What they did was take the median values of home prices and built a roller coaster track to highlight the “ride” home owners have been on historically.  It takes about 3 1/2 minutes to complete the ride, and the historical dates could be a bit more clear, but overall it is a pretty interesting ride. 

Considering that homes for sale in Phoenix Arizona have lost 65% of their value or more in many areas, it is easy to relate to the ups and downs highlighted in this video.  Looking ahead, Phoenix real estate foreclosures, Scottsdale AZ short sales, and continued distressed property sales are going to continue to limit the appreciation of values in houses for sale in Phoenix Arizona. 

Click HERE for the video

Looking at local numbers, our current unemployment rate sits around 9.5% which when compared to a low of 3.3% unemployment as recent as May 2007, shows a continued above average rate of overall unemployment.  Until we get employment and jobs moving again, it will be difficult to see demand rise for the general public purchasing new homes.  Investors finding record low prices and values continue to fuel the housing market when looking at houses for sale in Phoenix Arizona.  Top realtors in Phoenix as well as nationally all agree, that the sooner people find quality employment opportunities, the sooner prices will resume normal appreciation rates. 

Here is the article with graphs.

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Although the United States population has grown by 120 million people in the past fifty-odd years, today’s new homes are selling at just half the pace they were in 1963.

Home sales are being dragged down by the weakness of the labor market and the number of Americans who have grown too discouraged to look for work, economists say. In previous recoveries, the housing market has sometimes buoyed the economy, creating new jobs and driving economic growth. This time, however, the housing market is now lagging behind.

Over at Mish’s Global Economic Trend Analysis, a new chart helps bring employment into the housing story by comparing the ratio of annual new home sales to the size of the civilian labor force. See the chart below.

The point is simple: while the working age population is steadily rising, the size of the labor force is actually shrinking. And those Americans who have grown so discouraged that they have given up looking for work — around 4.9 million as of last month — are unlikely to be in the market for a house.

With construction for new homes all but coming to a halt in February, Americans are on track to buy fewer new homes than in any year since the government began keeping data almost a half-century ago.

Mish lays out the problems, as he sees it:

• Those not in the labor force are not looking
• Those unemployed are not looking
• Those afraid of losing their job are not looking
• Those in a house and underwater are not looking
• Those just out of school and deep in school debt are not looking
• Those facing retirement may be looking to sell or downsize
• Mortgage standards are much tighter for those who are looking

Economists, however, are hard pressed to tie down the exact relationship between a slumping housing market and a weak labor market.

“It’s very hard to zero-in in that way,” said Bank of America-Merrill Lynch economist Michelle Meyer. “But one of the major components for why housing demand has remained very soft is because the labor market is very weak. And until we see that really changing, housing sales will continue to be soft.”

The more significant problem, for Meyer, is how these two factors taken together — housing and unemployment — indicate an economy still in trouble.

“When you think about new home sales, and housing specifically, that obviously ties to what share of Americans are participating in the labor force,” Meyer said. “But you can’t really say that because the labor force shrunk by X amount there is this many fewer homes needed. To me, it’s more of a signal that the fact that the labor force is weak. And that at this point in the recovery, people are still leaving the labor force — that signals to me that the fundamentals are soft.”

Federal Reserve Chairman Ben Bernanke has said that it will likely take five years for the unemployment rate to return to pre-recession levels, while a recent report from the Federal Reserve Bank of San Francisco concluded that the unemployment rate, now hovering around 9 percent, may never return to pre-recession levels.

Here is the chart from Mish’s Global Economic Trend Analysis, comparing annualized new home sales to the civilian labor force ratio, year over year. (Click image for more detail). More graphs over at Mish’s can be found here.

http://www.huffingtonpost.com/2011/03/25/how-missing-workers-are-d_n_840570.html

For a quick overview of what’s happening in the Phoenix Metro market, our monthly update is a great starting point!  For additional information, make sure to sign up for our Monthly Market Update, or feel free to contact Cameron Johnson at 480-253-9145 for an in-depth market analysis and report.

Mid Month Pricing Update and Forecast*

Each month about this time we look back at the previous month, analyze how pricing has behaved and report on how well our forecasting techniques performed. We also give a forecast for how pricing will move over the next 30 days.

For the monthly period ending March 18, we are currently recording a sales $/SF of $82.22 averaged for all areas and types – up 1.8% from $80.80 on February 15. Our forecast range was $79.58 to $82.82 with a mid-point of $81.20. The actual figure is $1.02 above the mid-point of the range, but 60c below the top end, so last months projection was satisfactory; within range but somewhat higher than expected. Although price per square foot remained within our expected range, the stronger pricing was partly due to a rise in the percentage of normal sales and a fall in the percentage of REO sales.

Currently REO sales across Greater Phoenix (all types) averaged $61.84 (up 2.7% from February 15). Pre-foreclosures and short sales averaged $75.02 (down 3.6%) while normal sales averaged $110.59 (down 2.8%). Each of these changed by more than our tolerance of 2%, but the overall average did not.

Today the pending listings for all areas & types show an average list $/SF of $81.71, 1% lower than last month’s reading of $82.57. This suggests that average sales price per sq. ft. may fall a little over the coming month. Downward price pressure has eased a great deal but the 1.8% increase we saw since February probably cannot be sustained through April and we are likely to give some of that back while remaining higher than the low point of $80.62 reached on February 22. These fluctuations are not very significant – we can easily get variation from one day to the next of 1% or more based on the monthly rolling average $/SF, so the tolerances in our forecasts are fairly tight.

Our mid-point forecast for the average monthly sales $/SF on April 17 is currently $81.37, which is 1.0% below today’s actual reading of $82.22, and we have a 90% confidence that it will fall within ± 2% of this mid point, i.e. in the range $79.74 to $83.00.

We are currently at a price level just above the April 2009 level, though significantly down from this time last year by about 10%.

The market share figures are moving again with REOs falling from 48% in mid February to 45% in mid March. Short sales and pre-foreclosures have dropped slightly from 22% to 21% while normal sales have advanced strongly from 29% to 34%. This change in the mix makes the overall average stronger and compensates for recent weakness in the pricing of both short sales and normal sales.

When we look at pending sales we see that normal sales have gained market share, moving from 26% in mid January to 27% now. Short sales and pre-foreclosures have faded from 28% to 27% and REOs are still static at around 46%. Note than normal sales are under-represented in the pending listings while short sales and pre-foreclosures are over-represented. This is expected since short sales and pre-foreclosures usually take much longer to close. However it means that a forecast based on pending listings tends to be on the low side. Our forecasting methodology makes allowance for this tendency.

The pricing of REOs owned by Fannie Mae, Freddie Mac and HUD is much lower than those owned by banks and other commercial lenders. When the sales mix contains more of these “government owned” REOs, the average price tends to fall.

We do not include listings in AWC status in our price forecasting. Because of the large number of short sales under contract awaiting lender approval, AWC listings are very numerous. We have 7,000 today, and at $85.54. their list price per square foot is 4.7% higher than that of our 13,290 pending listings. To the extent that sales during the next 30 days come from the AWC pool, this may push our average $/SF higher. This effect also means our forecasts tend to be very slightly biased to the low side.

With supply now falling quickly and demand strong, the short term sales price outlook remains stuck in neutral. However supply cannot continue to fall at the current rate without upward pressure pricing coming into play at some point. For now we content ourselves with the likelihood that $80.62 of February 22 is likely to remain as a lower bound for $/SF and wait for sign of a major improvement in market sentiment. The changes in indicators other than price are almost all positive and therefore we do not see another significant price drop on the horizon unless and until circumstances change.

We would like to caution readers that follow median sales price readings that medians are often hyper-sensitive to changes in the number of REOs sold, so it is possible that we may see huge volatility in median sales prices. This was clearly the case in the period between February 23 and March 16 when the median sales price for single family homes in the city of Phoenix jumped over 16% from $73,000 to $85,000 in just 3 weeks. This clearly did not indicate a similar change in real values, but was caused by a lot of REOs selling between January 23 and February 22 while few normal sales closed escrow. We discourage paying too close attention to median sales prices at times like this – average $/SF is a far more reliable guide to real price movements in the market.

*The Cromford Report

WHERE HAVE FORECLOSURES HIT THE HARDEST?

As a change for those who think we have been too cheery in our optimism over recent improvements in market fundamentals, here is a news item designed for lovers of bad news.

We all know that since 2006 there has been a huge wave of foreclosures affecting the local market. Since January 2006, Maricopa County has recorded 167,621 Trustee Sales, of which 138,235 have been single family residences.

There are a total of 1,009,755 single family residences in Maricopa County.  So overall 13.7% of single family homes have been through a trustee sale. However the percentage by ZIP code ranges from a low of 1.3% in Sun City West 85375 to a high of 35% in Phoenix 85043. Rather than give you a table from high to low we thought we would use a ZIP Code map to illustrate how the Trustee sales have been distributed.

In the map below the areas in red if over 15% of single family homes in that ZIP code have already been foreclosed between January 1, 2006 and March 12, 2011. They are in green if between 10% and 15% have been foreclosed while those with less than 10% are shown in blue.

Zero foreclosures occurred in 85256 (Salt River Pima Maricopa Indian Community) and 85309 (Luke Air Base), as might be expected.

We can see that the worst affected areas tend to be in the West Valley, particularly the Southwest. More expensive areas are much less affected, and 55+ retirement areas least of all. Newer developed areas tend to have suffered more foreclosures, partly because purchase loans that were written between 2004 and 2007 are the most likely to have severe negative equity. There is a strong correlation between a high percentage of foreclosures and the amount by which prices have fallen since peaking in 2006/7. However it is not a precise correlation and there are notable exceptions. For example, prices have fallen the most in Phoenix 85009, but this ZIP code has only had 19% of single family homes go through foreclosure, ranking 27th by foreclosure rate. In contrast Rio Verde 85263 has suffered relatively little (2.5%) from Trustee Sales but has nevertheless experienced above average price decline since the peak.