As members of the Multiple Listing Service, we are privy to some great local statistics each month and I thought I would share this month’s data as it gives a year in review perspective.
by Tom Ruff of The Information Market
2013: Year in Review
The end of the year only comes once. That’s why we can’t pass up the opportunity to focus on how the market fared in 2013. Below you will find a detailed account of 2013 in review instead of our normal month-over-month examination.
For the second year in a row sold data shows a strong recovery in sales prices with the average sales price up 16.9% year-over-year. The median sales price was up 20.9%, giving local homeowners restored value and increased equity. The median sales price ended 2013 70% above our May 2011 bottom of $108,300 and 30% below our June 2006 peak of $264,800. When we take a closer look at the median sales price appreciation, we see that all the gains took place in the first half of the year. The median sales price ended 2012 at $153,000 and then appreciated each month through July reaching $185,000, the exact same price we closed out this year.
When reviewing the total number of homes sold in 2013, we see a familiar pattern, with July again be-coming the transitional month. Between January 2012 and July 2012, ARMLS reported 55,727 residen-tial closings. By comparison, 55,228 were reported for the same period in 2013, less than a 1% drop. However, from August 2012 through December 2012 there were 34,953 closings compared to 30,584 for the same period in 2013, off 12.5%. When we compare 2012 to 2013 in their entirety, there were 90,680 home closings in 2012 and 85,812 in 2013, off 5.4%. Again, the declines took place the last five months of 2013.
We began the year in a seller’s market and ended 2013 in what can best be described as a balanced market, with both supply and demand below what might best be described as typical. STAT reported a low in monthly supply of inventory (MSI) at just over 2 months in May 2013 and a high point in Novem-ber 2013 when it reported 5.1 MSI. We began 2014 with 25,360 active listings, 20.2% higher than 21,095 at the beginning of last year. Low inventory levels were reached in June of 2013 when only 19,511 total homes were listed for sale in-line with seasonal patterns. Listing inventory increased 30% from June through December, for the same period in 2012 the number of homes listed for sale in-creased only 5.9%. Listings that were priced to sell, sold quickly with the average days on market begin-ning the year at 73 days and ending the year at 72. The average days on market hit a low point of 59 days in August 2013.
The 30-year fixed rate mortgage started 2013 at 3.34% while starting 2014 at 4.53%. In historical con-text, interest rates are still extremely low. The lowest reported monthly average rate over the last 40 years occurred in December of 2012 and again in January 2013. Looking at the chart below, the rise in interest rates took place between May 2nd and July 11th when rates moved from 3.35% to 4.51%.
Distressed Inventory and Sales
As 2013 began, distressed sales accounted for 33.8% of all ARMLS sales. Dis-tressed sales are being defined as either a short sale or bank sale. Distressed sales as a percentage of total sales declined from January through October when distressed sales accounted for 15.3% of our total sales. We saw a slight uptick in distressed sales in November 2013 and December 2013 as a percentage of total sales when they accounted for 15.8% and 17.1% respectively. Today distressed listings account for approximately 20% of listings.
The change in distressed sales activity and listing data is a reflection of foreclo-sure activity. We began 2013 with 11,635 active notices of trustee’s sale and started 2014 with 5,974, a decline of 49%. In 2012, 22,621 residential properties were sold at trustee sale. By comparison, 9,685 residential foreclosures took place in 2013, declining 57%. One new trend emerged in November 2013 on properties being foreclosed was a higher percentage of properties sold at auc-tion began reverting back to the banks. For three consecutive years (2011-2013) third-party purchases accounted for roughly 50% to 55% of all purchases at auc-tion. Half of the foreclosed properties went to investors while the other half be-came bank owned. In November, 65% of all trustee sales reverted to the lender and in December this number rose to 68%. At first glance this appeared to be a more aggressive pricing strategy on the part of the banks, upon further review, it appears to be diminishing investor interest particularly from a buy-and-hold strategy.
US 30 Year Mortgage Rate as Published by Freddie Mac
May 2, 2013
May 9, 2013
May 16, 2013
May 23, 2013
May 30, 2013
June 6, 2013
June 13, 2013
June 20, 2013
June 27, 2013
July 3, 2013
July 11, 2013
When we view investor activity in Maricopa County as defined by the intent to rent the property purchased, again we see July 2013 as the transitional month. In the month of January through the month of July, investors accounted for roughly 25% of all residential purchases. The percentage of investor purchases began to decline after July, declining each of the subsequent five months as well. In December investors accounted for 17.5% of all homes sold. Large insti-tutional investors, which had averaged 600 purchases per month between April 2012 and July 2013, purchased 652 properties in July 2013. August through December , they averaged slightly over 100 purchases monthly with the number of purchases declining each month.
We began 2014 reporting 4,719 pending listings compared to 8,051 last year, a drop of 41%. Some of this decline can be attributed to the higher percentage of pending short sales, short sales of course taking a longer period of time to close there by inflating numbers in the beginning of 2013. Regardless, with fewer pending contracts, higher inventory levels, higher interest rates and lower investor demand – 2014 began with far less momentum than 2013. We have clearly moved away from a bargain and investor driven market to a market that will be driven by the traditional buyer. After a decade of rapidly rising prices followed by rapidly declining prices, then followed by rapidly rising prices a normal year where prices show modest fluctuations up or down will be a good thing. It may take time for the traditional buyer to replace the investor, but they will return.