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

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

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.

It’s very much a seller’s market in the more affordable price ranges in Phoenix. Homes are flying off the shelf, and it’s difficult for home buyers with financing to compete with those paying cash.

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

2011 was definitely a turning point for the local real estate market.

Home prices are now on the upturn in greater Phoenix area, known as the Phoenix-Scottsdale-Mesa MSA (Metropolitan Statistical Area).

Last year locally, the median real estate price for existing single family homes dropped 10.2% from 4th quarter 2010 to 4th quarter 2011, making the Phoenix-Scottsdale-Mesa area 29th on the list of largest price declines in the U.S.

But then, look at what happened to local home prices in the 4th quarter of 2011, and you will see a huge improvement.

The Phoenix-Scottsdale-Mesa MSA is #4 on the list of  markets with price increases when comparing the 3rd quarter of 2011 to the 4th quarter of 2011.  Median home prices for existing single family homes increased 4.5% in the last 3 months of 2011.

Pretty amazing, but if you talk to any working Realtor, you’ll hear the same story. Lots of buyers and not enough homes on the market to satisfy the demand.

• Scottsdale Real Estate: Cash Buyers and Lack of Inventory Are Driving Home Prices Up
• Full Price Offer in 20 Minutes: Is a Seller’s Market Heading our Way?
• Phoenix Real Estate Market Update – Prices are up & inventory is still falling
• NO! The sky is not falling in Phoenix real estate

Interest rates in Scottsdale are truly remarkable this month.

Jay Thompson, aka “The Phoenix Real Estate Guy”, published an update to his interest rate chart a couple days ago showing interest rates at 4%, the lowest rates in the 40 years tracked here by FreddieMac.

Personally I can share that the last two contracts I received for listings now under contract had “not to exceed rates” quoted at 4.25% and 4.375%. One was an FHA loan, and the other was conventional.

Really quite amazing and one of the reasons that buyers are still out looking for homes and writing contracts during the last two weeks of December. This is typically a pretty quiet time of the year for real estate in Scottsdale, but not this year.

And as I shared last week, Phoenix area real estate agents are very optimistic about the coming months. And if you’d like to get a better handle on what’s going in the world of home finance nationally, I recommend The Mortgage Reports by Dan Green.

The consensus from my Mastermind meeting yesterday was that 2012 is going to be a strong year in real estate, and the lenders present didn’t really see much of an increase in interest rates, until after the election. Another agent mentioned that he’d listed a record number of homes in December. With the low interest rates, minimal home inventory, and voracious home buyer demand, I do believe that the first half of 2012 will be quite remarkable.

All we need are more homes to sell.

So, if you’ve been thinking about listing your house, and need a market update, just call or email.  It’s a complimentary service, and will give you info you need to decide whether now is a good time for you to sell.