â€œIt was the best of times, it was the worst of timesâ€¦â€ so begins the novel a Tale of Two Cities, As we mentioned a couple of months ago, in the case of Phoenix area real estate it is the tale of two markets: homes under $350,000 in sales price and homes above the $350,000 sales price. That price point couldnâ€™t be more exact.
There are 52,361 active listings in the local MLS (Arizona Regional Multiple Listing Service). There were 5,616 sales in the past 30 days. This is a 9.32 month supply. At that level there is still an over supply based on current demand, but not nearly what one might fear. At least that is how it appears, but letâ€™s take a closer look. Under 350k there are 35,667 active listings and with 4,628 sales â€“ a 7.71 month supply. With less than an 8 month supply we could say we had returned to a â€œnormalized marketâ€.
Now letâ€™s take a peek at the sales and inventory in the above 350k price range. Inventory stands at 16,695 homes for sale. On the surface that sounds pretty good. Except there were only 886 sales in that price range for the past 30 days â€“ this is almost a 19 month supply (18.84 months to be exact)! That is a dramatically different picture and in sharp contrast to the homes below 350k.
Why the disparity?
Answer: FHA financing. The FHA limit for Maricopa County is $346,250. FHA loans, almost a relic for the past decade are now back in vogue. In fact, the majority of the sales are currently FHA financed sales. Why? A variety of reasons â€“ lower interest rates than jumbo loans, more generous lending guidelines, and the availability of FHA down payment assistance programs allowing buyers to purchase with no down payment or closing costs. So for all of the brainstorming that Congress is doing on housing bailout programs, perhaps the simplest answer lies in expanding the FHA price limits
Be that as it may, even these small bright spots are tenuous. Currently, and for a period of the next 60 days, Congress and HUD are revisiting the down payment assistance programs called Nehemiah and Ameridream. Because these programs currently comprise at least 50% of all the FHA sales locally, elimination of these programs would send another shock wave through our already fragile market.