Phoenix Real Estate Market More Balanced in August 2014

Historical monthly sales obtained from the Phoenix MLS

It’s not for the reason you may think. Housing demand is not increasing in the Phoenix real estate market. In fact, demand for homes has continued to decrease since April.

The reason lies with the number of homes for sale in the MLS. While 25,000-26,000 listings is normal  there are currently 23,326 available homes in the for the Phoenix real estate market. It’s good news for sellers. If that were not the case sellers would be facing growing competition from each other.

August 2014 Phoenix MLS Listings

The Cromford Market Index™ (CMI) measures a combination of factors within the Phoenix real estate market that includes supply and demand. An index of 100 indicates a balanced market. Scores over 100 indicate a seller’s market and scores under 100 indicate a buyers market. April 2014’s index was 83.9 which was the lowest of the year, and inventory in the Phoenix MLS was 26,500 homes at that time. Only low buyer demand was at the heart of the buyers market.

The index has now risen to 96.6 to begin September 2014 because inventory has dropped and is more in line with weak home buyer demand. The 2nd graph shows the up and down nature of the of the (CMI) since 2001.

Phoenix real estate market and the CMI

Historical CMI in the phoenix real estate market

Phoenix Real Estate Market Home Sales

6,457 homes sold in August 2014 in the Phoenix real estate market. The below chart indicates demand has fallen for 5 consecutive months. In normal years demand peaks in June, then it slowly declines to a seasonal low between November and January.

Phoenix MLS sales in the Phoenix real estate market

The below chart shows the average monthly sales from the Phoenix MLS over a seven-year period. Monthly demand in 2014 has averaged 6,588 homes over the first 8 months. 2014 has the lowest monthly sales volume since 2008. We have discussed several reasons for the lower demand in 2014 (found in previous market reports). However, we will discuss buyer financing in more depth later in this article.

Historical monthly sales obtained from the Phoenix MLS

Phoenix foreclosures have returned to normal levels. As indicated in the chart, foreclosure type sales (comprised of bank homes and short sales) have accounted for 10% of all sales in the Phoenix real estate market. As a matter of information, foreclosure type listings have been under 8% of total, active listings in the Phoenix MLS since March 2014.

Phoenix real estate market: forelosures in the MLS

Home prices in the Phoenix real estate market peaked at $130 per square foot in March and April of 2014. The buyers market has impacted both sales volume and sales price with August 2014 coming in at $126 per square foot — identical to July 2014.

Price per square foot comparison from the Phoenix MLS

Let’s talk about one of the reasons demand is low in the Phoenix real estate market: poor supply of financing for potential buyers.

The banks are unhappy the FHA has disputed roughly one third of all insurance claims causing banks to take more losses than expected. This has reduced their appetite for risk. Here are some quotes from the CEOs of Wells Fargo and J.P. Morgan Chase.

John Stumpf, CEO, Wells Fargo: “If Fannie Mae and Freddie Mac want to stick with this program of ‘putting back’ any time, any way, whatever, that’s fine, we’re just not going to make those loans …

James Dimon, CEO, JP Morgan Chase: “We want to help the consumers, but we can’t do it at great risk to J.P. Morgan, so until they come up with some kind of safe harbors or something, we’re going to be very, very cautious with [home loans.]”

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