Home sales in the Phoenix real estate market made the news again. Our housing tracker reports that sales of Arizona MLS home listings reached 9,492 in April 2011. This is the fourth highest home sales month in the history of our MLS.
The article in our Phoenix housing tracker from last month reported that March 2011 had the third-highest home sales with 9,973. The all time highest sales month was June 2005 with 10,216 MLS homes/listings being sold. The number two month was August 2005 with 10,003 sales.
The percentage of sales that were foreclosure homes, defined as bank owned (or REO homes) and short sales, remained near 65%. You'll notice on the chart, as indicated in green, that the height of foreclosure sales was reached in the months between April 2009 and July 2009. March 2011 managed to sneak in as the third-highest sales of foreclosure homes, while April 2011 is now recorded as the sixth highest month.
Many sales are attributed to both people and businesses who are making investments in real estate. The rental market has never produced more people looking to lease, primarily because they have lost their homes to the short sale or foreclosure process. The trend of unprecedented low home pricing and higher rents has caused investors to flock to the Phoenix area and put their money back into real estate.
We will report on pricing trends in the next couple articles, but the decline in real estate property listings will undoubtedly produce at least a temporary increase in prices.
The bar for investment real estate in Phoenix Arizona has been raised. Our housing tracker reports that cash buyer's in 2011 have quadrupled from historical trends, as noted in information obtained from the Cromford Reports. Investors who bought property for cash almost always had advantage over home buyers who were obtaining mortgage financing.
Historically, less than 10% of all residential home purchases are made with cash. As the chart below indicates, the foreclosure trends of the last few years -- coupled with lower interest rates for saving accounts and unstable stock and financial markets -- have induced many more investors to buy property with cash.
The chart indicates that cash buyers jumped to an average of 17.1% in 2008.The number went to 31% in 2009. 34.7% was the average in 2010. However, cash purchases for residential homes, either by home buyers or investors, has jumped to an amazing historical high of 41% in 2011.
Let's take the analysis a step farther. How many Phoenix real estate investors do you suppose are paying cash for home purchases? While I have not been able to find any detailed information on that statistic, we can always do a little interpolation of the data based on the below chart.
The chart indicates how many residential home purchases were made by investors. The Cromford report obtains this information by scraping it from the tax records. They do this by evaluating the number of properties that are categorized as rentals at the initial purchase. The left side of the chart, illustrated by the blue lines, indicates the number of purchases made by investors. The right side of the chart, and illustrated by the red circles, indicates the percentage of investment purchases. We can now clearly see that 25% of all residential home purchases in 2011 were made by investors. This is a higher percentage than during the real estate boom when the average was around 17%.
Now comes the time for the interpolation. If 25% of all property purchases are made by investors, and 41% of all purchases are currently being made with cash, what percentage of investors are paying with cash? The odds are in favor of an extremely high percentage of investors paying cash. Therefore, it appears you are in a minority if you're a real estate investor and not paying cash.
Phoenix real estate property listings have entered their 7th consecutive month of declines. At 27,075 property listings (seen in red on the chart), Arizona MLS homes/listings are now at a 5 year low point. To give a historical perspective, listings averaged around 25,000 when I first became a Realtor in1999.
Let me make a distinction for anyone who is an avid follower of the Cromford Report (as I am). Mike Orr looks at "active" listings differently than I do. I consider an active MLS property listing to be one that does not have any offers on it. Mike Orr also counts properties that have "contingent"offers on them as part of his active count. In the Arizona MLS such listings are defined as "AWC," or active with contingencies. In today's market AWC generally means that a seller has entered into a short sale agreement and the contingency is whether or not lien holders will approve the short sale. It can also mean the sale is contingent upon a successful home inspection. There are currently about 7,700 property listings in the Arizona MLS that are classified as AWC.
Regardless of whether you subscribe to Mike Orr's philosophy or mine, we will both show a 12,000 property decrease (seen in yellow) over the last 12 months. If you follow the real estate market you know that shadow inventory is the reason for the property listing declines. The banks understand basic economics and realize that if the demand for properties goes up and the supply goes down -- the price will go up. Apparently the banks have figured out that the cost of holding the shadow inventory is less than the losses they will sustain by flooding the market with foreclosures, thereby driving prices down even further than at present.
The chart also illustrates that both the number and percentage of foreclosures is declining (seen in the orange). The number of foreclosures reached a historical high in October 2010 with 20,097 REO homes and real estate short sales. At 11,698, as seen in May 2011, they are at a 20 month low point.
This this brings up two main points: 1.) will prices go up in the short term because of lower inventory and higher demand and 2.) how long can banks hold onto shadow inventory? I believe many investors have voiced their opinions by the increased competition at the trustee sales.
Our Phoenix housing tracker shows a near record sales volume in the Phoenix real estate market for March 2011. Nearly 10,000 MLS homes/listings were sold making this the third highest sales volume in the history of our market. The sales significantly reduced real estate property listings to begin April 2011.
The chart (shown in green) indicates 9,973 transactions, though home sales figures vary within the first week of each month while corrections and updates are made. The only months with higher sales were recorded during the peak of the real estate market. Our Phoenix housing tracker reported the number one sales month as June 2005 with 10,216 MLS homes/listings being sold. The number two month was August 2005 with 10,003 sales.
You'll also notice that the summer months are historically the months that record the best sales. That's because many families time their home purchases to coincide with the school year. Click here to search Phoenix real estate.
One of the most commonly heard questions by real estate agents is: "Has the Phoenix real estate market hit bottom yet?" For a number of reasons the answer is probably a solid "no." However, in our best opinion, we believe they won't drop that much further because of how the banks are controlling the shadow inventory. That being said, home buyers have cast a vote of confidence that, while prices may not be at the very bottom, they are low enough to make a real estate purchase right now.
The chart also illustrates the five months with the highest number of foreclosure-type home sales recorded in the Metropolitan area. Foreclosure type sales are defined as either bank owned (REO homes) or real estate short sales. You can see that March 2011 ranks number three.
At the beginning of April 2011, Phoenix real estate property listings have continued their downward trend for the sixth consecutive month. Our Phoenix housing tracker chart illustrates the 9,047 property drop in Arizona MLS homes / listings.
There has been talk about "shadow inventory" for at least the last 16 months or more. Shadow inventory homes are homes owned by the bank and those on the verge of foreclosure, but not listed on the market as Phoenix real estate property listings. The reason shadow inventory is important is because of the dramatic affect they would have on pricing if they were all released into the market at the same time. Housing prices could plummet if there was a dramatic increase in Phoenix foreclosures. The banks are doing us all a bit of a favor by holding onto these homes.
As seen in the chart, the initial drop in real estate property listings (indicated in yellow) was rather small compared to the escalating decreases over the last two months. Simple economics dictate that the smaller the supply, the greater the possibility of increased prices. Let's see what happens to residential home sales by the end of this month.
Another indication of the validity that banks are holding onto shadow inventory is the decrease in the percentage of foreclosure listings currently on the market. Notice that the numbers in orange indicate total foreclosure listings, expressed as a percentage of total listings, and that they have been decreasing in sync with the decline in overall listings.
The number of active listings in the Phoenix real estate market remained relatively constant for yet another month. The drop in the number of listings was only 587 listings from March 1st to April 1st. The big news expects to be the total number of homes sold for March 2010. It looks as though home sales may approach the 9,000 mark, making March the biggest residential sales month since last July.
Read the chart this way: "Residential listings in The Phoenix real estate market totaled 34,461 to begin April 2010, a drop of 587 from March. 14,087 of those listings are foreclosure listings (bank owned or REO properties and short sales). Foreclosures make up 40.9% of the total listings.
Talk of "shadow inventory" still looms on blogs and in the news.
The second chart shows the breakdown between the normal listings and the foreclosure listings. Read the chart this way: "20,374 listings are "normal listings that have been on the market for an average of 172 days. 14,087 listings are foreclosure listings that have been on the market an average of 102 days."
Short sales have dragged that number higher as bank owned homes slip off the market much sooner than short sales in Metro Phoenix. Real estate with short sales continues to be an adventure.
I constantly get buyer clients asking me about the pros and cons of short sales. In fact, I've received so many questions I created a short sale page on my website and I refer clients to that page. I'm sure I'm not the only realtor who has done that in this market.
I'll tell you that I've had my share of successful short sales, both on the selling and buying side. I've also had my share of short sales that have blown up because 1.) a HELOC demanded a promissory note and the seller refused to sign it OR 2.) a bank wouldn't let go of an unreasonably high BPO. [Side note: If the realtor who did the BPO for my short sale on Desert Cove Rd in Glendale is reading this -- your BPO WAS too high and the house sold for $10,000 less as a REO] Since I have a fairly analytical mind (which can be a curse in a marriage) I decided to see if I could figure out the statistical probabilities of a short sale closing escrow.
My bachelor's degree is in business administration and I did well in quantitative analysis. However, I did not want to create a thesis. I was just seeking a simple way to convey the success rate of short sales to my clients. Here's what I came up with: divide the number of closed short sales in one month by the combined total of the closed short sales plus the canceled short sales. Expressed mathematically:
closed short sales / (closed short sales + cancelled short sales) = % of success
I used only canceled short sales and not those that "expired" or were "temporarily off market." I reasoned that expired short sales could simply be re-listed, were generally caused because the listing realtor lost track of time, and that most of them received an extension. I did not count those that were "temporarily off market" because they would probably end up as either closed or canceled.
Here's my conclusion based on 12 months of statistics from the Arizona Regional Multiple Listing Service: There is a slightly better chance closing a short sale than winning at a roulette table. Remember that roulette has a 50% chance of winning if you play either "odd/even" or "red/black." OK, it really 47% because of the green "0."
The 12 month chart shown below illustrates that an average of 53.7% of short sales close. Read the chart in this manner: "4,150 foreclosures sales (bank owned and short sales combined) occurred in February 2010. 1,438 of those sales were short sales. 1,167 short sales were canceled in February 2010. Therefore, 55.2% of short sales were successfully closed in February 2010." You will also note that the success of short sales has been greater in the last six months than in the first six months of the period.
I can already hear all of the short sale experts across America claiming a much higher success rate. I have a higher success rate too. However, I present these numbers for your information or your humor -- whichever you prefer. Actually, I kind of like the roulette analogy and have already used it twice today. Next time a client asks you if they should consider buying short sales say to them "red or black?"
Phoenix Real Estate sales were up 14% in February 2010.
February only had 28 days, but that was enough time to beat January's total home sales in Metro Phoenix. Real estate residential sales increased from 5,812 in January to 6,613 home sales in February 2010. Need we ask why? The answer continues to be last minute shopping for the tax credit fueled by low interest rates. Expect more of the same during the next few months.
Read the chart in this manner: 6,613 homes sold in February in Metro Phoenix . Real estate defined as "normal" sales (not bank owned property or short sales) accounted for 2,463 sales, or 37.2% of the total. 4,150 sales were foreclosure related which comprised 62.8% of the total.
Here's another interesting statistic. Year over year sales, commonly known as YOY (a common industry comparison standard), have been up for 21 consecutive months (not completely shown by the chart ). YOY essentially compares the sales in February 2010 to the sales in February 2009, the sales in January 2010 to the sales in January 2009, and so on. In other words, Phoenix real estate sales have consistently been improved from the previous year.
It's also interesting to note that foreclosures (bank owned or REO property and shorts sales) officially accounted for over 1/2 all sales in the Phoenix real estate market beginning in October 2008. They have surged as high as 75.9% but have yet to drop below the 50% mark. My chart goes back to June 2007 for anyone who wants a longer term perspective.
My next post will evaluate the number of foreclosure sales and their makeup in terms of how many were lender owned properties and how many were short sales.
A Forcible Entry and Detainer is an action that a new property owner (the foreclosing bank) can take if the existing occupant refuses to leave after appropriate notice (90 day notice of Trustee Sale). This occupant could be either a tenant or original owner of property that was sold at a foreclosure or trustee's sale. Foreclosure eviction laws are subject to change, but this article is current In Arizona as of March 2010. This article was prepared with the help of a good friend, Georgi Stratton. Her contact info is on the bottom of the post.
The tenant/occupant receives a written demand to vacate the property. The term of the period to vacate is dictated by the type of occupancy - whether commercial or residential and whether a tenant or an owner that was foreclosed on. This term normally is either 5 or 7 days, unless the contract states otherwise. After the 5-7 days expire and the tenant/occupant still refuse to leave then a complaint for a forcible detainer action can be filed. The statutes provide for a very short notice period before a
court hearing.
The sole issue at the court hearing is whether or not the tenant/occupant has the right to possession. If they do not then they will be found guilty of a forcible entry and detainer. The court will enter an order directing the tenant/occupant to vacate within 5 judicial days. After that period has expired the Sheriff's office can then evict the tenants/occupants, remove their personal property and give the rightful owner possession and control of the property.
It would be wise for the rightful owner to change the locks and take steps to protect the property.
Typically the seller must vacate the home within 7 to 14 days after a Trustee Sale (auction). Often the bank will offer the homeowner a $1,000 - $2,000 relocation fee if the homeowner moves within several days and leaves the home is good condition. If a foreclosed homeowner is being forced out without a moving fee or several days to move, the homeowner has rights. Inform the lender’s representative that you request a moving fee or are requiring them to file a Forcible Entry and Detainer Action. If they
refuse to comply with either of these or if you feel your rights are being infringed upon, contact the local Sheriff for enforcement of current foreclosure eviction laws.
If the lender has to file a Forcible Entry and Detainer Action, you will not be able to get any cash for moving expenses.
Georgi Stratton
,Paralegal - Director of Short Sales,
Winsor & Coleman, PLC
Direct: 480.695.6565
Fax: 480.699.8853
Email: georgistratton@yahoo.com
Phoenix Real Estate Market remains dominated by Phoenix foreclosures.
The number of active listings around Phoenix remained virtually unchanged from February to March of 2010. As seen in the chart, property listings hit a several year low in September 2009. They have been gradually increasing since that time. The chart also indicates how far active listings have dropped since 2008, thereby accounting for the swing in the market from a complete buyer's market to a market that has evened out in Phoenix. Real estate listings in some locations around the Valley have sparked a seller's market because of extreme competition for low priced Metro Phoenix foreclosures. It's no surprise since real estate prices in the Phoenix housing market are at their lowest levels in 10-years.
The chart also shows that 41.2% of all listings in the Phoenix area are foreclosures. I am defining foreclosures as bank owned homes and short sales.
Phoenix area real estate market conditions, Metro Phoenix homes for sale, Metro Phoenix foreclosures, plus statistics and photos and news.
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