Clear Title of Arizona is pleased to provide its clients with the Clear Connections Monthly Market Update. This report will provide you with the latest real estate trends.

Our business is built around the concept of educating and providing the personal service that Real Estate Agents and Lenders have come to depend upon. It is with this philosophy that we offer the Cromford Report to our clients, associates and friends.  It is intended to keep you informed on critical market trends that affect our businesses.

Market Summary

Sales volumes dropped in September while supply failed to decline for the first time since December 2010. To compensate we saw positive pricing movement for the first time since the second quarter.
Looking into the ARMLS data across all areas and types we see the following:

• Sales per Month: 7,832 in September - down 11% from August but up 17% from this time last year.
• Active Listings (including AWC): 26,869 on October 1 - up 0.2% from September 1 but down 40% from this time last year.
• Active Listings (excluding AWC): 19,327 on October 1 - up 0.6% from September 1 but down 50% from this time last year.
• Pending Sales: 10,841 on October 1, down 5.8% from August 1, but up 12.4% compared with this time last year.
• Listing Success Rate: 75.7% on October 1 - up from 74.5% on September 1 and up significantly from 56.9% on October 1, 2010.
• Contract Ratio: 95.2 on October 1, down from 99.5 on September 1 but dramatically up from 40.0 last year at this time.
• Days Inventory: 99 on October 1, the same as September 1 but dramatically down from 179 at this time last year
• Cromford Market Index™: 159.3 on October 1, up from 155.6 on September 1 and 85.4 on October 1, 2010.
• Sales Price as a Percentage of List: 96.70% on October 1, almost the same as 96.72% on September 1 but up from 95.43% on October 1, 2010

We can see that all these numbers are far better than 12 months ago but most are not as good as last month. However the Cromford Report Index™ continued to improve. This is because this index is a seasonally adjusted measure and it is normal for inventory to increase between September and October. In fact the inventory increased only 0.2%, far less than in an average year and causing most of the improvement in the index.

It is also normal for sales volume and pending listings to decline between September and October. This year sales volumes fell faster than pending sales, which is partly due to the decline in REO listings. With fewer lender-owned and HUD properties available, last year’s sales volume for REOs is no longer sustainable. We now see demand in slight decline and expect to see the Cromford Market Index™ fall back from its recent highs as a result.

REOs are losing market share very quickly now.  Fewer trustee sales are taking place. There were 2,689 residential trustee sales in Maricopa County during September 2011, 44% fewer than the 4,808 of September 2010. In addition a larger percentage of these auctions are now won by third parties (42% in September 2011 versus 20% a year ago). So the quantity of homes reverting to the beneficiary is dropping extremely fast. Only 1,280 single family homes went back to the lenders in Maricopa County in September 2011. This is the lowest total since November 2007. It is also 61% lower than the 3,289 that they received in September 2010. They are selling far more than this number through ARMLS each month and so the lenders’ inventory is being rapidly depleted.
It is a clear sign of the strength and dominance of negative sentiment that this remarkable turn round is mostly overlooked. At the same time, a completely irrelevant increase in foreclosures between July and August (due entirely to August having 23 trustee sale days instead of July’s 20) managed to make headlines in the local papers. When bad news is amplified like this and good news is ignored we know sentiment has swung too far.

For the housing doom fans who like foreclosures, September 2011 was a pretty dismal month. There were a total of 4,544 new notices issued in Maricopa County of which 4,335 were residential. This is 39% lower than September 2010. This new number is actually slightly higher than April through July 2011, but 15% lower than last month and lower than every month prior to April until we get all the way back to December 2007. The downward trend has slowed but remains in place. The bigger news is that there were only 2,840 trustee sales of all property types. This is 44% down from September 2010. This is also the lowest number since March 2008 (except for November 2010 when Bank of America completely halted its trustee sales). Foreclosures are clearly well past their peak and the short sale is looking likely to overtake the foreclosure in the coming months as the primary mechanism to resolve homeowners’ financial distress.

Pricing

After hitting a low point in late August and again in mid September, pricing is on a slight upward trend again. The monthly median sales price has climbed from $107,000 on August 18 to $114,950 on October 3 (all areas & types). That’s a 7.4% increase in less than 7 weeks and illustrates how violently the monthly median sales price reacts when REOs start disappearing from the mix and increasing in price at the same time. For Greater Phoenix REOs the monthly median sales price has jumped from $80,000 to $86,400 in the same period, an 8% increase. Pricing for short sales and foreclosures has not followed suit and neither have sales prices for normal sales. In fact pricing has been a little weaker at the higher price points cancelling out some of the gains at the bottom of the market. The overall average price per sq. ft. is up only modestly. Having hit a decade low of $78.51 per sq. ft on September 15, we are now looking at $79.81 per sq. ft. for October 3, a bounce but not a very convincing one. The most encouraging sign is that the pending $/SF has finally started to change direction and is moving up again after trending downward for a prolonged 15 month period since May 2010. We wait with bated breath to see if it can keep this up throughout October.

Please go ahead and show this table to those who still talk of a “huge glut of foreclosed homes for sale”.
Note that the areas most affected by the foreclosure tsunami are also the ones that have had the biggest declines in lender owned inventory between 2009 and now. El Mirage used to have more REOs than the much larger city of Scottsdale. Now it has only 18% of Scottsdale’s inventory.

This includes what is sometimes referred to as “Shadow Inventory”.
The data is for the county of Maricopa and includes only single family property types (assessor land use codes 01 and 86).
There are five categories of homes and the number of homes in each category can be individually displayed or hidden depending on which part of the inventory you wish to analyze.

Pending Foreclosures - these are homes with an active Notice of Trustee Sale. Some of these will avoid foreclosure through loan modification, successful short sale or other means. If the trustee sale goes ahead then the property may be purchased by a third party and so avoid entering the REO inventory. Thus only a proportion of this inventory will end up in the hands of the lender or government equivalent (e.g. Fannie Mae, Freddie Mac, VA or HUD).
Unlisted REOs - these are properties which failed to sell at the trustee’s auction and reverted to the beneficiary. These “REO” properties have not yet been listed for sale on ARMLS but are likely to be going through the lender’s preparations for sale. Some may pass from one lender to another before being marketed.
Active REOs - these are owned by lenders and are actively being marketed for sale through the ARMLS system. They may or may not have a contingent contract.
Pending REO Sales - these are listed on ARMLS but already have a completed firm contract for sale and are awaiting their close of escrow.
Listed but Off Market - these are listed on ARMLS but are temporarily suspended from marketing for some reason.

Items 1 and 2 above are often referred to as “Shadow Inventory”, although defintions vary considerably. Unlisted REOs will almost certainly become Active REOs within a short period and this is the most basic form of “Shadow Inventory”. Pending Foreclosures may become Unlisted REOs but many will not. Many are already active listings on ARMLS where they are being marketed as short sales.

Some analysts include in their “Shadow Inventory” definition any home which is delinquent by more than a certain number of days (e.g. 30, 60, 90 etc.), even if no Notice of Trustee Sale has been issued. We do not include these in the chart below.

You can select the counts for an individual ZIP code or the total for the entire county of Maricopa. Note that ZIP codes 85120 and 85142 lie partially within Pinal County so the counts shown for these ZIP codes are only for that portion that lies within Maricopa County.
This chart is updated monthly.

 Daily Market Snapshot - Concise

Explanation of Terminology

ST = SHORT TERM TREND - The arrows in this column indicate the direction of the change between TODAY and LAST MTH
LT = LONG TERM TREND - The arrows in this column indicate the direction of the change between TODAY and LAST YR
Color code: The background to the trend arrow is colored green if the direction is favorable for sellers and is colored red if the direction is favorable for buyers. It is colored yellow if the change was zero. If the circle is white then then the statistic is neutral for both buyers and sellers.
Columns: Each data column shows measurements taken on a single day with the date shown at the top of the column.
TODAY means the date given at the top of the page.
LAST MTH means the same date last month.
LAST QTR means the same date three months ago.
LAST YR means the same date one year ago.
2 YRS AGO means the same date two years ago.

City Rankings - Annual Average Sales Price per Square Foot

This table ranks the cities by their annual average sales price per square foot. Only single family detached homes are included in these numbers. Information for the 12 major and 17 secondary cities is current as of the date shown. Data for the 14 small cities is updated on a monthly basis, and is measured on the 13th of each month.

The primary function of this table is to show the least and most affordable areas in the Phoenix metropolitan area together with longer term pricing trends.

Annual averages are based on a relatively large number of sales. Therefore they are not as subject to rapid change as monthly averages. The downside is that they do not necessarily represent the current market very accurately, since they include sales from up to a year ago. Pricing may have moved a great deal since then.

Note that Higley has been included in Gilbert and Ahwatukee included in Phoenix. Desert Hills is still counted separately though it is increasingly being incorporated into Phoenix.

Explanation of Terminology

All statistics are for single family detached homes recorded on ARMLS as sold in the city shown.

Daily Market Snapshot - Pre-foreclosure/Short Sales

The table below provides a statistical analysis of today’s residential resale market for short sales and pre-foreclosures in the Phoenix metropolitan area.

To be included in this analysis the property must not be lender owned, and must either be in pre-foreclosure or classified as a short sale.

The figures shown are for the Greater Phoenix area. Geographically, this includes Maricopa county, a large part of Pinal county and a small part of Yavapai county. “Out of area” listings recorded on ARMLS are not included.

All residential single-family dwelling types recognized by ARMLS are included. For-sale-by-owner, auctions and other non-MLS transactions are not included. Land, commercial units and multiple dwelling units are also excluded.

Foreclosures - Per Month

The following line chart shows the number of notices and trustee deeds on a monthly basis from 2002 onwards.

The data is for the county of Maricopa and includes all real estate property types, including land and commercial. A commercial parcel counts as 1 foreclosure even if there are multiple structures within that parcel.

The red line denotes notices of trustee sales which is the first formal notification that the lender  has asked the trustee to start the foreclosure process. The blue line denotes the foreclosure auctions where the property is either sold to a third party or transferred to the beneficiary (lender).

 The monthly STAT newsletter addresses DOM and MSI for the entire residential market as a barometer of overall market health. It is a macro look at these two key metrics, and does not, however, give any insight into inherent differ-ences between various price ranges. STAT+ will allow Subscribers to address market supply more in depth with Buyers and Sellers. STAT+ was first published in the fourth quarter (Q4)2010.

DOM from Q4 2010 to Q1 2011 increased or stayed the same for all price ranges $2,000,000 and below. MSI in Q1 2011 decreased from Q4 2010 in the $250,000 and below ranges and the ranges between $500,000 and $1,500,000, reflecting increases in the average number of sold properties per month. More dramatic changes in the DOM and MSI for properties above $2,000,000 are less reliable due to the small sample size in the higher ranges.