Because Mike Orr covers the ins and outs of Phoenix metropolitan real estate statistics so thoroughly, I will share his July 17th report in total:
Each month about this time we look back at the previous month and analyze how pricing has behaved and report on how well our forecasting techniques performed. We also give a forecast for how pricing will move over the next 30 days.
On June 17 we gave a 30 day forecast that average sales $/SF would rise and be within the range $86.12 to $89.64 with a 94% confidence. Our midpoint prediction was $87.88.
As of July 17, the average $/SF for monthly sales across all areas and types was $89.09 up 2.7% from $86.73 on June 17. Note that the latter figure has been adjusted slightly from $86.81 since June 17 due to additions and changes to ARMLS recorded sales data since then. The actual figure of $89.09 is above our midpoint forecast but still comfortably within our 94% confidence range.
Today the pending listings for all areas & types shows an average list $/SF of $89.81. This is 2.9% below the average list $/SF for homes sold in the last month ($92.53), which suggests that average sales pricing will not increase further in the next 30 to 50 days but is more likely to fall. The relationship between these measurements can be seen clearly on the list price per square foot chart. .
Our mid-point forecast for August 16 is currently $87.78, and we have a 94% confidence that it will fall within ± 2% of this mid point, i.e. in the range $86.02 to $89.54. The confidence level for ±3% is 99% and for ±4% is 99.9%. Note that our current forecast is within 10c of last month’s.
The implication is that overall average sales $/SF on August 16 is expected to lie between -3.4% and +0.5% of the $/SF on July 17. Thus the odds favor flat to decreasing prices over the next 30 days. This should not be surprising since we have already recorded an average 8.5% increase for monthly sales $/SF since the confirmed low point on April 6. and it appears to be time for some consolidation. Median sales prices reached a confirmed bottom of $115,000 on April 30, and have risen 8.7% to $125,000 since then. Monthly average sales price has recorded a 11.2% increase since April 6. This is higher than the $/SF because the average home size of homes sold has also increased.
The detailed picture is still very complex, as it often is when a market reaches an inflexion point. We also see some interesting changes since mid June. We have seen pricing for normal transactions start to fall while pricing for lender owned properties have continued to rise strongly. Short sale pricing appears to be attempting to stabilize but it’s not quite there yet. Short ales have clearly strengthened while normal sales have weakened. Luxury home prices still have some way to go in a downward direction while most homes under $350,000 are generally moving upward or flat. The trustees were much busier in June than in March through May, so we currently have a larger supply of REOs in July, more in balance with the huge demand from buyers. Thus the low priced REOs are no longer falling as a percentage of the overall mix and this removes one of the factors that has been driving the average $/SF higher. List $/SF prices for REOs are now up 13.4% since their low point of $77.17 on March 23, but this seems to have had barely any effect on buyers’ enthusiasm. The supply of REOs is still tight enough to cause multiple bid situations on almost every home.
So we see the market “catching its breath” over the next month. Clearly it would be unrealistic for average pricing to continue to increase at the rate of 8 to 9% every three months, and we should probably regard the last three months as a “bounce”. The key factors to watch out for are:
- Will REOs resume their downward movement as a percentage of sales, which means higher-priced properties become a larger contributor to the averages?
- Will the sales of properties over $500,000 continue to grow as they have over the last three months?
- Will the rise in pricing of REOs be overwhelmed by the fall in pricing of normal properties. This mathematical struggle is finely balanced and could fall either way over the next few weeks?
- Will short sale pricing stabilize as success rates improve and demand rises, or resume falling as it did in the first five months of the year?
- Will we follow the usual seasonal pattern of declining volume from July onwards, or will the $8,000 tax incentive that expires in December drive more first time buyers into the market?
We certainly live in interesting times.
Note that our last 6 forecasts have all proven to be slightly too pessimistic. We have to go back to December 2008 to find a month in which our $/SF projection was higher than the actual. If this happens again in August we may have to adjust our price forecasting model slightly.
Around August 16 we will to check the accuracy of these projections and report back again.
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