I was ridiculed from coast to coast for saying the local real estate market was ‘abuzz’, but similar stories are slipping out. Yesterday’s post about the downtown-SD condo market showed inventory has dropped from 600+ units last year to just 247 condos for sale currently, and sales are up. Apparently the drop in prices, and mortgage rates around 4%, are causing more properties to be sold!
Here’s another, this one about the Phoenix market.
(P.S. I got busted by the Wall Street Journal yesterday, and told them that I would abide with their policy to only include a snippet, and direct you to their website for the full article. Hopefully you are a subscriber!)
From the wsj.com:
PHOENIX—The Phoenix housing market is defying conventional economic theory.
Inventories of homes for sale are low, falling 41% to 21,304 in October, compared to 35,732 at the same time a year ago for Greater Phoenix, according to the Cromford Report, a market research firm in Mesa, Ariz.
The number of home sales is rising—to 6,428 in October from 5,443 in same month a year ago, according to the Cromford Report. The city’s unemployment rate is inching down and is below the national average.
The laws of supply and demand suggest housing prices should be rising, or at least stop falling. But they continue to decline, due to a flood of bargain-hunting investors who still dominate the market, as well as conservative bank appraisals. As a result, economic recovery in what was once one of the country’s most dynamic cities is being held back.
The monthly median price for a previously owned, single-family home in Greater Phoenix sank 5% to $120,000 in October from $127,500 a year earlier. The national median was $165,400 in September, the latest month reported by the National Association of Realtors.
Over the same time, as prices weakened, unit sales rose 18%, according to the Cromford Report.
Read the full article here:
(Everyone mis-reads the drop in median sales price as a sign that prices are dropping, but what it really means is that more properties on the lower end are selling. When inventories are dropping, and sales are rising, you have a healthier market.)
Is it just a seasonal drop-off? Not in San Diego. Compare the difference above between today’s inventory with those from 12 and 24 months ago.
Others:
Miami houses sales up 41%, condo sales up 63%:
http://www.housingwire.com/2011/11/21/florida-home-and-condo-sales-rise
Orange County’s supply is 3.27 months worth, down from 4.18 a year ago (though lots of mis-direction about why):
http://lansner.ocregister.com/2011/11/22/distressed-listings-heaviest-in-so-county-foothills/148793/
The Phoenix market is hot!
Sorry, couldn’t resist. 🙂
I thought “conventional economic theory” included the idea that demand is elastic and price sensitive, and therefore when unit prices drop substantially, the number of units sold should increase?
What is the $/sf for Phoenix y-o-y for the past 24 months?
A few months ago we were suggesting that elective sellers would pull properties off the market if they haven’t sold by now. Couldn’t that be one of the major contributing factors for the lower inventory totals now. I think we’ll know a lot more once this next spring selling season shows up. We’ll finally have YoY numbers that aren’t being influenced government programs. Mortgage rates look like they’ll be a bit lower but pretty close to last year.
Certainly there’s a lot of investors in cheap homes looking to cash flow right now. Probably a good time to invest in property management firms.
Active listings in the greater Phoenix MLS (ARMLS) are below 20,000 vs. over 60,000 a couple of years ago. The area served by ARMLS includes Maricopa, Queen Creek, Florence, Buckeye and a bunch of other places on the fringe. Everything that is reasonably priced is selling, often with multiple offers. If it’s under $100k, it goes within a day or two with multiple offers. At the bottom, Goodyear had over 50 houses priced under $80,000. Now there are three.
Ask any competent Phoenix agent, and they will tell you it is almost as difficult to secure a decent house at a reasonable price now as it was in 2005. Traditional owner-occupant buyers are having to bid on houses as soon as they come on the market and hope they don’t get out-bid by a cash buyer. Often they have to bid on several houses before their offer is accepted.
Periodically I visit some of the new home communities out there. I thought new homes would become competitive with resales in many areas next spring as prices rose and inventory dropped. I was wrong. In several areas, the combination of lower prices, builder incentives, and the certainty of availability has dramatically increased spec and new build absorption.
You can sit in your armchair and hypothesize based on what you read or you can get out there and see what’s really happening. Ride along with a buyer’s agent in Phoenix for a day and then tell me if that market is hot or cold.
This was going to be some kind of awesome.
http://www.redfin.com/AZ/Paradise-Valley/5630-N-Cameldale-Way-85253/home/28052717
I couldn’t afford the windows.
Thanks AI for the report!
Phoenix stats:
https://www.bubbleinfo.com/wp-content/uploads/2011/11/Phoenix-INVENTORY.png
The current sold average for houses is $57/sf:
https://www.bubbleinfo.com/wp-content/uploads/2011/11/Phoenix-MEDIAN_HOUSE_SQ_FT_BY_TIME.png
JTR – I like how the sellers (in your second chart) see a slight turn up, and the listing prices accelerate faster than the sale prices (evidenced by the increasing width between the two lines).
Sellers will always be greedy
Buyers will always be cheap
Each side will always know better than the other side.
Sean,
“Conventional Economic Theory” just got trumped by Behavioral Economic Theory:
Thaler’s model of price reactions to information, with two phases, underreaction-adjustment-overreaction, creating a price trend
One characteristic of overreaction is that average returns following announcements of good news is lower than following bad news. In other words, overreaction occurs if the market reacts too strongly or for too long to news, thus requiring adjustment in the opposite direction. As a result, outperforming assets in one period are likely to underperform in the following period.
from: http://en.wikipedia.org/wiki/Behavioral_economics
We’ve left conventional economic theories to be used in Utopia only. In the real world, sheeple are here to be sheared.
So good times are ahead…
With low inventory , sellers can demand the premium for their precious..
Wondering why all these banks (with non performing realestate loans) are worried … May be it is just liquidity issue, not an solvency issue..
Clearfund…
Sellers hope…
Buyers wait..
Fed prints..
Govt forms super..super..commities..
New graduates/Students/unemployed/.. protest as 99ers.. ..
Bankers work & make $$$
Guess it reflects more reality..
Not saying US is worst compared to many counter parts, but we are no better than anyone else..
There is no recovery in Phoenix. I wish there was. There are TON of empty houses. There is an amazing amount of shadow inventory just in my little neighborhood. 1/3rd of the neighborhood is either empty or in some stage between foreclosure and bank owned.
I would say that the least savey folks may be buying, but there is much inventory to come on the market, and wages here are SUPER DUPER LOW.
Hot market does not neccessarily mean prices are going up anytime soon. We know nationwide and in particular California there are a lot of people living in places (or collecting rent on places) that they have not made mortgage payments on in years.
Despite the large down payments in some desirable areas, most places even with limited inventory are seeing falling prices because people simply cannot qualify for higher prices.
Nevin also commented that all those DT condos being bought will be back on the market in a few years (Well at least he hopes so for sake of his commission). If that is true good luck seeing appreciating prices.
While there are a handful of examples to prove this point wrong, I would also say that every sale (limited inventory or not) seems to become more of a ceiling on prices than a floor.