Leif Swanson

Phoenix Metropolitan Area Real Estate Statistics - October 2009

What is happening with the real estate market in the Phoenix metropolitan area? What changed in October 2009?

[click on the charts to expand]

1) Did the number of sales go up? Compared to September 2009, no they did not. But October 2009’s sales of 8,121 were much better than October 2008’s 5,366 sales. That’s 51% more sales this October than last October! 2009 is shaping up to be the 3rd best year for sales in the past 10 years. 86.6% of the sales in October were homes, 12.0% were condos, and 1.4% were manufactured housing.

20.66% of the Phoenix metro area MLS listings sold in October 2009, up slightly from September 2009 but more than double from October 2008. 22.6% of the homes sold in October; 14.1% of the condos sold; 8.9% of manufactured homes sold. Bank-owned foreclosure properties accounted for 44.6% of the sales in October 2009 down from July 2009’s 53.4%. More and more buyers are purchasing homes from regular sellers. While 33% of the total sales in October 2009 were cash, 38% of the sales were with FHA or VA financing. This is the first time in at least 10 years that FHA/VA financing has been this high.

2) Did sales prices increase in the Phoenix market? No, they flattened. The average sales price in October 2009 was $170,086, almost $5,000 less than September 2009. And still 20% less than October 2008’s $211,924 average.

The median sales price in October 2009 decreased to $128,000. This was 22% less than the median sold price of $164,000 in October 2008. For buyers, Phoenix area homes continue to be very affordable. As a result, multiple offers are still common in the price range below $200,000. The Phoenix metropolitan area real estate market bottomed out in early April.

3) How was the inventory of homes in Phoenix? Did the absorption rate go down (the # of months’ inventory available for sale)? The inventory of homes in October 2009 was 4.84 months, almost exactly like September 2009. It was much better than October 2008’s absorption rate of 10.38 months and October 2007’s 15 months!. A balanced buyer-seller market is six months. The absorption rate in October 2009: 4.4 months for homes, 7.1 months for condos, and 11 months for manufactured homes. Therefore, it is now a seller’s market for homes in the Phoenix metropolitan area.

4) Did the number of new MLS listings decline, especially compared to same month previous year? Yes, they did. In October 2009, the number of new listings was 13,099, which was less than October 2008’s 14,602 new listings. The majority of the new listings were short sales. Usually at this time of year, inventory drops. However, in October, inventory increased to 39,312 active listings. And we’re seeing that trend continue through mid-November.

5) Did the average # of days on market decline? Yes and no, compared to last year and last month. Phoenix area homes sold quicker this October at 67 days compared to 73 days in October 2008 and was the lowest amount since August 2006. However, condos are still taking longer to sell; 97 days in October 2009 which is six days more than October 2008’s 93 days. With lower prices for homes thanks to foreclosure listings, buyers continue to select single-family residences instead of condos. But there was a increase in condo sales in October.

6) Are sellers keeping more money in their pockets? The percent of $$$ that sellers keep (sales price divided by list price) increased in October 2009 to 97.2%. This was better than October 2008’s 95.5% and the highest level since July 2006. This is due to home prices being so low and thus having little room for negotiating in a seller’s market and also due to a rush of buyers for the first time home buyers tax credit. Expect to see November’s figure to be even higher. A normal market has sellers keeping 97.5% of their final list price.

7) Pending sales are a great indicator of future sales. How are pending sales in the Phoenix area? Foreclosure listings are still selling fairly quickly which boosts the numbers of pending sales. The pending sales numbers were very strong in October 2009, reaching better levels than in all of 2008, 2007, and 2006. Pending sales in November are tracking historically strong but lower which is seasonally normal. The Phoenix real estate market activity is now performing higher than 2005 levels, except that prices are lower. In September, there were over 20,000 properties under contract (pending & contingency), an all-time record. We’re currently at the 18,600 mark. Short sales make up almost 52% of the properties under contract, which skews the numbers (looks good, but doesn’t count if they don’t convert to actual sales).

8 ) What about price per square foot? It remained steady at $89 per square foot in October 2009, which is historically low. Multiple offers and declining inventory should have helped this statistic go up. Looks like March 2009 was the bottom of the market for price per square foot. The price per square foot a year ago was $107! Check out the chart!

9) What about occupied homes and vacant homes? An unprecedented number of Phoenix metro area MLS active listings still are vacant. Sold homes have an even higher number of vacancies. Vacant properties accounted for 79% of all properties sold in October 2009, but it dropped off a hair as more buyers purchased occupied homes. This was the 8th month of decline. The normal is under 40%. The vacancy rate of sold properties in October 2008 was 80.6%.

10) Is there any difference between asking prices and sold prices? Yes. The average new list price in October 2009 was $250,054. This was $44,000 less than October 2008’s average new list price. Due to lower priced foreclosure listings and short sale listings.

The median new list price in October 2009 was $148,844. The median new list price was $26,000 less than from October 2008. Again, it’s evidence of the predominance of lower-priced foreclosure and short sale listings.

11) What about short sales in the Phoenix metro area? Short sales continue to stifle the Phoenix area real estate market. They control 24% of the active listings and 52% of the properties under contract. Sellers have been lulled into the false hope of short sales and buyer have been led to think the 4-month-long transaction will be worth it, especially when inventory dropped. There are currently over 9,660 short sale listings under contract, up from 5,800 in May. This number continues to build because they are not converting to actual sales. What are the chances that the banks will accept all 9,660 offers? Not good. In fact, only about 19% of the pending short sale properties will successfully close escrow. The chart below compares short sale and all sale success rates. However, the percentages are improving for short sales to the point that they are catching up to all sales. In fact, the success rate of short sales is nearly four times better than a year ago.

What will happen in upcoming months? November sales typically decline because of the holiday season. First-time homebuyers who thought the tax credit would expire November 30th will be responsible for a spike in November sales. We predicted a sharp drop-off in sales in December & January, however the tax credit has been extended. Banks are also holding back on foreclosure auctions.