Edited 5/21/2008: Please note this post. It appears Mr. Butler’s numbers may be flawed.
I suspect two things are about to happen:
1) You’ll see a post about this on virtually every Phoenix real estate blog and an article in every local newspaper. (Probably already happening, I haven’t read anything today)
2) The mainstream media (MSM) will minimize if not ignore the good and highlight the bad. (I know, what a shocking prediction.)
The What: ASU’s Realty Studies has released its report for April’s real estate activity in the Phoenix area.
The good news: For the first time since July 2005, resale homes have posted a year-over-year (YOY) improvement.
Dr. Jay Butler, Director of Realty Studies reports there were 5,585 recorded sales in April. April 2007 recorded 4,855 sales. (4,335 in March 2008)
I’m not personally as enamored with YOY stats as many. I prefer to look at month-to month trends. I don’t quite get what is so special about looking at this month compared to 12 months ago — without looking at everything else in between. The media however, seems to love YOY numbers (particularly when they are declining).
What the MSM will likely focus on: The median Phoenix home price declined from $220,000 in March to $210,000 in April. Last April’s median value was $265,000.
“One of the driving forces in increased activity has been rapidly declining prices that have fueled renewed investor interest and potential owner-occupants, especially in the lower income ranges,” said Butler. “Investment interest is being driven by the anticipation that home prices will rise again in the next few years. The lower median price is being impacted by several factors, including the large number of vacant homes, especially in certain neighborhoods,” he said.
Telling numbers in the foreclosure market:
Last year, 41 percent of the resale homes sold for more than $300,000, while it was 24 percent for April 2008. Influenced by foreclosed properties, homes selling for under $200,000 have increased from last year’s 16 percent to a current 44 percent of the local resale housing market. The most evident impact of lower prices is improved affordability.
This certainly reflects what we are seeing. Foreclosure and short-sale listings in some areas of Phoenix (particularly outlying areas) account for 35% of the inventory.
Sellers seem to generally be understanding that they can not base their home value on what the neighbor got last year. Buyers on the other hand do not seem to be understanding that they can’t get short sale and REO (bank owned) properties for 50 cents on the dollar. REOs are moving — sometimes swiftly and with multiple offers at (or even above) the banks listing price. Short sales are typically not moving, and they swiftly become REOs in the vast majority of cases.
Beginning of a recovery? One time blip? Who knows. One YOY data point does not a trend make. But sales seem to be picking up steam, foreclosures are creating affordability, and absorption rates are falling. All of this seems to indicate we may be bottoming. The question once that officially happens is, how long will it last? No one knows. As I’ve said before, you can never truly call the bottom unless you’re looking behind you saying, “Yep, that was the bottom…”.
See the full report for specifics on different parts of the Phoenix metro area.