no hassle listing blog

Any statistic is only valuable if it has been properly evaluated.  A tremendous amount of “information” gets printed and repeated.  Much of it is false or just plain silly.  Various economists make predictions about “the recovery” of the real estate market.  What is the definition of “the recovery”?  What exactly would one see if it “had recovered”?

RANK	YEAR	MLS UNITS SOLD	EQUITY SELLER	REOÂ	CASH
Â	Â	Â	Â	Â	Â
# 1	2005	104,133	99%	0.42%	12%
# 2	2004	98,294	98.4%	1.66%	13.5%
# 3	2009	91,757	30%	56.00%	37%
# 4	2010	90,408	37%	41.30%	42%
# 5	2003	79,512	98%	1.99%	13.5%
# 6	2006	74,105	99%	0.18%	9.2%
# 7	2002	68,411	98%	1.65%	14%
# 8	2001	62,523	98.7%	1.30%	16.5%
# 9	2008	59,220	64%	34.50%	21%
# 10	2007	54,231	96.7%	3.30%	11.6%

On the chart you see here note that the highest sales year in history was 2005.  The second best year ever was 2004.  Take just a moment to observe that last year, 2010 was the fourth best year ever for number of homes sold.  Also, notice the relative number of sales starting with the record breaking number of 79,512 homes sold in 2003.  Look at how last year (90,408 closed sales in the MLS) compares to the other top years.

So, what is different or “bad” about our current market?  Well I suppose it would depend on who you ask.  If you ask the hoards of investors currently paying cash what is “bad” you would get a very different answer than if you asked a home seller (a whopping 42% of all sales in 2010 were cash buyers, mostly buying bank foreclosures).  What is good or bad is “price”.  What you see on the chart is that the REO (Real Estate Owned – commonly called foreclosures) category just a few short years ago was almost non-existent and last year the bank owned houses composed 42% of all the sales (that number for 2009 was even higher, 56% for the year).  When the percentage of cash sales rises way above 12 – 14% there is a reason:  heavy investor buying.  Currently investors are a huge component of our market due to the current low prices.

Notice that we now have a category called “Equity Seller”.  Just a few short years ago, these people were just called “sellers”.  The category “short sales” so recently entered our MLS data that we have eliminated it as a category – although it would tend to mirror the REO pattern.

Here are some interesting points on the market from the Cromford Report: “Segmenting by price range we still see the greatest weakness below $100,000 where supply is very high and additional REO supply may be looming as trustees process the backlog from Bank of America’s hiatus last quarter.  Even here the situation is much improved because buying activity has accelerated as the pricing has fallen.  The strongest price range is currently $400,000 to $800,000 where sales prices have stabilized and even moved very slightly higher over the last four months when measured by price per sq.ft.”

After unusually low foreclosure numbers in November and December (due to seasonal moratoriums and Bank of America’s temporary halting of foreclosures) the numbers reverted back to normal levels with 6,783 new notices and 4,585 trustee deeds recorded.  The net effect was to reduce the number of pending foreclosures to fewer than 40,000 for the first time since March 2009.

Add in to the mix of all this, the government’s proposal to eliminate Fannie Mae and Freddie Mac – or at a minimum move it back to the private sector.  This is a bit like locking the barn door after the horse has bolted – but change is warranted and inevitable.  Whatever the change, it will no doubt result in a rise in interest rates as less money is available for lending.  Rising rates impact affordability and could create downward pressure on pricing.  Our hopes are that the change will be implemented gradually to minimize the damage and allow the private sector to fill the gap left by these lending giants.

As always this market continues to provide plenty of topics for the water cooler.  We will continue to share the trends as they appear.  Please call us with your thoughts or concerns.  We are here to help.

Russell & Wendy Shaw

It is with some fascination that we continue to watch the local real estate market as it continues its predictable pattern for unpredictability.  Forecasting has been largely abandoned, replaced by tracking the immediate history.  So where do we stand today (for those who simply want us to bottom line the market conditions, skip to the end of this article).

The market hit bottom in April 2009 (at least in the under 250K range).  From that point, speculation was raised of whether the worst was over or if in fact a “double dip” was in the offing. The market began a slight recovery phase with the first time homebuyer tax credit – which stimulated the demand for real estate through mid-2010 and made great headway in consuming the over supply that had so badly harmed pricing. Pricing began to firm and we pondered if the first leg of recovery had begun or not. Some 20 months later after the “bottom” was established, the double dip has arrived.  But as is consistent with our market for the last few years, it presents some interesting dynamics (some might say schizophrenic).

For the monthly period ending January 15, the price per square foot averaged $82.16 per square foot for all areas and types – down 1.3% from $83.20 on December 16.  Pending sales price per square foot seems to suggest further drops in sales prices ahead.

It is clear that we have now fallen below the April 2009 levels and overall prices are trending lower still. However the detailed picture is more complex than appears at first sight.

First, pricing for normal sales (not short sales or foreclosures) has actually strengthened over the last three months, from an average of $106 per sq. ft. in October to around $112 in January.  You read that correctly, normal sales have strengthened slightly.  While this would appear to be a cause for celebration, this improvement in normal sales pricing has little effect on the overall average because normal sales only constitute 28.4% of sales.

Short sales, not surprisingly after the foreclosure festival held by the lenders this summer, currently compose only 21.1% of the closings.  The lion’s share of the closings (and gaining) is the REO properties (bank foreclosures).  The pricing of short sales and foreclosures has been particularly weak in the last six weeks, falling from $82.78 on November 30th to $77.45 on January 16th. That’s a 6.4% drop in just 7 weeks and is the primary cause of the overall fall in prices. Sales pricing for REOs has remained virtually unchanged at $63.70 over the same 7 weeks, but this also negatively affects the averages because REO market share has increased from 47.6% to 50.4% in the same period. Increased market share of foreclosures rarely bodes well for pricing.

Price behavior also varies by dwelling type. Over the last six months we see the following:

Monthly Average $/SF for:	July 16, 2010	Jan 16, 2011	Change
Single Family – Detached	$89.98	$81.85	-9.0%
Apartment Style / Flat	$94.69	$88.94	-6.1%
Townhouse	$80.72	$73.26	-9.2%
Gemini / Twin	$69.05	$65.74	-4.8%
Patio Home	$121.47	$102.21	-15.9%
Mobile / Manufactured	$34.99	$33.66	-3.8%

 

So we see a less than cheery picture for sales pricing and no sign of any improvement in the next four to six weeks. In fact we see continued deterioration. But we are not overly concerned about this since sales pricing is a trailing indicator of the market and is the last thing to reflect any turnaround. When we look at other measurements things are not so gloomy. This is because lower pricing results in increased demand which is certainly making its presence known at the moment.

In short, prices are down, activity is up.  The current monthly sales rate and the number of pending listings are both very strong for this time of year, while active listings have declined over the last two months. All of these signs suggest a strengthening market. This gathering strength is still unlikely to be reflected in sales prices for several months, but it does look as though the spring buying season will be very busy in 2011. It will take more than one spring season to generate a market recovery. However it does mean that the downward pressure on pricing is starting to ease.

So 2011 is off to a bumpy but busy start.  Our thanks to Mike Orr of the Cromford report for the numbers and inspiration for this article.  As always, we will continue to track the market and share our findings with you. 

 Russell & Wendy Shaw

Phoenix: On Saturday, November 6th, Milestones Charter School is holding their 2nd Annual Holiday Craft Fair & Bazaar, while their neighbor, New Vision Center for Spiritual Living is holding their Annual Pet Blessing and Adoption Fair.

The Bazaar will be held from 9:00 am to 1:00 pm and will feature dozens of vendors offering unique holiday gifts, from handbags to wearable art;  photography prints to hand-made children’s apparel.

The Pet Blessing and Adoption Fair will be held from 10:00 am to 3:00 pm and will offer pet blessings, adoptions and fostering of a variety of animals, as well as special appearances by Pet Communicators.

The Holiday Bazaar will be held in the lot adjacent to the Milestones Charter School 4707 E. Robert E. Lee and New Vision Center for Spiritual Living, while the Pet Blessing will be held at New Vision Center’s buildings at 18010 N. Tatum Blvd. Both are located across from Moon Valley Nursery on Tatum Boulevard (between Bell & the 101) in Phoenix.