Need a reminder about “doing the right thing, at the right time”, even if it seems to break the rules?
Last week, I had the good fortune to listen to Mike Orr’s presentation at the Arizona Regional MLS Technopalooza. I’ve been a subscriber of Mike’s Cromford Report for sometime, but haven’t had a chance to learn from him directly.
One of the most interesting insights he shared was that some of the metrics we commonly use are tainted by the extremes of the market. For instance, average home price can be forced higher because of high-end luxury home sales. Median home price is biased by the number of foreclosures selling. Mike said that he relies on average price per square foot to more accurately gauge market conditions.
Mike also shared this following chart and said that historically the List price of Closed transactions runs parallel to the actual Sales $ / sf price. You can see that the green and red line are about the same distance apart, and with the sales price running about 95% of the list price. Even though this chart only shows the past 60 days, Mike indicated that it is a long term behavior.
Now, if you look at the blue like which is the listed price per square foot of Pending sales (homes currently under contract), you will see that in early March the numbers began to plateau. Mike said that he assumes that once these properties start closing, we will see an increase in Closed prices.
He went onto say that he believes that we have finally hit the bottom of the market, and went so far as to say it occurred on April 6th. Time will tell, but as you can see from this chart and the dramatic rise in home sales, we have more good news for the Phoenix real estate market.
Just in case you need a reminder about some of the crazy, out-of-the-box thinking that’s possible.
Scottsdale is one of those long, skinny towns that has very definite north, south, and central neighborhoods. Prices tend to increase, from south to north.
Today, I’ve created some charts (with the help of Altos Research) to show the current differences in these varying markets.
Current median list price for South Scottsdale (85257) has dropped down to just over $200K. While the area just north of downtown Scottsdale (85250), the median listing price is now running about $375K. The area around McCormick, Gainey, and Scottsdale Ranches (85258) has not see a drop in listing price. To the north, where DC and McDowell Mountain Ranches are located in zip code 85255, median listing prices have hovered right around the $1 million dollar range.
In this next chart, you can see that in all areas have really experienced a reduction in price, if you look at it from a median price per square foot basis. South Scottsdale has taken the brunt of this depreciation.
Although the northern part of Scottsdale has kept its listing prices high, inventory has actually increased slightly, where as in the other zip codes to the south, fewer homes are now available for sale.
Finally, pricing really does have an impact on how long it takes to sell a home. As you can see here, in 85255 and 85258, it is taking longer and longer to sell a home. However, in downtown and South Scottsdale, you are seeing a plateauing of days on market, or the number of days it takes to sell a home.
Scottsdale’s real estate market has not been as impacted by foreclosures as many of the other areas around Phoenix. Also, the majority of the homes on the market in north Scottsdale do not qualify for FHA financing or fall into the jumbo loan category, and with the tightened mortgage market, there has been an impact, resulting in a slower market.
Move-up buyers have been sitting on the sidelines waiting to see what is going to change. However, once there’s an increased level on confidence in the real estate market and our economy, I do think that we will see an increased number of home sales. Owners who purchased prior to the market run up, with equity in their homes, will decide that selling their current home in today’s market will give them the opportunity to buy up. Lower home prices and the lowest interest rates in years will drive this change. It’s bound to happen, it’s just a matter of when.
Here’s a couple photos of a foreclosure property in Phoenix.
And a view from the upstairs loft.
Photo credit: D. Patrick Lewis
What can you say?
Mostly we are speechless.