The Phoenix Arizona residential housing market continued to heat up throughout the month of February. Over 5400 homes closed during the month, representing an impressive 58% increase in volume over the same period a year ago and an astounding 15% increase since January, when 4722 homes closed escrow. An additional 6524 properties went under contract and were taken off the market during February of 2009, which brought Phoenix MLS inventory below 50,000 for the first time in over two years.
Phoenix Bank Owned Property Inventory On the Decline
Not surprisingly, most of the sizzle in today’s market is found in the lower price ranges (under $500,000). Bank Owned Property - REO - supply continued to fall during the past month driven by asset managers who are intent on moving properties at fire sale prices. Today’s inventory of foreclosed homes ranges from 3.1 months for those listed under $100,000 to just 3.8 months for homes in the $300,000 to $500,000 price range. Less than 5 months of inventory is widely believed to represent a Seller’s market. Remember, if you wait to see the bottom of the market you will surely miss it.
Another significant development came mid-month as JP Morgan Chase, Bank of America and Citigroup all suspended foreclosure proceedings to allow the Obama administration time to complete a bail out plan for distressed homeowners.
This may well prove to be historic; as inventory tightens further we may finally find the bottom of the market and once again begin to see considerable upward pressure on prices. Most homeowners are clearly not as motivated to sacrifice the value of their homes as the bank’s asset managers seem to be.
To illustrate this point: While REO’s (real estate owned by banks) represent just 23% of the homes currently listed for sale; they amounted to 65% of the homes closed during the month of February. And while foreclosed properties declined 41% in price year over year, the rest of the Phoenix market fared much better, falling just 16% in price during the same period. And in fact, there were sections of the market that experienced significant price increases during February.
One can well imagine that if the Obama Administration is successful in preventing further decay in the foreclosure market; that when today’s supply of foreclosed houses dries up and ceases to be a significant drag on overall property values, that there may well be a real rebound in the average sales price (a jump of over 25% is indicated by the current market data).
One need only examine last month's sales activity in the city of Surprise to see that this potential can quickly be realized. Inventory of bank owned homes had fallen to 2 months of supply by late February. Volume of sales far surpassed the market average, surging 70% in a year and 35% since January of 2009. And while prices in Surprise are still down 36% year over year, they went up an astounding 6% since January. If you are waiting to see where the bottom is before buying your new home in Surprise, you probably just missed it!
Several other cities in the Phoenix metro area experienced similar though less dramatic price rebounds. Laveen, Goodyear and Litchfield Park all beat the market; while Mesa, Chandler and Glendale are close to breaking out as well. See chart: Phoenix Real Estate Market Data February 2009.
So for awhile at least, interest rates and prices continue to combine to make the American dream more and more affordable. And as the market numbers indicate, many more buyers, realizing that this market represents the chance of a lifetime, are stepping in and securing their own piece of the pie.
Additional Evidence Phoenix Home Purchase Market Is Up
In an additional note, according to the National Association of Realtors signed sales contracts fell to the lowest level since 2001. However, according to NAR Chief Economist, the number of contracts in the west grew by 2.0% from December 2008 while in many other parts of the country fell by as much as 13%.
What does all of this mean? Homebuying in the Phoenix market seems to be on the increase as we head through March 2009.
Jim Greisiger is a licensed Broker in the state of Arizona with over 30 years residential real estate experience. My website is: AZREAdv.com. Jim can be emailed at: jgreisiger (at) qwest.net
