Market Trends

If you're in the market at all lately, you've probably noticed a lack of homes to buy and higher prices. Your notice would be correct. Inventory is painfully low.

As of now the median price, measured monthly is $140,000 compared to $119,000 in January and $114,000 last year: a jump from $114,000 to $140,000 is huge and much of it as a result of low inventory.

But, there is a but. Much of the low priced inventory has been depleated. As a result of fewer low priced sales the median price will be up, so part of that jump is due to more expensie, in general, homes selling, but only a portion of that rise - the rest is demand and low inventory and of course changing sentiment about the current financial situation and the future. 

Sales are down from both 2011 and 2010. Only 8,480 properties sold compared to 9,452 for the same period last year and 9,129 two years ago. The same thing for pending properties: 11,996 currently while last year it was 13,326 and 14,406 two years ago. 

If you only looked at those numbers the trend would look depressing and dismal, but the reality is so much different, it's almost as extreme and surreal as it was in 2005 and 2008.

All those numbers are down from the previous periods only and only because there is a lack of inventory, or demand has driven down inventory to levels that have forced a significant change in the market trend. Lack of inventory, lots of cash out there, a volatile stock market, low interest payments in the banks and low

Investors are a huge segment of the current buying group gobbling up inventory as if their hunger were insatiable. Every few months I post a graph showing what percentage of the market is investor buyers.  Last time this information was posted it was high: near 22%. Since then that number has increased to as high as 29% as it's at 265 at last count, earlier this month. 

Also over 40% of sales are cash and i'm sure investors make up a greater than 50% of cash sales. Most of our investor clients are cash or combination of cash and loans when they are purchasing multiple homes.

The buyers who are not investors have some resentment toward investors when they learn about these numbers, often comparing this trend to the trend that brought down the

The news is all over now: prices for real estate are up and often significantly up over last year. The lack of supply and a healthy demand has forced prices to increase: simple economics. Demand is high from regular home owners to investors, all trying to take advantage of still low prices and even lower interest rates, though - 40% of sales are cash.

There's a lot of talk about missing the boat on this recovery. Not so fast. Even though prices have increased, they are still at long time lows. With the price of building materials on the rise and really with no reason for a slow down in demand for the materials due to global demand, it is unlikely you will be able to build homes at the price you can buy them now. Replacement cost is a huge factor and

Surprise like many suburbs were hit hard, but these are also the areas in the midst of a hot real estate grab. Inventory is at a long time low of 800 homes and months of inventory is down to 2.7 months, which is very low even compared to a low 3.9 months last year.

It means increasing prices. The average price is up to $153,271 from $143,926 last year and the more meaningful Median price up to $135,000 which is a significant rise in one year from $123,550 last year. 

 (Graph - Cromford Report)

It's nice to have a balanced market, but in real estate it's rare to have one; though the imbalance is not, usually, skewed too much: that's an okay situation, but are we getting too much of a good thing now? Too fast of an improvement, is it really an improvement when it's skewed so much? The market is not balanced.

Personally I don't like it, this imbalance it makes everyone's job more difficult and there is alot of aggrevation, animosity and bad feelings out there. Even something simple as working in your client's best interest can earn you new nick names or have someone question your integrity. There can be only one buyer for any particular home and when many people want it - and there are few other choices - the results are not always good. 

On Monday of all days I got a call from a news reporter wanting to do an live on camera interview with me about the pending numbers, why they are down and what it means. Of course Monday is the busiest day of the week with all the pent up weekend listings and contracts needing escrows opened or replies: essentially 3 days of work need to be squeezed into one, so an interview was out of the questions, which was too bad for me.

I did tell him my opinion about the matter which I'd like to share with you since these numbers are confusing, though very symbolic.

First look at the active properties on the market. There are fewer properties:  inventory is low. In addition look at new listings this year compared to previous years. Follow that with the

Spring is almost here, but it already feels like summer. Spring is also the busy season for home sales. Every city in Greater Phoenix low on inventory, even Scottsdale, though inventory is higher then in other parts of the metro area, which is normal.

( Chart: The Cromford Report )

Scottsdale was not as hard hit by the Great Recession, partially due to the higher end market, but mostly due to the fact that the area is established with long time residents, many of whom have been there for a long time and have a low mortgage or no mortgage. 

Thus long term apprecation has, for the most part, stayed in the black.

Right now there are some 2,081 homes on the market, which has been steady for the last few months. Sales have increased. The last

Ok, sales of traditionally sold homes or in other words not short sales nore bank owned homes are on the rise: in fact, 50% of all properties sold in the recent months are normal sales versus 43% last year and 44% two years ago; that's an improvement, but 50% is not where the market should be.

Since the market has seen an improvement, let's take a look at the 'normal' real estate market.

The best comparison is the look at the numbers against other segments of the market for a given period and the same segment in different periods of time.

Before now, the traditionally sold market was a drag on most of the median and average numbers, like months supply of inventory. While other segments were well into seller's market territory, normal sales

With the improvements in the Phoenix real estate market, investors have increased their activity. The graph below charts sales to investors from 2001 to now. 

The last year has seen about 25% of the properties go into investor's portfolios and the last recorded month that jumped to nearly 30%, that despite the number of properties sold dropping. 

Keep in mind that the only reason the number of properties has dropped is lack of inventory. 

Investors are coming from around the world to take part in Arizona's real estate recovery and the current path the wealth building. 

Just to give you an example of our client base: China, Poland, Australia, New Zealand, Canada plus many investors from different states in the U.S.