It’s the end of July and we are actually getting our downtown and greater Phoenix real estate market report out early. That actually feels pretty darn good. The news is a bit different than I would have predicted in June.
As you know by our past reports, the Phoenix real estate market has been on fire, especially in the downtown region. Inventories of homes and condos went down big time and buyers raced in to take advantage of the wonderful low prices. The result was a significant jump in home prices with peaks of 5%/month from mid March to early June. See the listing success graph to the right. Quite a bit of success for home sellers.
July was a different story, but one that is good news as far as the Urban Team is concerned. Let’s bullet out a few of the highlights:
- Inventory levels are rising slowing. Just a couple months ago we has less than 1300 single family homes for sale; As of this 7/31/2012 we had 1759 homes on the market in Phoenix.
- Demand is lessening slightly as well. We don’t have hard figures on this, yet it is being expressed by the rising inventory and fewer homes being put in escrow. This is also traditional during the hot summer times. Face it, who wants to look at homes when its 110 degrees out.
- Home prices and values are expected have only modest gains through the balance of the hot season.
You may be wonder why we like this softening of the market since we’re Realtors and we should love it when the market is crazed. In fact, we like gentle markets with reasonable value appreciation and a balanced supply and demand curve. People get hurt when the market goes wacko and that’s not a good thing for anyone. The relaxation of escalating home prices is important if we are going to keep from seeing another bubble… let the pendulum swing gently for a while.
As is traditional with our market report we turn to the sage wisdom and commentary of Michael Orr of the Cromford Report and Carey School of Business at ASU. Yes, Mike is now heading the real estate department at ASU.. a wise move on ASU’s part. Below is what Mike wrote in his July market update:
The supply of active listings rose slightly between June and July but is still 39.5% below July 2011. Though the sales rate is restricted by the short supply, it managed to climb 9% month to month. However pending sales dropped 15% and are 17% below last year suggesting that demand is cooling. Sales pricing took a rest during June, with average $/SF down 1.2% after rising swiftly between February and May. At $92.04 per sq. ft. the latest reading is 32.6% higher than a year ago. With pending $/SF also falling we don’t expect pricing to rise over the next month despite the continued imbalance between supply and demand. The market is still digesting the large price movement during the spring. Average days on market is falling quickly now for active listings and sales. Foreclosures are down with notices down 20% compared to a year ago while trustee sales are down 58%. This underlines how much short sales (with 32.6% market share) have taken over from REO sales (with 15.3% share). Using the contract ratio as a guide, the market remains hottest in 85019, 85043, 85035, 85034, 85040, 85037 and 85027.
What’s Happening with Real Estate In Downtown Phoenix?
Downtown Phoenix is its own beast when it comes to real estate. We have the highest concentration of condos in the region and the only area with designated historic districts. In addition, the ASU downtown campus, UA College of Medicine, TGEN and core businesses have made the downtown area very popular. This popularity is evident in the home and condo sales numbers and other real estate metrics. Here are a few things we’ve noted:
Only 90 single family homes are currently for sale in the downtown and midtown Phoenix area.
There are currently 102 homes under contract in the area. This is more than the number for sale. Thus, the inventory is still quite low with only about a month of supply. FYI: In a normal market we generally see supplies in the 5-6 month range.
Condos are even more scarce than houses with only 23 currently for sale. Low price condos, under $150K, are even harder to find and most of the inventory is in the $200K+ range.
There are 24 condo/townhouse/loft properties under contract at this time. Like single family homes there are more under contract than for sale and the months of inventory is about the same as houses but the demand is generally higher in the downtown Phoenix market.
Mike Orr has a metric he created to measure supply and demand volatility; He calls this Contract Ratio. According to Mike, a number above 40 is a hot market. The July contract ratio numbers in downtown are pretty darn high. Here are a few of the figures. Note: He offers his contract ratio data for single family homes only, no condos or lofts.
We expect to see home prices in the Phoenix market to remain pretty level in August and September. We also expect to see a very gradual increase in inventory of both homes and condos. This is primarily due to the fact that many people are still upside down on their mortgages and can’t sell without doing it as a short sale. As home values rise, more people will be a position to sell and this is a gradual process.
We expect to see a slight bump in the number of lender owned homes coming on the market. This is not so much do to an increase in foreclosures as it is to failed short sales. See our article on this subject from June 2012.
BUYER ADISORY: Since we do not see much appreciation on the near horizon we are advising our clients to be a bit less aggressive than we’ve been in the past few months. This doesn’t mean other buyers will be following the same philosophy though and we may continue to see aggressive offers. If you are currently involved in a short sale you may see the lender coming back requiring a higher offer price to reflect the price rise we saw in March, May and early June.
SELLER THOUGHTS: Appropriate pricing is always important. Mind you, we do not like home/condo sellers to leave and money on the table, but over zealous pricing usually restricts buyer interest and often results in lower offers in the end. Buyers are still most attracted to two types of properties. They tend to pay more for homes that are updated and move-in ready or they want a killer deal on a fixer upper. See our articles on selling your home for more info.
Well, that pretty much sums things up for this month. We hope you find the info helpful and feel free to give us a call if you have any questions or ideas you’d like to bounce off us. Our site is about information and conversations.
Best to you,
Gene Urban and Ron Urban
The Urban Team at Realty Executives
7600 N 16th Street, Suite 100
Phoenix, AZ 85020
connecting people to the perfect place for over 20 years