Dealmakers Blog – Ramblings of a Real Estate Mogul

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

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