OK, folks. You’ve seen my critique recently of the Arizona Republic’s negative Nancy routine around real estate. Only recently have they admitted that the sky is not about to collapse on us like a giant chalupa.

So, the Biz Journal is starting to change its tune, too. A recent Phoenix Business Journal blog discussed the idea that the Phoenix real estate market is starting to stage a comeback.

But unlike a late inning rally, this comeback will take years before things return to normal with some experts saying 2013 or even 2014. So says Michael Orr of my favorite real estate stats table, The Cromford Report.

So what does this mean for you? Well, if you have the money, this is the time to pounce on available real estate. Many experts agree that the worst is behind us in terms of low housing prices and that they can only increase.

Scott Golba, a local real estate manager tells us that “This is not the time to go out and buy one home. It’s time to buy two or three homes.”

You got that emphasis, right? Buy two or more!

This will be a two-fold benefit for investors, as so many people are unable to put down the necessary payment to buy a house and instead opt to rent. This is positive cash-flow into a buyer’s pocket that can easily pay for a majority, if not more, than the cost of the home over a period of time.

So, give me a call and I can answer all of your questions regarding the housing market in Phoenix. I can help you find the home of your dreams or the home that meets your investment plans. 602.456.9388

Admit it, you’ve missed my usual fun-lovin’ and humorous market analysis over the last month. “What will I do with my time without Ken’s market analysis now that Modern Family is on summer break?”, you say.

My apologies. It’s been a nutty month. Between closing properties, showing new ones and the Independent Redistricting Commission, I’ve been running around like a blue-arsed fly (ask your Australian friends).

But, Cynthia Lujan from Old Republic Title Company delivers with a really handy June month-in-review.

Executive Summary: “If you are still waiting for that mythical second wave of foreclosures, you are more likely to see Snookie settle down in a commune of vegetarian, celibate, palm readers before that will happen.”

Market Headlines

·         Supply continues to fall, though rather more slowly in the ranges between $200,000 and $800,000.

·         Demand very strong below $200,000 but showing seasonal weakness above $200,000.

·         Average sales price per sq. ft. is stable below $300,000 and increasing above $300,000.

·         A change in the sales mix could adversely affect overall market average prices and medians.

·         Foreclosure activity declining and active REO inventory is at the lowest level for several years.

Homes under $100,000

·         Demand remains strong while supply is still declining. Prices now stable for 7 months.

·         Demand normally falls off during the summer but the demand in this price range is dominated by intense buying by investors who are only slightly affected by the seasons.

·         Active listings are now 7.8% below this time last year.

·         This supply continues to gradually shift away from REOs (down 15.7% in the last month) towards short sales and pre-foreclosures.

Homes Between $100,000 and $200,000

·         Supply down and demand fading slightly. Pricing remains very stable.

·         Having peaked in October, supply has fallen another 6.8% in the past month and is down 23.4% when compared with March.

·         Demand has faded a little, but this is in line with normal seasonal patterns.

·         REOs dropped to 38% of monthly sales while normal listings also fell to 38%. Short sales and pre-foreclosures increased from 21% to 24% of sales.

Homes Between $200,000 and $400,000

·         Buying interest falters a little although supply continues to decline. Pricing remains very stable.

·         The supply of single family homes dropped by another 4.1% between May 26 and June 26, and is now down 17.0% over the last three months and 29.2% over the last year.

·         Over the last month REO supply actually rose by 2.4% reversing an 8 month trend, while short sales and pre-foreclosures fell by 3.0% and normal listings fell 5.5%.

Homes Between $400,000 and $800,000

·         Supply falling but demand continues to weaken. Nevertheless sales prices remain on an upward trend.

·         Single family homes between $400,000 and $800,000 have experienced a 6.4% fall in active listings in the last month.

·         The sales volume strengthened slightly in June, with monthly sales up 7.0%.

·         REO supply didn’t change during June at 84 homes, but this is down 10.6% over the last 3 months.

Homes over $800,000

·         Demand weakens for the summer months but supply is down again. Sales prices continue to climb.

·         We see the first sign of the spring season turning to summer as pending sales start to fade.

·         The good news is that the supply of homes above $800,000 fell 8.5% in one month, 18.9% over three months and 29.2% since June 2010.

·         Active REOs rose 18.4% from 38 to 45 over the last month but these represent only 2.9% of total active listings.

What’s the opposite of a canary in a coal mine?

I’m looking for that phrase that means indicator of good things to come.

Oh, I know: property appraiser.

At least for now, that is.

I saw the following quote in an appraisal that my client got for her new home purchase yesterday –a home that appraised at $35,000 above sales price.

“Over the past year the sales prices in this area have fluctuated. The prices have increased since a year ago and are now starting to stabilize. The data collected reflects homes in the subject’s market area that are considered comparable to the subject in design, size, age, and quality. It appears the market is stabilizing in this market area and the absorption rate is declining.”

OK. So, hurray, right? My client has $35,000 of instant equity. I don’t think she could have bought at a better time.

But, let me put this in to context for you.

1 year ago –We agents were seeing data that indicated that home prices (especially in Central Phoenix areas) were stabilizing. The press stuck to the chicken little narrative, of course.

9 months ago –Appraisers were consistently coming in low on their appraisals, by wide margins, even though buyers and sellers were valuing property higher. This was great for some of my buyers, as I could then get the seller (usually the bank) to drop the price for us. This was a pain for sellers, of course. It also seemed terribly unfair for sellers of historic homes. See, as of about 2008 appraisers are assigned to appraisal jobs from a blind pool, and we often got appraiser from the suburbs who did not know the first thing about historic homes and completely undervalued them.

4 months ago –We were seeing much more evidence that the market had turned, with fewer foreclosures and multiple offers, but the appraisals were still coming in low. I think the appraisers were reading the Arizona Republic.

Today — Appraisals are coming in on the nose (more so in Central Phoenix real estate areas). And, like the one above, they are actually recognizing the shifts toward recovery. I also started noticing when I did comparable analyses for people that the “sold” prices were showing up as higher than the listing prices.

So, my client got the absolute sweet spot for buying this house: the prices are going up, but not everybody sees that, so she could get a great deal. Then, the appraisal comes in over asking price so the bank is happy to lend money and my client has built-in equity.

Does this mean that appraisers are going to drive a price spike? Not likely. See the problem during the bubble years was that appraisers were told with a wink an a nod what market value the buyer needed to close the deal. (I was not an agent then.) They can’t do that now because you will never know who your appraiser is going to be.

Anyway, this is a good omen. I’m sure it is more applicable to historic homes and CenPho than the burbs, but this is a milestone in my book.

The Arizona Republic this weekend finally admitted what we in the industry have known for a while: “Foreclosure homes are selling fast in the Valley as investors jump at the low prices, and experts don’t think the area’s shadow inventory will suppress prices further.” See the full article here.

They start out the article as they have so many before with talk of this “shadow inventory”, or the number of homes that are foreclosed (but not on the market) or that may foreclose soon because folks are late on their payments.

In previous stories they have used this looming menace to tell you to hide your kids, build a fall out shelter and stock up on duct tape. Over the past six months I’ve told you several things, most importantly the following: 1) banks won’t let the houses out faster than the market can absorb them, in order to protect prices, 2) the number of foreclosures have gone down steadily over the past 6 months and 3) foreclosed homes are selling faster every month.

Finally, they are telling us what I’ve been saying: those homes are selling quickly and they are gaining speed. In addressing why the “shadow inventory” of 92,000 homes is not a serious problem, they actually put it in to context this time:

“That’s because the rate of sales is as important as the raw number of homes. If sales are brisk, the homes are snapped up quickly, meaning they won’t lead to lower prices.”

They say that 92,000 foreclosed homes is 12 months worth of sales. That is about 7,600 sales per month. That is about right. And given the increasing speed at which they are selling, I think that is a little long.

Consider also that the “shadow inventory” in Phoenix is lower than in the suburbs, where all the explosive building 5 years ago made a housing glut. I’m seeing bidding wars over houses that are going under contract in weeks, not months.

Well, its great to see the shift. Watch now as the media shifts from the “woe is us” tone to the “signs of recovery” tone over the next year.

Not to ramble too much, but there is a lot to be said for trying to diversify our economy here in Arizona so this does not happen again. We were on the right road with renewable energy, but then it kinda just petered out! Check out this interesting article on the issue of economic diversification.

Average Days on Market Going Down!

You’ve seen my charts, graphs and data on this blog over the past six months as I make the case that either (1) homes actually are going up in price or that (2) the local news media has its head stuck up some, er …., shall we say, “dark cave” when it comes to predicting the way the market is going.

So, here is a bit of anecdotal evidence to further the case.

About three weeks ago a couple clients of mine and I started narrowing down the list of houses that they wanted to see when they came to town last week. We started with a list of over 20 properties that were “favorites”. This was the short list of properties that we might want to see.

By the time they got here, half of those had accepted offers. Further, during the time that we were looking at what was left another one went under contract. Luckily we found the perfect property for them anyway. And what happened? There were multiple offers on the property.

I am constantly amazed at how quickly these properties are going as I show people around Central Phoenix. If I were to isolate the average “days on market” for properties in Central Phoenix, versus the rest of the city (not even the rest of the valley), I’m confident that they would be on the market for 20% to 30% less time than anywhere else.

Oh, but there’s that data again.

Several things are happening to make this trend (gleaned from anecdotal conversations with clients):

1) The economy is getting better. Yes, it is slow, but it is enough that those who have jobs are feeling more comfortable about making home buying decisions.

2) Gas prices. As gas prices go up, more people are looking in CenPho. I hear it from my clients all the time.

3) People are looking around and seeing that houses are going more quickly, so they are making decisions more quickly themselves.

If you have been putting this decision off for a while, call me at 602-456-9388 before the lower inventory results in higher prices.

I know that I’m a total broken record, but here is a quick point that I want to make. Actually my broker at John Hall & Associates shared this with me.

In the graph below you see the sales per month over the last couple months versus last year. The labels are clear. Last year with the subsides (federal tax credit) our sales per month were lower than they are today with no subsidy.

Need I say more?

Buy in Phoenix! Buy short sales in Phoenix! Buy foreclosures in Phoenix! Call me at 602-456-9388.

Here’s a hoot. Read these two articles and you will see why so many people are confused about the market right now.

The Phoenix Business Journal from Tuesday, April 19th:

This article is telling us that home prices have dropped again. “The median sales price for existing homes in the Phoenix area was down to $125,000 in March, according to new Arizona State University numbers.”

“ASU economist and real estate professor Jay Butler reports March’s existing home price was down from $127,500 in February and $142,500 in March 2010.”

The Arizona Republic from Tuesday, April 19th:

This article is telling us that home prices have remained stable. “The median price of resales in metro Phoenix has held steady at $115,000 since December.”

Luckily both articles tell us that the number of foreclosures are down

Business Journal: “There were 4,100 foreclosures this March compared to 4,400 a year ago.”

Arizona Republic: “Although foreclosures continue to drive the market, signs indicate those could soon start to decline.”

What do we take from this? I’d say you need to buy based on your needs, not on thinking of the real estate market like a stock market. We are still at all-time low prices, but they are climbing. We are still at all-time low interest rates, but they are climbing.

Let me know if I can help. 602-456-9388

I’ve been saying for months that the number of foreclosures has been going down. Yet the Arizona Republic would continue to print misleadingly false news.

Well, they have finally reported what is really happening. In this article they finally say that the notices of trustee sales (notices of foreclosures) is going down.

Background: When somebody stops making payments on their house, they get a notice of foreclosure. If they don’t pay up, they are foreclosed on and they go to a trustee sale on the courthouse steps. If nobody buys the property at auction, the bank puts it on the market as a foreclosed property.

So, see in this chart that the number of foreclosure notices has been going down since September of last year, quite dramatically!

In case you are thinking, “Well the foreclosures go down because more people are short selling instead.” Nope. First, you get a trustee notice before you short sell, so this informs that, too.

Second, see in this chart that the number of foreclosures has been going down and the number of normal sales is going up. This is because, in part, people are avoiding foreclosure after they get their notices. It is also because there is an increased number of renovated properties on the market. These sell as regular sales.

So there, Arizona Republic!

What does this mean? Prices will start moving upward during this summer buying season. Let’s hope interest rates don’t go up, as well!

Well, it’s been a long time in the making, but I’ve got a new website.

Now you can:

1) Find more information about Get Your PHX events.

2) More blog posts, news and analysis.

3) Log on and instantly to search the real estate market in the entire valley. There is sooooo much more power in this website!

4) Access pre-made searches for everything from historic homes to those super-cheap condos around town.

Let me elaborate on #3.

On my previous site you could see some searches, but only the criteria that I create for you. Click on “Search the Entire Valley” and you will be able to define your own searches!

I’m even opening up the blog to contributors who want to share thoughts ideas and experiences about how they “Get Their PHX”. So, have a look. Poke around.

Send me your thoughts!

Cheers,

Ken

I can’t let this article go by. Fortune Magazine says that it is time to get bullish about the housing market again. Read the entire thing here. It is worth a read!

Here is a summary of their arguments:

1) The historic drop in construction is leaving a void. People still need houses and they have not been built. Further, the steep decline in prices from 2006 (from 30% to 55%) has created an affordability that will bring buyers back in to the market.

2) It is cheaper to buy than to rent. Plus the portion of income devoted to buying a house is down to 9.8% from 17.2% in 2007.

3) Even in distressed areas like Phoenix, there are so few new construction homes entering the market that the former glut of foreclosures is getting eaten up.

The article likens the increase in demand to raising cattle: the increased demand will not be met immediately by new construction. In other words, prices will start going up again.

I’m glad that somebody is out there countering the constant doom and gloom of the Arizona Republic. For me, the proof has always been in the data. See this chart, below, from the Cromford Report. This comes directly from the MLS data. Phoenix has seen a decrease in foreclosed properties (REO) and short sale properties week over week since December.

I think Fortune Magazine is correct. It is time to reconsider the market!