As of February 1, 2013, Phoenix is doing much better than the previous month but slightly lower than the same time the previous year.

Here is what the Cromford Report has to say.

Here are the basic ARMLS numbers for February 1, 2013 relative to February 1, 2012 for all areas & types:

  • Active Listings (excluding UCB): 17,573 versus 17,602 last year – down 0.2% – but up 2.6% from 17,121 last month
  • Active Listings (including UCB): 21,757 versus 24,762 last year – down 12.1% – but up 3.9% from 20,942 last month
  • Pending Listings: 9,523 versus 10,611 last year – down 10.3% – but up 18.7% from 8,026 last month
  • Monthly Sales: 5,762 versus 6,377 last year – down 9.6% – and down 15.8% from 6,846 last month
  • Monthly Average Sales Price per Sq. Ft.: $108.53 versus $85.07 last year – up 28% – and down 0.4% from last month
  • Monthly Median Sales Price: $154,950 versus $120,000 last year – up 29% – and up 1.9% from last month

January is a month unlike any other. Sales are always much weaker than normal, but this January was down nearly 10% compared with last year. The primary reason was a lack of distressed properties to attract buyers with their bargain prices. Normal sales across Greater Phoenix were actually 40% higher than in January 2012. However lender owned sales in Greater Phoenix were down over 50% and short sales were down 42%. Though down from 2012 and 2011, January 2013’s sales exceeded all earlier years except for 2005, so remain fairly respectable.

The number of active listings is down 12% from last year, but that is including UCB listings, Excluding them we have almost exactly the same as this time last year. Again the nature of these listing has changed a lot. Within Greater Phoenix:

  • Normal listings – up 12.8%
  • Lender owned listings – down 15.7%
  • Short sale listings – down 53.7%

Prices have been climbing fast over the last year, but this change in the mix of both supply and sales, has amplified the effect. Prices have actually been relatively stable over the last month. Normal sales took a 65% market share in January (the highest since 2008) with short sales at 19% and REOs at 16%. This represents a slight and temporary recovery in the REO market share from 13% in December, but lenders’ small unlisted inventory is declining and there is little likelihood of REOs sustaining January’s percentage share. Short sales are dropping surprisingly fast, down from 25% in December and now at the lowest percentage since April 2010.

The key issue remains – where is the new supply coming from to keep pace with demand? January 2013 saw fewer new listings added to the ARMLS database than in any January since that database was first built in 2000. The weaker sales rate in January disguised this effect but sales will not be weak from now on. The peak buying season is just about to start and we simply have too few homes available.

The fabled “shadow inventory” is of almost no importance here. If the banks sold their entire unlisted inventory in Maricopa and Pinal Counties at once it would represent no more than 2 weeks’ supply and would be quickly absorbed without a hiccup. Builders processed surprisingly few permits for single family homes in December 2012 – just 652 across Maricopa and Pinal. Compare that with 2,805 as long ago as December 1998. and we can see they are going to find it hard to step up production fast enough to meet the supply gap caused by the steep fall in distressed homes. The majority of willing short sellers seem to have already made their move. If we are going to get more supply it is the ordinary home-owner we have to look to, and so far the response to the large prices increases has been pretty tepid. Most of these potential sellers seem to be waiting for prices to go up further before they will consider selling.

The obvious solution is for prices to rise – this encourages more sellers to list their homes and discourages buyers, especially investors. New homes prices are going to rise anyway. Labor costs are rising due to the shortage of construction workers. Materials costs have been rising at an unusual rate and land costs have been rising even faster. The increase in new home prices in inevitable and creates a vacuum for resale homes to move into. Buyers hoping and waiting for prices to drop back from 2012 levels are likely to be very disappointed. But eventually we will reach equilibrium when prices rise enough to bring supply and demand into balance.