The real estate market in Phoenix metro has been exciting, quick, lucrative, annoying and downright maddening at times.  There sure are a lot of transactions: homes are moving fast and inventory is at what many consider normal levels, but it's far from a balanced or normal market.  

We broke the sales figures down into three distinct segments because each of these is a separate market that makes up the whole.  In May 2009 a total of 9,189 residential properties sold.  This is up 8% over last month and 65% more the last year. 

Let's start with the the most damaging and the largest portion of what makes up homes sales in Greater Phoenix: Lender Owned Properties.  They made up 64% of all sales, but they make up only 14% of the active homes.  The result of this deluge of buyers on what used to be a deluge of lender owned homes but that river is almost dry.  Right now there is less then a month of REO inventory on the market.  The days of inventory are 47: this is a slower moving measure which you can read about at: Inventory Levels and Forecasting, and it's low as well. 

Delve further into the data and note that the active asking price has been on the rise, the Pendings have been on the rise as well.  The sold price is only discounted by just over 2% from asking price and 90% of the properties sell vs. being expired or canceled.

The point here is that, if your goal is to buy a lender owned property at a deep discount then your in for a shock when you find out your offer is up against many others for the the same property.  You can still find properties that are really good deals but don't expect them to be prime properties in move in ready condition under $200,000.  Only, once you move up the price scale do you stand a better chance against the competition.  Under $100,000 the well is pretty much dry.  We'll cover this in a future post.

 

 

Normal sales, those not in distress or visibly not in distress were the second group.  They are less then half the sales of REOs.  Still more homes sold in May then in April and almost double the sales of 2008 and last quarter.  Inventory remains high at 8.8 months of the slower moving days of inventory at 300 days, but it's an improvement either way.  Prices, though, continue to decline, from Active, to Pending to Sold is down again and will probably be down in the coming months.  

The listing success rate for normal homes is 40%.  This means you have about that chance of selling.  The rest, 60%, either expire or cancel: most likely overpriced for this market.  Not all Normally sold properties are over-priced.  Many owners are willing and able to compete and homes are selling at attractive prices for buyers.  In some areas of the valley you don't have much of a choice since very few homes are lender owned.

 

 

Short Sale or Pre-Foreclosures in terms of inventory are holding steady.  Some of the normal sales that fail to sell come into this segment. The steady inventory is not a good sign. 

The higher number of sales is very good.  It means that  more short sales are actually closing: 1,083 Sold in May up from 783 in April and 493 in March.  Further more, 2,357 are pending.  The success rate of sales for pre-foreclosures is actually better then normal sales: 40.8% vs 40.4%   Short sales are still a long term buying proposition, but I see more on the market with approved pricing, which means that it almost becomes a normal close. 

A supply of 12 months and almost 700 days of inventory means that there is lots of unbalance here in favor of the buyer, except that the process for the buyers is not always a pleasant one.

 

 

There is supposed to be more inventory coming on the market soon, especially lender owned inventory, but I doubt it will be at the levels to depress the market too much.  Absorption of REO properties is quite rapid.  Less then a month of inventory is very low so even if it doubles it won't have the impact that is had in the past. 

None the less we need to get rid of these distressed properties to truly balance the market.  The amount of foreclosed homes and short sale homes on the market should be negligible.  As long was we have this inventory, even at current levels, we won't have stability, despite the 4 months supply of all properties. 

In the coming weeks look forward to more detailed reports on specific price ranges, cities, segments and neighborhoods. 

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