Looming “shadow inventory” still holding back the home price increases.
Image one of four from NAR's Economists' Blog
Arizona experienced a 25% drop in homeowners behind on mortgage payments from December 2010 to December 2011. In other parts of the country, it’s not so good and Arizona is certainly not in great shape yet. Overall, we have a long-way to go before we’re rid of the shadow inventory that hangs over the housing market.
The National Association of Realtors® Economists’ Outlook blog provided a state-by-state update on shadow inventory today. “Shadow inventory” means homes that aren’t listed for sale yet, but soon will be. As discussed in the NAR blog piece, shadow inventory includes homes in the foreclosure process and homes with mortgages that are delinquent but on which legal foreclosure proceedings (or in Arizona, trustee sale processes) have not started.
I think it’s important to also think of the “looming shadow” as including those homes which have been foreclosed, are now owned by banks, and are sitting on the banks’ books without being put on the market. In Flagstaff, as elsewhere, there are also a lot of homeowners who would like to sell and will sell at the first uptick in prices. When that “shadow inventory” comes on the market, the new supply will put downward pressure on prices, so the home price recovery is likely to be bumpy or at least slow.
Nationwide, only about a quarter of new delinquencies are first-time delinquencies. That means that 75% of the reported delinquent homeowners are folks who were in trouble before and had some short-term resolution that didn’t work. The good news is there is not a flood of newly in-trouble people. Arizona is one of the states that saw a significant drop in new delinquencies during 2011.
In summary, as I’ve said before, things are getting better but the housing recovery is going to be slow.
Since the estimate of state-level shadow inventory in March 2011, and an update in the fall of 2011, the aggregate size of the shadow inventory has not improved convincingly.
Mood of the Market. I recently bought a couple of spa treatment packages for a friend's birthday (as much as a gift to myself as to her, to be sure). The package included a pedicure and a massage for the price of the massage, but had a bizarro restriction that required I pick the gift cards up at least one day prior to spa day.The problem: The spa was across a bridge from my town. Despite my very best calculations, I hit unexpected traffic and it took me an hour's drive just to pick them up.
In an article in the Omaha World Herald, Debbie Bosanek, Warren Buffet's recently-renowed secretary, discussed her reasons for purchasing a second home and the personal advice she received from Mr. Buffet:
"I just thought it was time to buy a home," she said. "Warren tells me that it will be the best opportunity in my lifetime. Mortgage rates are low and prices have dropped dramatically. Getting a nice home in a great climate for only a $30,000 down payment and a mortgage that has a low interest rate — I've been working 37 years and saving for an opportunity like this.
"I share Warren's view about the future of America, and we believe that our country will do just fine. I'm happy to make this investment."
Warren Buffet is seen by many as the greatest investor of our time. When he speaks, people listen. Like anyone else in his position of influence, he is criticized by some for using his bullhorn to promote his own business
U.S. house prices dropped sharply in November to mark the third straight decline, according to a closely followed index released Tuesday.
This report from Case/Schiller confirms data reported earlier about November home sales on the national level -- prices down and volume up. December was a somewhat different story and presumably we'll hear that from Case/Schiller in another month.
Meanwhile, remember that all real estate is local. For the latest Flagstaff real estate news, follow this blog and for my latest reports and analysis, see the links below:
I like to look at the real numbers when we're talking about home sales in Flagstaff.
Things have been bad with Flagstaff homes sales, but not as bad as elsewhere. And things are likely to get better here in Flagstaff more quickly than in some places (though not as quickly as, say, San Francisco and New York). None of that will be of great comfort to those who have to sell and are underwater on their mortgages. For the rest of us, let's not mire ourselves in doom and gloom -- or be overly optimistic. I'm in favor of realism when it comes to the Flagstaff housing market.
To get started, let's look at where we have been since the housing crisis started. It hit Flagstaff a bit later than the downturn in Phoenix and elsewhere. And, as you'll see from the chart, the impact on Flagstaff's median home price has varied month-to-month.
Let's watch the Flagstaff housing market with realism over the next few months. There are likely to be opportunities for both buyers and sellers. Check out some recent reports in the links below. And when you need to buy or sell, contact me: Ann Heitland at RE/MAX Peak Properties.
Some sellers have delayed their moving decisions for years now. For those champing at the bit to make a sale and move on with their lives, 2012 may offer glimmers of hope
Report from NAR today confirms closings in January and February likely will be more than 2011.
Pending sales of existing homes stayed ahead of year-ago levels, according to the National Association of Realtors®’ report on December statistics. The Pending Home Sales Index declined 3.5% to in December compared with November, but is 5.6% above December 2010. The data reflect contracts to buy homes, but not closings.
Lawrence Yun, NAR chief economist, said the trend line remains positive. “Even with a modest decline, the preceding two months of contract activity are the highest in the past four years outside of the homebuyer tax credit period,” he said. “Contract failures remain an issue, reported by one-third of Realtors® over the past few months, but home buyers are not giving up.”
Yun said some buyers successfully complete the sale after a contract delay, while others stay in the market after a contract failure and make another offer. “Housing affordability conditions are too good to pass up,” he said.
By region the Realtors® Pending Home Sales Index declined in the Northeast by 3.1% to 74.7 in December and is 0.8% below a year ago. In the Midwest the PHSI rose 4.0% to 95.3 and is 13.3% higher than December 2010. Pending home sales in the South slipped 2.6% to an index of 101.1 in December but are 4.9% above a year ago. In the West the index fell 11.0% in December to 107.9 but is 3.7% higher than December 2010.
Note: The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing. The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.
When you’re ready to take advantage of the low prices and low interest rates by buying a Flagstaff home, give me a call: 928-714-0001, or start learning about Flagstaff real estate on my website!
A mistake in pricing your home at the outset only compounds over time.
Thought for the day:
"The tough decisions won’t go away on their own, and like compound interest, the size of our problems will only grow over time. Ultimately, we’re only doing ourselves a favor by shortening the space between when we know we made a mistake and when we finally decide to do something about it." -- Carl Richards.
On thing I've learned in this tough real estate market of the last five years is that making a pricing mistake at the outset of listing a home can kill the sale. But worse than the initial mistake is failing to correct it in a timely manner.
I've got a pricing strategy to sell Flagstaff homes, not simply to list them. When you're ready to sell your Flagstaff home, give me call so we can meet and make a plan. 928-714-0001.
The latest monthly data shows total existing-home sales rose 5.0% from November to December based on seasonally adjusted numbers, and are 3.6% higher than the 4.45 million-unit level in December 2010. The estimates are based on completed transactions from multiple listing services that include single-family homes, townhomes, condominiums and co-ops. December was the third month in a row showing rising sales volume.
For all of 2011, existing-home sales rose 1.7% to 4.26 million from 4.19 million in 2010. The first six months of the year were very slow.
Total housing inventory at the end of December dropped 9.2% to 2.38 million existing homes available for sale, which represents a 6.2-month supply at the current sales pace, down from a 7.2-month supply in November. Available inventory has trended down since setting a record of 4.04 million in July 2007, andis at the lowest level since March 2005 when there were 2.30 million homes on the market.
“The inventory supply suggests many markets will see prices stabilize or grow moderately in the near future,” said Lawrence Yun, chief economist of the National Association of Realtors.® Indeed, we are beginning to see that in some markets around the country, including the market for Flagstaff’s lower-priced homes. Those Flagstaff home prices, by the way, are still substantially above the national median price of $164,500. Flagstaff’s median sold home price in December was $249,750.
Housing analysts reacted to the release of NAR numbers with cautious optimism about the coming months. Analysts noted that unseasonably warm weather may have helped boost sales in December, but that a strengthening job market and record low mortgage rates should help home sales in coming months. The distressed home component of sales will continue to slow recovery.
AP story reported in this morning's Flagstaff newspaper reinforces doubt that 2012 will be a boom year for Flagstaff housing.
As I wrote yesterday, some folks are predicting 2012 will be the year of the comeback in Flagstaff housing, and part of that comeback has to be stimulated by a boom in the Phoenix area housing market. News from Phoenix via the Associated Press and the Arizona Daily Sun this morning throws some cold water on those predictions.
AP reports and my thoughts about it:
"The report from the W. P. Carey School of Business at Arizona State University says the metro area recorded 106,850 transactions in the existing-home market during 2011. That's 125 fewer transactions than there was in 2010." 2011 was 2010 all over again and 2012 is going to be much the same.
"The number of foreclosures dropped from 41,625 in 2010 to 35,855 last year." While it might seem like a good sign that foreclosures were down, it's not. They are merely delayed by paperwork issues, poor staffing and the desire of banks to avoid crushing the market with inventory that would further push down prices.
"The median price for a single-family home resold in Phoenix was $125,000 last year. That's down from $138,000 in 2010 and $260,000 in 2007." Take comfort in the fact that Flagstaff's median price hasn't been hit that hard. I'll publish some numbers in the next few days which show how well off we are compared with the homeowners in Phoenix.
Bottom line, the researchers at ASU say "it will take years to fully reverse the drop from the peak." How many years is the big unknown. What does seem clear is that we are at or very close to the bottom and now is a great time to lock in an interest rate on a home for living in Flagstaff or a long-term investment.
The first step to housing recovery is positive buzz and Flagstaff is buzzing
Surprisingly, this week I’m hearing talk of a quick housing recovery in Flagstaff. The first place I heard it, yesterday, was from a mortgage techie out of Texas with jet lag. Well, to be honest, I'd heard something like it at a sales meeting in the morning, where 2012 was described as "The Year of the Comeback," but I discounted that as a pep talk. The next guy I heard it from was a local artist who had “heard something” on the news. I suppose this is how consumer confidence builds and consumer confidence really is a leading indicator of economic and housing recovery. But let’s stay grounded in the numbers.
Mr. Texas brought with him some charts of Arizona house prices, including some strange data about Flagstaff median home prices that none of the Flagstaff experts in the room recognized or agreed with. His Phoenix numbers may have been about right. Those numbers predicted a turn-around in home prices and significant uptick in the volume of sales in the 3d quarter of 2012. A good part of the driving force for that possible turnaround is the (probably correct) assumption that mortgage rates are going to remain low and start to rise slightly later in the year. There is also an assumption that the general employment picture will gradually get better (though Mr. Texas didn’t tell us how that magic was going to happen – that’s, after all, a political question).
If Phoenix does begin to make a come-back in the Fall of 2012, that would be consistent with other predictions that Flagstaff will be among the first in the nation to begin to recover, starting in 2013. Why not Flagstaff first? A big chunk of our housing market consists of second homes of folks in Phoenix. Until they feel that their primary homes’ equity justifies owning a second home, they won’t be buying one. Flagstaff lagged Phoenix on the downturn and I believe will lag Phoenix on the upturn. So, on the optimistic side, look for Flagstaff median home prices to begin to rise in 2013. But if you’re a buyer, don’t bet on Flagstaff home prices falling in 2012. With mortgage rates never lower, you’ll lose the bet whichever way the home price goes, or even if it stays the same.
December Flagstaff home prices and sales volume down from one year ago.
If you got overly optimistic based on last month’s Flagstaff home sales report, the December results should bring you back to reality. Sales slowed substantially from November and the median price fell to its lowest point since February. Distressed properties accounted for 34% of the Flagstaff single-family home sales in December.
The median price of single-family homes sold in Flagstaff last month was $249,750. That’s down over 5% from the month of December a year ago. Sales volume was down 15% from one year ago. Inventory (available listings for sale) was down almost 28%. One wonders if the lack of selection has driven sales down. I think so!
Certainly, there are serious buyers who are not finding what they want in the current Flagstaff housing inventory. Below the $300,000 price point, it’s a sellers’ market and unless January gives us a flush of new inventory, which I doubt, we’re not going to see downward pressure on the median Flagstaff home price this Spring like we have for the last few years. That does not mean that prices will begin to go up in 2012. It simply means we’ve stopped the downward spiral.
Here are the numbers:
Note: The data reported here are based on single-family-home sales in the Flagstaff metro area (the City of Flagstaff and immediately surrounding county areas that have Flagstaff mailing addresses) as reported in the multiple-listing-service maintained by the Northern Arizona Association of Realtors.® The data may not reflect all sales (but it surely reflects most of them).
MarketWatch.com columnist tells prospective home buyers that the opportunties now outweigh the risks -- go for it!
The real estate market has been battered for six years, and now the opportunities for good investments outweigh the risk of further losses, writes Andrew Jeffery of MarketWatch.com. "To call the U.S. housing market anything but distressed would be foolish. But to mistake a distressed housing market for one to avoid would be even more so." Here are the themes anticipated for housing in 2012:
The real estate market has been battered for six years, and now the opportunities for good investments outweigh the risk of further losses, writes Andrew Jeffery.
Tracking national data is interesting. But when you're ready to buy a Flagstaff home, get accurate local data.
A review of national home sales data available from the National Association of Realtors® shows that certain trends continue to dominate the outlook for the housing market. Low inventories, declining mortgage delinquency rates, and relatively stable buyer traffic should help to support prices this Spring. Buyers searching for the right home may have fewer options from which to choose.
Pricing expectations continue to present challenges for Realtors,® who need to educate their clients in the face of media confusion. Data recently released show that sellers typically sold their homes for 95% of the listing price, and 61% reduced the asking price at least once during the listing period. This means that sellers may start too high (if their Realtor® lets them), but once the home reaches a correct list price, the buyers cannot expect that every seller is desperate and that they can bargain for a huge discount from the list price.
On a month-to-month basis home price declines in October were small except among non-distressed existing homes where there were small price gains and new homes, which saw larger monthly gains. On a year over year basis, small declines were seen across measures in October within the range that has been typical of recent months. NAR data show a monthly increase for November and suggest that the decline from November one year ago may be smaller than in October. New home prices continue to fluctuate greatly due to low levels of construction and purchase activity.
Remember, all real estate is local. While aggregate national housing data is interesting, when you are ready to buy it’s very important to drill down to the local market statistics.
One-third of what's available for you to buy in the Flagstaff housing market is distressed properties. Are you ready?
If you are a buyer looking to purchase a foreclosure property or a short sale, do your best to ensure that you’ve hired aRealtor® who iswell-versed in REO and short sale transactions.
As an active Flagstaff agent in a busy real estate office, it is so frustrating to me when I hear of offers coming in from well-qualified, strong buyers who have unfortunately chosen the wrong Realtor® for the job. The Realtor® may very well be an excellent choice on a normal purchase transaction. However, REO and short sales require something different, and not all Realtors® have taken the time and effort to learn the nuances, and therefore effectively advise and represent their client. It’s mind boggling!
With 34% of the Flagstaff closed transactions in December 2011 being distressed properties, and with that percentage likely to rise in 2012, you need to be prepared that the Flagstaff home that you fall in love with may be one of these transactions. While we were all new to REO and short sales at some point, the key is to find a Realtor® who has the willingness and inherent ability to learn the necessary differences between an REO or short sale transaction and the old-fashioned kind.
If, as a buyer, you are coming to the table with a strong desire to purchase a Flagstaff home, and you’ve got your cash in hand or a prequalification letter in place, you don’t want to shoot yourself in the foot by hiring the wrong Realtor®!
RE/MAX Chairman and Co-Founder, Dave Liniger, reveals his top 10 predictions for the U.S. real estate market for 2012.
Predictions and some suggestions on how to improve things. It's all about jobs. Jobs need to lead housing in this cycle. 2012 will be the beginning, but we'll continue to see a market very much like 2011 with a high number of distressed properties sold.
Nationally, pending home sales increased in November and reached the highest level in 19 months, according to the National Association of Realtors® data released this week. The Pending Home Sales Index is a forward-looking indicator based on contract signings for sales of existing homes. The data reflects contracts but not closings.
The index increased 7.3% to 100.1 in November from an upwardly revised 93.3 in October and is 5.9% above November 2010 when it stood at 94.5. The last time the index was higher was in April 2010 when it reached 111.5 as buyers rushed to beat the deadline for the home buyer tax credit.
Lawrence Yun, NAR chief economist, said the gains may result partially from delayed transactions. “Housing affordability conditions are at a record high and there is a pent-up demand from buyers who’ve been on the sidelines, but contract failures have been running unusually high. Some of the increase in pending home sales appears to be from buyers recommitting [to purchase a different home] after an initial contract ran into problems, often with the mortgage,” he said.
Coupled with the good news about the job market today, the outlook for improved conditions in home sales in 2012 is encouraging. According to Macroeconomic Advisers, using private company payroll data, there were 325,000 net new jobs added in the past month in the private sector. This outsized monthly job gain is one of the largest monthly tallies in over a decade. Over the past 12 months, 2.2 million private sector jobs were added to the economy according to this data.
Again, these positive signs may indicate that market prices have bottomed out, not that we are about to see a jump in prices. We still have a long way to go and lots of housing inventory to work through. And, remember, all real estate is local. For information on the specifics of the Flagstaff homes market, follow this blog!
Proud to be part of the best real estate office in Flagstaff, according to our local newspaper's readers, in 2011!
I'm proud to be part of the best real estate office in Flagstaff, according to Arizona Daily Sun readers! I’m grateful for another successful year selling Flagstaff real estate when so many other agents have found it necessary to leave the business.
I continue to believe that the RE/MAX brand adds value for my clients and I know that being affiliated with the well-managed, locally-owned franchise makes my life easier and my work more effective than they otherwise would be. Again, other agents have made other choices in this economy. My plan is to stick with the best, and that’s RE/MAX Peak Properties.
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