COMMENTARY September Stats for Real Estate Market Arizona
by Tom Ruff of The Information Market
Our housing market continues to show slow and steady improvement. On a year-over year
basis distressed inventory is down, foreclosures are down, traditional buyers are up,
purchase money mortgages are up and new construction is up. Each of these metrics continues
to improve, a repeat of what happened last month. Sales volume was up 9.1% year
-over-year while the median sales price increased 5.7% and average sales price increased
4.7%. We saw month-over-month declines in sales volume and prices, as expected, following
seasonal patterns. With no monthly surprises, our attention has been placed on
the negative equity reports.
Negative equity is fancy talk for homeowners who owe more on their mortgages than
their houses are worth. Many call it being underwater. For the purposes of our analysis
we will be looking solely at public records data for Maricopa County.
The median resale price for homes in Maricopa County peaked in May 2006 at $253,418.
This is meaningful because summer 2006 is the epicenter of negative equity in our market.
The 227,000 foreclosures, which cleared a large chunk of negative equity from our
market, and the 35,000 short sales we’ve experienced have been mostly from this period.
Today, foreclosures are a trickle, averaging 223 per month. The majority of homes heading
to foreclosure are from the bubble days. 96.2 % of our mortgages in Arizona are current
according to Black Knight. We rank the 8th lowest in the U.S as only 0.5% of our
mortgages are in foreclosure.
The chart below shows the percentage of equity a home owner would have based on the
time the home was purchased. Assumptions made in building the chart: zero down payment,
mortgage and sales price are equal, 30-year fixed mortgage, never refinanced, interest
rate based on the time the loan originated, value based on median sales numbers.
The worst negative equity point on this chart occurs in July 2007 and is 0.0679%
It has been 113 months or 9 years, 3 months since median prices peaked. I know it’s common
sense, but if you pay your mortgage as agreed, you will see your equity increase. The chart below
shows the reduction over time based on Freddie Mac’s published monthly average commitment
rate on 30-year fixed-rate mortgages. Note: The chart starts in 2015 and goes backward
An example of how this works: If a home was purchased in May 2006 for the median sales
price of $253,014 and was financed 100% with a 30-year fixed interest rate of 6.27% and each
payment was made as agreed, the current balance due would be $217,587. By paying down
the mortgage in this example, negative equity would have decreased $35,426.
A homeowner that purchased their home 13 months ago would have increased the equity in
their home 5% through appreciation and would have reduced their mortgage by 1.72%.
ARMLS Pending Price Index
Our last Pending Price Index projected an August median price of $210,000 with the actual
median reporting at $208,000. Our sales volume projection was 7,200 with actual sales of
7,010. Looking ahead to September, the ARMLS Pending Price Index projects a median sales
price of $210,000. In the last 14 years the median sales price has risen five times, fallen seven
times and had no change twice between September and October. We begin September with
6,276 pending listings and 3,319 UCB listings giving us a total of 9,595 residential listings under
contract. This compares to 9,726 listings under contract at the beginning of August. The September
2015 sales volume will undoubtedly exceed September 2014 (6,252), but should be
lower than the total of 7,010 in August 2015. STAT is projecting 6,850 home sales in September.
It should be noted, the perceived slowdown in our market is strictly seasonal as the sales
volume in September is almost always less than August.
ARMLS® STAT SEPTEMBER 2015