Bill Olmstead Team

Yes, its true, we are seeing steady and fast appreciation here in the Phoenix market!!  The Cromford Report just released this great detailed summary of what we are encountering in the Phoenix area.  Its a very active and transitional time in our market. If you are thinking of selling your home, LIST NOW, as you can really maximize value due to the lack of supply and competition.

Market Summary for the Beginning of May

No relief is yet in sight for buyers as inventory continues to fall to even lower levels. Sales and pending counts are down due to the lack of enough supply to meet demand. With demand outstripping supply by a wide margin, prices continue to rise substantially each month.

Let us look at some basic numbers for April 2012 relative to April 2011. So for all areas & types across ARMLS we record the following:

• Active Listings (excluding AWC): 13,117 versus 27,052 last year – down 52%
• Active Listings (including AWC): 20,781 versus 34,594 last year – down 40%
• Pending Listings: 11,996 versus 13,326 last year – down 10%
• Monthly Sales: 8,480 versus 9,452 last year – down 10%
• Monthly Average Sales Price per Sq. Ft.: $95.79 versus $83.61 last year – up 14.6%
• Monthly Median Sales Price: $137,000 versus $110,000 last year – up 24.5%

With prices fairly flat during the first half of last year but rising fast this year, the appreciation measurements are on their way up to eye-popping levels. The monthly average price per square foot is the more conservative measure, but already shows appreciation approaching 15%. We recall that monthly sales $/SF reached a low of $78.83 in September 2011. so if prices were to stay flat from now on we would be measuring appreciation of 22% by September 15 2012. With no relief in supply, prices are much more likely to continue to rise, so appreciation measurements of well over 25% are on the cards for the fall. The monthly median sales price is more volatile. The disappearance of vast numbers of low-priced REOs from the sales mix causes the median sales price to rise much faster than the average $/SF, so we already see appreciation almost reaching 25% when we look at median sales prices.

As prices rise, demand loses steam and more sellers are enticed into the market. This is the normal mechanism for a market to reach stabilization. Another would be for a fresh source of supply to arrive on the scene. New home builders are ramping up production, but from an abnormally low level, and they are unlikely to have much impact on the overall supply situation in the short term. This is particularly true when we are looking at active listings on ARMLS, since builders are not listing very many of the homes they sell through the MLS. The relatively low capacity of subcontractors to expand their skilled workforce will put a cap on how many new homes can be built. Another theoretical source would be for the banks to release their so-called pent-up “shadow inventory”. But since it doesn’t exist in Greater Phoenix to any significant extent, this source of supply will remain imaginary.

When you look at the overall active listing counts, the supply situation does not look too dire at first. We have 20,781 active listings in total on ARMLS. However, 7,664 of these are in AWC status so that brings us down to 13,117. Excluding those that are outside the Greater Phoenix area brings us down to 11,828. Excluding those priced at $250,000 or more takes us down to 6,106, and if we restrict ourselves to single family homes we see only 4,069. In the last month 5,443 such single family homes were sold, so the current active (not AWC) supply is only 22 days. One year ago those numbers were 14,036 active (not AWC) and 6,574 sold, so we had 64 days of supply, which was already quite tight. Two years ago we had 15,369 active (not AWC) and 6,236 sold, representing 74 days of supply. That was at the height of the buying spree inspired by the tax credit expiry. At no time since early 2009 has supply been excessive, although there was a worrying upward trend for 6 months in 2010 after the tax credit expiry. Now we are in a severe out-of-balance situation which is likely to last until supply starts to increase significantly.

The supply in the luxury market is also starting to decline, as it is in the active adult 55+ areas of the valley. However here it has not yet reached anything we would describe as out of balance.

The Maricopa County foreclosure statistics for April were:

• New Notices of Trustee Sale: 4,448 versus 4,487 in March – down 0.9% for the month
• Trustee Deeds Recorded: 1,739 versus 2,092 in March – down 16.9% for the month

As foreclosures decline it becomes more important to examine the home loan delinquency rate to see what is happening upstream of the notice of trustee sale. The Lender Processing Services Mortgage Monitor report for March shows that Arizona now has 6.1% of its outstanding homes loans delinquent by 30 days or more but not in foreclosure, while 3.0% are already in foreclosure. This compares with 6.6% and 3.0% in February and 7.1% and 3.0% in January. Clearly the percentage of home loans that are delinquent but not yet in foreclosure is dropping fast and is now not a lot higher than the long term average of 4.5%. In fact it has fallen by over half since peaking in February 2010 at 12.4% and this is a very important number to watch going forward. Loans in foreclosure remain much higher than the long term average of 0.5%, but if delinquency rates keep falling fast then loans in foreclosure must also drop significantly before too long.

Just a couple of years ago Arizona ranked third highest in the nation at 16.3% non-current loans (30+ days delinquent or in foreclosure) when the national average was 13.5%. Arizona now ranks 33rd among the states for non-current loans at 9.1%, well below the national average of 11.7%. In the last month Arizona fell another two places by dropping below the states of California and Washington and now ranks equal to Missouri and just above Texas. These changes go a long way to explain why we are entering a period of sustained recovery in the Greater Phoenix housing market.

Cromford Report May 2012

Good Evening!

 This last Tuesday, (October 11), I spent a full day in a Real Estate Seminar focusing on Phoenix market trends, and hearing from the BIG banks (Chase, Wells Fargo, Bank of America, and Citi) on their view of the market, short sales, and foreclosures.

 It was an excellent seminar and I want to share with you the important take-aways that I learned:

1.  Market stabilization— Phoenix does not fit the National #’s. We have had almost 7 months now of stabilization in the Great Phoenix area. Prices have remained relatively consistent, while our inventory has continued to decline each month. Michael Orr of the Cromford Report (Phoenix guru on market statistics), projects price increases in the next 12-18 months. The interest rates, lack of inventory, and the appeal that the Phoenix area has from outside investors.
2. Only 11% of the current inventory on the market is foreclosed properties (from the height of over 40%)
3. Multiple offers on properties— All 800 of us in the room raised our hand when asked if it’s hard to get a buyer a house in today’s market. We are all experiencing multiple bids on properties—even short sales are moving very quickly!
4. AZ used to be #3 in the nation for foreclosures, we are now at #27 and are expected to continue to rise. Very good news for our economy and specifically the housing market.
5. Success rates on short sales are up from around 4% in 2008 to 65% now in 2011.
6. What the big banks are saying?? (Bank of America, Wells Fargo, Chase, and Citi)
   1. Shadow inventory—it doesn’t exist—unless a bank gets a property back after foreclosure that has a hefty tax lien, fix-up, or the house is in serious need of repair, homes are hitting the market very quickly after they foreclose.  
   2. Short Sales have become much more streamlined, and banks are working with many individuals on the closing of these sales…Key question the bank wants to know is—what is the hardship?
   3. Borrower outreach—if you are in a distressed situation, banks are offering incentives to some homeowners—make sure to open your mail to see if this offer is being extended to you.

 Be informed, make educated decisions, and as always, don’t hesitate to contact us for up to date market information. We are an excellent resource for our local Phoenix Real Estate Market.  

 Have a great weekend!

 Bill