Friday, January 07, 2011

Phoenix, Arizona Metro Real Estate Monthly Statistics and 2010 Summary

SALES Month over Month
Monthly Sales in December were 8,401, a 23.8% increase over November’s 6,786. This
complements an upward sales trend for the whole fourth quarter. The highest sales for
2010 of 9,280 occurred in June. This month over month gain coupled with the fourth
quarter trend demonstrates a metric of home sales clearly moving in the right direction, after a
pattern for 2010 characterized by a “one step forward and two steps back”
phenomenon. The December Sales figure ends the year as a 45.12% increase compared
to the January figure (5,789) at the start of the year.

SALES Year over Year
December’s 8,401 Sales total represents a 9.7% increase over 2009’s December Sales
figure of 7,657. In addition, it is the second largest November to December monthly
gain (23.8%) of the decade, just below the November to December gain (24.98%) in
2008.

NEW INVENTORY
December New Inventory (9,443) declined 13.9% or 1,526 listings from November’s
10,969. This month’s New Inventory figure follows a steady decline started in September.
This is in line with a pattern of November to December declines in New Inventory
experienced every December since 2001. New Inventory added to the market in 2010
was 148,968, 1.17% increase over the same figure for 2009, but well below the figures
for 2006, 2007 and 2008 (173,363, 165,615, and 162,181 respectively). New Inventory
added to the Total Inventory each month is an important factor in the supply and demand
balance, as greater supplies support a Buyer’s market and exert downward pressure
on pricing

TOTAL INVENTORY
Total Inventory declined 2,890 listings in December to 42,463, a 6.37% decline from November.
Total inventory remained flat during 2010 with an average of 43,088 per month.

MONTHS SUPPLY OF INVENTORY (MSI)
MSI for December declined to 5.05, representing the first drop below 6 months since
June, and a positive step toward a balanced market. A Seller’s market is typically defined
as a months supply of inventory in the 4-5 month range, while a Buyer’s market is described
as a 6 month or greater supply. While MSI is a barometer of overall market
health, it may not represent an accurate picture of inventory supply in specific market
niches. The December decline from 6.68 to 5.05 months is a drop of 1.63 months or
24.4%. While this is a very positive metric, a quick glance at the historic new listing and
sold data shows that new listings rise significantly from December to January each year,
and sales significantly fall from December to January each year. Thus next month’s inventory
rise coupled with fewer sales, could cause the MSI to rise again.

NEW LIST PRICES
Both the median and average List Prices added to the market continued downward in December.
Median List Price dropped 3.2% to $118,000 from November’s $121,900. Likewise the
average List Price declined 7.5% to $191,000 from November’s $206,400SALES PRICES
December’s Median Sales Price was $110,200, a 4.2% decline from November, and a 12.9%
decline from December 2009. The median value represents the midpoint in a market where
there are as many sales above that value as below. Great housing affordability in the Valley
was fueled by the declining median price trend line in 2010. The average Sales Price for December
rose $1,400 to $160,400, a .9% gain over November, but 9.7% decrease from December
2009.

THE ARMLS PENDING PRICE INDEX™
The ARMLS Pending Price Index is a predictive tool unique to ARMLS which forecasts Median
and Average Sales Prices for the coming three months based on the pending sales data in
the MLS. The PPI’s predictive accuracy naturally declines the further into the future it goes,
as the number of transactions in the forecast lessens. The actual Median Sales Price for December
was $110,200, which was 4.17% below the December figure predicted in November.
The Average Sales Price for December was $160,400, or 1.47% below the December Average
predicted in November. While the actual numbers may deviate from predicted values, the
forecast value for the direction of market pricing remains true.

The three month predictions for Median Sales Price for January, February and March are
$115,000, $112,000 and $110,000 respectively, indicating continuing downward pricing
pressures well into the first quarter. Likewise, Average Sales Price predictions follow a similar
downward forecast for January, February and March of $159,400, $158,200, and
$145,800 respectively.

Downward pricing pressure in the Valley is influenced by the large, steady supply of homes
(42,463) and the disproportionate percentage (69.6%) of Distressed Sales relative to the Total
Sales.

FORECLOSURES PENDING
Foreclosures Pending for December (41,485) is right below the July-November average
of 41,603. The trend line for Foreclosures Pending has remained relatively flat since July,
hovering between 41,203 and 41,958.

LENDER OWNED SALES
/ FORECLOSURES
Lender Owned Sales for December (4,061) increased by 1,172 sales from November, representing
the highest month over month change all year of 40.57%. December’s Lender
Owned Sales accounted for 48.3% of the total December Sales, representing the highest
percentage of total sales for all of 2010, spurred by Buyer/investor motivation to close
and lender incentive to clear inventory from their books all before January 1.


AVERAGE DAYS ON MARKET
Average DOM finished 2010 at 115, which included an additional 23 days added over the
course of the year. This was a 25% increase to DOM since January (92 days). Despite a
slight drop in April (97) and May (96), the Average DOM trend line for 2010 was upward,
a typical response of a market in over supply.

DISTRESSED SALES
December’s Distressed Sales (5,849), a composite of Lender Owned Sales and Short
Sales, accounted for 69.6% of Total Sales (8,401), and were well above 2010’s monthly
average of 4,665, or 62.18% of Total Sales. The December Short Sale component of Distressed
Sales saw a 31.3% rise in number of units sold to 1,788 over November’s 1,362.
Short Sales accounted for 21.3% of Total Sales in December. Clearly, distressed properties
continue to drive the market and exert downward pressure on pricing.

COMMENTARY

STAT reports mixed news for December. The increase in Total Sales in December along
with a drop in New Inventory is welcome news. Also, the decline in Months Supply of Inventory
to 5.05 signals a market trying to balance itself. Yet, despite these positive signs,
the negative downward pressure on pricing continues. Trend lines for both median and
average List and Sales Prices have declined since January 2010, despite an occasional upward
move during the course of the year. In addition, the average Days on Market rose
five out of the last six months to 115 days in December, and the predictions of the ARMLS
PPI indicate more downward pricing pressure coming in the first quarter.

The Valley still struggles with housing vacancies as a result of the housing bubble and effects
of immigration legislation. According to the U.S. Department of Housing, based on
a survey by the U.S. Postal Service, the Phoenix-Mesa-Glendale area shows 91,687 vacant
residential addresses, a 4.9% vacancy rate which historically has been in the 1.5%
range.**

This glut will have to be absorbed before normal supply and demand can return.
Not surprisingly, the return to a balanced market with healthier pricing trends will be slow
in coming. Two key stabilizing metrics that will reverse the downward trends are net migration
into the Valley and more jobs. Net migration into Maricopa and Pinal Counties
through October is 2,873* which is in effect negligible. However, the most recent unemployment
figure (October) is 8.48%, dropping for the fifth month in a row.*
Net migration into the Valley will be influenced by the recovery in feeder markets
throughout Arizona and the United States, which in combination have experienced the
lowest migration in sixty years. The Economic and Business Research Center, Eller College
of Management at the University of Arizona, predicts modest improvement in 2011, with
population and employment rates to grow at less than 2% annually.**


The latest National Association of REALTORS® figures show that the national Pending
Homes Sales Index rose again in November with the broad upward trend over the past
five months, indicating a gradual recovery into 2011.***

As other markets thaw and activity heats up, more potential homebuyers from feeder markets become available to take advantage of the Valley’s affordable housing, the silver lining to the downward price
pressure cloud. The underpinning of net migration and employment metrics have seen
gains, although small, in the Valley, Phoenix, Arizona Real Estate and/or nationally: leveling of foreclosures pending in Maricopa County, addition of jobs in the employment services sector, upward
trending of manufacturing healthcare and social services jobs, growth in solar and biotechnology
industries, etc. are harbingers of recovery to come.**

The year 2011 holds promise, and positive gains, however modest, will pave the way for a brighter real estate future eventually.

Contact Laura Boyajian to begin the process of buying a Phoenix, AZ home or selling your Phoenix, AZ home today.

*EBR DatabaseOnline
**http://azeconomy.eller.arizona.edu/
***http://www.realtor.org/press_room/news_releases/2010/12/pending_gradual

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