Wednesday, June 16, 2010

Current Real Estate Trends Housing Report - June/2010 - What do I know?

Leading Real Estate Data Trend Expert Tom Ruff''s Monthly Housing Report:

“Stability itself is nothing else than a more sluggish motion.”

Michel de Montaigne, a 16th century French philosopher is recognized as the father of Modern Skepticism, his catch phrase was, “Que sais-je?” “What do I know?” Wikipedia states he became famous for his effortless ability to merge serious intellectual speculation with casual anecdotes. I chose his quote simply because he used stability and sluggish in the same sentence. The fact that his portrait reveals a stiffly starched frilled collar of lace, the Ruff, was simply a bonus.

Falling Home Prices Spur Fear of New Bottom

The headline was taken from the link above. In May of this year the median priced home in Maricopa County was $140,000, we define homes as all single family residences and condos purchased, this number includes both new and resale properties. In May of 2009 the median priced home was $130,000; our current median home price shows a 7.7% increase year over year. If we extend our view and look at home prices throughout the past year, we will see that prices rose from June through September; in September of 2009 the median priced home in Maricopa County was $140,000. In the past 12 months we’ve seen 95,868 home sales in Maricopa County; with a median price of $138,500 this sets a fairly firm foundation.

We’ve heard talk of doom and gloom with forecasts of falling home prices throughout the past year, our numbers show something else, stability. I know prices are no where near the seller’s expectation and it is common angst for buyers to fear prices will drop after their purchase, but in reality, movement in home pricing has been quite boring this past year. The rapid ascents of home prices from 2003 through the summer of 2006 followed by rapid descents into April 2009 were exceptional times. Real estate is not supposed to behave like Lindsay Lohan without an ankle bracelet; it is supposed to be more like Andy Griffith; slow, steady, stable.

Ominous headlines attract readers and viewers, sorry to say, when it comes to home pricing, the last year has been quite dull, or as my new mon ami Montaigne might say, sluggish. As a steady flow of new foreclosures each month work their way back into the market, home prices are remaining flat. Am I turning bearish on real estate? Not at all, read on.

Phoenix Housing Undervalued

If you normally don’t read my links, you should read the link above by Michael Douville. A couple months ago I wrote a piece entitled “Blood in the Streets” as to why I thought Phoenix housing was undervalued. In a much more eloquent and detailed manner Douville drives my point home. His article is well written and well thought out, nonetheless, being the potato po-tah-toh guy I am, I must take exception with Mr. Douville’s statement, “The Housing Indexes of Case-Schiller and ECRI recognized a national bottom in April of 2009; locally in Phoenix, the Cromford Report confirmed the findings.”

Personally, I think it was the other way around, on April 6, 2009 the Cromford Report, in a highly criticized report at the time called a pricing bottom in the Phoenix housing market, when Mike Orr made his call, Case-Schiller was forecasting a June 2010 bottom. Months later, Case-Schiller recognized the April 2009 bottom and confirmed Mr. Orr’s findings. Tomato, to-mah-toh, the experts agree.

Our Esteemed Assessor

A couple of weeks ago I had the privilege of sitting on a panel for the Valley Citizen’s League with Keith Russell, our esteemed County Assessor. It was fun just having the opportunity to chat with Mr. Russell about his office and the process by which assessed values are determined. I must tell you that Mr. Russell and his staff are doing an exceptional job in a very challenging environment. In our conversation I learned valuations are based on an October through October cycle, and as I had assumed, the full cash value has a target of 80% of what the assessor believes the properties actual value to be.

I don’t mean to oversimplify a very complex valuation model, but for this illustration, the median price home for the fiscal year ending October 2009 was $141,900 leaving 80% or $113,520 for the median assessed full cash value. The first eight months of data for the 2012 assessment show a median price of $140,000 with 80% being $112,000. I know in my February opinion piece I guaranteed an increase in home valuations with the 2012 preliminary, I had done my calculations on a January to January cycle. I would like to hedge my bet and say there will be little or no change in our 2012 full cash values as compared to our 2011 values, again, stability.

Most Noticeable Trend

It seems like a lifetime, but two years ago at this time I was talking about a number that I thought was a key in forecasting our housing recovery, the number of active foreclosure notices in Maricopa County. The number of active notices in Maricopa County reached its peak on December 31st 2009, and since that time has shown a consistent downward trend. I believe and always have believed that when this number began heading downward, it would be the best indicator the worse was behind us; but then, “Que sais-je?” (Side note: in 16th century France, that would have brought down the house.)

In my opinion intervention on the part of the Federal government to stabilize the housing and mortgage markets pushed foreclosures back nearly a year allowing the number of active notices to swell to 51,466. Today, the total number of active notices of trustee’s sale sits at 44,526, a 13.5 % drop from the first of the year. As I review the foreclosure numbers each day I see a 50 to 100 property decline in the number of active notices. The chart below will clearly illustrate the current trend.

Figure 1. Refers to all active notices on all property types in Maricopa county.

May’s Numbers

New notices in May came in just below the 6500 we had forecast, actual notices filed were 6,471. Look for June numbers to be very similar as we’re seeing on average 300 notice of trustee sales filed each business day, 200 trustee’s deeds and 150 cancellation notices. There were 20 business days in May, and there will be 22 in June. Short sales are having a noticeable impact on the foreclosures numbers as we’re seeing approximately 1735 short sales each month in Maricopa County with 1100 having an active notice at the time they sell.

Articles and reports about rising numbers of bank owned properties just aren’t true, at least, not true in the Phoenix area. REO numbers have stayed steady at approximately 16,300. The number of bank held properties rises slowly each month as the month progresses, and then falls as the month end sales arrive. The month ending total of REO’s has remained constant the past three months, basically, 3,100 new bank foreclosures in the front door, 3,100 REO sales out the back door.

My Final Thought

After viewing the soccer game last Saturday between the United States and England I have concluded that if I ever field a football team, our resident alien Mike Orr will not be permitted to be my goalkeeper.

To contact Tom Ruff -
Tom is a graduate of the University of Nebraska.  He founded "The Information Store" in 1982 and quickly became known as “The Source” of publicly recorded real estate data in Maricopa County. In August 2005 he formed "The Information Market" specializing in foreclosure data and housing studies. Mr. Ruff is an expert on publicly recorded data and is known for his monthly housing opinion which shares an inside and sometimes irreverent look at the Phoenix Housing Market.  He is often quoted in local and national publications.

No comments:

Post a Comment