This is my column for this week from the Arizona Republic (permanent link).
Has the Phoenix real estate market turned the corner? It’s too early to tell, but May’s results suggest we may be nearing the bottom
Are you in the mood for some good real estate news for a change? How about some news that’s not all bad? Here’s what news there is, in any case:
May was a very strong month for clearing bread-and-butter inventory in the Phoenix real estate market. BloodhoundRealty.com tracks sales of newer suburban tract homes — three bedroom, two bath, single-story homes with tile roofs and two-car garages — the middle of the housing-supply bell curve.
We have records going back to January of 2004, so we have tracked both the boom and the bust in our recent real estate history. May 2008 was the strongest month for the homes we track since May of 2007, with the best month before then being November of 2006. A total of 170 of these homes sold in May, up from 114 in April.
Prices were down, month over month, and not by just a little bit, so May’s results no doubt reflect the sale of a lot of lender-owned properties. But inventories of the homes we track are down by 7% from April and by over 14% from March.
The implied absorption rate from May’s results is 5.2 months, down from 8.4 months for April. Absorption rate is the amount of time it would take to absorb all currently-available inventory at the current rate of sales.
The absorption rate calculation is less than reliable, since it uses backward-looking numbers to make a forward-looking projection. But substantially greater sales taken together with substantially lower inventories is a very good sign.
As a matter of anecdotal evidence, earlier this week I phoned the listing agent of a very market-weary short sale. After months of no activity, three offers came in over the weekend. The seller issued multiple counter-offers, with the high-bid being $17,000 over the list price.
So has the Phoenix real estate market finally turned the corner? We won’t know for sure for two or three months after the fact, but May or June could be the bottom of the market in Phoenix.
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Ann Cummings says:
That sounds like so good news to me! We’re experiencing an increased amount of activity in my areas as well, with a good number of buyers getting back into the marketplace.
June 7, 2008 — 7:21 am
Robert Kerr says:
May or June could be the bottom of the market in Phoenix.
If so, at just 2 years from peak to trough, this would be one of the shortest duration downturns I’ve ever seen.
June 7, 2008 — 7:35 am
Doug Quance says:
It is difficult for us to truly quantify our stats, as we use two MLS systems… and roughly a third of the listings are not in both.
According to one of these services, we had 5854 single family homes sold in May of 2007… but only 2168 in May of 2008.
Kinda gives you an idea how the market is here in Atlanta right now…
I will say that foreclosures are selling really well right now, as most REO specialists seem to average a third of their listings under contract.
June 7, 2008 — 10:35 am
Doug Quance says:
I forgot to add… we also had 6841 sales in May 2006, and 5956 in May 2005…
June 7, 2008 — 10:39 am
Chris says:
Personaly I think we are close to the bottom if not at it in CT. Real estate usualy goes in 5-7 year cycles so 2011-2013 is when the next up swing should be well underway.
Once all the foreclosures work their way out of the market, the real estate market itself should be pretty healthy.(low prices, fairly cheap money, etc.) Which IMHO is happening this year. Fuel prices are the wild card here, if they keep going up no one is going to have any money to buy homes, heck they are going to be freaking out spending $700+ a month trying to heat them in the winter.
IMHO this winter is going to be an important period. I think a lot of people are waiting for two things:
1. They want to see what fuel is going to do.
2. The election.
I think this year will be what it is, but 2009 could be a real turn around. If oil prices come down a bit I bet you a bottle of whatever you like to drink that the market will start an upswing. If gas is $6++ a gallon, we fall into the pit.
June 7, 2008 — 12:18 pm
Bawldguy Talking says:
Greg — It’s good to see I’ve not been the Lone Ranger here. Whenever this correction is over it’s been my contention Phoenix might shock the RE world.
June 7, 2008 — 1:36 pm
Barry Cunningham says:
Bottom??? Unfortunately for those of us in ground zero areas like Phoenix, Miami, LA etc…it’s more like the eye of the proverbial hurricane passing over. More than likely just the clearing before the second pounding.
1 Million more foreclosures set to come in late 2008 and early 2009. Large number of foreclousre properties already taken back by the bank and not as of yet on the market…bottom? I think wishful thinking.
Not one to subscribe to the Housing Panic mania whatsoever, but the data and statistics are quite scary (Sean Purcell may think otherwise) but to me it would be premature at best, and foolish at worst to even project that Obama is going to be president..oops I mean that we are at the bottom of the market yet.
Keep the snorkels nearby and clear boys!
June 7, 2008 — 1:45 pm
Greg Swann says:
I have nothing to say about other markets, and I’m sure it will be a while before we see 6% a year again in Phoenix. But we add 80,000 households a year in normal years — and last Winter’s snowfall was far above normal. We’ve given back our price gains back to October 2004. Turn-key homes are affordable for owner-occupants, and our foreclosure inventory is selling at prices that make for slam-dunk cash-flow-positive rentals. It’s plausible to me that prices could stay very low for quite a while, but the immediate test is simply this: Will they stop dropping soon? It won’t take much in increased demand to soak up the reasonably-priced inventory. The over-priced homes will languish — but that won’t mean anything if the depreciation stops.
June 7, 2008 — 1:48 pm
Barry Cunningham says:
If South florida had the absorbtion rate you quoted the agents here would be calling it a Seller’s market down here. How bad is it you ask? And why I keep calling agents to STOP TAKING LISTINGS…here’s why:
Broward County Single Family Homes Absorbtion rate: 27 months..over 17,000 SFH on the market! just over 600 sold last month.
That’s JUST the SFH then you add in the condos and town houses….
Broward County Condo / Townhouse Absorbtion rate: 33 months..over 23,000 condos and townhouses on the market! just over 700 sold last month.
Remember..that’s just 1 County down here in South Florida. Miami Dade and Palm Beach are even WORSE!
Also..understand we’re talking about a 90 mile strip up I-95.
That’s an as#$load of inventory with much more to come. Maybe that’s why the listing agents down here are working at Red Lobster.
So some of my posts in the past may have been over influenced by what is going on down here. In the world of South Florida real estate the listing agent is going the way of the dodo bird. Rightly so I would add.
However, as you can imagine with these kinds of numbers..it’s a veritable smorgasbord for savvy buyers, Euro buyers, South American buyers and experienced investors.
Can anyone say CASH FLOW!!
June 7, 2008 — 2:05 pm
Robert Kerr says:
But we add 80,000 households a year in normal years
80K is 30% higher than the Census Bureau’s 62K figure for 2007. And one-third of that influx is Hispanic, so I assume that means below-median income, ergo scratch that third off the list of potential buyers.
EDIS estimates median household income in Maricopa 2007 at $60K. With conventional finance, that’s a $180K mortgage, a $200K home with 10% down.
What’s the median home price in Maricopa these days?
June 8, 2008 — 12:27 am
Doug Quance says:
We have the same thing here in Georgia, Barry.
In one listing service, we show 58,438 single family homes for sale… with only 2168 sold last month.
That’s a 27 month supply.
And people wonder why I’m not taking listings?
June 8, 2008 — 10:20 am
Brian Brady says:
“What’s the median home price in Maricopa these days?”
$220,000 as of March, 2008″
http://www.poly.asu.edu/news/2008/04/09/
$60,000 gets you a $187,000 mortgage, which would get you a $210K home. Robert we’re splitting hairs.
Values are materializing at the low end of the market.
June 8, 2008 — 7:36 pm