Phoenix Real Estate Market Update – December, 2012

After a sluggish summer, the Phoenix real estate market regained strength in the 4th quarter. Supply continues to build, although still below average. Homes priced below $200,000 are moving quickly and we are still seeing multiple offers on these homes – edging prices up at this price point. The highest appreciation rates continue to occur in those places where prices fell the most in 2007-2009 – primarily the drive until you further qualify communities. In contrast, higher priced homes have shown only a small amount of appreciation with just a few posting double-digit improvements such as – Carefree at 11.7%, Desert Hills at 13.9% and Tempe at 11.0%

Increasing prices are luring “on the fence” Sellers – and even builders – back into the marketplace. At some point, increased prices will drive back the demand resulting in a balanced market. We do forecast spring of 2013 to be a very healthy market for both buying and selling

The best summary of the 2012 market is stated most perfectly by Michael Orr of the Cromford Report (a trusted and highly sought after source throughout the Arizona real estate community)

The change in price over the last 12 months is clearly impressive. There are very few occasions in which the average price per sq. ft. rises by 25%. The only previous time I know of is May 2005 to March 2006 and that was at the height of the bubble. A rise of 2.7% in the single month of September would also normally be startling, but we have got used to big numbers. When the market eventually gets back to normal we should expect to see 2.7% for a whole year, not a single month.

What we have seen is the “coiled spring theory” in action. Supply became extremely low last year, but prices refused to react until the 4th quarter of last year. Now prices have moved substantially higher, we are seeing signs of the market cooling. Supply is growing as Sellers start to take advantage of the higher prices achievable. Some Buyers have become discouraged by the amount of competition – along with higher prices – and have left the market, resulting in some softening of demand. Sales volumes though ARMLS (Arizona Multiple Listing Listing Service) are down. However, this is somewhat misleading because a large number of real estate transactions are happening outside of the MLS. Deals between investors, new homes sales, trustee sales, pocket listings and private sales add up to a significant volume which is missing from the MLS numbers but captured by the county records.”

For the 3rd quarter, normal sales are now 59.5% of the market. The number of normal sales should continue to grow. Short sales have stabilized at 30.17% of the market (and we expect them to be a declining part of Phoenix area real estate sales for the next couple of years). Happily, REO/HUD (bank owned) sales are down to only 13.95% and have become almost irrelevant. On that note, you may recall last month I noted Bank of America suddenly shifting gears by taking back into their inventory REOs rather than selling them at auction to investors. After 5 weeks of this, it appears that they have stopped that program. We expect to see a small increase in REO (bank owned) listings as these homes go to market, but will have a negligible effect. The number of Notices of Trustee Sale in Maricopa County was 2,690, the lowest total since July 2007 over 5 years ago. This is all GOOD news. Our hope is that by the end of 2013 REOs will be back in the “normal” range.

As always, I am happy to provide you with a free market analysis of your home at any time. If you’re looking to purchase a home, NOW is absolutely the time to do so. I look forward to working you.

Cheers!

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