In an ongoing effort to post consistent and timely real estate market updates, here below is a Concise Market Snapshot from The Cromford Report, and my own short commentary afterward. This snapshot has been re-posted with permission from The Cromford Report.
And the number of Active Listings just keeps on falling.
To see what I’m talking about, take a look back at the last time I posted this report, on April 18, 2011, when the same chart had the count at 36,183 homes for sale. Today, at 30,272, you might think to yourself that’s still a pretty high number. If so, consider this.
The Active Listings Mike Orr of The Cromford Report reports above also includes most of the homes here in the Greater Phoenix Area that are under contract but still have contingencies on them. These are sales that will likely close, but the buyers of them have yet to satisfy all of their inspection and financing contingencies. If you were to remove all of those listings – since most buyers don’t want to waste their time considering properties that have already been sold to someone else – you would actually be left with only approximately 22,000 homes for sale, a reduction of over 25%!
If this data is true, and the inventory of homes for sale in Metro Phoenix really has been declining for almost a year now, why doesn’t the average home sale price reflect the decreased supply and increased demand?
For one thing, distressed sales continue to account for 60% – 70% of the monthly sales, and sell on average 35% – 45% below the average traditional sale (not in distress). The Valleywide average sales price cannot make any real gains until either the sales prices of distress sales begin to rise or traditional sales account for more than 50% of the monthly sales. Despite what we all hear on the news night after night, the latter may happen sooner than you think.
Back in October of 2008, there were 28,391 pending foreclosures in Maricopa County. Fast forward to December of 2009 and you’ll see the highest number of pending foreclosures The Cromford Report has ever reported: 51,022. Why do I think the percentage of traditional sales may soon begin to rise? This week, there are just 27,731 pending foreclosures in Maricopa County, and by all indications, it’s only headed down from there.
For another explanation why the laws of supply and demand have not yet seemed to take effect here in Phoenix, I’d like to share with you what Mike Orr said in his very astute June 3rd Market Summary:
“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.”
Do you detect any similarities? Supply falling dramatically, no one seeming to take notice, a widely believed myth that prices can never go up again…
**If you would like a chart, similar to the one above, prepared for your own city or zip code within the Greater Phoenix Area, just post a comment below, send us an email, or, give us a call the old fashioned way! We would love to hear from you.**