Posts Tagged ‘cromford report’

If you have been out shopping for a home recently; you may have experienced multiple offer bidding wars occurring which is becoming commonplace for the “good” homes out there. You got to have patience and be prepared to jump when a home you like comes available because odds are that you are not the only one that will be interested in it.

The below chart is very interesting because it shows the Inventory Levels in the last 10 years for here in the Valley; compliments of The Cromford Report. I’ve had the pleasure of working in Real Estate now nearly 20 years, since 1993. When I started my career, I mainly focused on selling HUD homes which are definitely becoming quite prevalent in our marketplace again. Real Estate traditionally will bring someone a 5-6% gain in value year over year here in the Valley because of the steady flow of Supply and Demand- that was until 2004 when we saw our market go “crazy” and values increase exponentially.

To put this into perspective- our “happy place” for supply and demand typically is about 4-5 months worth of inventory.

Today we have just 27,618 Active properties in our marketplace and 104 days worth of inventory

Last Quarter; May 2011- we had 33,094 Active properties and 132 days inventory

Last Year; August 2010- we had 43,417 Active properties and 172 days inventory

Clearly the trend is downward with our Active properties available to pick from; but the word has not gotten out to the general public yet- therefore we have not seen a jump in prices as of yet.

Our average price per square foot today is just $82.46 and our prices have been relatively stagnant since September 2010. The question is how long will that last? Inevitably, the law of Supply and Demand will have to kick in sooner or later and the prices will definitely start to rise at some point in our near future.

When I reflect on my own career- today’s pricing is very comparable with the nineties and rates under 7% were considered very good back then. Today we are happy when rates are below 5%, which means monthly our homes cost us less today than they probably ever have ever in recent history.

In 2004, I had the first Holiday Season where my business did not slow down at all. The Days of Inventory in November 2004 were just 46. The “peak” of our market was April of 2005 when the supply was at 31 days of inventory VS the worse we have seen being in April 2008 (just 3 yrs later) at 425 days of inventory available. Our advice to folks watching the market and trying to decide when it’s safe to get back in it- is TODAY is the day but you MUST have patience and be prepared for the bidding wars and multiple offers.

It can be frustrating, but it’s worth it because the prices & rates are still so low. If you or someone you know is considering making a purchase and needs help from an experienced and trust worthy Realtor- please let us know. Contact us here to get started OR call us at 480-243-4242 & we will gladly send you a customized list of homes to check out!

Every Month we like to post the latest article by Mike Orr to educate our clients on the most recent stats in our local Real Estate Marketplace.  Very few have not been affected and with prices comparable now to those of nearly 20 years ago, we are seeing very little inventory out there for buyers to pick from.  

CLICK HERE to read Mike’s entire article; but here’s a summary quote that is very telling.

“It seems to me that although the supply/demand imbalance is becoming extreme, demand from investors alone is unlikely to sustain a significant upward price movement. We may have to wait until the general public realizes the degree to which the reality and perception of the supply picture have diverged, so that fear of missing out on a bargain overcomes the fear of prices dropping yet further.” 

Our thoughts is that once word is out to those “fence sitters” that there are few “good” houses out there right now, those prices will start to climb as more competition hits our local market place.  Don’t miss the “bottom” if you are thinking about buying!  And for those of you wanting to (Short) sell, homes are going fast- before the holidays roll around and it slows down- give us a call to discuss your options 480-243-4242 or CLICK HERE to get started.

The Law of Supply and Demand have not effected prices- yet! If you are thinking about buying a home and putting it off until you hear that things have gotten better out there- you will miss the bottom of the market for sure- please read the article written by Mike Orr (below) of the Cromford Report and he explains WHY.

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It feels almost like the inverse of 2005.

In the second half of 2005, supply rose dramatically but no-one seemed to take any notice. There was a widely believed myth that prices could never go down. Between March 31, 2005 and June 30, 2006, active listings rose from 8,394 to 45,729 (up 445%) creating a huge glut of homes for sale. Yet average sales prices continued to rise throughout this period, up 28.6% from $146.98 to $189.05 per sq. ft. Meanwhile demand fell 16.5%, with sales per month dropping from 8,490 to 7,093. It was as if everyone believed the laws of supply and demand no longer applied. Of course we found out by 2007 that supply and demand really did matter and the bubble burst explosively in 2008 causing untold damage to the economy and family finances.

It’s a question of timing. Supply and demand do control pricing, but in real estate there is a very long time delay between cause and effect. That timing can be extended even further by sentiment. In 2005 sentiment was off-the-charts positive – "irrational exuberance" ruled the roost and caused people to make decisions that in hindsight look crazy. Not just homeowners and developers, but especially lenders and the investors who fueled the credit surplus. Those few of us who tried to warn people in early 2006 that prices would fall dramatically were treated a bit like Harold Camping predicting the end times.

The opposite seems to be happening now. Sentiment is very negative. Everyone seems convinced that prices can only fall further, yet demand is rising and supply has been falling like a rock dropped off a cliff for 6 months now. It comes down to one simple fact: people believe what they want to believe. The facts do not exert a significant influence.

Here at the Cromford Report, we only deal with facts and figures, not beliefs, so here is the market update.

Sales – We are currently recording 9,814 sales in May. This is up 3.5% over April and up 10% over May 2010. This is a very strong sales total because in May 2011 sales are not being boosted by the government bribe (sorry, tax credit) that applied in 2010 for buyers of owner-occupied homes.

Pending Sales – At 13,268 on June 1, pending sales are down 0.4% compared with May 1 but up 6.7% compared with June 1, 2010. Again an extremely strong indicator of demand. In 2010 demand fell sharply during the summer after the tax credit expired, but there is no sign so far that the same will happen in 2011.

Active Listings – At 31,346 on June 1, active listings are 9.4% below May 1 and 23.3% below June 1, 2010. Supply is clearly falling fast. However this understates the situation because a large proportion of the active listings already have a contract against them. In fact there were 7,737 AWC (active with contingent contract) listings as of June 1, 2.6% higher than the very high level we saw on June 1, 2010. If we exclude these AWC listings, we have only 23,609 active listings, down 12.7% in a month and down 28.8% compared with last year. This is almost 60% down from the peak of October 2007.

Supply Versus Demand – The average months supply (active listings divided by monthly sales rate) for the period Jan 1, 2001 to June 1, 2011 is 5.9 months. Right now we have a 3.2 month supply. Yet we read everywhere that there is a "glut of foreclosed home on the market". What we are reading may have been true in November last year. It is not true now. In fact available supply is really even tighter than this. If we only count active listings that don’t have a contract the months supply number drops to just 2.4 months. Anyone who thinks this is a "glut" is not living in the real world. They should just ask anyone who is actually trying to buy a home right now. Competition is intense, and not just for bank-owned homes and trustee sales. It is also heating up for short sales and normal listings. If you are trying to buy a home that is at all desirable and is priced at market or below, expect multiple bids. If you are a seller, then you only need to price realistically and your home will sell quickly.

(All the above numeric information is for "all areas & types" within ARMLS.)

Records Being Set

In Maricopa County, May saw the largest ever number of distressed homes disappear from inventory. Pending foreclosures fell by 3,394 homes while REO inventory fell by 971 residential properties.

For Maricopa County, May gave us the highest ever percentage of out-of-state buyers. 29.9% of sales went to non-Arizona residents. The average between January 1999 and May 2011 was 11.9%. The absolute count was also a record – 2,648 homes sold to out-of-state buyers. The average since Jan 1999 is 1,446.

For Maricopa County, May saw the highest ever number of foreclosures selling direct to third parties at the courthouse steps. The record set was 1,476, 33% of all the trustee sales.

Paradise Valley

Exceptionally strong market activity is occurring in Paradise Valley where sales are now averaging 52 per month compared with 31 last year at this time. Inventory is down to 319 from a peak of 581 in April 2009 when sales were averaging only 9 per month.

Prices

After a bump upwards between mid April and mid May, average sales price per sq. ft. is back down a little at the beginning of June. Although we are still some 2% to 3% above the market bottom in January and February this year, in most places prices have not yet responded to the huge changes in supply and demand. Why not? Please refer to what happened in 2005, but with everything upside down. The rules of supply and demand have not been lifted. Of course, you don’t have to believe me, but please don’t say I didn’t warn you.