Short Sales in Scottsdale: A Market Update

I have a short sale listing that’s scheduled to close today, so I’m inspired to take a look at the Scottsdale real estate market, relative to short sales.

In the chart above, you can see that Scottsdale short sale listing activity have been really consistent over the past year. With about 400-500 homes listed in the Active status, and another 300 with seller accepted offers (AWC), waiting for bank approval.

Looking below at the chart for the previous year, you can see that again the number of homes listed as short sales remained fairly steady, while the number of seller accepted offers increased steadily. If you recall, in 2009, a short sale still had significant stigma associated with it, while now, this type of real estate transaction has gained much more acceptance. Banks have better procedures. Agents are better trained. Sellers are contacting legal and financial counsel, and listing their homes, understanding that the process could go very smoothly, or not.

Looking at Scottsdale home sales activity for January 2011 (below), it’s apparent that the market is still challenged. Short sales & pre-foreclosures make up about 25% of the homes listed, while less than 10% of the homes listed in Scottsdale are foreclosures. The remainder are typical transactions.

Home sales are a slightly different story:

23% are short sales / pre-foreclosures
28% are lender owned (foreclosures or REO)
49% are normal sales

You can also see the big discrepancy in pricing normal sales vs. pre-foreclosures and lender-owned properties. Normal sales are listed at an average of over $300/square foot and selling fore less than $200/sf. Short sale, pre-foreclosures, and lender-owned properties are listed (on average) at $165-170/sf, while selling at much lower average rates. $147/sf for short sales / pre-foreclosures. $129/sf for lender-owned.

This next chart is for the greater Phoenix area. I’ve not been able to locate is specifically for Scottsdale yet.

Some pretty major changes across the valley over the past two years.

Active short sale listings are up 33%.
Pending listings (under contract) are up an amazing 210%.
The number of short sales per month has more than tripled. Looking at the increase on an annual basis, the number of completed short sales has increased by a factor of 5.
The time to sell (days on market) has remained about the same, averaging about 150 days.
The inventory (months supply) of short sale homes on the market has dropped remarkably, from 26 months to 10 month.
Average and median prices have taken a beating, dropping from 28-34%.
Listing success rate has doubled.
Contract ratio has changed significantly, moving from a buyer’s market to strong seller’s market.
From the Cromford Report: Contract Ratio indicates how "hot" a market is. It specifically measures the number of completed sales contracts relative to the supply of active listings. The higher the number the greater the buying activity relative to supply. If this number rises then it is a sign of growing contract activity and a positive signal for sellers. Conversely a falling number is a sign of a weakening market – either supply of active listings is increasing or contract activity is slowing, or both. In a balanced market for normal market segments, the value of the Contract Ratio is about 30. When it lies below 20 the market can be considered "slow" or a "buyer’s market". Above 40 can be considered a "seller’s market" and when it moves above 100 we regard this as evidence of a "buying frenzy". In high-end luxury market segments the normal level is lower, usually lying between 15 and 25.