Daily Observations Published by Cromford Report April 1-8

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Daily Observations Published by Cromford Report April 1-8

April 8 - The number of active REO listings has stabilized at 1,200 to 1,300 excluding AWC listings, having fallen within that range from March 20. This is less than 2 weeks supply. The number of active short sales listings, excluding AWC, has also fallen to within the range 1,200 to 1,300 and has now dropped below the REO count. This represents about 18 days supply. This is for all types of homes across Greater Phoenix. Below $150,000 (which is well above the median sales price) and looking exclusively at single family homes, the supply of distressed listings has fallen by 93% since January 1, 2011. With this huge collapse in supply of affordable homes, it should be no surprise that the market has reacted with higher pricing. Today’s average annual appreciation rate across all areas & types is 16% and climbing.

April 7 - The 30-day average rate for trustee deeds issued in Maricopa County is currently 69. That is the lowest figure we have recorded over the last 50 months. At the start of 2012 the number was 88 and so we have declined 22% over the last quarter. We still see absolutely no evidence whatsoever of that mythical “new wave of foreclosures” promised by so many other market observers.

April 6 - The monthly median sales price for all ARMLS areas & types reached $131,000 today. This is significant because this is the highest it has been since January 30, 2009, over 3 years ago.

April 5 - This story from REUTERS by Nick Carey is the single most misleading report on foreclosures I have read in the last year. I suggest you save it and come back to read it next year for a good laugh. It is an almost perfect example of how careful selection of a few statistics can be used to fit a pre-conceived idea, even though the vast majority of the data points to the opposite conclusion. If you want to see a more balanced report of nationwide delinquencies and foreclosures I recommend you look at the February LPS Mortgage Monitor. In this we find that Arizona’s first home loan delinquency (but not in foreclosure) rate was 6.6% in February 2012, down from 12.4% two years ago and 7.1% last month. The “normal” rate for Arizona is 4.5%.

April 4 - This chart gives you a good idea of how far we have come through the “Age of the REO” in Maricopa County.

April 3 - EXCLUDING AWC listings, here are the days of supply (based on the annual sales rate) by price range. I am comparing April 1, 2011 with April 1, 2012 for Greater Phoenix single family homes:

  • Under $25,000 – 7 days – was 45
  • $25,000 to $50,000 – 8 days – was 87
  • $50,000 to $75,000 – 9 days – was 110
  • $75,000 to $100,000 – 12 days – was 100
  • $100,000 to $125,000 – 19 days – was 84
  • $125,000 to $150,000 – 28 days – was 82
  • $150,000 to $175,000 – 35 days – was 85
  • $175,000 to $200,000 – 50 days – was 107
  • $200,000 to $225,000 – 55 days – was 98
  • $225,000 to $250,000 – 66 days – was 112
  • $250,000 to $275,000 – 76 days – was 117
  • $275,000 to $300,000 – 81 days – was 133
  • $300,000 to $350,000 – 99 days – was 134
  • $350,000 to $400,000 – 117 days – was 147
  • $400,000 to $500,000 – 142 days – was 166
  • $500,000 to $600,000 – 157 days – was 196
  • $600,000 to $800,000 – 217 days – was 295
  • $800,000 to $1,000,000 – 298 days – was 380
  • $1,000,000 to $1,500,000 – 348 days – was 407
  • $1,500,000 to $2,000,000 – 480 days – was 664
  • $2,000,000 to $3,000,000 – 810 days – was 815
  • $3,000,000 and above – 1,245 days – was 955

We can see that inventory is flat between $2,000,000 and $3,000,000 and has increased over $3,000,000. However below $225,000 inventory is extremely low.

April 2 - Another way to look at the change in days of supply is by price range. So comparing April 1, 2011 with April 1, 2012 for Greater Phoenix single family homes:

  • Under $25,000 – 21 days – was 58
  • $25,000 to $50,000 – 28 days – was 112
  • $50,000 to $75,000 – 34 days – was 148
  • $75,000 to $100,000 – 44 days – was 132
  • $100,000 to $125,000 – 52 days – was 111
  • $125,000 to $150,000 – 60 days – was 108
  • $150,000 to $175,000 – 69 days versus 112
  • $175,000 to $200,000 – 79 days versus 133
  • $200,000 to $225,000 – 84 days versus 124
  • $225,000 to $250,000 – 93 days versus 134
  • $250,000 to $275,000 – 106 days versus 143
  • $275,000 to $300,000 – 107 days versus 159
  • $300,000 to $350,000 – 130 days versus 159
  • $350,000 to $400,000 – 143 days versus 173
  • $400,000 to $500,000 – 170 days versus 192
  • $500,000 to $600,000 – 190 days versus 228
  • $600,000 to $800,000 – 245 days versus 328
  • $800,000 to $1,000,000 – 340 days versus 406
  • $1,000,000 to $1,500,000 – 379 days versus 446
  • $1,500,000 to $2,000,000 – 496 days versus 705
  • $2,000,000 to $3,000,000 – 824 days versus 837
  • $3,000,000 and above – 1,291 days versus 978

Note that these numbers for inventory INCLUDE AWC status listings. Tomorrow we will look at the inventory EXCLUDING AWC.

April 1 - I have heard some people saying that we have less supply now than in 2005, when you allow for AWC listings. This is not true if we are talking about the extreme lows in supply that occurred at the end of March and beginning of April 2005, exactly seven years ago. On April 1, 2005 we had (across all areas & types) 8,342 active listings including 1,470 in AWC status, leaving us with 6,872 active listings without a contract.. On April 1, 2012 we have 21,841 active listings of which 7,666 are AWC and 14,175 are active without a contract. So 2005 was far lower and the shortage was across the board at almost all price ranges. However in 2005, supply rose rapidly from April 1 onward. Currently we are at the same level in active listings without contract as in the second week of September 2005. However our supply shortage is heavily skewed towards the lower price ranges.


Market Summary for the Beginning of April-Cromford Report

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Market Summary for the Beginning of April

In 2011 we experienced a relatively stable and predictable market  with very little price movement. In 2012 we have a market in which dramatic change is not only to be expected, but is already happening. Prices have moved in the single month of March 2012 more than they did in the whole of 2011. In these circumstances it is very difficult to appraise homes accurately, and in many cases appraisals are coming well below current market pricing. Normally this would act as a brake on price movement, but as so much of our market is cash-based, with the buyer waiving the appraisal contingency, the braking effect is less than normal.

Let us look at some basic numbers for March 2012 relative to March 2011. So for all areas & types we record the following:

  • Active Listings (excluding AWC): 14,175 versus 30,230 last year – down 53%
  • Active Listings (including AWC): 21,841 versus 37,246 last year – down 41%
  • Pending Listings: 11,964 versus 12,923 – down 7.4%
  • Monthly Sales: 8,782 versus 9,952 – down 11.8%
  • Monthly Average Sales Price per Sq. Ft.: $93.06 versus $82.13 – up 13.3%
  • Monthly Median Sales Price: $129,900 versus $110,000 – up 18.1%

So we can conclude that supply is down dramatically year over year, while pricing is clearly well up over last year at this time. It is no longer possible to measure demand freely since it is now heavily constrained by the lack of supply. Sales volumes are nearly 12% down on last year, so this suggests at first sight that demand has fallen. However we know that sales numbers would be much higher if more homes were available. That is why multiple bids have become the norm for most properties under $450,000 and this  supply shortage  means the upward pricing pressure is continuing.

We have a confirmed market price bottom during the third quarter of 2011 and we are now a comfortable 18% above that low point when measured by average $/SF, and 21% above when measured by monthly median sales price.  The average $/SF for pending listings on Apr 1 is $91.68. The improvement in pricing is due to two separate factors:

  1. Prices are increasing when comparing like with like properties
  2. The sales mix is changing in favor of higher priced normal sales and flips and against distressed sales (especially lender-owned homes)

With annual appreciation now in highly positive territory we repeat our analysis  of which cities are looking strongest from that perspective. Here’s a ranking table which shows the change in monthly average sales $/SF between March 2011 and March 2012 for single family detached homes:

  1. Coolidge – up 33.5%
  2. El Mirage – up 23.5%
  3. Maricopa – up 22.8%
  4. Florence – up 20.7%
  5. Buckeye – up 20.6%
  6. Queen Creek / San Tan Valley – up 19.2%
  7. Eloy – up 16.8%
  8. Casa Grande – up 15.5%
  9. Waddell – up 14.7%
  10. Tolleson – up 13.8%
  11. Phoenix – up 13.8%
  12. Avondale – up 12.7%
  13. Apache Junction – up 12.4%
  14. Chandler – up 11.9%
  15. Mesa – up 11.6%
  16. Cave Creek – up 11.2%
  17. Peoria – up 10.7%
  18. Glendale – up 10.0%
  19. Laveen – up 9.0%
  20. Surprise – up 8.0%
  21. Gilbert – up 7.5%
  22. Wittmann – up 5.7%
  23. Scottsdale – up 4.9%
  24. Youngtown – up 4.9%
  25. Anthem – up 4.7%
  26. Litchfield Park – up 4.0%
  27. Arizona City – up 2.5%
  28. Goodyear – up 1.4%
  29. Fountain Hills – up 1.2%
  30. Sun City – up 1.2%
  31. Tempe – up 0.8%
  32. New River – down 0.7%
  33. Paradise Valley – down 6.3%
  34. Rio Verde – down 6.9%
  35. Carefree – down 8.4%
  36. Sun Lakes – down 8.4%
  37. Sun City West – down 11.9%
  38. Wickenburg – down 12.5%

It is surely encouraging that we have 18 cities showing double digit appreciation rates, including the giant cities of Phoenix and Mesa. Scottsdale is now well into positive territory but is held back by its relatively slow super-luxury segment, as are Paradise Valley and Carefree. The active adult cities are also much weaker than average.

There is another obvious pattern here. Those cities least affected by foreclosures are seeing the least improvement in pricing (with several still showing negative appreciation). Those with a history of very high foreclosure rates and huge price collapses in 2006 through 2009 are seeing the fastest price improvement as distressed properties start to become a much smaller part of the market. So for example we have Coolidge, one of the most devastated cities where developers pulled out and abandoned their subdivisions, and prices fell by 79% from April 2006 to February 2011. Coolidge has seen average monthly sales $/SF jump by over one third in 12 months. Now it has to be admitted this is a jump from an eye-wateringly low $27.45 to a still very low $36.65 per sq. ft., but 33% is still a healthy percentage growth in value in anybody’s book.

We also note that Pinal County is extremely strong, and much of the west valley and southeast valley is doing well. One exception is Tempe, where appreciation is a modest 0.8%. Tempe saw  fewer foreclosed homes because it had very little new construction and therefore fewer problem purchase-money loans issued during the crucial bubble period of 2004 to 2007. Its pricing therefore stayed higher for longer than most of its neighbors.

So what we are seeing so far is primarily  a strong bounce back for the over-corrected areas. We are still a long way below the long term trend line for Greater Phoenix pricing. So despite the increases so far, housing is still very cheap by any historic measure and relative to our surrounding states. The recovery is still in a very early phase and the supply shortage is yet to have a big impact on normal (non-distressed) transaction pricing.

The Maricopa County foreclosure statistics are:

  • New Notices of Trustee Sale: 4,487 versus 4,584 in February – down 2.1% for the month
  • Trustee Deeds Recorded: 2,091 versus 2,219 in February – down 5.8% for the month

To put the current levels of foreclosure in proper context we need to compare March 2012 to March 2011:

  • New Notices of Trustee Sale: 4,487 versus 5,693 – down 21.2%
  • Trustee Sales: 2,091 versus 5,173  – down 59.6%

Since fewer than half of the trustee deeds were issued in favor of the beneficiary, we  have a  lower supply of REO properties coming onto the market than we have seen since 2007. There is still much talk of a “shadow inventory” supposedly manipulated in a conspiracy by the banks, but no sign whatsoever of it actually coming onto the market  any time soon. Anyone attempting to buy a residential property in Greater Phoenix would love to see some of that mythical “shadow inventory” emerge in volume to relieve the severe shortage of homes  currently offered for sale. My advice is: don’t hold your breath.

They can’t Handle the Truth-Phoenix is getting a healthier housing market!

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While watching TV News last week, I was surprised that those “talking heads” kept insisting Realtors are bracing for a tsunami of Foreclosures. Real Estate is Local, check these numbers below.  Not in Phoenix!

We are/have been declining large numbers of Foreclosed/Distressed Inventory. If the banks decided to dump thousands of homes on the market, we could handle 4000 additional homes a month (especially with the number of buyers that can’t find homes in certain price ranges). Don’t think the Banks have that much to give us for more than a few months at best.  What do you think?

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