October November Phoenix real estate forecast 2013

phoenix-real-estate-market-reportIt is time for the Urban Team’s October November Phoenix real estate forecast 2013 and boy is this pack full of info. The market has taken some shifts and we’re here to explore the whys, trends and what to expect as we come into 2014.

You may have read that the national real estate market either surged or sagged in September 2013. Stories were all over the place. The reason was mostly due to data. Some media use Case-Shiller info and others use more accurate local data. (We prefer the latter.)

Case-Shiller has lots of info but it is generally dated. A classic example is a Dallas News article published on October 29th talking about a 9% rise in home values. At first take you’d think this is current info but it’s Case Shiller numbers reflecting home sales from last August.

What is Happening In the Greater Phoenix Real Estate Market?

In a nutshell, the Phoenix real estate market has slowed down from the more frenzied pace of the past two years. This is both expected and, in our book, welcome. The current status shows signs of a more stable market.

Here is what Michael Orr from ASU says about the current Phoenix real estate market:

The market in Phoenix is cooling rapidly with the contract ratio falling to 62.4, its lowest reading since March 2011. (Note from Gene Urban: Contract ratios are a measure of supply verses demand. We’ve been in a very high demand market since early 2011)

The primary cause is a large drop in demand is evidenced by pending listings falling 33% compared with a year ago. Active listings have risen 13% over the last month and we now have 2.9 months of supply, which is still below normal, but the highest reading since February 2012.

There seems to be little doubt that inventory will rise while sales will fall over the next couple of months. However average prices look like they will continue to rise with the average price per square foot for pending listings up 2.5% from September. The move towards a more balanced market is most rapid in 85012, 85034, 85003, 85020, 85041, 85006 and 85004. Only 85050 and 85013 went against the trend and increased their contract ratio over the last month.

If you’d like to download the entire report Mike Orr created, just click here.

A Graphical Look at the 2013 October and November Phoenix Real Estate Market

We have a number of graphs we’d like to share with you.

sales per month 2013Let’s start with the sales per month for the past year. You can see the drop off from September 2012 until the buying season stared again in March 2013.

It appears the market has settled quite a bit and the number of sales is pretty steady. We expect this trend to stick with us until mid-February.

months of supply 2013Months of Supply is a very important indicator as it reflects the supply side of the supply demand model.

It is easy to see that the market was rather bought out this past spring. It’s not hard to see why prices jumped an additional 15% during the first two quarters of 2013.

Supplies are on the rise, yet remain historically low. FYI: Most in the industry say a 5-6 month supply is normal.

monthly sales in $sqftThe last graph looks at sales based on the price per square foot of the home. Nothing too surprising in this graph unless you are a homeowner who thinks the market is still rising. The numbers for late September and October are not represented in this graph. If they were you’d see a slight drop in values. We estimate a 2% decline in home prices in the past two months with little expectation of additional decreases.

How will interest rates affect home values and sale?

30 year mortgage trentsThis is the big question in our industry these days. People under 40 probably think interest rates in the 3-5% range are pretty normal while those a bit older remember paying 12%-16% for our first home loans.

The fact of the matter is the 30 year average for interest rates is in the 8% range… that is the actual norm. The only problem is we’ve been spoiled with low rates for about a decade. The big question is what will happen with the rates rise into the 6%-8% range as many believe will happen in the next year?

Our take is as follows. Initially people will go wacky, stop buying houses and complain about not seeing this coming. (Those who read our stuff will know this is going to happen and be less surprised) Some will say it the government has failed us and politicians will blame the other party.

The fact is, rates have been artificially low due to intervention of the Federal Reserve for years and have nowhere to go but up.

In short time, probably 3-5 months people will get used to higher rates and jump back in the market before they go up even more. Yes, we believe they will go up over 7%… probably more like 10% by mid-2015.

As always, thanks for taking time from your day to spend it with us. We hope the info proves valuable.

Gene Urban
The Urban Team at Realty Executives

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