What did I learn after being confined in a data mine for over six weeks? Simple: no matter what type of mine entombs you, singing like Elvis really does help pass the time.
Six Weeks Trapped in the Mine
The intent of the data-mining operation was to create a database wherein comparable sales could be matched by transaction type. For example, if a third-party investor purchased a property at auction and later flipped that property, that investor would be able to look at the prices that third-party buyers are paying at auction and then see what those properties are selling for on the flip, giving the investor an apples-to-apples approach.
Below is a summation of December’s resale activity that was harvested during my recent mining operation. I think it’s interesting, and I think you’ll find it interesting, too.
GOVERNMENT 2,314 28.0 6% $231,765,741 3,929,606 $58.98 $100,158.10 1,698
NORMAL 1,598 19.3 8% $436,705,251 3,243,677 $134.63 $273,282.40 2,030
DISTRESSED 1,505 18.25% $234,260,889 2,915,898 $80.34 $155,655.10 1,937
BANK OWNED 1,314 15.93% $199,764,403 2,491,724 $80.17 $152,027.70 1,896
FLIP 824 9.99% $126,460,493 1,538,353 $82.21 $153,471.50 1,867
3rd PARTY AUC 691 8.38% $74,801,371 1 216,641 $61.48 $108,250.90 1,761
As the chart above displays, a high number of lower-priced government home sales had a dramatic impact on the median sales price. Transactions involving the federal government accounted for 28.06% of all sales activity last month, making up the single largest transactional category.
An interesting conclusion drawn from the numbers above is that banks are now getting the same prices for REOs and short sales. In our opinion, this is very good news for short sale buyers. You will notice in this spreadsheet that normal sales are $134.63 per square foot, which is much higher than what other reporting services say.
The reason my numbers are higher is because I break out flips. As the chart above shows, flips in December sold for $82.21 per square foot. Investors purchasing properties at trustee sales with a sell-and-flip strategy are buying on average $61.48 per square foot and quickly selling for $82.21.
Looking ahead to January, early numbers show more government sales in the mix, which means continued weakening of our median prices. Taking a quick look at foreclosure activity, in December there were 5,766 notices filed and 3,523 trustee’s deeds.
Now that the holidays are over and the moratorium has ended, expect January’s notices to be very close to those of January 2010: 6,762 notices, and expect January’s trustee’s deeds recorded around 4,800, slightly above 2010’s 4,452.
From time to time when I see a new product come into the marketplace, I will mention it in my opinion piece. Like the kid in the early 60s who ran over from next door to announce his family’s new color TV, I’m pleased to announce to you the launch of azbidder.
For the sake of full disclosure, I must first say that the Information Market is participating, and we are working with azbidder’s creator, Dan Mayes. Mr. Mayes was a Senior Vice President for Walker Digital LLC/Priceline.com, where he was responsible for creating the financial settlement technology that forms Priceline.com Hotel Service.
With his latest effort, Mr. Mayes, a local realtor, created an online eBay style system for purchasing properties at foreclosure auction in Maricopa County. Through Mr. Mayes’ system, you or your client can bid “on the court house steps” from anywhere in the world; all you need is an Internet connection.
It’s always been my methodology to keep an eye on the data and an ear to the ground. Prior to the expiration of the tax credit, I was not hearing many reports of first-time buyers; there was much more chatter about investors and their dominance.
Hindsight is twenty-twenty: looking back now, I see that the data clearly shows how both prices and volume were inflated as a direct result of the tax credit; at the time, this trend was invisible within the data. The lesson here: never underestimate the power of federal policy to make or break a market.
While I missed the impact of the tax credit initially, the fact remains that I have been and still am very bullish on the Phoenix housing market. Anyone who has followed my writings will know that in late 2008 I encouraged people “to get out and shop,” and in early 2009 I asked, “What are you waiting for?” followed by 2010’s “blood in the streets.”
For the past two years I’ve written time and time again about the opportunity that currently exists in the Phoenix real-estate market, and I still feel that way today. The people who had the courage to act in early 2009 are amassing empires by buying, holding, and collecting rental income, wishing they had more properties to meet the demand.
While on the other side of the street, investors living by the same mantra, “you make your money when you buy,” are buying and flipping and boasting to their barbers and hairdressers about the deals they are involved in.
Through history we’ve heard of the shoe-shine boy giving stock tips before the great stock market crash in ‘29 and the retired investor talking about the steal he made during the RTC days in Phoenix after the Savings & Loans crashed.
We are living in the time after the crash, not the time before; Phoenix is now offering the same opportunities we saw in the early 90s. I haven’t heard anyone say, “Boy, I wish I’d have bought that home down the street in 2006 when I had the chance,” but I’ll bet you, ten years from now when they look back at this unique time in history…
Contact Tom Ruff at The Information Market.
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.