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Is the Valley Of The Sun Headed For A Real Estate Recovery?

Jan 17

filed under: Buying A Home, Foreclosures & Short Sales, Market Conditions, Real Estate, Yada Yada

Is the Valley of the Sun headed for a real estate recovery? Well it’s hard to argue with statistics. Sales rebounded in 2011 dramatically, hitting a high of 101,436 which is the second highest total sales of the decade. It was exceeded only by 2005 with 104,725 sales which was at the height of the real estate bubble.  So lets break down a few things that took place in 2011 that might lead us to believe that we just may be in a recovery mode.

Inventory

Total new listings in 2011 (121,041) fell slightly below the 2002 figure of 125,738. Correcting itself from the decade high of 173,363 after the housing bubble burst in 2006

Months Supply of Inventory

The decade months supply pattern follows the Valley’s journey from its “normal market” (starting in 2002 to mid 2004) through the buying and selling frenzy of mid decade (late 2004-early 2006) to the “correction” of the late decade (2007-2010).  The average months supply of inventory in 2011, which was 3.81 closely resembles the average months supply of inventory of 2003 which was 4.31, at the mid point of our last normal market.

Days on Market

Marketwide days on the market, while not indicative of days on market in smaller market niches, such as Fountain Hills, is a measure of overall market health. In 2011 DOM started the year at 113 and finished the year with a downward trend at 95.

Foreclosures Pending

Foreclosures pending, which fuel the Valley’s foreclosure sales, reached their pinnacle in November 2009 at 50,568 in contrast to 2011 which finished at 19,979, which by the way is 60.49% below the decade high. The average foreclosures pendings per year stubbornly held at 44,237 and 44,698 for 2009 and 2010. In 2011 it took an abrupt downward turn all year.

Distressed Sales

Distressed properties (short sales and foreclosures) as a percent of sales started the year at 70.2%. Although not without a few hiccups in direction over the course of 2011, it crashed through the 60% barrier in November and December, at 59.4% and 59.8%. Not only did the percent drop 10.4% over 2011, but the short sale to foreclosure mix shifted by year end to see short sales overtake foreclosures for the first time, granted by a small amount.

Pricing

Ah. . . pricing. We all want to know when the prices of our homes will stop going down or for that matter begin to go up. Pricing remains the last bastion of resistance to the Valley’s recovery. Unfortunately both List and Sales median and average prices showed very little movement over the course of 2011, basically stagnating at the “presumed” bottom. Median List price started 2011 at $124,900 and finished the year not much higher at $129,900. Average list price followed the same pattern, starting at $204,300 in January and finishing in December at $200,200

Sales pricing repeated the same lackluster performance of List pricing. Meidan Sales price began with $110,000 and ended 2011 at $117,000, well below the median list price of $129,900. Average Sales price in January was $157,000 and ended at $162,200. Much to our dismay, all four pricing metrics, List and Sales, took a full twelve months to go practically nowhere. On the positive side, given how long pricing has stalled, the Valley’s pricing has probably hit bottom. What is in dispute is how long it will stay there.

Pricing cannot correct itself until the forces of supply and demand equalize. Both List and Sales pricing are currently unduly influenced by the large numbers of distressed properties that compete for buyers. The slowing of foreclosures pending, if continued at the current rate, and here’s the good news, should stabilize in 2012, leading to a gradual decline to normal levels of foreclosures in the active property pool. In addition, growing lender mentality for short sales over foreclosure will also diminish foreclosure influence on pricing.

National predictions on home prices are a slow but steady upward climb in 2012. Given 2011’s underpinning metrics (inventory, sales, months supply of inventory and foreclosures pending) the Valley’s pricing is poised to gain traction in 2012.

Unemployment And Job Growth

Phoenix metro started the year with a 9.28 unemployment rate, with the rate’s overall trend line for 2011 downward. Preliminary figures for November are estimated at 7.7%, a drop of 1.58% from January. We are waiting with baited breath for December’s final percent. Arizona ended 2011 as a top ten growth state, now adding  jobs faster than the national average. Whoohoo!

The Bottom Line For 2011

In the 2011 “gaining momentum” column, are unit sales, total inventory, marketwide months supply of inventory, falling days on market, declining foreclosures pending, distressed property’s falling % of sales, falling unemployment and job growth.

In the 2011 “stagnant needs improvement” column, are all four pricing metrics: median and average List and Sales prices.

In the 2011 “loss” column, there is little moving in the wrong direction.

All in all, 2011 was a pretty good year on the road to recovery for the Valley of the Sun’s real estate market.

Written by Howard Harris