Tiffany Cloud's Arizona Blog

musings from 35 yr AZ resident and Realtor®

First-Time Home Buyer Tax Credit – Then & Now in the Greater Phoenix Metropolitan Area. Part 1 of 3, The Void

Excluding certain military personnel, the First Time Home Buyer’s Tax Credit has expired.  For all practical purposes we have been left with what amounts to a void in the Phoenix Area Housing Market.  I will need to cover this in three parts:

1.  A look at the immediate statistical summary and define our current ‘Void’.

2.  Project out and take a stab at the future and possible time tables for improvements and the factors that might and will play a role.

3.  Take a broader picture of the Housing Recovery in the Greater Phoenix Metropolitan area (this is the good news, so don’t miss this one!).

The Void … The Why

Our Highest Recorded Pending Listings in this century occurred in the week ending April 28, 2010, approximately 1 month prior to the closing deadline for the first-time home buyer tax credit.  At the end of April we had 15,149 homes listed as pending or under contract in our Multiple Listing Service (Just for comparison purposes, as of September 13th, 2010 we had 10,009 pending listings).  With only 30 days left to get a deal closed, those that were looking to qualify for the tax credit had already made their decisions and had something under contract.  In addition, something else occurred that was counter productive to helping our housing market regarding the reporting of these pending listings.  Quite a large percentage of buyers had put multiple offers out on properties with the intention of only purchasing one or at least less than what they had made offers on.  In their effort to try to ensure they got ‘something’, they opted for the ‘insurance’ of having more than one choice available to them when the time came to choose.  When we got down to the wire of having enough time to get a deal closed (typically about 30 days) and they had to choose, many of these duplicate contracts were cancelled.  Since April we have obviously seen a dramatic decrease in pending listings.  We essentially had a FALSE demand that was created by these multiple contracts. When you have a greater demand, the supply goes down and of course the price goes up, or in this case, more precisely is artificially inflated by a false demand.  I can tell you first hand, that buyers were panicked, and here in Arizona we had bidding wars, escalation clauses and in some areas, inventory was down to less than a four month supply which is generally considered a Seller’s market.  We essentially had a mini-bubble for a few months.  Well, we have learned that bubbles eventually pop, and now that the tax credit is over, our market must now correct…. AGAIN.

The Void … The Data
  • According the The Cromford Report, the end of August had our current price per square foot for the Greater Phoenix area at $84.44/sqft, down from $91.12/sqft at the end of June.  That is a decrease of 7.9% since the tax credit has expired only 2 months prior.
  • Housing Data for Maricopa county has the current Median Sales price at $123,900 ($132,900 in June of 2010).  Prior to last year, which has so far been the bottom of our market for median sales price, the last time our median sales price was at $123,900 or below was in December of 2000.
  • Inventory is increasing weekly.  In the last 3 months, we have added over 3,000 listings to our inventory which now sits at 44,531 up from 41,483.  Inventory is up 9% in the last three months.
  • Three months ago closed sales per month were at 9,312/month.  Today closed sales are at 6,911/month.  Closed Sales have decreased 25.7% in the last 3 months.

The Void … The Reality

As I speak to my fellow Realtors in the Metro Phoenix area, most listing agents are reporting a huge reduction in their showing activity and price reductions are on the rise for their listings.  Buyer agents are consequently reporting buyers that expect ‘everything’.  I got the following from an agent with buyers that were seriously considering a listing I have in Power Ranch:

“I was really surprised but I think they [buyers] are just all over the place.  I will let you know what the outcome is but you should not have a hard time trying to sell that house. There is just a lot available out there for sale and not a lot of buyers who are serious about buying. I have never seen interest rates as low as they currently are and buyers just seem to want everything and if they can’t have it their way they don’t want it. Pretty fussy buyers with interest rates at their all time low!”

In April of 2009 we reached our  lowest median price this decade of $119,000.  Since then the market has been trending up for the most part.  We had gone from a low of $119,000 in April of 09’ to $134,900 just 12 months later in April of 10’.  The press had started to report things were looking up, and we started to hear some positive things happening in the housing market.  In just two months since the First Time Home Buyer’s Tax Credit has expired, we have almost voided out the last year gains. I suspect we will likely reach that low of $119,000 in Sept. or Oct. of 2010, and unfortunately there is a real possibility that we will  trend lower for a new all time low as inventory continues to increase.

in the next part of this series we will take a look at some of the factors that could influence the next 6 – 12 months in the Phoenix market.  Of course there will be speculation and I will be relying heavily on some folks that are quite a lot smarter than I.  In the third part of this series I will take a broader look at the housing recovery.   There is actually quite a lot of good news to report when looking at the broader picture.

Thanks for reading.

Information gathered from The Cromford Report, Arizona Regional Multiple Listing Service, edpco.com and Arizona State University Realty Studies.

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September 14, 2010 Posted by | Arizona, Arizona Ecomony, Arizona Housing Market, home buyer, home seller, REALTOR | , , , , , , , , | Leave a comment