August 2011 Phoenix Housing Market

This months Phoenix housing market report is being relegated to inphoenix.com from it's normal place at PhoenixMarketTrends, but only for this month as we gear up PMT for a relaunch into version 3.0 on a completely new platform and new simpler design. In September market reports will begin anew there.

So let's get down into the July 2011 Phoenix home sales numbers.

Active inventory continues a nose dive into nothingness. We'll not quite that deep I hope because we'll have nothing to sell, but it's getting close, close enough that the market is extremely competitive: it's certainly a seller's market.  My friend who rents told me the home he lives in went on the market for $100,000, but the seller got multiple offers and it sold for $120,000.  These last two weeks we've been writing clean and competitive offers multiple times a day for multiple buyers and succeeding less in getting the home. I'm not talking about 1-2 competing offer. We're talking about 5,11,7,4,26 and so on.  Even those homes that tend to sit around a little longer are now being snatched up. 

So inventory is low and sales are strong, but they are actually down from last month. This is normal. Peak season is June so it's normal for sales do decline after that.  In fact, the will continue to decline until February: all's normal in that respect. 

Overall the active market should start pushing prices up, and it is, but the pressure on pricing is only active on desirable properties, not the market as a whole so both median and average prices will probably remain steady as they have and I would not count on any normal appreciation anytime soon. None the less people are making money in real estate if they do it right, though I want to reiterate that real estate, overall, is only a good investment if you separate it from the home you occupy. To add to that, recent number show home-ownership on a decline with effective real ownership being at a 40 year low at 59% - so who owns the rest of the properties, besides banks? Investors.

It's unreal how far we've come. Look at long term appreciation at negative 1.5%.  That means homes purchased in 2001 are less expensive now and that does not include inflation which means values are even lower.

If you purchased then for $100,000 which means you probably paid $105,000 with closing cost. Your home is worth less and you have a cost to sell which runs around 7%.  No wonder so many people who purchased way before this crisis are also doing short sales. 

This is getting ridiculous, but it's an astounding situation for buyers who are buying below replacement cost and with loans at 4.25% interest rate. Amazing. 

Distressed Properties: Bank Owned And Short Sale Properties

Lender owned properties continue their decline as a proportion of active properties. Last year it was 17.5%, last quarter 15.9% and now 13.5%, though sales have held steady at around 44% and short sales make up 40% of active homes and 22% of sales.

Overall 54% of the active homes are distressed, compared to 58% last year, and 67% of sales are distressed now while it was 69% last year. We're not out of the wood yet. That's probably the reason prices are not heading up despite the demand pressures.