Region: Maricopa County
The Age of the Short Sale
By Mike Orr
The impact of lender-owned homes reached a peak in the winter season 2008-2009. While these were available in large quantities and at falling prices, buyer interest was focused almost entirely on them. Supply was sufficient to keep REO prices declining until early April 2009. After the second quarter of 2009, REOs became much harder to find, and as competition for them grew fierce, short sales have become more important. Given the large number of homes still in distress and the banks’ desire to avoid foreclosure if possible, we expect short sales to become the most important segment in the market over the next few years.
In October 2009, short sales and pre-foreclosures constituted about 39% of the active listings on the Arizona Multiple Listing Service (ARMLS), with normal sales at 48% and lender-owned properties at 13%. Short sales and pre-foreclosures constituted about 50% of the listings under contract on ARMLS, with normal sales at 20% and lender-owned properties at 30%. Lender-owned properties are declining in market share, and normal sales are stable while short sales and pre-foreclosures are increasing.
The demand for short sale properties is now strong, particularly for the more affordable homes. However, a large proportion of the listings are still failing to close in a timely fashion. For example, the monthly sales rate for September was only 1,458 - less than 16% of the listings under contract. However patience is eventually paying off for a lot of buyers since the listing success rate has improved dramatically over last year. The success rate for short sales improved from about 15% in January to over 50% in October, just below that for normal sales, though far less than for lender-owned properties.
The growth in short sales has been most dramatic in the price ranges up to $200,000. The most important range in dollar volume terms is that between $100,000 and $200,000, with a trebling of monthly volume between January and September and a monthly dollar value now over $90,000,000. The price range below $100,000 has also shown dramatic growth although this is of much less significance in total dollars spent. Although the more expensive sectors have relatively low unit sales, when measured in dollar volume, they also show very significant growth in short sales.
When we analyze the 48,000 residential properties in Maricopa County that have received a Notice of Trustee Sale, we find that fewer than 1 in 5 are listed on ARMLS. Given that we are now seeing considerable success among the short sales, it is a little surprising that so few owners attempt a short sale. We anticipate that this percentage will increase over the coming year, as more homeowners understand the benefits compared with foreclosure. We believe that many lenders will postpone a trustee sale if there is any sign of a short sale taking place, so homeowners should not be deterred by the belief that they don’t have enough time within the 90-day notice period.
In Maricopa County, 47% of the short sales and pre-foreclosures listed on ARMLS have not yet received a Notice of Trustee Sale. So a large number of homeowners are clearly attempting a short sale long before they receive a notice, which seems like a sensible strategy. As lenders appear to be getting more flexible in their consideration of what constitutes hardship, it seems likely that more of these short sale listings will achieve success as long as the pricing is not too low to be acceptable to the lender.
Greater Phoenix suffered a very significant price decline between May 2006 and April 2009, so many homeowners who wish to sell their home and have a deed of trust on their property are going to find themselves in a short sale situation for the foreseeable future. Fortunately, lenders are now devoting more effort and resources to short sales, and many REALTORS® are learning the tools and techniques to bring them to a successful conclusion.
As properties get purchased by new buyers at the new lower prices and prices stabilize and then increase, we will eventually see a peak in short sales and a long slow decline in their importance. However, that peak is still ahead of us, and the next several years are likely to be remembered as the “Age of the Short Sale.”
 | Mike Orr holds a masters degree in mathematics from the University of Oxford. After 31 years in the computer industry, he moved to Arizona in 2002 to focus on real estate investment. Mike obtained a real estate license in 2005 and has been working on real estate market analysis full time since 2006. The results of his analysis are published each day in the Cromford Report–an online resource for professionals focused on the greater Phoenix residential resale market. |
Region: White Mountain
Market Dominated by Second Homes Eyes Future
By Debbie Martins
The White Mountain Association of REALTORS®, with jurisdiction in Navajo and Apache Counties in northeastern Arizona, has seen a negative impact to our average sales rates in the last year, but not nearly as drastic as in the metropolitan areas. The total number of listings for third quarter 2009 has increased by 15% over first quarter 2009 for both site-built and manufactured homes. Comparing the same time frame, the sales rates have increased by 265%, while the average days on market has stayed the same. With a 5% drop, the average selling price continues to decline in the White Mountains, although the rate of decline has slowed in several areas.
Comparing January - September 2008 with the same period in 2009, the total number of listings increased by 17%, while the sales rate declined by 11% for both site-built and manufactured homes. The average days on market remained the same, with the average selling price declining by 18%. Overall, while sales have been negatively affected, sales prices have not shown the same severity of decline.
Residential housing inventory rose 14.5% during the third quarter 2009 over the first quarter 2009, which represents an 8-month supply at the current sales pace, down from a 17-month supply during the first quarter 2009.
Comparing January - September 2008 with the same period in 2009, the absorption rate has increased in the vast majority of communities for both site-built and manufactured homes. Residential housing inventory rose 17% during this time frame, which represents a 37-month supply at the reported sales rate, up from a 28-month supply at the end of October 2009.
Two-thirds of our residential sales in the White Mountains continue to be second-home purchases. The longer the recession hangs on, the more likely that people within this segment will need to sell those homes.
 | Debbie Martins is the association executive at the White Mountain Association of REALTORS® in Lakeside, Arizona. Prior to that, she and husband Tony owned and operated The Right Price, a consulting service in the pharmaceutical industry for 25 years. They have lived in the White Mountains since 1990 and own Aspen Tire & Oil in Eager. |
Region: Tucson Metro Area
Mood in Tucson Marketplace Trending Positive
By Wes Wiggins
As we begin the fourth quarter, we continue to see the absorption of inventory hover around 20%. The year-to-date change in total home sales volume is only down 13.95%, which is not bad considering the average sale price is down 13.56%.
There were 2,048 new listings in October, which is up 10.29% over September. This could be the result of sellers trying to make a last-minute effort to take advantage of the November 30 cut off for the tax credit. (The tax credit has now been extended; see related article.)
Total days on market are at 71, but 41.2% are between 0-30 days. The top three methods of financing are FHA at 358, conventional at 299 and cash at 226.
As we continue to the end of 2009, we anticipate an increase for November with many homebuyers attempting to take advantage of the $8000 tax credit.
Short sales and REOs are the norm, but sellers, buyers and agents are becoming more comfortable and proficient with the process. Hopefully we will see some assistance from Fannie Mae and the Treasury Department that will make the process more efficient.
The overall mood in the Tucson marketplace is trending positive, with agents reporting more buyer activity and lenders more willing to make loans. While a far cry from what we saw in recent years, the market appears to be working its way back to “normal.”
We will continue to monitor the overall economy and unemployment rates, as these factors will have the largest impact on what happens in 2010.
 | Wes Wiggins is Vice President of the Tucson MLS, and has been with the Tucson Association for five years. A member of the National Association of REALTORS® Multiple Listing Issues and Policies Committee and Director of the Council of Multiple Listing Services, Wes’ focus is on the future of MLS and maintaining the viability of local REALTOR® associations. |
Region: Flagstaff Metro Area
Foreclosures on the Rise
By Jim Snook
The Flagstaff residential market has been less affected by the real estate downturn than most areas of the state. In the last 12 months, sales of residential properties have maintained a sales level in line with sales of 2007 and increased over 2008. December 2008 through April 2009 was very slow with sales in the range of 30-50% of normal for a time period that is typically slow.
Shorts sales of residential properties comprise about 14% of the sales since December 2008, and foreclosures account for another 7% of the total during the same period. Currently, 14% of available residential inventory are short sales and 4.5% are foreclosures.
The price ranges show that most of the short sales are in the $200,000-400,000 range, which is 44.85% of current inventory. Short sales account for about 14% of this price range , 8.7% of inventory from $0K-100K , 7.8% of inventory from $400-600K and 7% of inventory from $600K on up.
Foreclosures are increasingly common in the NAAR MLS, and 70% of the foreclosure sales over the last year have come in the last six months. If the past record of successful closings of short sales holds true, I would expect to see the foreclosure rate rise to equal or surpass the number of short sales on the market.
While the market downturn in Flagstaff has been tempered by the substantial amount of second-home owners (who do not need to sell now) and a lesser rate of unemployment than the Phoenix and Tucson markets, Flagstaff is also dependent on the metro areas for a steady supply of people looking to escape to the mountains for winter or summer recreation. If the recession is prolonged into late 2010 and 2011, Flagstaff could see a larger share of short sales and foreclosures.
 | Jim Snook has been a real estate broker since 1980 and moved to Flagstaff in 2004. He is a top producing agent committed to giving back to his community. Jim is the 2010 President of the Northern Arizona Association of REALTORS®. |
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