Numbers and statistics are an important part of understanding the Phoenix, Arizona real estate market. We spend a lot of time crunching the digits to gain some sense of understanding.

Some of the areas we study are days on market, asking verses actual sales price, average price and more. The relationship between these different market stats can tell much.

The graph below looks at all of Phoenix and plots the days on market (DOM) against the sales price verses asking price ratio (S/A Ratio). What we see in this analysis is quite telling.  

 A year ago, just before the sub-prime news hit big time, homes were selling for near asking price and the days on market were pretty low. As we moved into autumn, buyers were hesitant to make a purchase (noted by the rise in DOM) and home sellers were settling for less than their asking price. This trend continued into 2008 and reached a critical point in January. (Note the wide difference between DOM and the S/A ratios.) The numbers in April and May start to paint a more optimistic picture. DOM fell and the S/A ratio rose. This tells us that the market found some equilibrium. Home sellers reduced their prices to a level that made buyers more comfortable.

However, the sharp fall in the S/A ratio in April/May could be a sign that prices will continue to drop. If this occurs, we feel it will be largely due to the influence of bank owned properties as these are often priced well below the market. These REO homes will likely influence pricing until such inventory is assimilated.

One question is whether appraisers will take into account the often horrific condition of these foreclosed homes. We saw a number of them this weekend that will require several ten's of thousands just to bring them to livable condition. Our advice to clients is this can be an outstanding buying opportunity. However, buying right is of the highest importance. Get your loan ducks in a row, thoroughly research the conditions of the subdivision and nearby areas to understand trends, negotiate to your advantage and be willing to walk away if needed.

Gene Urban & Ron Urban