no hassle listing blog

Last month we covered the remarkable shift the market has taken recently, shifting from a neutral market over to an overheated seller’s market.  The shift occurred in reality much sooner than it has taken to show up in the minds of both buyers and sellers.  However, the shift HAS occurred creating the best selling environment for sellersPhoenixhas seen since 2006.

What is behind this shift?  The short answer is “limited supply”.  The supply has tightened severely and no easy fixes for additional supply are on the horizon to ease the problem.  In fact, January had the lowest number of new listings for a January in the Greater Phoenix area since this statistic began being monitored in 2001.  Ditto for February.  Even 2005 – the pinnacle of the frenzied seller market – had more new listings than 2012.  Plus, there are other factors missing in the current supply of homes pipeline that were present in 2005 – builders and for-sale-by-owners.  Both of those are missing in the 2012 marketplace.  As previously discussed, builders have only just begun to trickle back into the market as the cost to build couldn’t even come close to the pricing of the distress sales. Foreclosed homes (REO) are being added to the MLS at the slowest rate in 5 years.  Even trustee sales, which used to rarely sell at action and therefore ended up on the MLS, are now being sold to investors instead. In fact, 2 out of 3 homes at trustee sales are going to private purchasers leaving very few to show up on MLS. The only segments of the market that are not reflecting these severe imbalances on supply are the 55+ communities and the luxury market.

This imbalance in supply and demand is finally having an impact on prices.  Until the traditional seller and builders come back in to the market, there are no factors at play to ease the supply shortage.  Therefore, sellers, at long last, can once again sell as they face little competition.

The real question is when should a seller sell in a rising market?  Long-term predictions have failed miserably in the last 8 years, so we are loathe to break out our crystal ball.  What does seem clear is that if you have been putting off selling because you have been waiting for values to rise or because you believed there were no buyers for your home – now is the time to sell.  The economy, interest rates, financing, builders and lending policies can all throw a damper on the real estate market.  At the moment, none of these factors are impacting the strength of the seller’s market.  Now may be the time to act.

As always, our thanks to the genius Mike Orr for the insightful numbers provided; and to you our friends and clients, we thank you for your continued loyalty.

Today’s answer to the question would be a much different answer than a year ago. In fact for the years 2008-2011, the bargain in the market place was most definitely bank owned foreclosures. Fast forward to today, and the very best bargain in the marketplace is unquestionably short sales. Why? Well, first, the bank owned foreclosures are lower than they have been for years. The rule of supply and demand applies here – little supply with lots of demand for the foreclosures is causing them to be bid up in price taking them out of the realm of a bargain. That leaves the “other distressed sale” – short sales (does this sound like the pork ads – the “other white meat”?). In fact short sales typically give the benefits of the equity sale (homeowner still maintaining the home) with the bank pricing that used to be part of the bank owned sales.

Why has it taken so long for short sales to become the purchase of choice? In short, the past performance of the banks. For far too long the banks floundered and failed to get their short sale processes in place to expedite these sales. At long last, improvement has come in the form of more approvals in better timeframes. At last we can truly recommend them to both our sellers and our buyers.

Craft Fair & Bazaar                    

Saturday, March 10, 2012    9:00am to 3:00pm

 from handbags to wearable art  and every imaginable craft in between–

Art from the Heart, B’s Bling Embellished, Designs by Dena & Dara, Earth Stone Jewelry, Essential Body Pleasures, Girl Power, Izzy Bella Designs, Lillie of the Valley, Lily Pad Bows, North Valley Carpentry, LLC, Origami Owls, Party Lite, Pootsie’s Place, Scentsy, Sheridan’s Stuffed Stuff, Tastefully Simple, Thirty One Gifts, Usborne Books, Wood Wrought plus MANY MORE!

Chicago’s Best and the Girl Scouts will be selling food & COOKIES!

Milestones Charter School

4707 E Robert E Lee Rd.

Phoenix, AZ 85032

(off Tatum between Bell & Union Hills)

There is a lot of talk in the national and local press about “when the recovery will happen”.  Seldom is “the recovery” ever defined.  The word is tossed about as though the person saying it and the listener both know what it means.  But what does it mean?  And just what is “recovered”?

The signs of recovery typically come in a few forms:  Supply drops, demand increases or exceeds supply, distressed sales drop (especially foreclosures) and are replaced with traditional sales, and finally pricing stabilizes and begins to edge up.  In the final stages of recovery, builders re-enter the market.

Now that 2011 has come to a close and 2012 is in its infancy, it would seem appropriate to look at where the valley residential real estate market stands having slogged through one more year.  When this debacle began in earnest back in 2007, we speculated on what the recovery might look like.  Prior to this market decline,  recoveries tended to come in the shape of a  “V” – meaning one leg down and one recovery leg up.  This market was unique.  This market formed a “W” shape – dropping, then a “recovery” leg up (thanks to the artificial “recovery” prompted by the tax credit), followed by another drop once the stimulus was removed, and now what we believe is the final leg up.  It has taken 4 rather brutal years but we believe we are now in the early stages of our actual real estate recovery.  Of course factors like the economy, jobs, and interest rates all have the ability to affect the speed and trajectory of the recovery – but we do see the recovery underway.

Let us share some of the positive statistics comparing where we were only a year ago (as usual, thanks to Mike Orr of the Cromford Report for his impeccable research):

Sales per month are up 8% from this time last year.

Active listings were 19, 377 on December 1^st 2011 – down 50% (that’s right, 50%) from the same time last year.

The day’s inventory (the number of days to sell all the listings if no new listings were added) is down dramatically to 96 from 184 a year ago.

The price per square foot is up 3.1% in one month – and up 6.5% from the extreme low point measured in September 2011 (price per square foot most accurately reflects short term price movement).  In fact in every price range, sales prices by square foot are higher than a year ago.

New notices of foreclosure have continued to be filed at similar levels for the last six months of 2011 (about 4500 a month) however increasing amounts are resulting in short sales, loan adjustments, or a purchase by a third party at the trustee sale.  Add in the banks selling assets to hedge funds and non-profits and foreclosed homes are becoming a smaller and smaller portion of the market than we have seen in the last 3 years.  To put this in perspective, foreclosed homes for sale under $100,000 are down 81% from this time last year (72% in the 100K-200K range).  Those are staggering numbers.

There is really no negative news to counter the positive.  In fact about the only slight damper occurs in the 800K and up category which is showing growing supply with demand below par.   Interestingly enough the pricing is remaining stable in this range despite the doldrums that appear to be in effect.

So as we begin the year 2012 it would appear we have much to be thankful and hopeful for.  It appears the real challenge lies primarily in the mindset of the public and real estate professionals.  The primary battle appears largely in the mind, as the facts need to replace the emotion of the market.  This will take some time.  Our hopes are that these facts will help assist that battle.

Russell & Wendy

I wanted to feature Melrose Paradise Recreation Club, spreading the word to those in our community who may want to participate in the 50^th reunion. 

One of the best kept secrets in Melrose Paradise is an approximate 2 acre parcel of land located at 30th St. & Lupine Ave. (North of Cholla St. & South of Cactus), it is home to the Melrose Paradise Recreation Club.   

Melrose as we call it, is an outdoor community recreation facility with amenities including a four lane pool, Snack Shack, bathrooms with showers, volley ball, tether ball, basketball, playground and is also home to the Melrose Makos Swim Team which is part of the recreational Desert Swim League.  Melrose also offers swim instruction, as well as hosts many family friendly seasonal events.
 Melrose is celebrating 50 years in operation this Fall.  It’s a not-for-profit organization founded in 1961 by a hand full of ambitious neighbors determined to provide an oasis in the desert for their families.  Thanks to their legacy we will be hosting a 50th reunion event Sept. 3, 2011(Adults only) and also on Sept. 5, 2011(Family Potluck BBQ).

You may explore the Melrose website at www.MelroseMakos.com which will also provide a link for Facebook and the reunion invite

As we hit the mid-way point for 2011 the trend that began as a trickle in the beginning of the year seems to be established. The cliff note version is as follows:

• Supply continues to decline and demand remains at a high level almost everywhere.
• Having hit bottom in January, average price per square foot is now moving higher.
• Buyers are active at all price levels, and multiple offers are returning to the market.
• Pending foreclosure counts are dropping at an accelerating rate.

For those who want more detail, read on. The overall price per square foot inched up by 2.93%. How did that happen? The simple answer is that normal sales gained market share, moving from 34.2% to 35.9% of sales, while foreclosed homes lost market share (always a good sign). Foreclosed homes dropped in market share moving from 46.9% to 44.2%. Short sale and pre-foreclosures also gained market share moving from 18.9% to 19.9%. Generally, increased market share in the normal sales and short sales and away from foreclosures, result in a higher price per square foot. The one opinion all experts share is that foreclosures have an extremely negative impact on home prices.

New notices of foreclosures are dropping rapidly. April’s figure is looking lower than anytime since 2007. Wow, that is something we have waited a long time to say. The actual trustee sales also are down, which combined with the lowered new notices is helping drop the inventory of pending foreclosures. Anyone looking for foreclosure bargains will be sadly disappointed soon with the lack of inventory. Supply is falling at a fast rate and in fact supply levels have not been this low since January 2006. If this trend continues, we expect to see even more multiple offers and bidding wars over the dwindling supply of all homes, not just distressed homes.

Another interesting trend is that investors are buying more than ever at the courthouse steps. A record 30% of the homes being auctioned off were sold to investors in April. As a comparison, when foreclosures really began their climb in April 2008, 95% of all foreclosures reverted to the lender. As these foreclosures continue to dwindle, look for pricing to continue to struggle upwards. As we mentioned so many times, price is a trailing indicator – meaning that supply/demand imbalances occur first, with pricing to follow.

Here are the positive trends:

• Economy and jobs are improving slowly
• Homes supply has been declining fast since November
• Low prices are stimulating stronger demand for homes – intense low-end demand primarily from investors; Affluent buyers are returning to the luxury market
• Foreclosure notices are now declined to late 2007 levels

Here are some negative trends:

• Strong shift from ownership to rental occupancy
• Financing still remains a challenge for owner occupants (41% of purchse are all cash; another 22% have more than 10% down)
• Arizona population has declined since 1st quarter of 2009

Short term, the trends appear to be that pricing is moving upwards, demand is outpacing supply, rental supply and demand are in balance. Long term trends remain elusive as economic recovery must continue and the dreaded “option arm resets” that were to peak in 2011 bringing a wave of foreclosures with them must be responsibly resolved by the banks and the homeowners.

A word of warning, expect to see a report from Case-Shiller explaining that housing prices are falling. That’s right, just the opposite of what you see here. The missing information on the Case-Shiller index is one thing: time. Case-Shiller is 6 months after the fact. That means that any current information is actually speaking of what was occurring last November, not mid-year. So, you have been warned.

The best trend of all from our perspective is bitterly acquired success of the short sale. Apparently after just 3 short years, the banks finally have gotten some systems in place for dealing with short sales. Further, the banks are once again postponing trustee sales for sellers who are truly working in cooperation with the banks to sell their homes through a short sale. Compared to the foreclosure-fest of August 2010, these indeed appear to be halcyon days. One year after HAFA (the government pre-approval program for short sales which pays up to 3K to sellers completing a short sale) was implemented; the banks actually are doing the program. This allows sellers to retain some dignity and cash in the elimination of their over-encumbered homes.

So there is the current market of the moment. As always, we thank Mike Orr and Tom Ruff of The Cromford Report for their exhaustive research. Our hope is that the W shaped recovery is underway for real and that we have begun our true climb out of this housing hole.

Russell & Wendy Shaw

Prior to 2007, home foreclosures played little to no role in the local real estate market. In fact only agents of our advanced years recalled the late 80’s, when the Savings and Loans went under and the resulting foreclosures flooded the market. History has a way of repeating itself and so it was in August of 2007 when the “Mortgage Meltdown” occurred, resulting in the return of the foreclosed home. What began primarily in the outlying communities (the “drive until you qualify communities”) spread rapidly until no neighborhood remained untouched. So pandemic was this wave of foreclosures that it quickly became our “new normal”. The danger of this kind of normalcy is that, well, it isn’t normal. Eventually, given enough time, the number of foreclosures will drop until they no longer are a factor in the marketplace. In short, at some point all the foreclosures will have happened – it is not an inexhaustible supply.

In fact, from January of 2006 through March 2011, Maricopa County has recorded 167,621 Trustee sales. Of those sales, 138,235 have been single family residences. To put this in perspective, there are 1,009,755 single family residences in Maricopa County. 13.7% of single family homes have been through a trustee sale. The zip code with the lowest percent of foreclosures is Sun City West with only 1.3%. The highest percent of foreclosures is 35% in the Phoenix zip code of 85043. For those of you who would like to see the breakdown of foreclosures by zip code, click here. Our thanks again to Michael Orr of the Cromford report for these statistics.

Sales Update

On a cheerier subject, real estate sales in the valley continued their strong pace. For only the fourth time ever in a month, residential sales were over 10,000 this March. For perspective, the three other months of sales over 10,000 were: June 2004, June 2005 and August 2005.

Single family detached homes consisted of 8,350 or 84% of the 10,000 sales. Seventy-seven percent of all single family sales were under $200,000. There were 862 single family sales under $50,000 and a whopping 90% of those were purchased with cash.

When combining all residential sales, 43% were lender-owned sales (REOs), 19% were short sales and 38% categorized were neither a short sale nor a lender-owned sale, though many of sales in the other category were recent lender-owned sales that were fixed and flipped.

Not surprisingly due to the high rate of displaced homesellers, the single family rental market remained hot with only a 1.5 month supply of single family rentals in Greater Phoenix.

Trends

Looking at the numbers and the implication for the immediate future, Michael Orr had this to say:
“With the balance between supply and demand changing quite quickly for the better over the last four months, we are down to an overall inventory level of 4.2 months based on the monthly sales rate. This can be regarded as a “normal” reading for the time of year (it is below the 4.5 we measured in 2002 at the same point in our last “normal” year). This goes a long way towards explaining why prices have stabilized once again.
Currently the trend is for supply to fall further and demand to increase, and if this continues then at some point it is likely to lead to prices moving higher. How soon and how much, it is too early to say. However it is not too early to say that prices are unlikely to fall to any significant degree while this situation persists. Last year the disappearance of the tax credit at the end of April caused the market to deteriorate suddenly in May and pricing fell sharply between July and September. At the moment we see no indication of a similar interruption to the recovery process that is now under way.”
Recovery! What a long awaited concept. We welcome it.

Russell & Wendy Shaw