Mid-Month Pricing Update and Forecast for September

Article Courtesy of Michael Orr
The Cromford Report

Each month about this time we look back at the previous month, analyze how pricing has behaved and report on how well our forecasting techniques performed. We also give a forecast for how pricing will move over the next 30 days.

For the monthly period ending September 15, we are currently recording a sales $/SF of $78.83 averaged for all areas and types. This is 0.7% lower than the $79.40 we now measure for August 16. Our forecast range was $77.17 to $80.21 with a mid-point of $78.74. Once again our forecasting technique proved remarkably accurate as the actual figure is only 9 cents higher than the mid point of our forecast range. The reason for the unusual accuracy over the last two months is that the market has remained fairly stable although it did change substantially after mid June. For the last three months sales activity has been concentrated at the bottom end of the market with the middle and top end much weaker than during the spring.

On September 15 REO sales across Greater Phoenix (all types) averaged $61.65 per sq. ft. (up a substantial 3.5% from August 16). Pre-foreclosures and short sales averaged $73.27 (down 0.3%) while normal sales averaged $100.73 (down a startling 4.9%). Normal sales gained market share, moving from 32.4% to 33.1% of sales, while REOs lost substantial market share, moving from 45.0% to 41.4%. Short sales and pre-foreclosures were the winners again this month, moving from 22.6% to 25.4% and recovering from a dip in August after a strong spike at the end of June. 

On September 16 the pending listings for all areas & types showed an average list $/SF of $78.47, 0.5% above the reading for August 16 - the first time we have seen a rise for several months. Among pending listings we have 27.6% normal, a sharply declining 35.0% REO and a fast growing 37.4% in short sales and pre-foreclosures. The average pricing for pending listings on August 16 in each category were: $108.70 normal, $68.90 short sales & pre-foreclosures and $60.82 for REOs. We can see that compared with last month the pending $/SF averages are up for REOs, but down for normal listings and (especially) short sales.

The price gap between REOs and short sales has narrowed substantially and disappeared completely for several price ranges.

Our new mid-point forecast for the average monthly sales $/SF on October 15 is $79.21, which is 0.49% above the September 15 reading, and we have a 90% confidence that it will fall within ± 2% of this mid point, i.e. in the range $77.63 to $80.79. A substantial change in the mix can have a significant effect on the average price per sq. ft. and we are still seeing considerable variation from day to day.
 
Since we are projecting a small and insignificant rise in pricing it is possible that our reading for August 25 - $78.69 per sq. ft. - will remain the low point over the near term. While prices for lender owned homes are on the rise, short sales and normal listings are still displaying considerable price weakness, so the overall price direction is still vague. The lowest monthly average sales price is $150,201 set on August 25. However the record low monthly median sales price is still standing at $107,000 and this was set seven months ago on February 24. Our current monthly median sales price is back at $110,000, where it has been for the majority of the last 9 months.

There have been several media stories making a big deal about increased foreclosure numbers in August. Outside Arizona, and especially in judicial foreclosure states. these may have had some significance. Inside Maricopa County, they seem to have no significance at all. The rise in completed foreclosures from July to August was small at 8% and less than the 15% increase in the number of days that the calendar gave the trustees to work. There was a noticeable rise in foreclosure notices issued by Recontrust, the company that handles the notices for Bank of America. However the notices for other trustees were at roughly the same level as July and substantially down from 2010. The underlying downward trend is reinforced by the month to date numbers for September. We are projecting about 4,500 new foreclosure notices during September, a drop of some 16% from August and about 2,850 trustee sales, a drop of about 21%. Part of the drop is because September has 9% fewer working days (21) than August (23). Nevertheless it still looks like the foreclosure tide is on its way out, and the inventory of bank owned homes continues to fall, as does the count of pending foreclosures.