Tuesday, March 12, 2013

Reality in Real Estate vs. The Media


Happily the downward trend in short sales continues in spite of reports to the contrary...


March 12 - I love getting comments from buyers who are trying to purchase and tell me about something they "read in the paper".  It's unfortunate because misinformation can cost people thousands of dollars.  This story in the Phoenix Business Journal used data issued by RealtyTrac to show that short sales surged by 43% between the 4th quarter of 2011 and the 4th quarter of 2012. Kristena Hansen is an excellent local journalist who covers real estate, but unfortunately RealtyTrac has had a long history of issuing erroneous information about Phoenix, some of which have been wildly wrong like this one. Across Maricopa and Pinal Counties, our data shows conclusively that short sales declined by 22% between 4Q 2011 and 4Q 2012. There was no surging to be found anywhere. This seems to call into question the entire methodology used by RealtyTrac to classify short sales.
Cromford Daily Observation


Tuesday, March 5, 2013

Inventory Update


Find your city and apply this definition.  Great explanation...let me know if you have any questions.
Days Inventory indicates how many days it would take to sell all the Active Listings if they were to sell at the rate implied by Annual Sales and assuming no new listings became active. It equals Days in Last Year x Active Listings / Annual Sales.
I like to think about it as 'the pace of activity'. It's predictive power is that as the pace of activity picks up (in lower days inventory) it means demand is greater than supply, which, if the trend continues, must translate into higher prices. Note: Mike Orr (Cromford Report) says Days of Inventory is a better measure than the more commonly used # of Month Supply. This is because Days Inventory is less volatile, as for example, when there is an atypical 1 month surge in high-end sales (as we saw last June).
We Can look at how days of inventory had changed over the last 12 months by price range. Days of inventory is one of the most revealing measurements for predicting the future direction of the market. It is a leading indicator for future price movements. When it goes down, prices tend to move upwards, although the effect can be delayed by up to 18 months. Now let us take a look at the same measurement by geography for single family homes.
CityDays of Inventory 3/1/13Days of Inventory 3/1/12% Change
Anthem80118-32%
Apache Junction8574+15%
Arizona City13471+89%
Avondale5054-7%
Buckeye9374+26%
Carefree4034040%
Casa Grande12179+53%
Cave Creek111141-21%
Chandler5669-19%
Coolidge12281+51%
Desert Hills69183-62%
El Mirage5542+31%
Eloy218230-5%
Florence146107+36%
Fountain Hills161175-8%
Gilbert5665-14%
Glendale4856-14%
Gold Canyon214202+6%
Goodyear9794+3%
Laveen5653+6%
Litchfield Park11375+51%
Maricopa10554+94%
Mesa6667-1%
New River11480+43%
Paradise Valley389403-5%
Peoria6173-16%
Phoenix6261+2%
Queen Creek8657+51%
Rio Verde444719-38%
Scottsdale131155-15%
Sun City115117+2%
Sun City West117174-33%
Sun Lakes133192-31%
Surprise9982+21%
Tempe5265-20%
Tolleson6045+33%
Tonopah11966+80%
Waddell14492+57%
Wickenburg410466-12%
Wittmann168108+56%
Youngtown2921+38%
This table tells us that buyers are having a very hard time in areas like Tempe, Glendale, Phoenix, Chandler, Peoria, Tolleson, Avondale, Gilbert, Youngtown, Mesa, Laveen, Anthem, Desert Hills and El Mirage. Most of these areas are in the more central areas of the conurbation. The pricing pressure is strongly upward in these locations, especially those where the days of inventory is even lower than last year at this time - Tempe, Glendale, Peoria, Chandler, Gilbert, Avondale.
Further out from the center, Maricopa, Queen Creek, Florence, Casa Grande, Arizona City, Buckeye, Surprise, Waddell, Eloy, Goodyear, Wittmann, Litchfield Park, Coolidge, New River, Apache Junction and Tonopah have more supply than last year. Buyers will have a somewhat easier time finding a home if they are prepared to search in these areas, particularly those where inventory has increased sharply from last year such as Maricopa, Arizona City and Casa Grande.
Supply is still adequate in luxury homes areas such as Carefree, Rio Verde, Paradise Valley and Gold Canyon.
The Scottsdale market almost always has higher inventory than the valley average, so a 15% reduction from last year indicates the balance is moving in favor of sellers and prices will rise.
Wickenburg at 410 still has plenty of homes available which explains why there is little upward pricing pressure there.