Local Housing Stats Flash Exciting Signals

by Merrill Moss on July 29, 2011

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Local Housing Stats Flash Exciting Signals

Is the almost ceaseless, downward spiral of the area’s housing market finally approaching a turnaround?

Not every single indicator is flashing green, but there are now more green than yellow or red, and the green ones are staying bright and persistent. It just could be that the greater Phoenix housing market—Scottsdale included—is coming around. Finally.

Let’s take a quick, executive summary look.

1. Inventory is extremely low. As I write this, there are only 20,358 active listings in the Arizona Regional Multiple Listing Service. In certain price ranges there is only a two months supply of listings available, and that is the equivalent of nothing. It means that there isn’t much to choose from, and explains why houses in good condition now sell quickly and often with multiple offers.

2. Monthly home (unit) sales in June hit an all-time high. Never before have as many homes sold in the Phoenix area in a single month. (The chart below just goes back to 2001, and it only shows the months of April, May and June, but it wouldn’t change the outcome no matter how far back you went or which months were analyzed.)

2. That of course begs this question: what describes the homes being listed? The answer—what can be sold quickly, namely the most affordable homes, those under $200,000. Accordingly, and in sync with today’s foreclosure and short sale dominated market, the average price of new listings in June, 2011 was the lowest since 2001—$190,414. (For comparison, the highest for any month since 2001 was in January of 2007—$421,951.)

3. The average sales price per month appears to be stabilizing. Some might even say rising.

4. While almost half (45%) of Phoenix area home sales in June, 2011 were in the price range from $100,000 to $250,000, the sales activity of more expensive homes ($500,000+) has begun to noticeably pick up—a very good sign and one that has been absent for a long time. As a result, there is now only a six month supply of $500,000 to $700,000 homes. Many experts consider six months supply to be the point of equilibrium, giving advantage to neither buyer or seller.

5. Almost 40% of home sales in June, 2011 were paid for in cash. Cash is used to buy homes more than mortgages these days. Who buys with cash? Mostly investors. Why are investors buying now? Because they can make a better return on their cash investment (by renting) than elsewhere. Would they invest if they thought home prices would decline further? In a word, no.

6. Bottom line: Inventory is dropping, while sales are brisk. Prices appear to be stabilizing. More listings are needed. Choice is too limited in the price ranges of greatest interest. That’s a recipe for a turnaround. Green means go!

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