Dr. Jay Butler of ASU Realty Studies has released his home sales report for March, and we’ll start with my favorite quote:
The median home price remained stable at $220,000, in contrast to last year’s $265,470.
It’s true that month-to-month, the median was unchanged, but it’s also a 17% YOY drop. In most circles that brings words to mind like "crash" or "plummet"- not "stable".
Here’s the graph:
No, "stable" is not the word that comes to mind- "consistent", maybe.
Sales
Butler reports:
March is typically an indicator for the coming resale home season, and with 4,335 recorded sales it’s showing signs of a continuing weak market. Even though it is an improvement over the 3,750 sales of February, it is significantly below last year’s 5,385 sales and is the lowest March since 1996, with 3,270 sales.
With a 19.5% drop in sales year-over-year, I think the market is not so much "continuing to be weak", but "continuing to deteriorate".
Butler states:
While there are many problems rising out of the hyper-resale market, many households were able to acquire homes with traditional financing, according to Jay Q. Butler, director of Realty Studies in the Morrison School of Management and Agribusiness at Arizona State University’s Polytechnic campus.
“People who settled in their dream homes with manageable mortgage payments have little incentive or pent-up demand to change their housing investment. Thus, lower sales activity should not be unexpected,” he said.
Butler may not expect lower sales activity, but I do. Last year March was the busiest month of the year, and in 2006, it was the second busiest. While it is possible that there might be a month or two that are busier than March this year, it is unlikely that there would be a significant increase over March sales, and it is my expectation, based on traditional seasonal patterns that most months would be slower.
His conclusion is surprising, given this frank assessment of the current situation:
During the last year, the housing market has been confronting issues derived from the hyper-market of previous years such as the subprime meltdown and overly ambitious investors. Unfortunately, there is increasing data, such as job losses and layoffs, that the economy is now weakening and will add further stress for the housing markets
Butler also does a good job explaining what is driving the lower prices:
Capital is available for lower-priced housing, but lacking in the higher priced housing market. The recent rise in the FHA limit from $271,050 to $346,250 will help some move-up market activity. However, the non-conforming limit is expected to remain at $417,000, which will be of little assistance to the higher priced market.
Last year, 39 percent of the resale homes sold for more than $300,000, while it was 27 percent for March 2008. Homes selling for under $200,000 have increased from last year’s 16 percent to a current 40 percent of the local resale housing market.
For readers who have been with us awhile, you may remember that Doom was originally started to track the market in the Phoenix East Valley, in particular my hometown of Gilbert. While things like the collapse of the national housing market and a global credit crisis have distracted us along the way- I do continue monitor Gilbert. According to Butler:
The resale market in Gilbert increased from 290 to 295 sales, and the median sales price decreased from $295,500 to $245,000 ($254,700 in February).
That’s down 17% year-over-year. Gilbert home prices peaked in February 2006 at $341,000, so the median home price has dropped 28% since then.
