According to data from ARMLS, (Arizona Regioinal Multiple Listing Service) home sales in the Phoenix metropolitan area have seen a year-over-year increase every month since June 2008. Inventories have been declining, foreclosures were down in March and the government has unrolled new foreclosure prevention measures. Does this mean that we’re likely to see the median sales price, which has been falling since March 2007, stabilize any time soon?
Don’t count on it. Here’s several reasons why:
Sales
About those increasing sales, take a look at the percentages of homes sold in different price ranges March 2009 versus the previous couple of years. [Thanks to M for the 2009 data!]
It looks like in 2009, the cheaper a home is, the better. Over 40% of homes sold in March sold for less than $100K. Compare that with only 3.5% of homes in 2008 and 2,3% in 2007 sold for less than $100K. It would have been nice to break down the data according to what was sold above the conforming loan limit, ($417K) but I had no way to select the data at that point. However, only 4.8% of homes sold for more than $400K in March of this year, versus 14.4% of homes in 2008 and 21.5% of homes in 2007. It is likely that the lack of affordable funding available above the conforming limit is a factor.
How does this compare to listings? ARMLS has not released their March report yet, but you can see February’s report here. The distribution of listing prices does not begin to match the distribution of sales prices. You can see why there are reports of bidding wars for cheaper homes, but very little interest in more expensive ones. Availability is out of line with interest. This can only lead to further price declines.
According to Jay Butler, Director of Realty Studies at ASU in his March report:
The declining prices have piqued interest for potential investors and owner-occupants, especially in the lower income ranges. For the traditional market, the median price in March was $127,000, down 45 percent from the $229,900 for a year ago. Foreclosed properties had a median price of $146,880 ($189,170 for March 2008).
Investment interest is being driven by the anticipation that home prices will rise again in the next few years.
Foreclosures
According to Butler:
Foreclosure activity, as a share of total activity, is down significantly from the 51 percent (4,295 recordings) in February 2009. The slowdown can primarily be attributed to the various hiatus programs that lenders instituted, while awaiting the new loan modification and refinancing programs from the federal government.
Now that the federal government has announced their latest foreclosure "rescue" programs, lenders have started to lift their moratoriums. Look for foreclosures to increase sharply– and put more downward pressure on prices.
Inventory
There are those who believe that banks are holding inventory off of the market. I have seen lender owned homes in the Phoenix area that were not listed, but I do not know if the number of these properties is significant. I do know, however, that as Butler indicated, a lot of sales are going to investors who intend to resell in a few years. I believe this is merely "inventory delayed", and is likely to hold prices down for some time.
In summary-
Will increasing sales bring price stability? Nope- the motto of buyers at the moment seems to be, "The cheaper the better". Will decreasing foreclosures bring price stability? No. Foreclosures are about to increase– and the new batch of government programs won’t do much more than the old ones did. Will decreasing inventory bring price stability? No– that won’t do the trick either. Too much inventory will only come back to haunt us.
What will bring about price stability? TIME
UK House Bubble
Mish's Global Economic Analysis
Ohio Fraudclosure
Northern Virginia Housing Bubble Fallout
Bubble Meter
Breaking News Relevant Articles© Copyright 2012 Housing Doom | Copyright© 2011, AuthentiCraft, Inc.
Comments are now closed.