Market Summary for the Beginning of July

What an amazing month was June!

According to the current ARMLS data, 2,216 homes closed on June 30 across all areas and types, the largest total we have ever recorded for a single day. It beat the previous record set on June 30, 2004 by nearly 57%! Not only that, but the total for the calendar month of June was 11,141, also a new all time record for sales through ARMLS. We know that the total sales recorded by the counties may have been a little higher during the summer of 2005 because so many transactions were completed outside of ARMLS in those days (mainly new homes and FSBOs). However in June's total we are not including the homes purchased at trustee sales which were very few in 2005 and likely numbered over 1,500 last month. However you look at it, June 2011 sales volume was enormous.

The make-up of these ARMLS sales was also exceptional. Short sales and pre-foreclosures totaled 3,057 across Greater Phoenix, up 49% from May. Balzotti's Note: Short sales in PV were only 14% of the market (72% normal) and Scottsdale short sales were 19% of sales (56% normal). Lender owned properties were up only 3.4% at 4,508, while normal sales were up only 3.8% at 3,416. These three counts don't quite add up to 11,141 because there were 160 "out-of-area" sales too, lying beyond the borders of Greater Phoenix.

Because so many of these closed transactions were short sales, we have to expect some volatility in these numbers over the next few weeks. The flexmls system automatically closes pending transactions when their COE date is reached. Sometimes a snag occurs in real life and a sale fails to close when expected and has to be manually reversed later. This is far more likely to happen with short sales than other types because of the large number of approvals and documents needed to successfully close escrow. As usual our sales counts will be constantly monitored and corrected as newer statistics emerge on a daily basis.

The exceptional number of short sales had another impact. With normal sales dropping from 34% to 31% the monthly average price per sq. ft. fell just under 1% from $82.55 to $81.75 between June 1 and July 1. REO pricing per sq. ft. went up 1.0% and normal pricing went up 1.1%, but short sales and pre-foreclosure pricing went down a huge 4.7% across Greater Phoenix.

Here are some key figures for all areas & types:

Monthly Sales: 11,141 is 13% higher than May 2011 and 21.7% higher than in June 2010, when sales numbers were still getting a boost from the government tax credit.

Pending Listings: 12,224 on July 1, down 7.9% from June 1 but up 16.1% compared with July 1, 2010.

Active Listings: 28,837 on July 1, down 8.0% from June 1 and down 30.0% compared with July 1, 2010.

So supply continues to drop while demand is extremely strong. However, during the summer months we expect demand to remain much stronger among investment buyers than among regular buyers. Particularly at the upper end, buying interest tends to fall off during the third quarter. For example in the range above $3,000,000 there were only 3 homes under contract on July 1 whereas there were 11 on June 1. If this trend happens in 3Q 2011 we could see average prices fall due to the changing mix favoring the lower end of the market. It seems counter-intuitive that prices could weaken when supply is dropping fast and demand is so strong. However we must remember that public sentiment toward housing is still very negative and most people have not noticed the change in the balance of the market. In late 2005 and the first half of 2006, demand was weak and supply growing like Topsy, but prices continued to rise and were still extremely high at the end of 2006 because public sentiment toward housing remained very positive until the moment prices could no longer hold their artificially elevated position. At the moment the market balance is reversed but prices are hardly reacting at all. It is possible to theorize that the longer this situation lasts the sharper the ultimate correction is likely to be. We will have to wait and see.

There are those who still believe a large "shadow inventory" of distressed homes is looming over us and is going to cause another collapse in pricing. To address this question, we have developed a chart showing the "shadow inventory" counts for single family homes in Maricopa County. You can find it here. The chart shows that the "shadow inventory" has been declining since November 2010 and is relatively small compared to the monthly sales rate. Of course successful short sales contribute to this decline in the "shadow inventory". We did not include loans that are delinquent but not in foreclosure in our graph, but instead we recommend an expert on these: Jay Brinkmann, Chief Economist of the Mortgage Bankers Association. You can find his press release on 1Q 2011 delinquencies here.

In contrast to the sales transactions, the foreclosure numbers for June were relatively unexciting. In Maricopa County we counted 4,477 new Notices of Trustee Sales, similar to both April and May but 27% below June last year. We counted 4099 trustee sales, the lowest monthly number since the Bank of America moratorium in December 2010. This total is also 14% lower than June 2010. Both counts are symptomatic of a foreclosure tsunami that peaked in 2009 and is now gradually ebbing.

From the Cromford Report

Home buying today versus back in the day…the evolving pursuit of the American Dream

March 1st, 2011

In 1995 Realtor.com went live, posting multiple listing information (MLS) from around the country in one database with public access. Before that, MLS information was proprietary. You couldn’t ‘see’ all the inventory of available homes without an agent / member of the MLS. Would-be buyers would drive neighborhoods looking for ‘for sale’ signs, or circle ads in the Sunday paper at the local coffee shop. But when they wanted more information on a home with that ‘for sale’ sign in front of it, or that ad in the paper, they had to call the phone number on the sign or ad. The real estate agent was the gate keeper.
Today you can see that same for sale sign, but now it may have a bar code-like ‘tag’ on it. Focus on the tag with the tag reader app on your smart phone and the next thing you know you’re looking at the home online, complete with a virtual tour of all the rooms. And if you don’t like what you see, another GPS powered phone app can immediately identify any other listed property in the area. In fact, by 2012, 20% of home searches will be done on a mobile device. The gatekeeper is nowhere in sight.

Things have changed a bit…but not the fundamentals.

For example, the common denominator in the above scenarios is that buyers typically initiate the home-buying process on their own. They rarely contact a real estate agent as their first step. What was true back in the day is still true today–buyers quite frequently find their agent through what we might call ‘the back door’ of agent inventory. However, now they can do it with a great deal of precision.
One reason for the delay in talking with a professional is the temporal factor. That is, from inception of the idea of making a move (‘honey, we’re pregnant’) until the actual move into the larger home (with at least one more bedroom for little Johnny) is statistically a 6-month to 2-year process.
This also explains why the classified ad in the paper or magazine typically doesn’t sell the house (only about 1% of the time). Similarly, the odds are against the ‘sign call’ turning into a purchase (about 12% of the time).
The common denominator that explains the low correspondence between marketing and advertising venues and selling the house is that when buyers are looking at the ad or the sign they tend to be early in that 6-month to 2-year process…they are not ready.
Rather than drive through neighborhoods, today’s buyers surf the web. 90%+ of today’s homebuyers will do at least some of their home searching online.
But the stunning statistic today comes from a large survey by the National Association of Realtors of homebuyers and sellers released 6 months ago. When buyers were asked where they first learned about the home they ended up purchasing, 38% report they saw it first online! This percentage has grown dramatically over the past decade and will likely continue…and why not. Purchasers like being empowered with both information and anonymity.

Has the importance of the role of the REALTOR diminished?

Ironically, internet savvy buyers find that in spite of and indeed because of literally millions of pages of online content, the local agent cannot be trumped by the web as the ultimate source for information. It is information overload within a minefield of legitimate risk management concerns.
Real estate will never be like buying an e-ticket or a stock online. It is fundamentally a local enterprise, where the idiosyncrasies of neighborhoods and individual properties can only be parsed by the professional who has lived and worked in those neighborhoods; who is familiar with those individual properties; and who knows how to maneuver the minefield of inherent risks. The online listing information won’t tell you if the property backs up to a landfill!
And when it comes to the decision-making process, the real estate agent / local specialist understands the many tradeoffs that every buyer must manage–like vintage versus proximity; square footage versus premium location, etc. There are always tradeoffs. Even the 2 million dollar buyer wants the 3 million dollar home!

Bottom line:

In the evolving pursuit of the American Dream technology will continue to redefine the home-buying process. Yet as true today as back in the day, one factor remains a constant—the local professional REALTOR is center stage. Only today, instead of carrying around a catalog of homes, they distribute free GPS enabled smart phone apps that track all the housing inventory in your area!

Cash Buyers Lift Housing

http://ping.fm/iOKVc

To Wait or Not to Wait: Financing versus Purchase Costs

http://ping.fm/56y7Z

Mortgage delinquencies lowest in 2 years

MBA economist: U.S. has 'turned the corner' in foreclosure crisis

By Inman News, Friday, February 18, 2011.

Inman News™

The percentage of mortgage holders who were behind on their payments dropped to the lowest level in two years during the fourth quarter of 2010, the Mortgage Bankers Association said in a report today.
At 8.22 percent, the seasonally adjusted delinquency rate was down from 9.13 percent during the third quarter and 9.47 percent from a year ago.
The percentage of mortgages in foreclosure climbed from 4.39 percent during the third quarter to 4.63 percent during the last three months of the year, matching an all-time high.
Fewer loans are entering the foreclosure pipeline: the percentage of loans only one payment past due -- 3.25 percent -- was at the lowest level since 2007, and the foreclosure start rate fell from 1.34 percent during the third quarter to 1.27 percent.
The percentage of loans three payments or more past due was down from an all-time high of 5.02 percent at the end of the first quarter of 2010 to 3.63 percent at the end of the fourth quarter of 2010 -- a drop of almost 28 percent over the course of the year. All but two states saw a drop in the 90-plus-day delinquency rate, and the increases in those states were "negligible."
"While delinquency and foreclosure rates are still well above historical norms, we have clearly turned the corner" in the foreclosure crisis, MBA Chief Economist Jay Brinkmann said in a statement.

While unemployment remains high, the economy added more than 1.2 million private-sector jobs during 2010 and first-time unemployment claims fell during the second half of the year, Brinkmann said. Absent a significant economic reversal, he said, "the delinquency picture should continue to improve during 2011."
The MBA National Delinquency survey covers 43.6 million loans -- about 88 percent of all outstanding first-lien mortgages. If the survey's results are extrapolated, about 4.1 million homeowners were 30, 60 or 90 days or more behind on their mortgage payments during the fourth quarter, and another 2.3 million were in the foreclosure process.

Economy in Arizona on the Rise

59 comments by Russ Wiles - Feb. 17, 2011 05:03 PM
The Arizona Republic

It may not seem like much of a recovery for Arizonans hobbled by job losses or falling home values, but the state's economy actually is improving at a solid clip.
So says Nathaniel Karp, chief economist for BBVA Compass and one of the few bank economists who tracks conditions here.
"Arizona's economic recovery is among the fastest in the country," said Karp, speaking to BBVA Compass clients in Phoenix this week. "And we're seeing a faster recovery compared to a few months ago."

Karp acknowledged challenges remain for both Arizona and the nation. Arizona's state budget is in particularly bad shape, including unfunded pension liabilities, he said.
But he also pointed to relatively strong manufacturing gains and exports, especially in software and other technology items. Other positives include an increase in hours worked for Arizonans with jobs and moderating price declines for home values here.
Karp predicted Arizona's economy would grow 3.4 percent in 2011, better than his projected 3 percent expansion for the U.S.
On the national economy, Karp sees continuing mild inflation and moderately rising interest rates, despite sharper price increases for oil and various other commodities.
He doesn't see commercial real estate bottoming until summer, but said confidence among business leaders had risen after Congress extended income-tax laws and signaled greater clarity in regulation.
Another bank economist who spoke in Phoenix recently, Paul Kasriel of Northern Trust, also sees gradual economic improvement for the nation in 2011.
In an interview, Kasriel said he expected the U.S. economy to grow 3.3 percent this year, helped by exports, consumer spending and a gradual uptick in lending. Housing and state/municipal finances will act as drags. He didn't provide a forecast for Arizona's economy.
Kasriel sees mild inflation, along with slightly higher interest rates. He expects the national unemployment rate, currently at 9 percent, to dip to 8.6 percent by year's end.
"I think the worst is over for housing, and it should show improvements by the end of the year," he said. "Housing now is a better buy than it's been in 40 years."
While Kasriel doesn't see a big drop in the unemployment rate, he said the employment picture had stabilized.
"If you've been able to hang onto a job for the last several years, there's an increasing probability you'll stay employed," he said. "We couldn't have said that two years ago."

Read more: http://www.azcentral.com/business/articles/2011/02/17/20110217economy-arizona-rise-expert-says.html#ixzz1EczXXRrE