In an ongoing effort to post consistent and timely real estate market updates, just below you’ll find an REO Market Snapshot from The Cromford Report, and my own short commentary afterward. This snapshot has been re-posted with permission by The Cromford Report.
And, just to make sure we’re all on the same page, when I say REO, I mean real estate owned properties, AKA foreclosures, lender owned homes, bank owned houses, et al.
The biggest problem with most real estate market graphs is that it’s hard to tell what all of the numbers on it mean, and whether they’re telling us good news or bad news. One of the things I appreciate most about The Cromford Report’s graphs, like the one above, is that they provide these smart little green and red arrows. The green arrows tell us that number has improved since it was last measured (whether it be inventory declining or sales prices rising), while the red arrows tell us that number is worse than it was when it was last measured.
With lots of green and red arrows pointing in every direction, it’s not easy to make sense of what’s getting better and where the market is still struggling. Let’s take a closer look below.
Signs of Market Improvement
* Active Listings – Since our last lender owned update on January 18, 2011, the total number of REO listings has decreased from 8,464 to 4,245. This brought the percentage of foreclosed homes to total inventory ratio down from its 2011 peak of approximately 21% to its present day ratio of 14.5%. As the number of active REO listings continues to fall, we will see other facets of the Phoenix real estate market begin to improve with it.
* Months Supply – With a 1 Months Supply, it’d be hard for anyone to argue that it’s a buyer’s market for REO properties in Phoenix anymore. On the contrary, competition for these types of listings is now fierce, and the average listing is selling within 1 – 2% of its list price, and many times above its list price. For more information, we also discussed months supply in this post.
* Active Listings $/SF – Seeing that this statistic has increased modestly for at least the last three months, I can conclude two things. First, bank asset managers must be noticing the strengthening market, too, and they’re responding by raising their starting prices. Second, it may be wise to jump on an REO listing now before the list prices rise any further, and the inventory dries up altogether.
Signs of Continued Market Weakness
* Annual Sales $/SF – Although the active listings price per square foot has been rising for more than three months, and the monthly sales price per square foot saw a minor bump upward this month, I won’t be convinced we’ve hit rock bottom pricing until the annual sales price per square foot begins to rise as well. The problem with relying on this statistic as a measure of the market’s strength is that no one will know we’ve hit “rock bottom pricing” until we’re two or three months past it. I’d put more weight on the other forward-looking statistics like months supply and active listings price per square foot, and jump into the market now before it gets to be too late.
**If you missed my Phoenix Area Real Estate Update post earlier this month, give it a look. In the comments section below, I’d love to hear your thoughts on our lender owned market and how it compares to the overall market.**