Huge gains in the Phoenix real estate market this year.

Monthly median sales price for the first week of the year was $118,700. And in the 20th week of the year, just four short months later, the median sales price is $142,500.

That’s a 20% increase!  In four months.

If you look at the point where the pricing surge began, which was the last week of February (Week 8), and compute the increase over the next 12 weeks, you’ll see that the rate of appreciation is 18.75%. Then, multiplying that rate by 4, to get a projected annualized rate, you get a fantastic, and unsustainable increase of 75%.

Yesterday, the Cromford Report shared the following perspective:

Prices very rarely go up at this phenomenal rate for an extended period of time. They need an occasional rest to let the rest of the world (especially appraisers) catch up. However, supply has not improved, so the upward pressure building under prices is still strong.

However, cash purchases continue to play a strong role in the current rate of appreciation, with about 40% of all homes being purchased with cash.

And, the number of homes on market continues to dwindle, especially when compared to the number of homes being sold.

Buyers are scrambling. Equity owner are considering selling. Offers before the home is listed, and multiple offers are the order of the day.

One thing about Phoenix real estate, it’s always changing.  And, it’s never boring!

More on the current state of the Phoenix real estate market:

• Yes, the real estate market is crazy in Phoenix. Again.
• Phoenix Real Estate Update: “Absolute positive signs of what’s happening on the price front”
• Severe shortage of homes for sale in Phoenix

In the City of Phoenix, it’s very clear that prices are on the rise, with annual appreciation based on the monthly average of price per square foot, rising from almost –20% in June 2011 to +20 in April 2012.  That’s a 40% improvement!

Mesa has improved from the negative to the positive also, with current appreciation rates bouncing between 5 and 15% annually.

Tempe is showing huge gains, too. With prices steadily improving from almost –30% in February 2011 to about 15% currently.

Chandler is also on the rise, showing annual appreciation of over 20% in the past year.

However, the picture is not so clear in Scottsdale. In 2011, the market jumped from negative to positive appreciation twice! And has continued to improve for the early months of 2012. While the gains are almost as striking as the nearby cities, it’s not a consistent improvement, and has dropped off in the second quarter.

So, while appreciation in Scottsdale remains slightly positive, it still has not reached the double digit improvements seen nearby.  So, essentially, it looks like there’s an opportunity for researching and investing in the Scottsdale real market while it lags behind.  I’ll clearly state that I have no idea what the futures holds, but it is possible that Scottsdale homes will begin to see appreciation that other cities in Metro Phoenix have already experienced. Prices were slower to drop in Scottsdale, so it is quite possible that they’ll be slower to rebound.

More on Scottsdale and Phoenix real estate:

• Yes, the real estate market is crazy in Phoenix. Again.
• Phoenix Real Estate Update: “Absolute positive signs of what’s happening on the price front”
• Scottsdale Real Estate Update: “I only want to buy a short sale or a foreclosure”

Listen to Jim Sexton, Designated Broker of Realty One Group, share his real estate market insights for March 2012.

Some of his notable quotes:

• “Hot, hot, hot”
• “I could sell houses if I could find them, if they were on the market”
• “2 months supply of inventory”
• “Look for a continued strong market”
• “Absolute positive signs of what’s happening on the price front”
• Prices increased significantly in March

Recent updates on the Phoenix and Scottsdale real estate markets:

• Severe shortage of homes for sale in Phoenix
• Phoenix Real Estate Appraisers Having a Hard Time Keeping Up with Appreciating Home Prices
• Yes, It’s a Seller’s Market in Phoenix Real Estate

March 29 – The supply shortage is getting increasingly severe as new listings are now being added to ARMLS at the slowest seasonal rate since the current ARMLS database began in 2000. This new chart illustrates the trend. Note that January and February listings are well down compared with the same month last year. Note also that with only 2 days left to go in March we are going to be substantially down on both 2010 and 2011. In fact it already is certain to come in at the lowest level for any March in the last 13 years.

From the Cromford Report:

March 8 – As home prices rise at an accelerating rate, we today hit $125,000 for the monthly median sales price (all areas and types) for the first time since August 12, 2010. The lowest monthly median recorded was $107,000. This was measured on February 24, 2011 and again on August 17 and 18, 2011. So the monthly median sales price has risen 16.8% in less than 7 months and looks likely to rise considerably more in the coming months. Appraisers are finding it hard to keep pace with this rate of increase as comps are out of date within a couple of weeks. This is similar to 2005 except we are starting with prices a very long way below 2005 levels.

From personal experience, I can tell you that it’s really an interesting and challenging time in the Phoenix real estate market.

As an example, I listed a Scottsdale townhouse in January, which had multiple showings, and an almost full-price offer within the week.  The buyers loved the house, but not enough to pay the difference when the house appraised at $7,000 less than the purchase price. The house went back on the market, and a second buyer placed the same offer almost immediately.  When his appraisal came in several weeks later, the house appraised for OVER the purchase price.

If I put that same townhouse on the market today, I suspect that it wouldn’t last a day, it would have multiple offers, and that at least one of them would be over the listing price.

One of the really good side effects of the appreciation is that owners, with homes that are borderline short sales, are now able to see the light and start planning to sell, without the repercussions of a short sale.

It’s a crazy time to be a buyer, or a real estate agent for that matter, but in the grand scheme of things, this appreciation is very welcome and another step on the road to a more balanced market.

From his Daily Observations (available only subscription):

February 18 – If you find yourself talking to someone who thinks prices are still falling, please feel free to hand them this chart.

According to my calculator, a median price increase from $108,000 to $120,000 in six months is an 11% increase. Huge!

If this pace continues over the next 6 months, that would equate to 22%.

Not so long ago, Michael Orr told me he thought we’d see as much as 25% appreciation in the near future.  Have to say that I didn’t fully believe him, but it looks like he was right on target.

Amazing.

More on Phoenix Metro real estate:

• Realtors High on Phoenix Metro Real Estate
• 2011: A Turning Point for Phoenix, Scottsdale, and Mesa Real Estate
• Phoenix-Mesa-Scottsdale #2 on List of Soaring Home Prices

The Arizona Regional MLS (ARMLS) publishes a monthly view tracking REALTOR® confidence of Phoenix Metro real estate market confidence, as compared to the past and to future expectations.

The results of this survey are the result of “the firsthand, up close observations of REALTORS® who operate at the front line of real estate in the Valley”.

The survey results are based on the following six survey questions:

1. What is your appraisal of current real estate conditions in the Valley compared to six months ago?
2. What is your expectation of real estate conditions in the Valley six months from now?
3. What is your appraisal of current business conditions in the Valley compared to six months ago?
4. What is your expectation of business conditions in the Valley six months from now?
5. What is your appraisal of current employment conditions in the Valley now compared to six months ago?
6. What is your expectation of employment conditions in the Valley six months from now?

As you can see, local REALTORS® are definitely high on Phoenix Metro real estate with all indicators rising strongly for the past five months zeroing in on the 90% range.

More on the improving Phoenix real estate market:

• 2011: A Turning Point for Phoenix, Scottsdale, and Mesa Real Estate
• Full Price Offer in 20 Minutes: Is a Seller’s Market Heading our Way?
• Phoenix Real Estate: Overall 2011 was good news