The Cromford Report™ Monthly Market Review Brought to you by: 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. Market Summary Most of the supply and demand numbers were rather boring in November. All the excitement was concentrated in the pricing action. In this, October and November have been the opposite of the previous 12 months where there were massive changes taking place in supply but not much of interest going on in pricing. The ARMLS Pending Price Index (PPI) predicts that the December average sales price will fall to $152,000 followed by $151,000 and $141,000 in January and February respectively. The median sales price is expected to fall to $110,000 in December, remain steady at $110,000 in January and drop to $100,000 in February. Unfortunately predictions for the next 90 days show little improvement in the Valley’s lackluster pricing. To start with, we will look at the ARMLS data across all areas and types:
Thus we see evidence of a huge improvement in the market balance compared with December 2010, but little if any change between last month and now. The Cromford Demand Index™ and Cromford Supply Index™ are both flat-lining, meaning that supply remains low and steady and demand remains high and steady. So let us look at where the action is:
3.1% in a single month is a pretty strong bounce for $/SF, so it is worth looking into exactly how and why this happened. If we look at the details we find:
So we see that short sales and foreclosures, while booming in sales volume and success, have not been going up in price. In fact they have been falling faster than the other two groups are rising. The gap between the average $/SF for REOs and short sales has never been closer. We also see that overall pricing has improved faster than any of the three groups. This may seem paradoxical at first but the explanation is quite simple. REOs have the cheapest pricing and their sales volume is declining fast due to the reduction in supply. Normal listings are growing market share and have the highest pricing. The change in the mix has a huge effect on the overall average. This is the exact opposite of what happened in 2008 when prices tanked at unprecedented rates. We can say on balance that sales pricing is back to where it was last year at this time and we can also reasonably expect to see positive appreciation rates for the market as a whole for at least the next 4 months. This is easy to predict because last year we had a gently declining pending listing $/SF whereas now pending $/SF figures are headed upwards. This positive appreciation is not spread evenly around. The following cities currently show higher prices than at this time last year (measured by average monthly sales $/SF): · Fountain Hills (14.8%) · Paradise valley (11.9%) · Casa Grande (7.6%) · Sun City (7.1%) · Buckeye (5.3%) · Maricopa (3.2%) · Gold Canyon (2.7%) · Arizona City (1.9%) · Phoenix (1.3%) · Queen Creek / San Tan Valley (1.2%) · El Mirage (0.8%) · Cave Creek (0.4%) The following are still in negative territory: · Sun Lakes (-14.3%) · Litchfield Park (-8.5%) · Goodyear (-7.7%) · Tolleson (6.8%) · Avondale (-6.3%) · Surprise (5.6%) · Peoria (-5.6%) · Sun City West (5.3%) · Mesa (-4.2%) · Anthem (-4.1%) · Glendale (-3.8%) · Apache Junction (-3.4%) · Laveen (-3.0%) · Gilbert (-2.8%) · Chandler (-2.6%) · Tempe (-0.9%) · Scottsdale (-0.1%) Most of the second list are seeing an upward trend in the last two months but are still down compared with November 2010. For the months of July through October, we saw trustee sales volumes fall while new notices stayed fairly flat. The opposite occurred in November. Foreclosure notice started to fall off again while trustee sales popped up slightly, due to the large batch of Recontrust (Bank of America) notices that were issued in August against Countrywide originated loans. These became ripe for trustees to sell during November. The longer term trend for both is still downward and the pending foreclosure count has started to fall fast again having stabilized for several months. We believe that there will be relatively few REOs generated from now on. Most of the foreclosure tsunami is past us, perhaps 80%. Those foreclosure notices still to come will generate a lot of short sales and third party purchases at the foreclosure auction, but relatively few homes will revert to the beneficiaries. We have probably already seen over 90% of the REOs that are to be created by the 2004-2006 real estate bubble and fewer than 10% are yet to come. The following stacked area chart allows you to investigate the number of actual and potential lender owned homes in Maricopa County from November 2010 onwards. This includes what is sometimes referred to as “Shadow Inventory”. The data is for the county of Maricopa and includes only single family property types. There are five categories of homes and the number of homes in each category can be individually displayed or hidden depending on which part of the inventory you wish to analyze. Pending Foreclosures - these are homes with an active Notice of Trustee Sale. Some of these will avoid foreclosure through loan modification, successful short sale or other means. If the trustee sale goes ahead then the property may be purchased by a third party and so avoid entering the REO inventory. Thus only a proportion of this inventory will end up in the hands of the lender or government equivalent (e.g. Fannie Mae, Freddie Mac, VA or HUD). Unlisted REOs - these are properties which failed to sell at the trustee’s auction and reverted to the beneficiary. These “REO” properties have not yet been listed for sale on ARMLS but are likely to be going through the lender’s preparations for sale. Some may pass from one lender to another before being marketed. Active REOs - these are owned by lenders and are actively being marketed for sale through the ARMLS system. They may or may not have a contingent contract. Pending REO Sales - these are listed on ARMLS but already have a completed firm contract for sale and are awaiting their close of escrow. Listed but Off Market - these are listed on ARMLS but are temporarily suspended from marketing for some reason. Items 1 and 2 above are often referred to as “Shadow Inventory”, although definitions vary considerably. Unlisted REOs will almost certainly become Active REOs within a short period and this is the most basic form of “Shadow Inventory”. Pending Foreclosures may become Unlisted REOs but many will not. Many are already active listings on ARMLS where they are being marketed as short sales. Some analysts include in their “Shadow Inventory” definition any home which is delinquent by more than a certain number of days (e.g. 30, 60, 90 etc.), even if no Notice of Trustee Sale has been issued. We do not include these in the chart below. Although you could select the counts for an individual ZIP code, this particular chart reflects the total for the entire county of Maricopa.
Daily Market Snapshot - Concise The table below provides a concise statistical summary of today’s residential resale market in the Phoenix metropolitan area. The figures shown are for the entire Arizona Regional area as defined by ARMLS. All residential resale transactions recorded by ARMLS are included. Geographically, this includes Maricopa county, the majority of Pinal county and a small part of Yavapai county. In addition, “out of area” listings recorded in ARMLS are included, although these constitute a very small percentage (typically less than 1%) of total sales and have very little effect on the statistics. All dwelling types are included. For-sale-by-owner, auctions and other non-MLS transactions are not included. Land, commercial units, and multiple dwelling units are also excluded.
Explanation of Terminology
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