Good News Numbers
Sales for May are up 15% from April. Pendings (properties under contract and closing in the next 30 days) are up and the total inventory has dropped for the fourth month in a row. In fact, the numbers for May 2008 are almost exactly the same as they were in July of 2007, when there was a 10-month inventory of properties. This was just before the "perfect storm", when mortgage companies stopped lending under the old rules.
In Tempe there was a dramatic 50% increase in properties sold between April and May and the inventory is now at just 6 months. This is no surprise as ASU parents usually start buying homes and condos for their kids about this time of year.
Short Sales and Bank Foreclosures
There is always a seasonal increase in activity in May and June. Even so, this is a dramatic move considering the market has been flat for six months. A percentage of these sales are short sales and bank foreclosures. Therefore, although sales are up and inventory is starting to drop, the value of homes is still stagnant because the bank sales are keeping prices artificially low. We hear on the street that the banks are under pressure to get rid of their inventory as there is still one last wave of foreclosures on the way. This should cause another up tick in sales.
Market Stabilization
We continue to hear about multiple cash offers being made on bank owned properties close to list price. This means that the bottom of the market will begin to rise and move up toward retail levels (In Tempe, bank owned properties are selling for $110-$100 per square foot and retail price is $130-$140 per square foot.).
This is just in from Realty Times: "Mortgage rates jumped this week after a number of Federal Reserve officials, most notably Chairman Bernanke and Vice Chair Kohn, expressed concern over a threat of inflation," said Frank Nothaft, Freddie Mac vice president and chief economist. "This led some market participants to believe that the Fed will raise rates more aggressively over the year than previously thought."
The window of opportunity is starting to close
Deals are still out there but are highly sought after and may soon be gone. If you are thinking about buying a home in the next 12 months then now is the time. Although we don't predict a dramatic increase in prices in the immediate future, affordability could be affected if interest rates start to climb. All indicators suggest that the window of opportunity is starting to close and that home you have your sights on may no longer be affordable.
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