Inventory down, but so is pricing… Why is the Phoenix market defying the laws of supply and demand?
For the past 6 months the Arizona Home Group has been telling you that our market is one of the hottest in the country. We have set record level sales in the months of March, June, and August of this year. Investor activity is still at an all-time high as people try to cash in on the low prices and the strong rental market. Even with the snowbirds gone, our inventory has dropped from 40,000 homes to under 20,000 as of today. Yet, at the same time, the average home price in Phoenix has dropped 4% over the same time period…Why is this?
Well, in my opinion, this can probably be attributed to 3 main reasons: Appraisals, wholesale pricing, and consumer confidence.
APPRAISALS: In today’s market of uncertainty, the appraisers are much more cautious than they were back in the boom days. Indeed, appraisers were considered a large part of the problem with soaring house values from 2003-2007. As a consequence, you are seeing much more conservative appraisals coming in today. This is also in part because there is simply not that much inventory to use as “comparables.” In some neighborhoods up to 80% of the homes are foreclosures, so what else can an appraiser use?
WHOLESALE PRICING: The other part of this equation is a continued oversupply of foreclosures flooding the market at auctions, and then the MLS at 15-25% off Retail pricing. In short, the banks are still unloading houses at bulk pricing, which continues to devalue the overall market. Until the banks stop foreclosing, it’s hard to see how prices will stabilize. And this of course leads to part 3.
LACK OF CONFIDENCE: I have read reports that say that there are many “everyday” buyers willing and able to purchase homes right now, but they are simply watching and waiting. This may be the case for you as well. It’s a vicious cycle that keeps feeding itself. Until buyers start to see some stabilization in the market, they will not jump in. However, if these traditional buyers do not start buying, the recovery will be much slower.
So, what does it all mean?
It is virtually impossible to catch the market bottom…in any market: real estate, equities, and even bonds and commodities. Is your portfolio filled with stocks you bought at the bottom? In reality, prices have dropped 60% on average from where we were when all of this began. We have basically retreated back to 2002 pricing. If you see something you like, you should move on it, like many of my clients have done this year. In the end, you are more than likely “long” on Phoenix and 5-7 years from now you will certainly have experienced a nice lift, especially if we are helping you make an educated choice!! People will always want to live in Phoenix, either full-time or part-time. Sunshine never goes out of fashion. It’s a once-in-a-lifetime opportunity we find ourselves in, and we are here to help you make a smart investment.
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Let’s look at the numbers from August to September …..
NEW Inventory is DOWN: 6%
Overall Inventory is slightly lower.
Month Supply is slightly higher.
Pending Sales have dropped from 19,549 to 18,729 units, 30 days ago
Closings were DOWN: 8%
AVG Sales Price was UP: fractional
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Inventory – - Month Supply – - Closings – - Avg Sale Price – - LP/SP % – - Day on Market
Sep: 19,615 – - 3.35 – - 8095 – - $152,692 – - 96.8 – - 118
Aug: 19,549 – - 3.15 – - 8,805 – - $151,309 – - 96.8 – - 119
July: 19,942 – - 3.39 – - 8,557- – $154,184 – - 96.7 – - 118
June: 21,323 – - 2.87 – - 10,940 – - $159,216 – - 96.2 – - 115
May: 23,145 – - 3.35 – - 9,906 – - $158,208 – - 96.1 – - 114
Apr: 26,290 – - 3.87 – - 9,477 – - $160,209 – - 95.7 – - 116
Mar: 29,522 – - 3.96 – - 10,006 – - $157,646- – 95.1 – - 123
Feb: 42,120 – - 5.85 – - 7,201 – - $155,280 – - 95.3 – - 120
Jan: 43,458 – - 6.57- – 6,610 – - $156,239 – - 95.1 – - 122
Dec: 44,936 – - 5.34 – - 8,318 – - $160,774- – 94.4 – - 123
Nov: 46,353 – - 6.83 – - 6,786 – - $158,477 – - 95.7 – - 115
Oct: 46,116 – - 6.99 – - 6,598 – - $163,222 – - 95.4 – - 114
Sep: 45,390 – - 6.71- – 6,768 – - $159,872 – - 95.5 – - 116
(All Data provided by Arizona Regional MLS)
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Distress sales continue to drop…Traditional Sales growing.
I have many clients ask me just how many bank homes there are for sale…?
Well here is a percentage breakdown of the types of homes in today’s market.
33% are Bank Owned Foreclosures
25% are Short Sales
42% are “traditional” sales. (40% of the market in August)
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As a percentage of the market, mid-level price ranges creeping upward….
It looks like more buyers and investors are buying in the 200-500 price point. I believe this is because investors are seeing good rental returns on more expensive homes, as rental rates continue to rise.
Here is a break down of percentages by price range
43% are under $99,999
48% are from $100,000-299,000
6% are from $300,000-499,000
3% are OVER $500,000.
The Higher End Luxury Market as a percentage of the overall market is still very small and it is shrinking in September…Closings went down again for the 5th month in a row… Less snowbirds = Less Luxury Sales
Homes closing in the 1 Million+ range were at 42, down from 57. The highest sale in September was a 4.2M “traditional” sale, in Desert Mountain ($572/sqft)….
So, as we have stated before, if you are looking to steal a luxury home, now is the time to do so…before the snowbirds start heading down. There are plenty home owners sitting in this heat waiting for a buyer. We have roughly 1100, $1 Million+ homes for sale.
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Arizona Home Group thanks all of you for attending our Seminars!
We had great turnouts in Ontario and Alberta last month. It was a pleasure to meet some old “friends” and some new acquaintances. We are looking forward to helping all of you find your “Place in the Sun” someday.
As a reminder, if you are planning a trip down here this fall or winter, please send us an e-mail sooner than later. We are heading into our busy season, and we already have a number of clients booked for house hunting visits. We would like to get you a spot on the calendar as soon as you have your travel dates set.
Thanks a million!
John
Sharon
Melanie
Finding your next home is just a phone call away:1-888-844-0001
