I just received a real estate market update. It is based on information from the Cromford Report. Naturally, I’ll add a bit from our experience working in the trenches every day. Hope you enjoy:
Greater Phoenix–Single Family Home and Real Estate Market News and Opinion: Provided by Old Republic Title and The Cromford Report
- The market is very strong below $100,000 and in good shape up to $200,000.
- Above $200,000 the market continues to deteriorate slightly.
- Average sales price per sq. ft. is rising for homes under $200,000 and stable up to $400,000.
- Above $400,000 there is potential for further price weakness unless demand improves.
- The overall average and median sales pricing is now on an upward trend.
- Foreclosure activity is declining and REO (Bank Owned) inventory is falling fast, especially at the lower price levels.
The demand for homes between $50,000 and $150,000 is particularly strong as investors chase homes to add to their rental portfolio. Demand from owner occupiers remains relatively weak. The supply from foreclosures has fallen and short sales are becoming a more important part of the picture.
Homes over $400,000 are suffering from lower demand that balances the relatively low supply. Buying interest in homes over $3,000,000 is dramatically down compared with the spring.
A clear and significant upward trend has developed in prices of homes below $200,000, particularly those owned by lenders. In contrast pricing for homes over $400,000 are trending lower. Because of the high sales volumes at the low end this sector is starting to win the struggle and push overall pricing higher.
At this time the period from second half of August to the first half of September represents a low point in pricing from which we are now climbing out. Unless we get a major change in the market this slight upward trend looks likely to continue.
The Urban Team’s Thoughts:
We believe home values will be on the rise in October and November, stay steady during the holidays and pick up again in Mid-January through June. Why you ask? It is pretty simple, the number of homes available in Maricopa County is very low right now. Let’s look at a few numbers from ARMLS.
- All Single Family Homes for Sale in Maricopa Country on 10/6/2011 = 12,630
- Non-Short Sale Homes for Sale in Maricopa Country on 10/6/2011 = 10,1000
- Non Short Sale and Bank Owned Homes for Sale in Maricopa Country on 10/6/2010 = 8061
- Total Number of Homes Purchased in Maricopa Country in 2010 = 65,000 (5400/month)
- Total Number of Homes Purchased in Maricopa Country from January to June 2011 = 35,000 (5800/month)
As you can see, the demand from home buyers will consume the total number of homes available in a bit over two months. Two months of inventory is a very low number and reflects high demand. We normally see monthly inventory levels in the 5-6 month range. If we remove the distress property sale (short sales and bank owned) the available home numbers at even lower.
Old Republic’s analysis suggests the higher priced and luxury home market is still in trouble. We do not agree. The high end market it being bought up at a much higher rate too. The luxury market often has much longer turn over times. It is common to see the months of supply well over a year;This time last year the supply was often over two years. The good news for the luxury market is today’s inventory numbers suggest the figure is about an 8 month supply. Whoopee.
We believe the real thing to watch is availability of mortgages. FHA just reduced the limits they will loan in Arizona to $271,050. This will make it more difficult for people buying in the $280,000 to $350,000 range who were securing these low down payment loans. The good news is several lenders are now offering conventional loans with as little as 5%-10% down-payment requirements.
Thus, we believe the low home inventory numbers (supply) at a time when demand is fairly stable will force prices higher. As we move into Q1 and Q2 of 2012, our buying season, we will see an increase in consumer demand causing home prices to rise slightly over time. Obviously, there are a lot of national and world economic factors we can not consider in this short analysis. However, should the Government not do something really stupid and consumer confidence remains stable, we are very likely to have good news in the greater Phoenix home market. Double Whoopee.
If you have questions about your home’s value or the Phoenix/Scottsdale real estate market, we are here for you. Toss us an email at Gene@UrbanTeamAZ.com or give us a call at 602-234-5777. We are here to help.
Gene Urban and Ron Urban
The Urban Team at Realty Executives