Mid-2009 Metro Phoenix Home Sales Update

Posted By Mike Padgett

July 7, 2009

Guest column

“I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.”

Warren Buffett

By Tom Ruff, The Information Market

A year ago I was batting clean up for the housingdoom.com team. Today, I’m called a cheerleader for ARMLS, comments like these don’t even dignify a response, plus they demean my skirt and pompoms. Today, and everyday, our mission is to paint a clear picture of where we are, and where we think we’re heading; here’s Michael Orr of The Cromford Report.

The Cromford Report

June produced another strong sales number of 9,333 across all areas and types, just ahead of May 2009. We are still seeing very high numbers of pending listings and record levels of AWC listings (active with contingent contract). The limited availability of financing is a major factor in how fast these convert to closed sales. June was relatively normal compared with the huge changes of the previous four months. Demand has stabilized at a high level, while overall supply is lower than demand and is still falling. At price points over $500,000, we still have a large over-supply situation, however.

The fall in overall supply was nothing nearly as fast as it was between February and May. Regarding foreclosures, after something of a lull in March through May, the banks have emerged from all the so-called “moratoriums”, the trustees got busy and foreclosure sales hit a level similar to February. The resulting additional supply of REOs was almost enough to meet the buying demand and the inventory of REOs on ARMLS started to level off somewhere above 5,000. I think it would be fair to those who are continually forecasting a “flood of foreclosures” to say that more than 5,000 trustee sales in one month is definitely a big number.

However, these same analysts seem to believe this number is so large that the market must crumble with the volume. In fact, however, the number of lender owned properties listed as active on ARMLS fell from 5,475 to 5,150 during the month. Moreover the average price per square foot for the REOs that sold during June rose from $63.77 to $65.64. So the supply was huge, but the demand was even greater. We will have to wait to see which is stronger in July. With both numbers between 5,000 and 6,000 per month, we now have a more evenly matched contest and as a result it becomes a little more difficult to call the result ahead of time.

Pricing is still increasing

Overall pricing moved higher during June, as evidenced by the sales median, average pricing and average sales price per square foot. However, certain sectors are still moving lower. Short sales pricing ended lower, as did normal sales. The rises in pricing of REOs, coupled with a rise in the number of normal transactions were the two main factors leading to the overall pricing increase. Single family detached pricing is stronger than for other dwelling types. In many cities, single family detached pricing made a distinct move upwards during the spring quarter. These include:

Anthem

Apache Junction

Chandler

El Mirage

Fountain Hills

Glendale

Goodyear

Litchfield Park

Maricopa

Phoenix

Queen Creek

Sun Lakes

In other cities, pricing can best be described as “moving sideways.” In the following cities, there is no longer a prevailing downward trend, but we have not seen a sustained and determined move upwards so far:

Arizona City

Avondale

Casa Grande

Gilbert

Laveen

Mesa

Paradise Valley

Peoria

Sun City West

Surprise

Tempe

The cities where pricing appears to be still falling is now a fairly short list:

Buckeye

Cave Creek

Gold Canyon

Scottsdale

Sun City

Notices of foreclosure issued in June were similar in number to May, and 8,500 to 9,000 per month seem to have become the norm. It is also normal to see about 2,500 foreclosures canceled each month. The current market conditions, together with the usually seasonal fall in volume during the third quarter, suggests that July may be a consolidation period like June rather than a month of dramatic change like February through May.

A Look Back

By Tom Ruff, The Information Market

Wow, that guy has a lot to say; now it’s my turn. When reviewing June numbers, the last month of the second quarter, we might be well served to review March, the last month of the first quarter. In March we stated, “You’re going to see a lot of confusion among people reporting foreclosure numbers as new notices hit all time highs and the number of active notices continue to rise. If an analyst is only watching new notices and not viewing the entire process, they are going to make some very dire predictions.” While other analysts were predicting an avalanche, we predicted a controlled release with a steady flow. I’ll let you decide, avalanche or steady flow?

3rd Quarter 2008: 12,495

4th Quarter 2008: 12,308

1st Quarter 2009: 12,833

2nd Quarter 2009: 12,061

In the past 12 months we saw a monthly high of 5,237 Trustee’s Deeds recorded in February and a low of 3,103 in April. We’ve seen some ups and downs in the monthly numbers, a sign of outside intervention, but the quarterly numbers are very similar. Now let’s take a look at median home sale prices. While others were calling for a bottom in early to mid 2010, Michael Orr of The Cromford Report called the bottom on April 6th, 2009. I know it’s early, but again, you be the judge. Here are the single-family median resale numbers, derived from recorded affidavits from the Maricopa County Recorder offices. Personally, I think it was a pretty impressive call considering it was published in mid-April. I think that’s probably the reason his dance card is getting booked.

January: $135,000

February: $126,000

March: $120,000

April: $119,900

May: $122,000

June: $125,000

Investors in the marketplace

We have seen an increase in third party purchasers on the courthouse steps. Numbers for this year saw a low in February where 3rd party buyers accounted for 213 or 4.10% of all properties sold at foreclosure to a yearly high in June when 651 or 12.6 percent were purchased by third party buyers. Now let’s take a quick look at financing numbers for May, the last complete month where we have complete financing numbers. In May 40 percent of all home sales were for $100,000 or less. We define home sales as single-family residences and condos. Of homes purchased for $100,000 or less, 39 percent of these carried an intended use code “B”, meaning the new buyer intends to rent. Of the homes sold in May under $100,000, 65 percent of the buyers paid cash. It’s obvious the investor numbers are much higher than stated on the affidavit of value. I can’t imagine many first time homebuyers paying cash.

Aloha kâkou!

I read the same news articles as you, and just like you I get confused sometimes by what I read. Whenever I see numbers or opinions that disagree with what I’m seeing, I review the way I look at stuff. Basically, I ask myself, am I missing something, are my calculations wrong, is there a logical explanation for our differences, is there anything to be learned from their methodologies, what are they trying to identify, and finally, are they wrong? I believe the science of proving one’s theories correct is best done by constantly trying to prove one’s theories wrong.

Over the past year I have written about my dogs, farming, football and adult beverages. I’ve spoken of family, friends and colleagues, I’ve quoted people real and imaginary, and I’ve talked about the real estate market in Maricopa County. We’ve had a few close misses and a lot of direct hits. We’ve poked fun at ourselves and others, we’ve even had a God bless you or two along the way. Requests for our email came from around the country and beyond, and no one asked to be removed. Our mailing list included people from the Camelback corridor to Wall Street, the Federal Government to local municipalities, from the CEO to the unemployed, from academia to drinking buddies, and newspapers and magazines around the Country. If anyone saw our mailing list they would be surprised, at both its width and depth. I started with a few lines and a couple of reports for a few friends, and it was really they who made it grow. I just did what I do best, share with you the knowledge they shared with me. Now it’s time to move in a new direction, so I’m saying goodbye from Inphoman, and hello from The Cromford Report. My company is still The Information Market. The only thing changing is my commentary – it will only be available on a subscription basis through The Cromford Report.

The commentary above is just a small part of what you’ll find on The Cromford Report. For an extensive view of the area’s housing market please go to http://cromfordreport.com. The service is free for ARMLS subscribers through the end of the year; if you’re not an ARMLS subscriber, there are now quarterly subscription rates at $90.00 per quarter. Mike Orr is also available for public speaking engagements. Fees begin at $600.00. Finally, if you’ve enjoyed my emails or found them informative or valuable, they will now be located solely on The Cromford Report as will the free reports currently being displayed at www.theinformationmarket.com.

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Jul 7th, 2009

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