The Phoenix residential real estate market saw the bottom in March through May of this year based on average and median sales price information and other indicators.
Chandler, Arizona 6/23/2009 07:35 PM GMT (TransWorldNews)
The Phoenix real estate market has clearly experienced a bottom as seen in average home prices, median home prices, and other indicators. Indeed, home buyers who purchased homes during this period appear to have captured the best values to date since the downturn began nearly 3 ½ years ago.
The Phoenix Real Estate Market Bottom By the Numbers
From the perspective of average home prices for sold properties in the Phoenix area, April 6th and again, April 25th represent the low points. The average sold home price for these periods was $155,789 and $155,900, respectively. These average sold values are lower than any year since 2002. Since April, the trend has seen upward movement resulting in a current average home price of $169,668.
From the perspective of median home prices for sold properties in the Phoenix area, the low point occurred approximate mid-May for a value of $115,500. This is lower than any other value since before 2002 and significantly lower than today’s median sales price of $124,000 for Phoenix homes.
Complementing this is anecdotal evidence that recent Comparable Market Analyses points to better home values in this time period than what is currently available for purchase. With the substantial drop in foreclosure volume, short sales and normal home seller transactions are what is left available in the market.
According to the Cromford Report, the volume of foreclosures available for sale in the marketplace has gone from a year-to-date high of 28% of available listings to 14% of available listings currently. Conversely, short sales have grown fro 22% to 33% in the same period while non-distressed properties have remained relatively steady.
And with many buyers shying away from short sales due to their uncertainty and probable disappointment, normal home sellers are getting more showings and are able to attract buyers who otherwise would opt for foreclosed homes.
Is This Bottom the End of the Malaise?
Unfortunately, there are expectations for many new foreclosures to hit the market starting in July. If the new inventory volume is substantial, the Phoenix real estate market may very well see a ‘W’ shape as a new dip in the market occurs in pricing. Given the recent rise in values, the opposite could certainly be true if inventory begins to grow substantially with foreclosures priced aggressively.
As well, homes above $400,000 still represent a weak area of the market as sales for homes in these upper bands remain significantly weaker. Overall, only 12.3% of homes priced above $400,000 are currently under contract for purchase versus 42% for homes priced below $400,000.
As a result, communities such as Scottsdale and Fountain Hills, known for their affluency and high average home prices, have experienced significant improvement in the number of homes being purchased but still lag considerably behind other more affordable Valley cities such as Chandler and Gilbert.
For example, of the 5,790 Scottsdale homes currently on the market, only 1,183 are under contract for purchase, or 20%. Compare that to Chandler where the number of Chandler homes under contract is 42% of total homes currently on the market. Gilbert is posting even stronger results at 48% of Gilbert homes being under contract for purchase. Maricopa, located 34 miles southwest of Phoenix, is posting an amazing 60% of Maricopa homes being under contract.
Job losses may also have yet to fully factor in for the year as many foreclosures tend to reflect job conditions and trail job losses.
This bottom may very well not be the end of the malaise given the uncertainty above. However, the strength of buyer activity in the Phoenix real estate market does represent a wild card.
Record Buyer Activity
The strength of buyer activity in the Phoenix real estate market has been at a record level, even stronger than that seen in the 2004-5 timeframe during the market high.
For instance, on January 1st, the number of “Pending” homes or homes under contract for purchase in the Phoenix area was 5,504 properties. This number peaked on May 15th at 14,176 properties, nearly a 3-fold increase. The number now sits at 13,426 properties under contract which doesn’t include another “under contract” category of approximately 4,000 properties.
Whether buyer interest is strong enough to take up any large increases in inventory is the question. Much of the answer simply depends on the extent of any inventory and how quickly it is added to the market.
Summary
The Phoenix real estate market appears to have experienced a bottom in pricing through the March to May timeframe of this year. As such, buyers are finding it more competitive to win homes and win them at low prices seen in that earlier timeframe.
However, if additional foreclosed homes begin to hit the market, we may see a second opportunity for buyers to acquire homes and real estate in the Phoenix area at their lowest valuations in years. As there are no guarantees this will happen, buyers will be smart to take advantage of it quickly if it does.
As for now and barring the above, the bottom of the Phoenix real estate market appears to have formed and has passed by as quiet as a whisper.
