Posted By: Sean Terry | January 7, 2009
Article Written By: Tom Ruff | Information Market
David R. Kotok, Chairman and Chief Investment Officer, Cumberland Advisors
“We are saying that markets change their pricing because they are forward looking. They usually bottom in the midst of the bleakest outlook and they often bottom BEFORE the economics appear to turn. History shows that over time, financial markets are able to change prices to reflect forthcoming changes in economic data. That is why markets are viewed as leading indicators. They are not forecasting the change; they are measuring the behaviors and sentiment of the investors who are forecasting the change. Markets move as a result of actions by those who are seeing a change earlier than economists can compile the data to demonstrate that the change is at hand.”
Market Summary for Greater Phoenix
MLS sales volume recovered sharply in December, rising 28% from November. Those sales reduced the number of pending listings a little, but this count remains high for the time of year, more than 76% higher than in January last year. These numbers are being driven by transactions in lender owned properties.
More than 60% of the homes sold through MLS in December were lender owned properties and another 11% were pre-foreclosures or short sales. Only 29% of sales were “normal” transactions. This trend is expected to strengthen further in January because lender owned properties comprise 65% of pending sales. Among active listings: 52% are normal, 21% are in pre-foreclosure or short sales, and 27% are already owned by a lender.
We saw a large drop in trustee sales in December as banks eased off for the holiday season. It’s possible that this will result in a resurgence in January. New foreclosure notices also fell off, but the effect was smaller, resulting in an increase in pending foreclosures.
The low pricing of bank owned properties coupled with lower interest rates has caused a significant up tick in demand from 90% of normal at the start of December to 97% of normal at the beginning of January. Supply fell slightly to 177% of normal. This combination means that the market supply/demand balance improved even though the level of distress increased.
Unless otherwise stated, all figures quoted above are for “all areas and types” in the ARMLS database.
December Sales/Public Record
We had 5064 homes resell in Maricopa County in December with an overall median of $145,000. Bank owned properties accounted for 3,047 (60%) with a median of $118,000. “Normal” or traditional sales were (40%) of the market, 2,017 sales with a median of $200,000.
January Foreclosure Numbers
I expect January foreclosure numbers to increase, and I think this increase will have more to do with November and particularly December than January itself. A period of grace took place over the holidays leaving December numbers lower than expected, with actual foreclosures coming in well below our quarterly projections. I would not be alarmed by an increase in January numbers anymore than being encouraged by December numbers. It’s much easier to send the Sheriff out for an eviction in January than just before Christmas
It was in late February last year when I became fully aware of the magnitude of the problems we were facing. Sales were way down, the median price was falling, listings were up, credit was drying up, gas prices were going through the roof, foreclosure notices and auctions were rapidly rising. The market still hasn’t bottomed, but not all signs are negative. Yes, we currently have 31,099 properties in foreclosure, 18,122 more than the start of 2008, and January scheduled sales and new filings are running high. We’re all in agreement, there’s still a lot of hay in the field, that being said, some signs are positive this year. The housing market is in a far worse starting position, but strangely enough the outlook for the end of 2009 may be brighter. I’ve heard rumors of mortgage lenders calling people back to work as loan applications rise. I just read yesterday where the efforts of the Federal Reserve are freeing mortgage monies and lowering interest rates. I filled up my car yesterday and it was less than $20.00, down from a high of $54.00. Sales volume on existing homes is rising, and while new home sales are floundering, new home median prices have risen for 4 straight months. News on median prices and foreclosures will continue to be bleak the first three months, but remember what Mr. Kotok says, when the outlook is the bleakest……
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