Phoenix Market Update - Indepth Look at October 2011 Stats

 

SALES Month over Month

Sales dropped for the second month in a row by 4.2% in October to 7,563. This figure is 11.56% below the previous 11 month average of 8,552 sales per month. Sales have been trending downward since June.

 

SALES Year over Year

October sales (7,563) were 14.7% above the October 2010 figure of 6,593. Sales fell from September to October in seven out of the previous ten years. Thus the October drop is viewed as seasonally typical.

 

NEW INVENTORY

New listings added to the market rose by 1.6% to 9,654. Despite the slight rise in October, the overall new inventory trend line has tilted downward since March.

 

TOTAL INVENTORY

Total inventory rose 1.2% in October to 27,266, breaking the previous eight month streak of declining total inventory. The slight increase in October is only a minimal deviation from the overall downward trend line of the previous 12 months, and 53% below the record decade high of 58,178 in total inventory in October 2007.

 

The period from January 2002 through May 2004 is now considered by many to have been the Valley’s last normal market. During that period the average total inventory was 26,727. This figure is right in line with the current total inventory, hinting that another of the Valley’s real estate metrics has righted itself.

 

MONTHS SUPPLY OF INVENTORY (MSI)

The market wide months supply of inventory inched up slightly for the second month in a row to 3.61 from September’s 3.41. This metric, which trended steeply downward between January and June, has been inching upward since July. It remains, however, below 4, seen as the dividing line between a seller’s market and a balanced market. 

 

NEW LIST PRICES

The median list prices rose again this month by 6.1% to $139,000, continuing September’s welcome upward tilt. Likewise, the average list price rose 9.1% to $229,900. This is encouraging since pricing has remained stubbornly resistant to rebound, despite improvement of other metrics over the past year.

 

SALES PRICES

Sales prices did not follow the upward motion seen in the September. Instead they remained singularly lackluster, with the median falling 2.5% to $112,000 and the average falling 1.1% to $153,400. Half of the gains seen in September sales prices were lost in the October figures, continuing the flat lined trend line of 2011. It appears that the Valley’s pricing recovery is stalling for time, unfortunately.

 

FORECLOSURES PENDING

Foreclosures pending declined again in October, but only by 344 units, to 23,211. The steep rate of decline experienced from February to July eased significantly from August through October. Earlier predictions that the foreclosures pending would cross the 10,000 mark before year’s end now appears unlikely. Unless the current trend line is significantly altered, crossing the 10,000 barrier may not even be accomplished in 2012. This is unwelcome news because the elimination of foreclosures, which are fueled by foreclosures pending, is key to pricing recovery.

 

DISTRESSED SALES

Distressed sales, defined as the combined total of foreclosures and short sales, continue to dominate the Valley’s real estate horizon. Of the 7,563 total sales in October, 4900 (64.8%) were distressed sales. This is slightly below the previous eleven month average of 66.7%. Foreclosures for October were 2,693, or 35.6% of total sales, while short sales represented 29.2% of total sales at 2,207. For most of the past twelve months, the short sales and foreclosure trend lines have remained almost parallel. Since August the two trend lines have been moving closer together indicating that short sales are gaining on foreclosures in the distressed property makeup. We can speculate on the underlying causes. After such a long run at shorts sales, lenders may be getting the hang of it. The FNMA Short Sale Assistance Desk (SSAD) has been instrumental in expediting many short sales where Fannie Mae holds the underlying first lien. While the number of distressed sales remains too high, gains in the short sale totals over foreclosure means that more homeowners have been able to dodge foreclosure.

 

AVERAGE DAYS ON MARKET (DOM)

Average days on market declined by one day in October to 94. This continues the steady downward trend line begun at a high of 116 days in February. It is well to note that this Valley wide average DOM is merely a barometer of overall market health over time. It should never be used to inform seller expectation of projected DOM for their property. Average DOM in individual seller contexts should be calculated using property specific

parameters to achieve any kind of predictive value.

 

Overall, October is best summed up as “holding the line.” While there were positive indicators, like increases in the median and average list prices, a one day decline in DOM and slight decreases in foreclosures pending; other metrics took steps, although minimal, in a backwards direction: decline in median and average sales prices, increase in new and total inventory, decline in total sales and an increase in MSI. The promise of recovery, fueled last month by the whimsical uptick in all four pricing metrics (median and average listing and sales prices), was not dashed in October, just not fulfilled. Jobs remain at the epicenter of the Valley’s, Arizona’s and the nation’s recovery. While many are frustrated with political impasses on job creation, there are positive signs that indicate that recovery is in process. In a report prepared by the Arizona Department of Administration, Office of Employment and Population Statistics in cooperation with the U.S. Department of Labor, Bureau of Labor Statistics, the unemployment rate for Maricopa County dropped in September to 7.9% from the high of 9.1% in January. In September, Phoenix was name #6 in the nation for new job growth, according to figures released by the U.S. Bureau of Labor Statistics. Non-farm payroll employment increased 2.3% from September 2010 to September 2011 in the Phoenix metro area, and the 2012 Phoenix projection for average non-farm employment is expected to be 1.4%, according to the Arizona Department of Administration. Phoenix metro area lost over 220,000 jobs since 2007 according the U.S. Bureau of Labor Statistics. It added 31,300 jobs between August 2010 and August 2011 which amounts to an annual growth rate of 1.88%, ranking Phoenix as 18th in the nation among 100 major metropolitan areas. Job gains now, while making up lost ground, simply have a long way to go. Employment and recovery are moving in the right direction but at an impossibly slow pace. Like the proverbial child who pesters, “Are we there yet?” our market responds, “Not

yet.”