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 July 15, we are currently recording a sales $/SF of $128.51 averaged for all areas and types across the ARMLS database. This is 0.4% higher than the $127.94 we now measure for June 15. Our forecast range was $129.07 to $134.33 with a mid-point of $131.70. For the second month in a row the actual result was below the lower limit of the forecast range and once again the mix of homes that sold was less expensive than the mix of homes that had been under contract.
On July 15, REO sales across Greater Phoenix (all types) averaged $88.13 per sq. ft. (up 3.7%). Pre-foreclosures and short sales averaged $94.46 (down 0.4%) while normal sales averaged $132.21 (up 0.3%). The market share of normal sales increased again over the last 30 days, but only slightly, moving from 89.6% to 89.8% of sales. REOs lost market share from 6.6% to 6.3%. Short sales and pre-foreclosures gained market share slightly from 3.8% to 3.9%.
On July 15 the pending listings for all areas & types showed an average list $/SF of $131.96, 1.0% below the reading for June 15. Among those pending listings we have 81.6% normal, 7.6% in REOs and 10.8% in short sales and pre-foreclosures. The average pricing for pending listings within Greater Phoenix on July 15 in each category was: $139.51 for normal, $92.36 for short sales & pre-foreclosures and $89.17 for REOs. The latter is slightly higher than last month while the other two are lower.
Our mid-point forecast for the average monthly sales $/SF on August 15 is $127.27, which is 1.0% lower than the July 15 reading. We have a 90% confidence that it will fall within ± 2% of this mid point, i.e. in the range $124.72 to $129.82. Our forecast this month is for a decline in pricing over the next month. Given that our last two forecast have proven over-optimistic it will be interesting to see if this breaks the pattern. Month to month forecasting has been hazardous this year with no clear direction despite considerable volatility from one month to the next.
We continue to expect the price range between $125 and $135 per sq. ft. to be a natural resting point after the rapid rise from $78 that has occurred since September 2011. It will take a big change in market conditions for prices to move significantly out of this range. In the current conditions we expect the strongest pricing of the year to have already occurred between March and June and therefore any breakout over $130 is likely to be very short-lived. Pricing is more likely to show some weakness during the second half of the year due to the usual seasonal increase in supply and weakening sales volumes. Despite the paucity of new supply, it will take a strong recovery in demand to change this expectation and so far we have seen nothing to suggest such a recovery is imminent.
Most areas have seen a decline in active listings over the past two months, but where this is not true downward pricing pressure is possible due to the increased competition among sellers. Most exposed in this respect are Litchfield Park and Chandler and, to a lesser extent, Wittmann, Avondale and New River.