"Existing Home Sales Jump to Two Year High" today's Bloomberg News proclaims and in the Arizona Republic there was the headline; " After 27-month slide, Valley home prices holding steady" affirming that our market is also stabilizing. The National Association of Realtors reports today that sales of existing homes jumped 7.2% in July the highest gain on record. Statistics that I have been keeping echo the headlines - in July there were 8,093 resale homes sold and currently there are 18,854 homes that have received an accepted offer pending closing. Multiple Listing inventory (all categories of homes) is down to 31,352 homes.
To better understand what this means it would be helpful to place the numbers in context. At the start of this last boom/bust cycle, in 2003, inventories in the Multiple Listing service were running approximately 30-35,000 homes. In June 2005 those numbers had dropped to 5,000 homes for sale but by December, 2005 they were back up to 25,000 listings. Sales were clipping along at a rate of 11-12,000 per month with new home sales adding an additional 3-4,000 per month. Gradually through 06 and 07 sales dipped and inventory jumped to over 57,000 listings
What changed?
Bank foreclosures, price drops and a national perception that we had averted the worst! As banks saw prices dropping and their inventory of foreclosed (REO) homes growing they shifted their tactics. No longer were REO homes coming on the market and dropping their prices every 30 days. Instead they were listing them well below market values to stay ahead of the curve. As affordability rose buyers came out of the woodwork. In January of 2009 we had 47,000 listings and sales had started to climb. In January of this year there were 4,238 homes sold - in July there were over 8,000 closings!
Now what?
The biggest factors are foreclosures, new construction and the economy. There are 47,000 homes in the Phoenix metro area with a notice of Trustees Sale. Does that mean we are in for another fall? Not necessarily, a growing number of trustee sales are being cancelled and we are seeing a consistent 4,000 homes per month being foreclosed on with an absorption rate double that. New home builders have been decimated by bankruptcy etc - the good news is very little new home inventory is being added forcing buyers to focus on resales. Fed Chairman Ben Bernanke today echoed what many economic gurus are saying -we are on the verge of a recovery. And aging baby boomers still look to our climate, golf and shopping for their golden years. Add to this the various stimulous/incentive packages for home buyers including the $8,000.00 tax credit and you get what I am seeing in the trenches - multiple offers competing on the same house. Evidence perhaps of a growing confidence?
Are prices going to go up?
Excess inventory at the fringes of the market are being sold off and the median resale prices for homes has increased from $126,00 in January to $129,000 in July. As long as low interest rates, low prices, incentives and economic factors improve, these historically low prices will gradually disappear. An increase to the prices reached in 06 however may be a ways down the road.
This is finally some good news!
To see the articles click on the following links:
http://www.azcentral.com/business/realestate/articles/2009/08/20/20090820biz-homeprices0820.html
http://www.azcentral.com/business/articles/2009/08/21/20090821biz-existinghomessales0821.html
David Thomas
David Thomas ABR, e-PRO
West USA Realty
602-763-6363
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