Last 12 Months
May 19th, 2011 - Posted in Uncategorized -
I can only speak to Arizona, Phoenix Metro area in specific (information is based on Arizona Regional MLS not the tax records which show all transfers of ownership and include foreclosures and Deeds in Lieu and sales).
Over the last 12 months the Phoenix Metro area saw 93,000+ homes sold vs 60,000+ homes in 08 and 54,000+ homes in 07.
December of 08 saw 54,000+ homes on the market, as of this morning 1/27/10 there were 33,000+ homes on the market. In the Metro area right now for every one home entering the market for sale 1.3 are leaving the market (as high as 2+ in June of 09).
At the beginning of the year over 45 percent of the homes were REO or Short Sales by the end of the year it was under 37 percent of the total sales (from the AZ Republic). Even before the tax credit was a conversation existing homes sales and pending home sales in the Metro area were on the rise starting in earnest in June of 08.
From my vantage it is because prices had dropped to a point where buyers who had been sitting out the unsustainable upswing of 04–06 (some because they felt the bubble and others because they were priced out of the market) saw a 50% price reduction (from 07-08) and started to realize that it was the right time for them to buy. Home values were affordable and were in line with income, it is not rocket science.
To speak to the tax credit from my very small group clients I worked with over the last year: most were going to purchase a home anyway; the tax credit was a nice bonus but not the reason they purchased (I know NAR won’t agree).
To speak to the New Home conundrum, again this is not rocket science… resale homes are less expensive than new home sales. Which leads into the other component of this conundrum that is not taken into account. The fact that many of the REO properties were never lived in new homes purchased by investors. With so much inventory of never lived in new homes selling at 1/3 of what it cost to build them it is not hard to understand why new home starts are so low and will remain so until the inventory is gone. Also, the bulk of new homes are on the fringe of civilization, with commutes in the forty-five minute to an hour and a half and longer in some cases depending on traffic. Though this may seem short as compared to NY, NJ, LA or San Fran it is quite a haul for Arizona.
Pricing is a different issue. We saw jumps of over 20 percent per month, not sustainable. At one point in 05 there were less than 5,000 homes available on the market vs. our normal 25-35,000. Homes would go on the market and be gone within minutes. Realtors wrote contracts that their clients asked them to write. Banks handed out money without asking the hard questions like, do you have a job? Do you have sufficient income? You know… the questions they are asking today.
Finally, are we out of the woods? Probably. Are there going to be more ups and downs? Yes. But looking at the cycles of real estate we are somewhere in the bottom of the curve and on the upswing out. I don’t mean for pricing, but for a healthy real estate market that has changed from a buyers market to a more even buyer/seller market. We still have some work to do on the inventory before pricing can stabilize fully, but in the Metro Area we have seen a 2% price increase in the core areas over the last 12 months (per the AZ Republic).
This is food for thought ladies and gentleman. But things always look the darkest before dawn.
Arizona Real Estate Trends
May 26th, 2010 - Posted in Uncategorized -
Historically Arizona real estate has followed the trends of the Nation with parity with few anomalies. Excluding the period between 2004-2008 when the Sun Belt from Florida to California saw extremes in both the increase in equity and the precipitous drop and loss of equity. Phoenix, Arizona, or the Valley which encompasses Phoenix, Tempe, Scottsdale, Mesa, Goodyear, Litchfield Park, Maricopa, Paradise Valley, Avondale, Peoria, Glendale, Ahwatukee, Anthem, New River, Queen Creek, Cave Creek, can be broken into regions Central/Core, West Valley, East Valley, North Phoenix and South Phoenix. Each region was affected by the extreme volatility in the market differently. For the purpose of this discussion we will touch on the outlying rings and focus on the Central/Core region, which encompasses Central Phoenix, the Camelback Corridor, Central Scottsdale and North Tempe (ASU).
The outer rings of the Valley saw a 72% increase over a 1.5-year span and in some cases an 85% decrease in valuation the following 2-year period. Both the extreme high and extreme drop somewhat less affected the Central Core with the rise floating in the 50% mark and the drop in the 55% depending on the individual submarkets. Tempe and Scottsdale faired the best with the same 50% increase but the overall decrease was approximately 43%.
Paradise Valley and Silverleaf in DC Ranch are where the highest concentration of wealth is in the Valley and the home pricing reflects that fact. Ranging from the 550,000 to the 25,000,000 plus mark the sales have slowed considerably in both PV and Silverleaf. PV has not faired well due to the fact that the majority of PV was built between the early 60′s and late 70′s and in desperate need of gentrification. At the top of the market “tear down” properties in PV were averaging 1.25M they now average 500,000. PV has seen a 50% drop from the top of the market. Silverleaf has faired much better with approximately a 15% drop from the top of the market due to the fact that it is much newer, fewer foreclosures and far fewer distressed sales.
The single-family home market in the Central Core started to stabilize in June of 08, though pricing continued to fall demand started to pick up. Based on pure volume of sales in the ARMLS system the each month after June 08 saw considerable volume increases. The top of the market saw 104,000+ homes sold in 05 the bottom was 54,800+ in 07 and the climb to 60,000+ in 08 and 92,000+ in 09. Pricing stabilized in November of 08 with a modest 1.2% increase for 08 and again modest increase of 3% in all of 09 based on articles from the AZ Republic.
With the volume of REO/Short Short Sales circulating in the market buyer demand has easily absorbed the inventory over the last 18 months. The banks have become more judicious when deciding to release properties to the market and have become savvy to the fact that there is a recovery happening. Based on ARMLS numbers the floor for REO properties in the Central Core in February of 09 was 25,000 for a 3 bed 2 bath home that needed 25,000 in repairs that was then sold for 125,000 six months later. Today that same floor is now 46,000 for the same home. At the height of panic in the market distressed sales hit 70% of the total sales in the market, today that number has receded to 52%.
Historically after the “big” recessions condominiums have trailed the single-family upswing by 12-18 months, the longest condo recovery was after the S&L collapse with 36+ months of stagnation in the condo market. Today the condo market has seen a nice rebound in volume of sales from 7% in November of 08 to 13%. Condominium conversions are fairing much worse with as many as 40-75% of the condominiums in a given complex either filed for foreclosure, listed for short sale or REO. Which is causing problems for buyers who need to obtain loans in order to purchase, as banks will not lend on properties with 5% of the homes being owned by one entity (usually a bank), complexes with more than 25% of the properties late on the HOA fees (banks don’t pay the HOA fees while they own them) and/or are simply not lending on condominium conversions at all.
The bright spot for condominiums is the new/repositioned condo market. With One Lexington and The Mark leading the market with pricing halved they have been able to drive sales volumes well above what is considered normal. Please see the Veritas Comparison spreadsheet. The other bright spot is the Optima Camelview property, still averaging 5+ sales a month in the mid 400 per square foot mark. The majority of the communities that were sold in the run up of the market are now trading at just over half of their market highs including Scottsdale Waterfront, 2211, Esplanade, Artisan Lofts on Osborn, Artisan Lofts on Central and Optima Biltmore.
The data from ARMLS points to a trend on the upswing, not a “V” or “U” shaped recovery, but rather a more natural climb of 2-3% for last year, this year and more than likely a 4% increase the following year for single-family homes. Condos are scraping the bottom and are at the end of their natural 12-18 month follow-up behind the single-family push. So the good news is that the Central Core is on the mend. The bad news is there is still some pain in the outer rings of the Valley.
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All information deemed reliable but not guaranteed. All statistics and references related to number of sold, pending and listed homes are pulled from ARMLS and may not be actual total number of homes in any catagory. Some of the Featured Homes may or may not be a Cosmopolitan Properties, LLC listing.
