as dramatically as the lower price points over the last month. Single family homes between $400,000 and $800,000 have experienced a 0.8% monthly fall in active listings. This is rather mild compared with the lower price sectors, but supply is now 3.9% lower than in December. The demand picture is mixed, with monthly sales down 7.1% compared with February. However, pending sales grew by 5.3% over the last month. With the reduction in the monthly sales rate, months’ supply now stands at 8.6 months compared with 8.1 on February 26. The annual sales rate fell slightly to 3,909 and inventory remained at 241 days when measured on an annual sales basis. REO supply is getting quite scarce at this price level, down 12.5% over the last month and 36.1% over the last 3 months. Only 3.6% of active listings are lender owned. Active short sales and pre-foreclosures increased by 6.2% while normal listings fell by 2.3%. REOs comprised 17% of monthly sales, up from 15% in February. Short sales took a 20% market share while normal sales rose to 63%. As a result the market distress index stayed nearly level moving from 30.6 to 30.7. The contract ratio grew from 32.3 to 35.6, the best figure since May 2010. Average sales pricing for this price range rose 1.7% compared to February to the highest level since July 2010. The long term annual average sales price per square foot has stopped falling and at $146.53 is now exactly the same as the monthly average, a signal that this price range has achieved price stability over the last 8 months. The average price for pending sales also jumped from $148.86 to $153.78 per sq. ft. over the last month, indicating higher sales prices ahead. However, active list pricing fell slightly from $171.60 to $170.99 per sq. ft. ft. With prices gently rising and supply lower than at any time in the last year, this sector remains in long slow recovery mode. The short term outlook for this sector remains positive as long as demand continues to increase. The most active ZIP codes for sales in this price range were Scottsdale 85266, Scottsdale 85255, Fountain Hills 85268, Scottsdale 85259, Phoenix 85050, Scottsdale 85262, Phoenix 85086, Cave Creek 85331 and Phoenix 85018. 5. Homes over $800,000
Summary: Distressed homes are getting scarcer and long-term price averages are starting to move higher. The supply of homes above $800,000 continues to fall though only slowly and is now down 2.9% in the last month and 3.3% compared with three months ago. It is now lower than at any time in the last year. March sales were up 18.0% compared with February but are down 10.6% compared with March 2010, so demand remains a little weak by historic standards. However pending sales are looking good - up 11.9% compared with January and 34.1% higher than December. The increasing monthly sales rate and little change in the number of active listings means that months’ supply is down again from 17.8 to 16.3 over the last month. The annual sales rate continues to fall and now stands at 1,266, the lowest level in 15 months. When measured on an annual sales basis, inventory stands at 554 days. Active REOs dropped another 22% to only 43, the lowest total in a very long time and these represent only 2.2% of total active listings. There were 21 REO sales which represents 18% of the closed listings. The REO sales price average of $210.33 per sq. ft. remains in the middle of the range for the last two years ($178 to $242) and still shows no significant trend up or down. The pricing for the 17 short sales and pre-foreclosures rose to $191.76 per sq. ft., but this is still the second lowest we have seen in ten years. Closed short sale pricing has been lower than REO pricing for the last four months and bargain hunters with patience would do well to check out short sales and pre-foreclosures as there are far more to choose from (194 versus 43 REOs). Normal sales pricing averaged $263.81 per sq. ft. for 80 sales, down from Fevruary but higher than the period August through November last year. The market distress index fell to 22.3 from 23.0, the lowest score since May 2010 and the contract ratio improved from 13.5 to 15.7, the best reading in over a year. Average active listing pricing rose 0.4% in the last month and at $357.89 is still much higher than achieved sales pricing at $241.37. Many sellers continue to set unrealistic list prices in this sector and the average time on market for active listings lengthened to 288 days. The monthly average sales price per sq. ft. was down 4.8% compared with February but the small number of sales in this price range often leads to considerable fluctuation from month to month. The annual average price per sq. ft. does not fluctuate wildly and it moved a little lower to hit $250.04 in February, the lowest level recorded since 2001, but not much lower than over the last 6 months. Although it is improving, demand still remains slightly weak by historic standards. However supply is declining and 88% of this supply is NOT distressed. Thus we see pricing continuing to firm up. The short term outlook for this sector is mildly positive and the situation is more likely to improve than worsen. The most active ZIP codes for sales in this price range were Paradise Valley 85253, Scottsdale 85255, Scottsdale 85262 and, Scottsdale 85266. There were 70 sales among these four ZIP codes and only 36 elsewhere. Forecast Last month we forecast that sales prices would stay in the range $80 to $84 per sq. ft. and this indeed is what they did. The actual monthly average sales pricing for single family detached homes across Greater Phoenix was $82.53 per sq. ft. on March 26. This is higher than the $81.51 we measured for February 26, as well as the $80.90 for January 26, but below the figures for October 26 through December 26 which were all over $84 per sq. ft. The average $/SF for pending sales has stabilized between $81 and $83 and this suggests we will only see small changes in average sales $/SF over the next four weeks. Any change is likely to be slightly upward, but we see prices remaining in the range between $81 and $85 per sq. ft. for the next month with the final number likely to fall around $83. Explanations of Terms Used Active Listings Listings of homes for sale on ARMLS with status active. They include those with a contingent offer if the home is still being marketed. Measured on the first day of each calendar month. Annual Sales Listings successfully closed on ARMLS during the twelve months that ended on the last day of the month shown. Contract Ratio This is a key indicator of the current balance of supply and demand. It is based on the ratio between listings under contract (pending or AWC) and listings for sale (Active). A typical value for a balanced market is 30. Values under 20 indicate a cold market with low demand and/or high supply while values above 40 indicate a hot market with high demand and/or low supply. Low price sectors tend to show much higher numbers than luxury sectors. Days Inventory Measures the time it would take to sell all the active listings based on the current rate of sales per year. It is a conservative seasonally-adjusted measure of the inventory of homes available for sale. Foreclosure Notice The first step in a foreclosure, officially known as a Notice of Trustee Sale. Market Distress Index Based on the percentage of REOs, short sales and pre-foreclosures among the active listings and monthly sales, this index provides an indicator of how much the market is dominated by distressed properties. The minimum is 0 and the maximum is 100. Monthly Sales Listings successfully closed during the month shown. Months’ Supply Measures the time it would take to sell all the active listings based on the current rate of sales per month. It is a volatile and seasonal measure of the inventory of homes available for sale. Normal Sales Sales which were not lender owned, short sales or pre-foreclosures among the monthly sales. Pending Foreclosure A home with an outstanding foreclosure notice that has not yet had its trustee sale or been cancelled. Pending Sales Listings of homes for sale on ARMLS with status pending. This means they have an accepted contract and are currently in escrow and are no longer being actively marketed. Sales per Month The number of listings successfully closed during the calendar month. Also referred to as the Monthly Sales Rate. Sales per Year Listings successfully closed on ARMLS during the twelve months that ended on the last day of the month shown. Short Sales Cannot be sold without the approval of the lender(s) because the expected proceeds are insufficient to repay the existing loan(s). Pre-foreclosures are included in the short sale counts. REO Lender owned properties (Real Estate Owned) among the monthly sales Trustee Sales Completed foreclosures. The final step in a foreclosure is when the trustee sale occurs. Sales Price per Sq. Ft. Average pricing expressed in dollars per square foot. Less volatile than median price or average price. The data used to create this report is obtained from public records and extracted under license from the Arizona Regional Multiple Listing Service, Inc (ARMLS). Although certain corrections and checks have been applied to this data, 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. This report is copyrighted in 2011 by Cromford Reports. |
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