We found out in part 2 that While Prices Are Rising in Central Phoenix in 2012, they’ve risen most dramatically under $150,000. The high end properties of $800,000 and upwards have increased in price, but not nearly as dramatically. (Before I jump-in, I want to again recognize Mike Orr and Tina Tamboer for allowing me to share their work from the Cromford Report which is mixed in with my take that follows.)

The monthly average price per square foot in greater Phoenix in this chart to the left is very broad. Obviously, not every home is going to be at $100 per square foot, especially in central Phoenix.

Jump your eyes down to this little blue square in the center of the next chart, which will come up later.

 I’m going to be putting everything into the historical context of that square, which is Non-Distressed homes between 2005 and mid-2009 for Single Family Residences in Maricopa County.

In this next chart, below, which shows the price per square foot from 2001 to Aug 2012, try to ignore the $190 Close Encounters peak  and take a look at the far left line. That’s the 2001 price lines. They were basically at about $100/sf at that time. Again, this is for the greater Phoenix average per square foot.

Based on that, here’s my rule of thumb: “Did you buy your home around 2001 or 2002 or before that?” You’re probably going to be okay to sell now, because you’ve survived the worst of it. If you’re thinking, “Gosh, I could really sell my home now”, or if you know someone who’s thinking that, make sure you both take a look at your specific area, before making the leap.

I know. What a relief.

Do we want to get back to over $190 per square foot, to that place where the UFO’s are landing on our mountain of Devil’s Peak? Heck no, not anytime soon. What this long-term context tells you is we do have a little bit of ways to go still. This is a great way to look at this to tell whether people are potentially underwater or those who are likely to be okay.

Next up: Median Sales Price.

We’re back to the little blue square I mentioned earlier: people who are potentially undewater from the 2005 to mid 2009 range.

When you take this median sales price, for single-family homes, all the way across the board, you can see it’s pretty obvious that during those years, for those people who are non-distressed (which is when we saw the big bubble and crash) these are the people who have not sold yet.

They’re potentially underwater, we don’t know for sure, but they’re not considered distressed or late on their payments.

So what’s going to happen with all of those? Are they suddenly going to find themselves in the market? Say, a year from now, when the prices get a little bit better for some of those people?

That’s going to be something that you’re going to want to watch.

I love this next particular chart. This tells you how much growth we have and how much potential you have if you happen to be an investor.

The long-term timeline with just general growth, year over year, (taking into account population, prices) is going to keep up at a regular pace.

This is a kind of equilibrium with a pretty good number of houses for sale that people will want to buy. This long distance in this chart is great because however long it takes us to reach that point, there’s still the potential for you to either buy something as an investment, and get some return on that investment, or buy a home and know that you didn’t buy it above what it should be worth.

Next, let’s look at greater Phoenix wide and then we’ll drill down closer into some specific zip codes. This is encouraging stuff. Okay, so look at this section listed as under $200,000.

Look at the price and notice that price per square foot has gone up 33% since August 2011. That’s citywide.

Now hop down to the next chart and look at the similar thing for greater Phoenix, between $200,000 and $500,000.

Drill down between $200,000 and $300,000, for just these zip codes, look at this huge 14% growth!

This speaks to a premise  that I’ve been pushing for a very long time: in central Phoenix, especially around the light rail and historic neighborhoods, prices dropped the least and will come back the fastest.

This is something to keep in mind as density continues.

And $500,000 and $800,000, in the same areas in the same zip code?

Look at this 18% growth!

That’s from the lowest point to where we are right now, that’s a good place to stay.

$800,000-$1 million? See below: The growth is 5%. Again, that’s in the Camelback corridor area.

“Under Contract” homes is what this next chart is all about. We’ll end today’s brief on this. It offers a lot of insight.

If a house is under contract, you don’t know the price at which the house is under contract for. It’s private information. Let’s say you go to the multiple listing service and look at the sales price of the house and its $200,000. The next day, it says it’s “pending”. It still says $200,000 but that property could have a contract for $215,000 or $190,000. You just don’t know.

But MLS does because agents must report it

It’s in the system. They can’t tell you what it is. But they can report an aggregate.

So when you hear “Under contract. Legally average list price per square foot.” That means that on this date, 10/1/12, everything under contract was under contract for an average of $93.88 per square foot.

Those hosues aren’t going to close for 30 days, though. So, when you look at this chart and see that right now it’s $93.88 per square foot, that’s the amount that is going to be realized, most likely, in the market 30 or 40 days from now.

If you’re following this chart and you suddenly see this line turn a different direction, you have a very good indication that 30 days from now, that may be what the market is going to start to look like.

That’s as much of a crystal ball, as I think you are ever going to see.

The thing that’s impacting all of these numbers, especially in places like the Camelback corridor, and those other zip codes, is new-home sales recorded, as in “What are the homebuilders doing?”

Great Question. In part 4 of our Get Your Phx Market Briefing, we’ll find out that very thing…

In part 1, I ended with an argument I often hear from people after I describe what a “normal foreclosure market” looks like. There’s always going to be some percentage of people who should not have bought a house and now they’re upside down or late on payments.

The real interesting bit we can see is that there will still be some foreclosures and short sales coming on the market. The argument I hear some people say is:

All the banks were just holding onto their houses. They just hadn’t been listed yet. You’re not seeing them in the charts and graphs you’re using as evidence.

(Much of my briefing is based on Mike Orr’s Cromford Report. A huge thanks to Mike Orr and Tina Tamboer for allowing me to use their work at my presentation and share it here as well.)

To answer those naysayers, let’s look at the “REO” (which is another way of saying “foreclosed property”, not a band who heard it from a friend who heard it from a friend…). The REO then is where the bank has already repossessed the house and is putting it on the market directly. This chart below is REO and includes everything sold between 2007 and 2012. The big blue Pac-Man looking thing on this chart is sales sold through MLS; in other words, 131,000 homes.

(graph, above)
“Sold wholesale” means some big investor bought a bunch of homes at one time. According to the chart, there are only 961 in escrow. When people talk about where to find this mythical crop of homes held back by the bank, you would find them in “Not yet listed.” Well, that’s a whopping 3,047 –not what I would call a wave of foreclosures.

Supply is down, but it’s also increasing.

This is a very interesting thing. Look at this next graph. If you look at December 2010 (far left) all the way into the future, you see a huge drop in supply. Homes being sold by Housing and Urban Development (HUD), the tiny sliver on top in gray, are few and far between and get a ton of offers when they come on the market.

(graph above)
The last two colors on the chart are short sales (light blue) and normal sales (darker blue).

You can see from this same graph that things are moving back up a little. Does that mean that we’re going to get back up to 35,000? No, because you’d have to have the same kind of event that put us into the recession to get back up to those numbers.

Let’s take that same thing, single family residential inventory, and look at the distressed sales.

It’s declined 77%.

That’s in terms of the active distressed listings. For those who don’t know, AWC means ‘Active With Contingencies’. Look at that chart again. See how it’s called “Distressed SFR Inventory (Excluding AWC)”? This means someone has an accepted offer on a short sale, but they’re waiting for their lender to say it’s okay to precede and close on that property. Let’s break it down a bit.

Look at the far right side of the same chart. There are 1,923 Active Distressed homes. It’s a huge decline. But this is the interesting part. Notice the top right corner of the graph, where it breaks down the percentages of the different price ranges listed.

Rather than do each price point, one at a time, let’s look at the combined total, the 81% of homes that are under $300,000. If you make another chart and take out the HUD homes, the REO’s, and the short sales, and compare those to where the normal sales have been…

…there’s basically no change since November 2011.

So what does this U-shaped area represent? I’m speculating here, but in my professional opinion, the normal sales coming back on the market comprise two types of sales: A) People who bought before 2003 or 2004 (so they are able to sell their house, get their money back, maybe make a little bit of money); or B) People who bought a house in 2008 or 2009—which was my advice to people at that time—and now they flipped it, or renovated it and put it back in the market. Those people are adding to the inventory.

The rebounding economy and stronger job numbers, plus incredibly cheap houses, are why–in this next graph–we went from a 3.7 month supply of homes to a one-month supply of homes. By “month supply of homes”, what is meant is that if you shut off the tap and prevented homes from being put on the market, how many months would it take to clear out what’s on there? In this case, it would take us one month to get from a 3.7 month supply of homes to a one-month supply of homes.

This is more drastic than, say, above $1 million homes, but all of this brings me to one point: single family homes that are affordable for most working families will continue to increase, in price and in value, in 2013. That’s even with the increase in inventory that we’ve seen here at the end of 2012.

Prices are rising. This is pretty obvious. You’ve probably heard it in the news. What wasn’t reported on the news, however, is that the rising prices in the last year are only happening at the low ends, under $150,000; far more than they’ve occurred at the high ends. Where’s my evidence? What do I draw from this conclusion? What should you conclude from it?

Stay tuned for Get Your PHX Market Briefing, part 3 where we’ll find out!

If you would like to be part of a future PHX Market Briefing, please contact me at 602-456-9388.

JUMP TO PART 3 OF THE MARKET BRIEFING HERE.