Yesterday, Jay Butler of the newly renamed Realty Studies at Arizona State University’s Polytechnic campus released his monthly report for December. Phoenix, like Las Vegas, has rolled back the clock with its falling median home prices. December’s median price was $255,900, 2% lower than the $260,000 figure for December 2005. It was also the lowest median price since July 2005. As many sellers now are offering various incentives to buyers, these incentives can keep the median price artificially high. Median home price can also be a reflection of the type of properties purchased, and does not always represent same house appreciation. Here’s the appreciation graph: (figures not adjusted for inflation)
Sales took a trip back in time as well- December’s 4,620 sales were the lowest since February 2002, when the ARMLS reported sales of 4,403. Butler reports that 2006 was the fourth best resale market year on record, falling between 2002 (62,625 sales) and 2003 (73,785 sales) numbers. However, with an inventory that rose to levels more than 60% above last December, the oversupply of listings put downward pressure on prices.
Already in January about 1000 new listings have been added to the inventory in the first 10 days of the month. Sellers who opted to stay off of the market during the holidays are starting to list their homes. Sales are generally stagnant in January, and then pick up in the spring. The big question for 2007 is how much inventory comes on the market. High levels of inventory are already putting downward pressure on prices, and a large increase in new listings could throw more cold water on an already dampened market.
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I’m curious to hear predictions on the scottsdale / fountain hills / desert hills secrion of town. I’ve seen several properties sell within 30 days, but these were priced around $200/sqft. Those wanting $225-$300/sqft are still sitting on the market.
I drove through my neighborhood the other day (I am renting a house) and at least half of the houses are unoccupied (no furniture, lights, cars, etc.). This is not a new neighborhood (built in 2002).
Once again your research on housing trends is very informative and the potential for loss, in housing seems firmly established in the MSM thanks to truth seekers like you, who review factual data. If you will indulge me, I would like to do the same. Consider it yet another cautionary story about blogs and financial advice.
In one of my tantrums with John the other day (Jan.6), I suggested, among other things, that if I had followed the “gold bugs” advice and took the proceeds from my home sale 2nd Quarter 2006, and put it into the yellow metal, I would have lost about 14% based on the London close on Jan.6. A comment was promptly posted by “tlicono” ridiculing my comment with the fact devoid statement “Pulease”. A few facts will suffice.
If I had compared the May 12, 2006, spot close of $725 oz with $610 oz of Jan. 6, the spot to spot loss would be $115 oz, or approximately 16%.To that, of course, I could have added the “commission” or “margin” of between 1% to 3% metals transactions involve, plus other transaction expenses like transportation, storage and insurance. In short the transaction costs for metals are not insignificant, even when compared with housing, and the volatile values of gold, when compared with real estate, are not quite as attractive as those “long on gold” like to tell us.
The point is simple. I did not exaggerate the potential loss by picking the May 2006 high and adding the real costs of doing a metal deal, probably pushing the loss over 20% I did compare the facts of gold buying and selling during May 4-18, 2006 with the London close on Jan 6, 2007 and came to an approximate 14%. Absent facts to the contrary, I am “pleased” with the assertion. My objective was not to pick on gold lovers, just to say “Be Careful Out There” and even on this site, because realtor groups are not the only ones out there with shaky advice and an agenda.
Thanks.
A bit confused – Twist says year end prices were down 2%, but Butler says YOY appreciation was 8.4%. Is this just cherry picking numbers?
Geeski-
It is said that “There are liars, there are d— liars, and there are statisticians.” Don’t you love the games we play with numbers!
Here’s what Butler said:
While sales activity declined 40 percent, the median home price increased 8.4 percent from $240,500 in 2005 to $260,600. While this is another record year, the median price has been steadily declining during the year from $267,000 in June to $255,900 in December, which is the lowest median price since $255,000 was reported in July 2005.
Let’s try this in a table form:
Annual median price 2005: $240,500
Annual median price 2006: $260,600
Up 8.4%
December median price 2005: $260,000
December median price 2006: $255,900
Down 2%
So are prices up or down?
I’m of the opinion that the annual price might be useful for historical purposes, but not really useful for tracking market trends. The fact that the median price is back to July 2005 is useful- so is knowing that the current number is affected by kickbacks and incentives. Incentives were considered virtually unneccesary in 7/05- so the current number is undoubtedly artificially high.
Numbers may not lie, but they can hide the truth if you are not paying attention.
Aha! “IN 2005″ … I missed that as well.
NVMike-
At least he left a hint there. In order to figure out if the cities listed at the bottom were YOY or MOM, I had to pull up Butler’s November report and do a side by side. (It’s YOY too.)
2007
Houses are sitting,investors are sacred to death to show their faces i suggest before all you flippers go broke you take a interest in your investment come out of hiding sit a open house and try to make a deal!
The days of just handed over the keys to a agent and sitting home reading a paper and waiting for the big pay day is long gone. Wake up, save your health and your wealth come down on your price and get it done, may it teach you a lesson their is rarely easy money in this world.