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 Appraisers are finding it hard to keep pace with this rate of increase as comps are out of date within a couple of weeks.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.

Look at this chart for a striking view of the amazing free fall of total home inventory in Phoenix during 2011.  The heavier line shows that from a high of 42,881 in January to a low of 24, 712 in December, housing inventory has dropped over 40%.

No wonder buyers are saying things like, “I never knew it’d be so hard to find a home.” Well-priced homes are attracting buyers, and in some cases, houses are going over list. Really.  One of my clients offered 15% over list on an entry-level townhouse. Multiple offers. And his bid was not accepted.

Lack of inventory will create an interesting environment. While the last time around, the lack of inventory created a buying and selling frenzy, driving home prices sky high, this time around, both buyers and sellers are taking more time to make decisions and not rushing into a sale.

To read the full report: ARMLS Stat Report – January 2012

• In every price range, sales prices in $/SF are now higher than a year ago.
• Inventory is still falling below $200,000 and constraining sales volumes.
• Above $200,000, supply is rising and demand remains relatively weak.
• After a noticeable weak patch during the summer, prices have regained strength.
• Lender‐owned inventory is falling fast, especially at the lower price levels.
• Short sales are overtaking foreclosures as the primary mechanism to resolve mortgage debt problems.

The fact that home prices (per square foot) is improving in all price ranges is great news, especially in the slower November market.

However, the challenges that are constricting the market in the lower end, with falling inventories, make it difficult for buyers are who seriously looking to find the homes they are looking for.  I have more than a handful clients who are in this situation. They have cash or financing lined up, but the house selection is minimal in many price ranges. They increase their geographical search area and their upper limits to the price ranges and still do not have a lot of choices.

As we approach the end of the year, I believe we are all looking forward to a robust spring, where more sellers are ready to sell, and buyers find what they are looking for.

Read the full report here: The Cromford Report – Monthly Market Review – Nov 28, 2011

Past Phoenix Market Reports:

• Greater Phoenix Real Estate Update for Single Family Homes–October 2011
• Greater Phoenix Home Sales Pricing Trending Upward
• Scottsdale Real Estate: “Shadow inventory” on the decline

In a nutshell:

• 10,500+ closings in June 2011. An ALL-TIME record.
• Both median and average prices are up.
• 11% over last year year-to-date

Watch Jim to get the rest of the story!

More evidence of the hot Phoenix real estate market:

• Average Sales Price for Phoenix Homes Stable and Climbing
• Phoenix Real Estate Market Heats Up for Summer
• Phoenix Real Estate Misses a Record by 100 Homes

Our Phoenix Metro real estate markets have been much more vibrant than most of the rest of world has realized. Ask anyone currently looking to purchase home listed at under $250,000.

The chart above shows just small the supply is for homes in the lower price ranges. Less than 3 months supply in many cases.

Competition for home entry-level, move-up, and 2nd homes is fierce.  Short sales are even getting multiple offers.

Buyers have to be ready to move when they find a house they want to buy in today’s market.

To see how much has change in less than a year, look at the difference between now and August 2010.

Late last night, I listed a home for sale. A short sale. Priced it as high as I could so that it would be acceptable to the bank, be marketable and attract a purchase offer, and still appraise to the value. First day on the market: four showings and one contract.

Bottom line: There is a definite shortage of homes on the market, especially for first time home buyers.

And to document this trend, I’ll share three charts clearly show how the Phoenix real estate market is trending, compared to the past 10 years.

Mike has created a proprietary measure, called The Cromford Index™.

Specifically:

The Cromford Index™ is a set of market indicators that the Cromford Reports uses to measure the balance of supply and demand. It compensates for seasonal factors and measures supply and demand based on long term historical trends.

And from the most recent data available:

The Cromford Supply Index™ (CSI) represents the supply position. Values above 100 indicate an excess of supply of unsold homes compared to historic norms for the market being considered. Values below 100 indicate a shortage of homes on the market. A reading of 100 indicates balance.

As of mid-2011, the supply of homes has just hit the 100 metric, indicating that if the trend continues, we will be entering a period where there are a shortage of homes for sale.

The Cromford Demand Index™ (CDI) represent the demand for homes. Values above 100 indicate higher than normal demand and values below 100 indicate lower than normal demand. “Normal” is defined by the historical data for the market under consideration. A reading of 100 represents balance.

Demand for homes has been well over the 100 metric since 2009, however it was tempered by the oversupply of homes on the market.

The Cromford Market Index™ (CMI) is a single value that indicates the balance of the residential resale market. Values below 100 indicate a market that favors buyers. Values above 100 indicate a market that favors sellers. A value of 100 is equally balanced.

The Cromford Market Index™ has bounced up and down around the 100 metric mark for the past two years.  For the last nine months, there’s been a continued and significant trend towards a seller’s market.

Based on the tenor of the calls that I’ve received for my last three listings, I will tell you that there are some anxious buyers out there. Trying to buy a home. Getting outbid. The last short sale I listed was under contract in 7 days, and I still get calls almost daily from agents asking me how solid the offer is.

Regardless of what you hear on the news or from your friends who bought a house three to six months ago, the temperature of the Phoenix real estate market has definitely heated up, just in time for summer.

Related Real Estate Reading:

• Phoenix Real Estate Update: Not all prices ranges are equal
• Scottsdale Homes: Sales are up, inventory is down, and prices….
• Phoenix Real Estate Update What are the odds of selling your house?

However, any home buyer will tell you, it’s a battle out there. Multiple offers are common in the lower price ranges,  and with the deadline of the $8,000 tax credit coming up quickly, last-minute shoppers are finding that a full-price offer is often not enough.

You see in the chart above that overall Phoenix has been experiencing a seller’s market since May of this year.  You can also see that the steep incline has been tapering off over the last couple of months.

When you look at the next chart showing Months Supply by Price Range, you will see that this year’s trend continues:  The lower the price of the home, the lower the housing inventory.

We are seeing just a bit of change though.  The Seller’s Market that we were experiencing this summer is cooling off in the $250-350K range.

• Homes priced up to $250K have less than five month’s supply.  Seller’s have the upper hand here.  Multiple offers are common.
• Between $250,000 and $400,000, we are seeing a balanced market.
• Over $400K, Buyer still have a lot of negotiating power, depending on how the Seller has priced the home.

If you’d like to go back and see where the market was earlier this year, these two posts will help:

Buyers Market? Sellers Market? Depends. – August 2009 view

Why is Scottsdale real estate market behind the curve? – June 2009 view

With the tax credit possibly coming to an end, the slight changes you are seeing here could continue, even more significantly.  I think most would agree that any movement towards a more balanced market would be a welcome reprieve after the roller coaster ride of the past several years.