MARKET LULL UPDATE:
Three months later, the data have changed enough that it is time to update this analysis. My responses will be specific to Phoenix, since I have access to all of Phoenix data, if you have real data from another market, feel free to share it.
Supply: as predicted, supply has increased. Today, Phoenix metro stands at 23,700 units for sale. This is up roughly 25% from a year ago, and has been climbing swiflty. Bank owned + HUD have held steady at roughly 1000 units, Short sales after plunging to near zero, are back to 1100.
Demand: 6000 sold in the past 30 days, a drop of 15% from a year ago.
Combined, this is a huge change. From roughly 2 months supply, we are now approaching 4 months, an amount likely to keep price increased muted for now. Fall-winter is always slower, and we had the government shut down last month, so it will remain to be seen if supply continues to grow into spring or not.
Pending foreclosures dropped another 460 in October. We are now at historical norms and on our way to lower than historical norms of pending foreclosures. Clearly, this source of distressed inventory is going to disappear, and that will serve to somewhat mitigate the changing supply/demand metric. (4 months supply/demand ratio is very different if half of them are bank owned and they keep flowing into inventory, then when it is mostly occupied homes that folks can afford to wait to sell)
I count 1285 Notice of trustee sales for October, 830 cancelled sales, and 895 trust deeds (either back to bank or to third party)
Pending short sales have plummeted to 2700 from 10,000 at this time last year. Banks simply put, are not giving away short sales any more, and price wise, this is also a positive for the market.
Given all the data, in totallity, we have two competeing trends:
1. Increasing supply/demand.
2. the still high effect of distressed homes passing through the market, despite ever fewer of them entering the process. The data show clearly this is going to diminish further.
For a more granular example, I track 3 zips very closely that were hard hit by foreclosures, due to copious new home building in 2003-2006: 85042,85041,85040. I track them because I own 3 properties in the area. For newer single family homes, built since 1990, I have been tracking the number for sale uner $140K. Two years ago, it was in the 70’s, a year ago, in the 30 to 40 range. 5 months ago, it dropped under 10, and prices shot up by $20K or so in a period of a couple months. Today, there are 26. Of the 26, 10 are bank owned or short sale.
So, we see clearly, that in some areas and prices, distressed homes are still a serious price prediction factor. As these distressed homes further decline in number, I expect prices to increase DESPITE increasing supply. Of the remaining 16, 5 are short term flips. (homes bought cheaply usually as a short sale, painted etc and sold) As there are less cheap homes to buy from banks, these returning listings will also decline.
However, in the aggregate, the Phoenix market lull I predicted several months ago, is in place, and seems strong enough to generally last deep into spring and summer of next year. Perhaps all of next year.
By next year, I expect both short sales and bank owned homes to be a thing of the past, and prices will rise slowly even with 4 or 5 months of inventory on the market.