Market Summary for the Beginning of 2011

Although we read plenty of gloomy news for the housing market in the various media, December was actually a surprisingly positive month for the Greater Phoenix residential market. Not in term of pricing, mind you, but remember that pricing is a lagging indicator. We need to watch supply and demand if we want to anticipate what will happen to prices down the road. The last month was surprisingly positive relative to expectations, including ours.

Not everything we study is good news of course, but the overall state of the market at the end of December is far better than at any time since the end of the tax credits last April.

Good News:

1. We are currently recording 8,378 sales in ARMLS (all areas & types) for December 2010. This is up 24% from November and up 13% from December 2009. This huge sales unit count shows that there is plenty of demand even though over-supply remains a problem. REO sales across greater Phoenix were up 31% month to month and 18% year on year. Short sales and pre-foreclosures were up 34% month to month and 17% year on year. Normal sales were up 10% month to month and 2% year on year.

2. Foreclosures remained very subdued during the month of December (compared with the last two years) with 5,731 new Notices of Trustee Sale (NOTS) in Maricopa County and 3,523 Trustee Deeds (TD) issued. The NOTS were the fewest since March 2008 and the TDs were somewhat higher than November 2010 but otherwise the lowest number since April 2009.

3. Normal sales pricing is on a strengthening trend.

4. Active listings on January 2 are 5.4% lower than on December 2.

5. The Cromford Market Index™ moved from 91.2 on December 1 to 101 on January 1.

Not So Good News:

1. All the sales closed in December depleted the pending sales a little are we started the year with 8847 pending listings, 7% lower than the start of 2010.

2. Overall sales pricing remains weak with average sales prices only 94.4% of list during December. For December 2009 this was 96.1% of list.

3. REO and short sales pricing are on a weakening trend.

Outlook:

Many people expect TDs to surge in January now that Bank of America has resumed trustee sales in Arizona. We very much doubt this will happen. Trustees cannot process the entire backlog overnight and in any case Bank of America has a history of being very slow to record Trustee Deeds and if we are to see a temporary spike this is most likely to occur in March 2011. We anticipate January will see a mild increase in TDs and no major change in NOTS, but of course we could be wrong.

In the short term, REOs and short sales are dominating the sales counts, so their weakening prices will probably overwhelm the improving prices for normal sales. The first two months of 2011 will therefore give us weak overall sales price numbers to report. However if January and February's sales counts remain elevated like December's, this will signal a significant resurgence in demand that will quickly eat into the excess supply that has built up since April 2010. Note the key use of the word "if". January and February are traditionally weak months for buying, but we need to watch closely to see if the market can sustain the positive momentum it gained during December.

We will track the Cromford Market Index™ to see if it can break through the 110 mark before the end of January. If it does this will mean we are likely to experience a busy buying season in the Spring.

Source: Cromford Reports