We are seeing multiple offer situations for many properties priced below $150,000.  The inventory of homes for sale is roughly half of what it was a year ago.  We think this will start putting upward pressure on home prices.  It will take time but a slow recovery would be much healthier than a fast one.  Interest rates are also at historical lows which combined with the current low prices will make homes affordable for many people.

Here are some links to recent articles about the housing market. 

Mortgage Rates Reach New Record Lows

Optimism Builds in Housing Market

Foreclosures Post Big Drop

Phoenix-area housing may be on the mend.

• The number of homes sold for each of the last three months has been over 9,000.  May saw 9,809 homes sold, an 8.1% increase over May of last year.  This was also the second highest monthly sales figure since August of 2005.
• Total inventory of homes has dropped significantly in recent months.  May inventory was at 31,661 homes, the lowest number in the past 24 months and 23.4% lower than May 2011.    For comparison, inventory in November 2010 was 45,353.
• Average and median sales prices have been relatively flat over the past six months.
• A large portion of sales activity has been for properties priced under $100,000.   46% of pending contracts in May were for properties priced under $100,000.    Another 22.4% were for properties priced between $100,000 and $150,000.
• Foreclosure and short sale properties continue to make up a large portion of sales and of properties still available for sale.

All of this data signals that the Phoenix market area is changing.    We believe there will continue to be significant monthly decreases in the number of properties available for sale for less than $100,000.  We think the lower inventory has already started to put some upward pressure on prices although it may take a while for this to show up statistically.  If more listings start being added to the market in response to the demand then prices are likely to stay fairly flat.  However, we think the lower inventory has already started to put some upward pressure on prices and if inventory continues to shrink we will start to see gradual increases in average prices.

• Sales were strong in both March and April.    In March there were 9941 closed sales and in April 9309 which was an increase of  0.8% over last year.  This is significant because last years April numbers were strong due to the housing tax credit.
• Inventory of homes for sale on the market has also been decreasing weekly.  April’s inventory was 17.3% than it was a year ago.  A reduction in inventory is necessary to balance the market and to create upward pressure on prices.
• Average and median sales prices have remained relatively flat since the start of the year.  The average sales price actually increased 2.2% in April.  The lowest average sales price for the decade occurred in February 2010.
• The number of foreclosures pending has been dropping for 17 consecutive months.

All of these signs are encouraging.  This remains a good time to buy.  Prices have remained fairly steady and are low.  If inventory continues to decrease, prices will start to increase in response.    This affect will vary in different areas of the Phoenix real estate market.  Outlying areas continue to have higher inventory than more centrally located properties.

What does this mean for you?  If you have been waiting for the market to hit bottom before purchasing a home, now is a good time to start the purchase process.  Interest rates are still low and housing prices are affordable.  Start by talking with a lender about the loan options available to you.  FHA loans are still available that require a 3.5% down payment and allow the seller to assist the buyer with closing costs.  Once you have been pre-approved for a loan, contact a realtor to assist you with the home buying process.

If you would like to search for homes on the internet, you can search townhomes, patio homes, and condos at www.townhomesonly.com and you can search for single family homes at www.realtysecrets.net.

March sales of existing homes through the Arizona Regional Multiple Listing Service increased over last year by 18%. Some of this is attributable to the home buyer tax credit which requires a contract by the end of April. We have also seen a number of second home buyers from other states and Canada. Home prices are low right now and many articles I’ve read indicate that we may be at the bottom of the market. Interest rates are also still at historically low levels.

The number of months of inventory of existing homes has come down significantly since 2008.  This does vary by city and neighborhood within the Greater Phoenix area.   There are also variances between single family homes and condominiums.  FHA rules have changed and it is more difficult to purchase a condo using an FHA loan than it was in past years.  This has reduced the buyer pool for condos somewhat and will likely cause price recovery for condos to fall behind that of single family homes in the months going forward.

“Overall, the 20-city index (S&P/Case-Shiller 20-city home price index) climbed 0.3 percent between December and January.  Phoenix was one of only five cities to post an increase in home prices.”  — from Modest Signs of Life, AZ Republic, February 24, 2010.

According to ASU professor Karl Guntermann … “The slowdown in the rate of decline has been accelerating for several months,”  he said.   “If the present trend continues, prices will level off later this spring.”  — from Housing Price Recovery Hits Milestone, AZ Republic, February 25, 2010

This article goes on to say that foreclosures may have already hit the point where prices are the same as last year and no longer declining.  This fits what we are seeing the housing market.   There are fewer foreclosures out there and prices are very similar to last year.  There are now more short sales on the market than there were a year ago.

As always with real estate, the results vary from city to city and neighborhood to neighborhood.  For example, while in one neighborhood in Tempe, inventory of homes may be low, a different neighborhood in Scottsdale may have a larger percentage of homes for sale.  The more homes for sale in a neighborhood, the more negotiating power the buyer has.  The fewer homes for sale in a neighborhood, the more negotiating power the seller has.

The majority of home sales last year were foreclosure and short sale properties.  This is likely to continue at least through the first half of the year and likely through the end of the year.  The abundance of foreclosure properties will continue to hold prices at the current low levels although the lower inventory should prevent the large price declines we saw in 2009 over 2008.