When looking at total sales, January sales of 6,455 represented a 17.7% drop from December. This is the 2nd largest drop we have seen in the past 12 months, surpassed only by a 24.4% drop in July/2011. The good news is that this drop is not due to a lack of buyers in the marketplace, but more a lack of supply. At the present time, there are only 14,445 homes that are currently active on the market in Maricopa County, which has approximately 1.4 million homes. This lack of supply is hurting the overall number of sales metric, but is helping the market in many other ways, which I will go over in this months report.
ARMLS recently released the numbers for December/2011 in their monthly STAT Report, and the results are mixed. Here is a breakdown of what happened in January in the Metro Phoenix Real Estate Market:
Sales (Month over Month)- Sales were down 1.3% (compared to December/2011), with a total of 6,455 closed listings. As stated above, this is the 2nd largest drop we have seen in total sales in the past 12 months. Advantage: Seller
Sales (Year over Year)- January/2012 sales were down 6.7% over the December/2010 figure of 6,541. January is always a tough month for sales, as we are just coming out of the holiday season. Advantage: Seller
New Inventory- We saw an uptick in new listings hitting the market, increasing by 34% over December/2011 (9,833 new listings hit the market in Janaury). For the past 10 years, new inventory has risen by an average of 61% from December to January, so this number should come as no surprise. That being said, remember that as of today, there are only 14,445 active listings on the market, and 9,833 were listed in January/2012. See where this is going? Think we might have a little supply problem? Advantage: Seller
Total Inventory- Despite the increase in new listings, total inventory rose only 1.3% in January. This metric pretty much leveled-out between July and January, settling in the 24,000-28,000 range (this takes into account all pending and AWC/pending short sales as well). This inventory level matches up with the inventories we had in all of 2003-2004, before the "real-estate bubble" began. Advantage: Seller
Months Supply Of Inventory (MSI)- This metric has been going up steadily since June, and January was no different, coming in at 3.88 months. Generally, an MSI below 4 indicates a seller's market, between 4 and 6 represents a balanced market, and above 6 represents a buyer's market. Advantage: Seller
New List Prices- Both new list price metrics , median and average, rose in January. The new listing median list price jumped 7.8% to $140,000, and the average new list price increased by 21.5% to $243,200. The last time we had an average new list price in the $243k0$244k range was November/2009. Similarly, the last time the new listing median price was in the $140k's, was January/2010. Advantage: Seller
Sales Prices- Again, both sales price price metrics, median and average, rose in January. The median price rose almost 2.6% to $120,000 in January, compared to December ($117,000). Average sales price rose 3.3% from $162,200 in December, to $167,500 in January. In my opinion, this is the metric that will eventually tell us that we have "hit the bottom" in the Metro Phoenix market. The median sales price has not been at or above $120,000 since October/2010, and the average sales price has not been above $165,000 since July/2010. While this is definitely not a "trend", it is nice to see these metrics increase, as they provide what I believe is the most important barometer when judging the health of the real estate market in Phoenix. Advantage: Sellers
Foreclosures Pending- Dropped from 19,979 in December to 18,287 in January. Beginning at the high-water mark in November/2009 (50,568), this number has dropped every month since then, and represents 36% of the all-time high. Foreclosures pending has now dropped 23 out of the past 25 months. This is a HUGE improvement over the high of 40,641 in January/2011. If this trend continues, we could see foreclosures fall under the 10,000 mark by May or June. I can't stress enough how important this news is, and we all hope that it continues. This is a very important metric, as we all know that coming out of this mess will depend heavily on the amount of foreclosures on the market. Advantage: Buyers
Distressed Sales-Distressed sales, which comprise of the total number of bank-owned and short sales, are the main source of the problem in our market (depressed pricing). Distressed sales as a percentage of actual sales reached a market high of 74.1% in September/2010. In January/2012, distressed properties (3,726) represented just 57.7% of total sales. For the second month in a row, short sales outpaced foreclosure/bank-owned sales In January, there were 1,801 lender-owned sales, and 1,925 short sales. This is fantastic news! More and more homeowners are understanding the short sale process, and the many benefits that come with a short sale versus a foreclosure. There is no doubt that if this trend continues, we will continue to see a steady increase in both the average and median sales prices in the months ahead. Advantage: Sellers
Lender-Owned Sales- Dropped significantly in January to 1,801 from 2,165 in December, and it's percent of total sales rose by .3% to 27.9%. This number has hovered between 40.8% and 46.2% since March/2011. This is great news, and it's a trend that we hope continues! Advantage: Sellers
Short Sales- The number of short sales in January decreased by 23.8% to 1,925, representing 29.8% of total sales. As stated above, I expect this number to continue to trend upward, as more Phoenix short sale agents are getting better at understanding the short sale process. Lender-owned and short sales continue to dominate the market, representing almost 60% of total sales in the Phoenix market. Our team of Phoenix short sale agents are ready to help, if you are considering a short sale. Advantage: Buyers & Sellers (short sales are better for the overall health of the market when compared to REO sales!).
Avg Days On Market- Decreased in January to 91 days. As short sales begin to dominate the market, we expect to see this number increase during 2012. Advantage: Neither Seller or Buyer
So, what do you think? Is it a seller's market or a buyer's market? I still think we are temporarily faced with a seller's market. While overall inventory increased by 1.3% in January, the telling statistic is that there are only 14,000 homes on the market today, listed as active. This, in a market with approximately 1.4 million homes. This statistic alone explains why it is so difficult for buyers to find homes in today's market.
There are tons of great things to point out from this report. All four pricing metrics showed an increase, with the largest gain (21.5%) in average new list price. There are several items that are "holding steady", including total inventory, market-wide MSI (months of supply inventory), and days on market. The biggest news to report is that short sales are continuing to outpace foreclosures. Should this trend continue (and I believe it will), we should start to see an increase in our average sales prices, which will be a sign that we are headed to recovery.
According to the University of Arizona's EB Eller College of Management, in their "Arizona's Outlook 2012-2013: On The Road To Recovery". They report that "all aggregate indicators of economic activity for Arizona are improving: robust spending and declining unemployment, bankruptcies and foreclosures. In addition to this, the Census Bureau is predicting a positive net migration to Metro Phoenix at 23,000. After many months of negligibly population growth, this is indeed good news.
If you are a buyer, hang in there! While there are some incredible deals in this market, you have probably realized (or will soon realize) that trying to purchase a home in this market is a daunting task, especially without the assistance of an experienced Phoenix buyer's agent. We are working hard to find homes for our buyer clients, but with inventory being so low, its been difficult, at best. For our clients reading this, keep checking your email inbox, and call us immediately when you see something you like.
When it comes to finding a home, TIME IS OF THE ESSENCE. If it's a good deal, expect multiple offers in the first 24-48 hours, and be ready to "go in strong". One more piece of advice for our buyer clients...If you are trying to obtain financing, STAY AWAY FROM THE INSTITUTIONAL LENDERS (i.e. Wells Fargo, BofA, CitiMortgage, GMAC, etc.) and Mortgage Brokers, and work with a MORTGAGE BANKER. The "big-banks" have literally screwed up every deal we've worked on in the past 3 months. This is not an anomaly, it is a trend. They have tightened their purse-strings, and are creating major headaches for our buyer clients. Work with a mortgage bank that can close your loan in-house, and has in-house underwriting. We have a list of qualified mortgage banks in the Metro Phoenix market that can close your loan in 15-20 days. The average institutional lender is having a difficult time closing a loan in 60-75 days, if they can close them at all. PLEASE do everything you can to work with a qualified Mortgage Bank. There is nothing more frustrating than waiting 3-4 months for a short sale to be approved, only to lose it because your lender couldn't get it done in time.
Now more than ever, you need a seasoned professional to walk you through these tumultuous times, not a part-timer.
Call me today and allow us to set up a plan to help you buy/sell your next home. You'll be glad you called.
Until next month....