Not Just Another Look At The December 2011 Phoenix Real Estate Market

It's quite an exciting time in the Phoenix real estate market. Good things are happening, despite the continued distress in the housing market and overall economy. There are some negatives to this turn in the market and we'll get into those, but they pale in comparison to what the market went through in the last half decade. 

This is now the year 2012 and it just keeps getting better. I know for many the financial and economic situations vary. In 2008/2009 when so few properties sold, it was hard to make ends meet and our reserves were depleted, the real estate portfolio value went down, even some properties were purchased a decade ago had no equity and the near future was bleak. Some people are still in hard times, but the important thing to remember is that the opportunity, the tools and options are there to improve life. They are there in much more abundance than a century ago. Despite the death of the short lived American Dream, it's possible to have a decent life, but it takes effort and self reliance. 

The worst of it is behind us, at least for the short term and hopefully the politicians who are supposed to represent the people start doing so, instead of supporting themselves. Much of what happens, economically, will depend on them, but you can't depend on them. I hope that makes sense. You may get social security, but plan on not getting it. You may always have a good job, but plan on other means of support. 

Maybe it's the awesome weather we're having, but I know 2012 will be great, but now let's get into the past, into the most recent residential sales data in Greater Phoenix. 

The first striking number is active listings. With the help of Canadians amongst other, the inventory of active homes in Phoenix has been depleted to a measly 24,700 properties. Down from last month, last quarter and down nearly 20,000 units from December 2010. It's simply mind boggling how the market has changed this last year. It's even more amazing because the normal trend has been broken this year. 

Normally inventory increases and sales decrease in the late fall and early winter. Not this year. Sales have gone down, but I suspect that it's more because of the lack of properties to buy rather than demand. 8,092 residential properties sold in December. It was 8,241 in 2010. 

Demand.

There are 18,221 properties under contract with contingencies and 9,086 are pending. Buyers are having to deal with multiple offers on most good properties and even cash buyers don't have much of an upper hand because so many buyers right now are cash buyers.  

This insatiable demand has brought the market pleading for more inventory.

The supply is down to only 3.2 months. That is below a balanced market. And there is no hope for a flood of homes. We'll surely see more homes for sale in Spring, but we're not going to see any deluge of bank owned homes. Don't expect it and don't count on it. The banks don't have it.

Many of the other indicators have followed the same path set by the high demand and low supply. That is, the active listings price per square foot is up to $143.13 over all previous periods, including last year, Pending price per square foot is up and even the sold price per square foot seems to have stabilized.

Part of this is simply the lack of inexpensive homes. Low numbers of low priced sales, mean the median prices get dragged up, thus the rather meaningless average price is up, the median annualized price is stabilized an the monthly median is up to $117,000, over $114,000 last quarter and $110,250 last year. 

There is no doubt that the market is improving. We may not have, real price appreciation, but that only happens once the sentiment toward the market changes and it is changing toward that direction.  Like I say, it's not the moment that counts, but the trends. It's easy to get intangled in small fluctuation, to flicker pebbles of a mountain, but it takes time and a lot of power to move a mountain and the market is a mountain, crumbling and changing, but still a mountain.

Lender Owned and Short Sale Segment

Bank owned properties continued their slide down and lower influence on the market. You can see why there are many fewer REO properties on the market on this new trustee sales graph just added to this site. It's only for the city of Phoenix, but it represents a common theme seen with all cities in Greater Phoenix - that is, there are far fewer foreclosures and many of the trustee sales are now sold to third parties, thus avoiding going into the hands of banks and on to the market as, often, devastated properties.  

Not to devalue the influence of these things. They still make up a greater share of the active properties then they should, at 9% and 27% of sold properties, but clearly it's not as insane as 20% of actives and 51% of solds as it was this time in 2010.

Short sales, too have declined. Active short sales have declined to 36% of actives from 38% last year, but sales have increased from 19% last year to 33% this year. Unlike for REO's this is good, in the context of the current situation. It means that many properties sell before going into foreclosure and the system is somewhat working to muddle its way through the situation. Better short sales then foreclosures, despite the short comings of the short sale process.

Expect this trend to continue. That is, harder to get bank owned homes and just as many or slightly fewer short sale properties.

What's Next

This market is better for sellers, many of them, but not all. It allows some of sell, and quite a few to sell and move up. That's important.  There are actually a lot of people doing this.

Going into spring expect the market to really tighten up. It's going to be even more difficult to find good homes for sale. Even though inventory increases in the spring, so does buyer activity. We have buyers from more sources now then just local. Buyers are coming from countries like China, Canada in addition other states in the USA: both for second homes and for investment properties. It's going to be an interesting and frustrating year. 

Hopefully the many organizations and institutions, both in the public and private sector can get with the game and contribute to a recovery. Don't count on it, especially in an election year. Then again every year seems like an election year. 

It's going to take a lot for the economy to truly recover. It will take a mindset of common good. Currently we're in a long term spiral down to lower wages, a lower standard of life for many and most importantly, less access to tools that allow a strong middle class. Maybe the Occupy movement will get some more traction and keep the conversation going. 

A hint of warning: this is the market as I see it. I have no bias either way: up or down. I write is as I see it. Sure I want the market to get better, but it's not going to get that way by my saying so. Please do your own due-diligence, before making a decision, just be careful which data you use and how it is interpreted - there is a lot of bad, un-scrubbed data out there, and many biased opinions. Yeah, people, politicians, businesses and organizations have agendas.