HOUSING MARKET BETTER
Sales steady, inventory lower
By LARRY LOCKHART
News Editor
Published:
| Steven King/Dispatch, The housing market seems to be stabilizing, and the number of foreclosures is getting smaller. |
That’s the finding in a report issued last week by the Center for Real Estate Theory and Practice at the W.P. Carey School of Business at Arizona State University.
Numbers for Casa Grande and the rest of western Pinal County parallel the trends seen in Maricopa County, according to its author, center Director Mike Orr.
Among the encouraging signs for Casa Grande contained in the report:
-- Prices were a little higher in January than in the same month last year. The average price was up from $95,432 to $95,913, but the median price [half the sales were for more, and half for less] rose from $86,950 last year to $90,000 this January.
-- The average price per square foot on all sales rose from $47.37 last January to $48.77 this January.
-- The number of total sales was little changed at 109 in January 2012 compared to 119 last January. But the January numbers declined for no bidders at auction where the house reverted to the lender (28 this year compared to 48 last year), bank-owned sales (11 this year, 33 last year), Fannie Mae/Freddie Mac sales (17 this year, 27 last year) and short sales/pre-foreclosures (none this year, nine last year).
-- The supply of homes on the market, or inventory, is down sharply. For the two-county area, inventory is down 42 percent from a year ago. The supply of distressed homes [short sales and lender-owned homes] is down 78 percent, while normal supply is down 24 percent. Separate figures on supply were not broken out by city or county.
“There’s not really a dramatic difference in the trends between Maricopa and Pinal counties,” Orr said. “Specifically for Casa Grande, I’ve seen the supply come down from about 450 to about 200 now. That’s a big reason for the improvement. When the supply is low, it tends to raise prices. People are bidding against each other, and that’s pushing prices up.”
“Our inventory has decreased so much, from an eleven-month supply to about a three-month supply,” said Neal Buckner, broker/owner of Elite Real Estate Pros in Casa Grande. “So yes, that will increase the [average] price.”
If there’s bad news in the numbers, it’s that new home sales remain stagnant and that many of the current sales are to investors. For January 2012, only one new home sold in Casa Grande and just 71 in Pinal County. That compares with nine in Casa Grande in January 2011 and 66 in all of Pinal County.
Lending, which experts say in retrospect was much too loose in the years leading up to the market’s collapse in 2008, is a factor in sales now. While qualified buyers can get loans — and get them at near-record-low interest rates — the process takes longer than it did before the market’s collapse. And that may favor cash buyers, many of them investors.
“Normal homebuyers generally have to finance and investors often pay cash,” Orr said. “If the seller has to choose, they usually take cash. Lenders have gone from completely abdicating responsibility six years ago to not taking hardly any risks in making loans.”
Buckner said that doesn’t mean people can’t get loans, however.
“It’s not difficult to get a loan these days,” Buckner said. “It’s just that the requirements are where they should be. It isn’t like five or six years ago, when they opened it up to almost anybody. If their debt ratio is right and they’re putting down 10 or 20 percent, they have no difficulty getting loans.”
The supply of homes on the market is dwindling as fewer are added to inventory each month.
“There’s usually a little bit of a peak in foreclosure notices around March each year,” Orr said. “The actual number of foreclosures is coming down. The preferred method now is a short sale [where the lienholder agrees to accept less than what is owed on the loan]. The bank ends up spending less on it [than on a foreclosure]. [Short sales] still take a long time, so it’s a misnomer that they’re called a short sale. And you need some professional help to do them.”
“The number of new listings for the entire year decreased by 23 percent from 2010 to 2011 [in all of Pinal County],” Buckner said. “In Casa Grande, the change was 19 percent.”
That has combined with slow, but steady, sales to slash the inventory to about a three-month supply in the under-$150,000 price range, Buckner said.
“Anytime we’re around a three- or four-month supply, we’re pretty much equal on buyers’ and sellers’ demand. Anything less [than a three-month supply] becomes a seller’s market, and anything more is a buyer’s market.”
The wild card in the supply picture is whether another wave of foreclosures will occur. The answer is anybody’s guess.
“It’s not possible to tell long-term,” Orr said. “I can tell maybe two or three months out at the most. I don’t foresee any flood of new homes coming on the market, at least until the builders start building again, and I don’t see them ramping back up. They don’t want to build too many and create a supply issue again, and they don’t have the means [capital or employees] to ramp up too quickly.”
“We just don’t know what is being held back,” Buckner agreed. “I have no idea what HUD and Fannie Mae and Freddie Mac have. I hope when they decide to put more on the market that they do it in a gradual fashion so it doesn’t affect the market. Some people are more optimistic and some people are more pessimistic, but we just can’t predict the future.”
For now, the market continues to improve and everyone involved has learned lessons from the boom-and-bust cycle that led to the collapse.
“I think everybody has [learned something],” Orr said. “These kind of crashes don’t happen every generation. I don’t think anyone anticipated quite the devastation we saw here. Now prices have over-corrected.”
“Hardships were created, regardless of whose fault it was,” Buckner said. “Maybe they lost their job or had a medical problem or a divorce. They still need to live someplace, and that’s why the market is so good for investors. These people [who lost their homes] haven’t left the area, for the most part. Instead of being a buyer, now they’re a renter. But if they did a short sale or foreclosure, they’ll be back in the market in a few years.”
