Price (green line)
The median price in metro Phoenix of single family homes sold via the MLS fell to $120,000 in March 2009. The median home price in Phoenix, Arizona hasn’t been that low since sometime in the 1990’s. I only have data back to January 2000.
At $120,000, the median single family home price in metro Phoenix has fallen 55% from the peak median home price of $264,800 in June 2006.
I expected that the median home price would NOT fall from February to March but, instead, it fell significantly, by $7,900. Oh well. Maybe I called it too early :). Let’s see what April brings.
Even if the median price levels off this Spring, I would expect price weakness this Autumn. It’s looking like it will be 2010 before we see “normal” appreciation in residential real estate. The price bottom of this cycle may not be until next December or January.
Well, there is one bottom I can peg accurately.
The bottom for number of homes sold was January 2008. See the graph.
Sales (blue line)
Single family home sales in metro Phoenix AZ in March were super strong at 6,899 homes. That was the best month for home sales since May 2006 and was 71% higher than a year earlier in March 2008.
Looking at the graph you can see that March often sets the trend for the number of homes sold in the following months. Strong March sales mean strong Spring sales.
Listings (red line)
The number of single family detached homes listed for sale FELL 5% from mid-March to mid-April. The mid-April inventory is 25% less than a year earlier, in mid-April 2008.
The March inventory of single family homes listed for sale was equivalent to a 6 months supply of homes.
Many people consider 4 to 6 months inventory to be “normal.” (I lean towards 5 to 7 months inventory as being “normal.”)
A year ago, in March 2008, we had a 13-month inventory. The inventory peaked at over 17 months in November 2007.
We will likely see a continued sharp lowering of “months of inventory” of homes listed for sale which should soon stop the fall in the median home price in metro Phoenix… at least temporarily.
Conclusion
The metro Phoenix housing market is correcting rapidly now.
(”MLS Listings” are measured at one point in time, usually the 15th day of the current month. “Median Price” of homes sold and the total number of home “MLS Sales” are for the entire preceding month.)
{ 6 comments… read them below or add one }
Rich 04.16.09 at 4:37 pm
I’m not sure your standard assumptions and model are going to serve you well trying to understand this market.
I believe what we are seeing now is market completely dominated by foreclosures. Basically, the banks decide they have X foreclosures that they HAVE to sell. They will do whatever it takes to sell those houses. The dramatic increase in sales simply means the banks have decided they have to sell more homes. This is why we’re seeing record price drops at the same time as strong sales.
If the banks had 20,000 homes that they had to sell this month, then they would have sold 20,000 and we would be talking about the strongest month ever for sales. Of course to sell 20,000 homes they probably would have to drop the median price an additional 20% this month. Conversely, if the banks only had 1000 to sell, sales this month would have been very weak but the price drop would have been much more moderate - perhaps the 2-3% / month we’ve been seeing since late 07, instead of the 6.2% we saw.
The key is to watch the foreclosures. Until the number of new foreclosures are significantly less than the number of sales, I don’t think we’ll see a bottom. (caveat - I do think median sales price will start to level out, but because of a change in the mix of homes sold, not due to stabilizing prices)
Kyle Pearson 04.16.09 at 5:29 pm
I have to agree with a lot of Rich’s analysis. I have read several different places that are talking about Fannie and Freddie and a few other large lenders all resuming sending out foreclosure notices, as they were on hold for the last several months waiting for the Obama plan to come out. Now that we have the plan (although people are still trying to figure out how it helps), the lenders are resuming sending out their foreclosure filings. Maricopa had 10,000+ letters go out to its homes in March; we are looking at a long way before the foreclosure spiral stops.
However, the strong buying is a very encouraging sign that we are nearing a equilibrium level in terms of price.
azrob 04.16.09 at 5:35 pm
Some relevant facts to consider about inventory:
1. the number of homes in foreclosure keeps climbing. In march, 4000 more homes were added to the foreclosure process than were removed from it. (10,600 NTR’s filed, 3400 foreclosures, 3200 canceled foreclosures roughly, going by memory my stats are on another computer. )
Now, banks seem to be trying to modify loans, or at least are delaying foreclosures while they consider modifying loans. However, until we actually see the number of homes in foreclosure diminish, it is premature to call this problem solved.
2. In April so far to today, another 2300 homes have been added to this ‘foreclosure backlog’ So, we still have no answer: will these homes be modified, or will the majority be foreclosed on, and added to the REO bank owned inventory?
3. We have a lot more buyers for under priced foreclosures, but we clearly have a lot more foreclosures coming. (as of today, 42000+ homes are in foreclosure in maricopa county) If even half of these foreclose and add to the inventory, this year is more than likely crushed/cursed/damned.
My predictions? Median bounces up for a couple months, sales stay strong through late summer, but by fall the continuing foreclosures and job losses begin slamming prices again. Median to $100K, Case-Shiller Index to 100 by december, though my bet will look risky for the next six months…
Brian 04.17.09 at 10:50 pm
AZRob, the Case-Shiller number will likely be at 100 by this month (when that is reported in June since C-S trails by a couple months). It was at 117 for January as reported at the end of March. It has been falling at 5% plus a month recently and given John’s more current price drop above, which shows median prices now back to (maybe) 1997, it seems likely that the C-S 100 (which is the index basis from January 2000) has already been passed.
BTW, John, remember when we all thought the C-S data was overly pessimistic and skewed to the downside? Now, it actually looks better than the MLS data you reference. Who would have ever thunk it. The scary thing is that once we get to median price levels from the mid 1990s, we enter a period where prices were pretty flat for a number of years (appreciating only 1-2% a year, according to the C-S data that goes back to Jan 1989 for PHX). So before long, we may be talking about prices that are at levels last seen in the 1980s. Boy, will that make affordability look great!
Russ 04.21.09 at 11:29 pm
The floor on Phoenix area house prices has evaporated. A median south of $100K is likely.
randi 04.24.09 at 5:26 am
yep its a huge sum, it will be a 100 that’s a reality