Now that we are in the waning days of 2012, it is time once again to review where we are and prepare for what will no doubt be another interesting year in 2013. After a rather sluggish summer, the market regained some velocity in the fourth quarter. Supply continues to build, although it is still well below average. Below $200,000 demand remains strong and we are still seeing multiple offers. Prices in this range continue to edge up. Not surprisingly, the highest appreciation rates have been occurring in those places where prices crumbled the most in 2007-2009 – primarily the drive until you qualify communities. In contrast, higher priced homes have shown only a small amount of appreciation with just a few posting double-digit improvements such as – Carefree at 11.7%, Desert Hills at 13.9% and Tempe at 11.0%
The increasing prices are luring both sidelined sellers and even builders back into the marketplace. At some point, the increased prices will drive back the demand resulting in a balanced market. We do expect spring of 2013 to be a very healthy market for both buying and selling.
Probably the best summary of the 2012 market is stated most perfectly by Michael Orr of the Cromford Report:
“The change in price over the last 12 months is clearly impressive. There are very few occasions in which the average price per sq. ft. rises by 25%. The only previous time I know of is May 2005 to March 2006 and that was at the height of the bubble. A rise of 2.7% in the single month of September would also normally be startling, but we have got used to big numbers. When the market eventually gets back to normal we should expect to see 2.7% for a whole year, not a single month.
What we have seen is the “coiled spring theory” in action. Supply got extremely low last year but prices refused to react until the fourth quarter of last year. Now prices have moved substantially higher we are seeing signs of the market cooling. Supply is growing as sellers start to take advantage of the higher prices achievable. Some buyers have become discouraged by the amount of competition and higher prices and so left the market, resulting in some softening of demand. Sales volumes though ARMLS are well down. However, this is somewhat misleading because a large number of real estate transactions are happening outside of the MLS. Deals between investors, new homes sales, trustee sales, pocket listings and private sales add up to a significant volume which is missing from the MLS numbers but captured by the county records. “
For the 3rd Quarter, normal sales are now 59.5% of the market. The number of normal sales should continue to grow. Short sales have stabilized at 30.17% of the market (and we expect them to be a slowly declining part of our market for the next couple of years). Happily, REO/HUD are now down to only 13.95% and are becoming almost irrelevant. On that note, you may remember last month we commented on Bank of America suddenly shifting gears by taking back into their inventory REOs rather than selling them at auction to investors. After 5 weeks of this, it appears that they have stopped that program. Go figure. We expect to see a small bump in REO product as these homes go to market but it still will have a negligible effect. The number of Notices of Trustee Sale inMaricopaCounty was 2,690, the lowest total since July 2007 over 5 years ago. This is all good news. Our hope is that by the end of 2013 REOs will be back in the “normal” range.
No matter what the new year brings, we will keep you posted on our ever-changing market. In closing, we wish to thank all of our wonderful friends and clients for your trust and for allowing us to assist you with your real estate needs. It is an honor to know you and to serve you. We are truly grateful.
Russell & Wendy Shaw
Occasionally we write articles that don’t focus solely upon current real estate market conditions. This is not one of those times. The real estate market in the valley has been providing headlines since late 2004. Until the market fully returns to “normal” (it has been so long since a normal market we wonder if we will recognize it) we are no doubt destined to continue that focus. As always, our best source for market statistics remains the brilliant Michael Orr of the Cromford Report.
First, let’s begin with some numbers comparing September 2012 with September 2011:
*Active listings with no offers – 14,405 versus 19,216 last year – down 25% but up 7% from August.
*Pending listings – 10,125 versus 11,508 last year – down 12% – and down 3% from August
*Monthly sales – 7,573 versus 8,470 last year – down 11% – and up 3% from August
*Monthly Average Sale Price per square foot – $97.45 versus $79.64 last year – up 23% – and down .7% from August
Greater Phoenix foreclosures (REO) are once again below 14% of the monthly sales total. At their peak in February 2009, they constituted 71.1% (gasp) of the monthly sales. At this point, they are not a major factor in the market. To put this in perspective, there were 12 times as many foreclosed homes available for sale in January 2009 as there are today. Short sales however, comprised 30.4% of all sales in August. This figure seems to be now holding steady after an initial drop in the first quarter.
The only real shift in REOs is in regards to Bank of America, who suddenly appear to have shifted their policies and are now taking back homes rather than primarily selling them at auction to investors as they (and pretty much all lenders) did. We now expect to see them re-enter the market as listings – no doubt to encourage higher prices as well as owner occupant purchasers. Even with BofA composing 25% of the foreclosure pipeline, the numbers still will not hugely impact our market supply.
Normal (equity) sales continue to rise to 56.1% of sales. This is a clear signal that sidelined sellers are finally re-entering the market as prices are beginning to allow traditional sellers to sell once again. This number will continue to improve as the distress sales drop.
Supply continues to increase gently as is normal for this time of year – but we are seeing more significant increases particularly in Queen Creek and Maricopa – the epicenter of the price crash. The luxury market is seeing steady supply with some small areas decreasing in supply. The luxury market is weaker in the summer so this is not really news worthy to find supply steady with a little weaker pricing.
It should be interesting to see if builders can respond quickly to the lowered supply and begin adding to the supply through increased building. Their challenges remain finding lots at competitive prices and qualified workers who vacated our crashing job market.
What does this mean to the homeowner? The increased values should encourage sellers to begin to monitor values to see if they now can enter the marketplace again. Just a note on this point, we do NOT encourage homeowners to use their county assessor valuations or “Zestimates” for determining value. A supply/demand analysis for your neighborhood still gives the best accuracy in a marketplace that is shifting. As always, we are here to help.
Russell & Wendy Shaw