From Mike Orr at The Cromford Report:
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 January 15, we are currently recording a sales $/SF of $130.38 averaged for all areas and types across the ARMLS database. This is 0.7% below the $131.28 we now measure for December 15 and represents a small slide in average pricing, as expected. Our forecast range was $127.10 to $132.28 with a mid-point of $129.69. Last month's forecast proved reasonable and the actual result was only slightly above the mid-point of our predicted range. To illustrate how difficult it is to get these forecasts exactly right, one day later on January 16 the average was $128.88, well below the mid-point.
On January 15, REO sales across Greater Phoenix (all types) averaged $83.90 per sq. ft. (down 2.6%). Pre-foreclosures and short sales averaged $111.50 (up 2.9%) while normal sales averaged $134.02 (up 0.1%). The market share of normal sales dropped from 91.0% to 89.4% over the last 31 days. REOs gained market share from 5.2% to 6.0%. Short sales and pre-foreclosures also rose from 3.8% to 4.5%. The increase in distressed home share impacted the overall average negatively.
On January 15 the pending listings for all areas & types showed an average list $/SF of $130.27, 0.6% above the reading for December 15. Among those pending listings we have 80.7% normal, 8.2% in REOs and 11.1% in short sales and pre-foreclosures. The average pricing for pending listings within Greater Phoenix on January 15 in each category was: $138.74 for normal, $94.82 for short sales & pre-foreclosures and $84.25 for REOs. The figure for REO sales is lower than last month, as is that for short sales & pre-foreclosures while that for normal sales is higher.
Our mid-point forecast for the average monthly sales $/SF on February 15 is $131.77, which is 1.7% higher than the January 15 reading. We have a 90% confidence that it will fall within ± 2% of this mid point, i.e. in the range $129.13 to $134.41. Our forecast this month is for a slight move higher in sales pricing over the next month. This follows a pattern which is common in most years where a stronger February follows a weak January after a strong December. These month to month fluctuations are of no lasting significance.
We are seeing stronger sales counts in the first half of January than we did in January 2014, 7% higher year to date. However pending listing counts and under contract counts are showing no improvement over last year so our enthusiasm is tempered.
Supply numbers are a little weaker than last year at this time, so the market is very close to balance. It would be natural for prices to keep pace with overall inflation in this environment. There is no cause for prices to fall except in a few small areas with excessive local supply.