One does not have to drive far in Gilbert (or anywhere in the Phoenix metro area) to see this:

 
This would be an abandoned subdivision. The streets and sidewalks are in, utilities are run to individual lots, there may even be some common area landscaping done.

But there aren’t any homes.

The builder’s bailed at some point for a variety of reasons – low/no sales, financial difficulties (including bankruptcy), you name it.

Sometimes you’ll even find them with half-built homes – full of tumbleweeds.

It’s a sign of the cratered new home construction market.

However… there are some signs of life, particularly in Gilbert.

Here’s a photo I took yesterday about a half a mile from my house:

That would be active new home construction, and every one of the homes in this photo are already sold.

The Arizona Republic reported yesterday that three builders – Toll Brothers, Pulte and Meritage homes – have purchased about 230 ready-to-build lots in Stratland Estates (near Higley and Germann roads) and plan to start building early next year.

This subdicvision was left nearly empty after the developer, Stratland Estates LLC, filed for bankruptcy on July 2008, according to the Republic article.

Pulte bought 107 lots and plans to build three models ranging from 1900 to 3000 square feet. Sales should begin in March 2010. Meritage expects to build 65 homes and Toll Brothers about 60.

Additionally, 34 spec homes were sold to an independent investor.

This comes on the heels of news that the Town of Gilbert has issued nearly 1,000 new home construction permits this year – twice the number officials expected. In September, Gilbert issued 116 new home permits, more than any other Valley municipality, including Phoenix proper.

What this may mean for “traditional” sellers

From an overall real estate market perspective, an increase in new home construction is generally considered a good sign.

But if you are a “traditional” seller – meaning you are trying to sell the home you are living in – there may now be even more competition for buyer’s eyes. You are already competing against foreclosures and short sales, along with existing new homes – many of which are offering loads of buyer incentives.

That is a LOT to compete with. Many real estate buyers think they can get a “better deal” with a foreclosure or short sale (this is not always a safe assumption, but it’s something you have to contend with). And it’s hard to look past incentives like $30,000 – $80,000 in free upgrades on a new home.

You can’t really directly compete with a new home builder offering crazy incentives. But you CAN make your home clean – immaculate clean – offer a warranty, get it pre-inspected and do repairs, make it easy to show, be willing to negotiate and price it realistically. That will help level the playing field.

A traditional seller in the Phoenix market can get their home sold. It’s not easy, it will probably take time, and in all likelihood you won’t get as much for your home as you’d like. But it can be done.

I know that’s not what anyone wants to hear, but you’ll get no sugar-coating here.

Oh for the love of Pete…

Tim Vetscher at ABC15.com “reports” this today:

According to Fiserv, a financial information and analysis firm, home prices in Phoenix are expected to lose another 23.4 percent by June of next year.

Really? A “financial information and analysis firm” can predict to the tenth of a percentage point where home prices will be – in eight months?

How utterly ridiculous.

No one on the planet can make such a prediction.

Is Fiserv right?

Maybe. Maybe not. Unfortunately, Mr. Vetscher provides zero information on how Fiserv reached this conclusion. The link provided leads simply to their home page, where there is absolutely no reference to be found for this “analysis”.

Personally, I’ve never heard of Fiserv. Granted, that doesn’t mean much, so I thought I’d look them up. According to their own About page this is what they are:

One focus: It’s all about innovation

We are leaders in our industry, advocating for our clients, looking for innovative ideas to change the way you bank. We are focused on the financial industry, transforming how banks, credit unions and thrifts serve their tech savvy customers.

We are looking to the future, focusing all the resources of Fiserv around the needs of our clients. This is the new Fiserv, one brand, one company, one focus.

Hat tip to Dan Mitchell.

“Thrilled” may not be a strong enough word to describe my feelings in announcing Shar Rundio has joined our growing family at Thompson’s Realty. Let’s try “jubilant”. Those that know Shar understand she is smart, funny, hard working and treats her clients the way they should be treated.

She’s a perfect fit for what we believe in at Thompson’s Realty.

Shar has held a real estate sales license for eight years and comes to us from Keller Williams Integrity First Realty. She is a short sale and REO property specialist and writes at the Speaking of Phoenix Real Estate blog. You can follow her on Twitter @SharRundio.

From her “About” page:

A rare Arizona native, Shar is familiar with the ins and outs of the Valley of the Sun. Her commitment is to servicing her clients every need before, during, and after the purchase or sale of their home. Shar takes a consultative approach vs. a sales approach. Her goal is to bring all the information together in a clear and concise way which will enable you to make the wisest choice for your family.

Shar has been married to her high school sweetheart and the love of her life, Matt for 13 years. Together they have two beautiful daughters, 11 & 9. Other than her passion for real estate Shar enjoys traveling with family and friends (anything from fishing in Greer to cruising the world), scrapbooking, quilting (or pretending that she has time to quilt), and eating Mexican food.

Please join me in welcoming Shar!

.

I just received this email notice from the Arizona Regional Multiple Listing Service.

BE CAREFUL FOLKS!  There are criminals out there that will use every advantage they have. Never, ever, let a stranger into your home – no matter how bad you want it sold or how nice they seem…

The police are looking for suspects in a West side robbery/assault.

ARMLS has been asked to alert all agents to an assault and robbery that occurred at a listing near Old Town Glendale (vicinity of 43rd Ave. and Glendale Ave.) earlier this week.

The homeowner was watering his front lawn when he was approached by a passing couple who asked if they could see the house.  The homeowner did what agents teach homeowners to do and referred the inquiry to the listing agent.  The couple stayed and continued to talk to the homeowner and after some casual conversation the owner changed his mind and allowed the seemingly nice couple into the house.

Once inside, they asked about the neighborhood, then the female pointed to something on the floor and asked what it was.  When the homeowner bent over to inspect, the male visitor attacked him from behind and beat him severely. They robbed him of money and damaged his cell phone so he could not call police.

The assailants are described as white, late 30’s to early 40’s in age.  The man is 5′8" to 5′9" and the woman slightly smaller, both medium build.  The homeowner has been unable to provide more details.  They are driving a late model brown/dark gold 4-door Buick with a distinctive radio antenna –  it’s a coat hanger.  If you see such a couple in this car, you are urged to contact the local police department with a location and if possible a license plate number. 

ARMLS urges you to reconfirm with your sellers that access to the home should never be allowed to someone the owner does not know.  All inquiries should be referred to the listing agent, for the homeowner’s own protection.

Foreclosures are ugly. Assuming you aren’t just a nasty person, no one wants to see anyone lose their home to foreclosure. However; unless we choose to bury our head in the sand and pretend they don’t exist, then if you are even remotely interested in the Phoenix real estate market you need to understand what’s happening in the foreclosure side of things. Like them or not, foreclosures in the Phoenix area aren’t going away any time soon.

Phoenix Pending Foreclosures

This would be a chart of foreclosures pending in Maricopa county for the 4.5 years. Scary chart isn’t it?

“Foreclosures pending” means this:

The inventory of foreclosures pending represents the number of properties which are scheduled for sale by the trustee at some point in the future.

Inventory is increased by 1 whenever a notice of trustee sale is issued. Inventory is reduced by 1 when a trustee sale is cancelled. Inventory is also reduced by 1 when a trustee deed is issued to either a third party or the beneficiary (i.e. the lender). If the trustee deed is issued to the beneficiary then this adds 1 to our REO (real estate owned) inventory and it no longer counts as a foreclosure pending.

The data is for the county of Maricopa and includes all real estate property types, including land and commercial. A commercial parcel counts as 1 foreclosure even if there are multiple structures within that parcel.

In Arizona (mileage may vary in other states), a “trustee sale” is what most people generally think of as “foreclosure”.  In very basic terms, if someone is delinquent on their mortgage payments the lender will at some point issue a “Notice of Trustee Sale”. It’s basically notification that in 90 days your home will be sold “on the courthouse steps” to the highest bidder.  Assuming that is, someone bids on it. Often (about 88% of the time) no one does, or doesn’t bid enough to satisfy the lender and the home is effectively returned to the lender, who will likely soon list it for sale on the open market. The home is now a “banks owned home” or “REO” (real estate owned) property – a “foreclosure”.

What can cancel a trustee sale?

• The homeowner can get current on payments. The bank doesn’t want your home, they want you to pay the loan. Catch up on your payments, and they’ll cancel the trustee sale. Note, your credit is going to take a hit – you’ve generally got to have several late or missing payments before the lender issues a Notice to Trustee Sale. Your credit is whacked before you even get the notice. Catching up doesn’t erase that fact.
• You can (at least in theory) get your loan modified / restructured.
• You could list the home on the open market and sell it. This may (or may not) involve a “short sale” – selling the home to a third party for less than what is owed on the mortgage. The lender will naturally have to approve a short sale. Short sales have been discussed here and countless other places. They are painful, though (some) banks seem to be getting better at handling them. A short sale will also damage your credit. Some people think that’s not fair. Consider the lenders perspective – you promised to pay a certain amount. You didn’t. Their investors therefore take it in the shorts. They report the fact the loan was satisfied at an amount less than promised and your credit gets whacked. Such is life. In the not-so-distant past, the federal government counted the forgiven amount of the loan as taxable income – resulting in hefty tax bills, so things could be worse. (And it’s important to note that there is no blanket rule that covers all situations when a portion of a mortgage is forgiven. TALK TO A PROFESSIONAL TAX ADVISOR IF YOU ARE CONSIDERING A SHORT SALE. Sorry to yell, but it’s important).

So the chart above indicates the number of homes which are scheduled for foreclosure, NOT the number of homes that have been foreclosed on. Some will ultimately go into foreclosure, some will not.

Third Party Purchases at Trustee Sales

Here’s a very interesting chart. It shows the percentage of properties sold at the Trustee Sale to third parties – anyone other than the lender. (Often the Trustee Sale is erroneously referred to as a “foreclosure auction”. While not technically correct, you can still think of it as a foreclosure auction.)

Why the big giant change between 2005 /beginning of 2006 and the end of 2007 through 2008?

The answer is actually pretty simple. The high percentages of homes sold to third parties in 2005/2006 correlates perfectly with the insane seller’s market Phoenix experienced. Conversely, that 5% of sales to third parties you see in 2008 corresponds to the strong buyers market.

When homes are in short supply (as they were in 2005 / early 2006) then people – be they regular home buyers or investors – tend to pick up foreclosure properties. When there is an excess of supply (ala 2008) there is far less demand for homes – including homes sold at Trustee Sales.

Note the uptick in sales to third parties from March 2009 – present. This is another indicator the market is shifting from a buyers market to a neutral market. We’ll have to keep an eye on this trend.

What does the current REO sales and inventory look like?

Sales and pending sales are off last months torrid pace.

There are currently 37,485 active listings in the Phoenix area Multiple Listing Service (ARMLS). If that sounds like a lot, it is. But consider two years ago there was 55,267 active listings. As a percentage of all listings, normal sales continue to constitute about 50% of active listings, short sales continue their steady climb and now represent 35% of active listings and REO properties have dropped almost in half since the beginning of the year – holding steady over the last couple of months at 15% of active listings.

And finally (FINALLY! say those that have stuck through and read this far – I bet there are four of you) we see that as a percentage of monthly sales, REOs still constitute the bulk of sales but both normal sales and short sales are both trending up. This may be as a result of a combination of things – banks are getting better about responding to short sale offers, sellers are getting more realistic in there pricing and there is a general lack of supply in REO homes.

— 
Tables and charts from The Cromford Report using data from public records and  data licensed from the Arizona Multiple Listing Service (ARMLS). Cromford Associates LLC, ARMLS and yours truly, Jay Thompson, expressly disclaim and make no representations or warranties of any kind – express, implied or statutory – as to the accuracy of the data, nor its merchantability or fitness for any particular purpose.

In other less legal-like words, if you use this data to make personal, business or investment decisions and something blows up, it’s not our fault and you can’t sue us.

This from the East Valley Tribune yesterday – Imposters steal from Chandler home sellers.

Thieves posing as realtors and prospective home buyers struck two homes in Chandler on Monday, according to police.

. . .

In the second theft, a listing realtor got a call on Sunday from a woman claiming to be a realtor and gave her the code to the lock and arranged for the showing on Monday.

Excuse me? GAVE HER THE CODE? Over the phone?? Why in the name of Pete would you give anyone a lock box code over the telephone?!?

Here’s the right way to answer this call:

Caller: Hi! I’m an agent and I need the lockbox code to show your listing.

You: The lockbox code is in the Realtor remarks section of the MLS.

Caller: Oh, I’m at the house and don’t have access to the MLS. We were just driving by and my client said, “Honey stop the car! I want to see this lovely home!”

You: Sorry, you’re going to have to call your office or wait there until I can come unlock the home. I can’t give a code out over the phone.

Problem solved.

Better yet, use an electronic lock box. They don’t require codes and have to be accessed with an electronic key that is only available to licensed agents. These boxes record every opening, so you know who accessed it and when the lockbox was opened.

Home sellers: Insist that your agent use an electronic lockbox, not a box that requires a combination or code to be entered. If your agent can’t afford the $125 an electronic lockbox costs and insists on placing a $30 manual box on your home, I suggest finding another agent. In the Phoenix real estate market, we use Supra electronic lock boxes that look like this:

“Combination” boxes take on several forms, here are a couple:

Agents: If you insist on going cheap, don’t EVER give out a lockbox code over the phone or via email (same goes for gate codes to gated communities). You’d think this would be painfully obvious, but apparently it’s not.  Use the Realtor remarks section of the MLS. Sadly, I’ve seen lock box and gate codes placed in the public remarks section of the MLS – which is beyond stupid. Also, change the default combination before you use one of these. You’d be amazed how many homes I can open simply by trying the as-shipped default combination…

Are lock boxes safe?

Many people have concerns about placing a lockbox on their home. Electronic boxes are safe. Cutting one of them open would take a LONG time. Burglars don’t want to spend time at your home with a hacksaw or acetylene torch trying to get a lockbox open. Let’s face the facts, they save significant time and draw far less attention to themselves by simply tossing a brick through a window or putting their foot through your front door.

Today I had a (very) brief chat with Channel 12 News about the Phoenix foreclosure market.  

Clicking the photo to the right will open video in a new window (sorry, I tried to embed it, but could not get the annoying auto-play feature to cease and desist).

In the segment I referenced “trashed foreclosures”. If you’ve never seen one, take a peek at this:

Above is an actual notification we received yesterday (contact info redacted and emphasis mine).

This post isn’t a rant about part-time real estate agents. Let’s face it, the Phoenix real estate market – along with much of the country – has been pretty rough of late. Many agents have left the business altogether. Others have picked up part-time jobs. And there is nothing ever wrong with having multiple income streams (heck, I do).

I know some brilliant agents that have second jobs. Those that handle it well have plans and systems to cover for them when they are not available for real estate. Maybe it’s a partner or team member. Maybe they are selective about the clients they take on, or the areas they work. Those that handle it well place real estate first, and their other job second.

But when the real estate sales job takes a distant second, when you can only help someone in the evenings – and apparently not on a Sunday – when you have no plan to have your client covered 24 x 7, then it is the client that suffers.

The person that sent in this showing request assumed this was our listing. It happens all the time. Someone searches for homes on one of our sites and doesn’t realize that we display all the homes available for sale, not just homes we have listed. Had this been one of our listings, of course we would have arranged to show it. But it’s not, and this person is already working with an agent so we can’t show it.

(And for the record, we would not expect someone in an existing agency relationship to give that up if we were to show one of our listings. In fact, I don’t like to serve as a “dual agent” – representing both the buyer and seller in the same transaction – so I’d encourage this person to work with their agent. There are however, some listing agents that would try to undercut the buyer’s agent. Believe me, it happens all the time.)

Here we have a home buyer that is obviously very flexible, and is interested in a $180,000 home. An ideal client by any definition. Yet they are searching for homes on a site that doesn’t belong to their own agent, and they are reaching out to what they think is the listing agent, trying to view a home they are interested in. They are setting up their own showing appointments.

What is their agent doing?

Working some other job I guess. It’s plainly evident that the agent they are using doesn’t have a home search enabled web site, nor have they instructed their client on the potential issues of dealing directly with the listing agent. It looks safe to assume the agent has not set their client up on a dedicated “client portal” that the MLS provides.

It makes one wonder what else they aren’t doing for their client.

How many potential homes is this buyer going to miss out on because their agent isn’t available? What happens when this buyer calls a listing agent that has no problem “stealing” them from their current agent? How is this evenings-only agent going to be present during the day for an inspection? How are they going to be at the title company for document signing? What if they do get under contract and something goes wonky with the inspections, the escrow, the appraisal, the lender, or any of the other dozens of things that can jeopardize a real estate transaction? Will the part time, no coverage in place “agent” be able to get away from his “real job” in order to hold the transaction together?

For his client’s sake, I hope so.

“Listing Success Rate” is defined as, “the percentage of listings that closed with a sale rather than expiring or being canceled”. It compares the number of listings sold this month with the number of listings that were sold, expired or canceled in the same period.

At this moment in time, the Phoenix real estate market is running at about a 60% listing success rate. In other words, 60% of all listings are sold.

What happens to the other 40%?

In a nutshell, they aren’t sold. The listing either expires, or is cancelled, or in the case of many short sale listings, is foreclosed on (and most likely re-listed at some point later as a lender owned (aka “REO”) property).

So is 60% “good”? It depends on your perspective. If you are trying to sell a home, you want to see Listing Success Rate as high as possible. If you are buying a home, a higher rate means (generally speaking) that their is more competition for available listings. More competition for the buyer means less negotiating power, and increased potential for multiple offer situations.

Historically speaking, a 60% listing success rate is quite high. My stats service only tracks this particular metric back to February 2006, and the current Listing Success Rate matches the high of March 2006.

Here is the historical data:

 
But wait, let’s take a closer look at the numbers.

The critical reviewer of real estate statistics would be asking themselves, “why the big increase in Listing Success Rate 2009?” A very reasonable question.

Currently, the Phoenix real estate market is heavily influenced by “distressed properties”. Distressed in this case means lender owned foreclosures and pre-foreclosure (short sale) properties, not distressed as in the pissed off owner has trashed the home and ripped out the fixtures, flooring and appliances (though believe me, that happens). Distressed listings currently make up almost half of the available listings and in most parts of the Phoenix metro area compose a significant proportion of sales (see the Distressed Sales chart posted last week for the gory details).
 
As anyone that has tried to buy a bank owned home will tell you, they are moving very quickly. It is the norm, not the exception, to see new bank owned listings get multiple offers within days of coming on the market.

Here is the Listing Success Rate for each major market segment (as of Saturday May 23):

• Lender Owned Properties – 89.8%
• Pre-foreclosures (short sales) – 36.6%
• “Normal” (not lender owned or short sales) – 40.6%

So there is your reason for the sharp increase in overall Listing Success Rate. Almost 90% of lender owned property listings end in a sale. Only 40% of “normal” listings end in a sale.

This market segment breakdown is why I sometimes struggle with the reports and indexes often quoted in the mainstream media and elsewhere. When you break down these overall market aggregated numbers into individual components, they often tell a very different story. It would be easy for a seller in a “normal” situation to see the graph posted above and begin a Happy Dance. The astute normal seller (who hopefully has an astute agent working for them) would note that their market segment isn’t performing quite so well when is comes to Listing Success Rate. Factor in other considerations, such as location, price range, condition, the number of surrounding distressed listings, etc. and you can find yourself in a very different situation than the broad-based metrics may indicate.

It’s a great trend and clearly is better than if the line were going in the other direction, but as always look at all real estate statistics with a critical eye and consider all the factors that compose the metric(s) you are investigating.

— 
Tables and charts from The Cromford Report using data from public records and  data licensed from the Arizona Multiple Listing Service (ARMLS). Cromford Associates LLC, ARMLS and yours truly, Jay Thompson, expressly disclaim and make no representations or warranties of any kind – express, implied or statutory – as to the accuracy of the data, nor its merchantability or fitness for any particular purpose.

In other less legal-like words, if you use this data to make personal, business or investment decisions and something blows up, it’s not our fault and you can’t sue us.

Read enough about the Phoenix (or elsewhere) real estate market, and someone will start spouting statistics. And while market stats are important to understand, one must exercise extreme caution in interpreting them, or listening to other’s interpretations (mine included!).

Let’s take a look at “Days on Market” (DOM), or “inventory”, or “months supply”. Whatever you prefer to call it, it is an oft cited indicator of overall market conditions. And generally speaking, it’s not a bad indicator. The supply of homes available for sale is a key component in understanding the overall real estate market conditions.

It is important to understand a few things though:

• Our current market really consists of three major categories of inventory: 1) Bank/lender owned homes (also known as REOs); 2) pre-foreclosure/ short sale properties; and 3) “normal” properties (homes that are owner/investor owned and not in  a pre-foreclosure status).
• Real estate is local. And the Phoenix metro area is a BIG place. Any time statistics or price indexes are quoted for the entire Phoenix area, you have to understand that conditions across the Valley can vary dramatically. Even within a suburb, conditions can vary from subdivision to subdivision. Within a single large Master Planned Community, conditions can vary from neighborhood to neighborhood.

The supply of homes is a perfect example. The general consensus in the real estate industry is that a six month supply of homes is considered a “balanced market”. Less than a six month supply means we are in a seller’s market and more than a six month supply is an indicator that we are in a buyer’s market.

At this moment in time, if you look at all the available inventory of homes across the Phoenix metro area, there is a 5.2 month supply of homes.

Months Supply of Homes: All areas and types:

If you’re a seller, you may be thinking, “Halleluiah! Phoenix is a seller’s market!” and if you’re a buyer you may be thinking, “Crap. I should have bought a home a couple of months ago when it was a buyer’s market and I would have had more negotiating power.”

Not so fast.

Let’s look at the categories of inventory that make up this number…

If you extract the data for just lender owned properties, you’ll see a much different picture.

Months Supply of Homes: Lender owned properties only:

Wow, there is only a 1.3 month supply of foreclosed homes. That indicates a very strong sellers market for foreclosed homes. A close examination of the data above shows you that foreclosure inventory is down, sales are up and pending sales (those homes under contract but not yet closed) are also up.

OK, so now you need to understand why these numbers are what they are. And sometimes the numbers alone won’t tell the whole story. Nothing in the chart above tells you that some large lenders and the Government Sponsored Entities Fannie Mae and Freddie Mac imposed moratoriums on foreclosures that are in the process of being lifted. Nothing in the numbers above tell you that there is still a lot of short sale/pre-foreclosure inventory – much of which slips into the lender owned category when it doesn’t sell on the open market.

Months Supply of Homes: Pre-foreclosure / Short Sales only:

Almost 12,000 homes listed in a short sale position.^[1] And it would take 15.2 months to sell all the existing short sale properties – if there were no more properties placed on the market.

The simple fact is, no home lasts for 15 months in a short sale position. The lender will foreclose long before that time period expires.

And what if you are a “normal” seller? Just the guy who owns their home and wants/needs to sell it. You aren’t in trouble with the payments, and you’ve got enough equity to sell at current values and repay your loan (and hopefully pocket a little cash at close).

Months Supply of Homes: Not lender owned or pre-foreclosure:

You my normal seller are still looking at a strong buyer’s market. Yes, sales and pending sales are trending up, but they are nowhere close to what they were last year and the year before. On average, you can expect it to take almost a year to sell your home. And guess what? You also get to compete with that foreclosed home across the street. The seller there is a bank that has probably already taken it in the shorts, they have no emotional investment in the home, and they’ve priced it very aggressively to get it off their books.

The Bottom Line

Not all statistics are as they appear, nor does any one stat tell the entire story. Consolidating all types of listings across an area the size of Phoenix metro into one number is usually very misleading.  Look closely at all real estate stats, keeping in mind that the variations across market segments and location can swing wildly (and change quickly). You should try to understand what the real estate market is like in your location, for your type of home in your situation. Just keep in mind that it is very easy to generalize and misinterpret real estate market stats, particularly the data that aggregate large areas of completely different property types.

— 
Tables from CromfordReport.com using data from public records and  data licensed from the Arizona Multiple Listing Service (ARMLS). Cromford Associates LLC, ARMLS and yours truly, Jay Thompson, expressly disclaim and make no representations or warranties of any kind – express, implied or statutory – as to the accuracy of the data, nor its merchantability or fitness for any particular purpose.

In other less legal-like words, if you use this data to make personal, business or investment decisions and something blows up, it’s not our fault and you can’t sue us.

1. Short sale: a sale in which the owner can not sell the property for what they owe. Banks always have to approve short sales. After all, they are the ones who are not getting the amount they loaned.