Market Update: Is There A 90 Day Window That May Slam Shut?

The Arizona real estate market is on an upswing. All the economic news and stats are pointing toward a long sustained recovery. The Reeves Team’s last 8 listings have had multiple offers from aggressive buyers competing for their homes. So what info do we have that leads us to believe this white hot market will cool off in a few short months? Check out our Market Update below.

Article Summary

1.) Arizona housing inventory is the lowest it has been in over 5 years. (see chart below)
2.) The 5 largest banks just settled a major suit with the government, bringing nearly 2 Billion to the AZ economy.
3.) Home prices in AZ have risen for four consecutive months, first time since the housing collapse. (see chart below)
4.)The Reeves Team and other big agents handling a large portion of the foreclosure business in Arizona have seen foreclosures dry up in recent months.

The Good News

Arizona real estate has been in the news quite a bit over the last month. First, there was the report released that confirmed Arizona was the only state in the U.S. that experienced an increase in home values. The speculation is that because Arizona was one of the hardest hit states when the housing bubble burst that it is also going to be one of the first to rebound.
Next came the news that the 5 biggest mortgage companies in the United States agreed to a 26 Billion dollar settlement with the government. This 26 Billion is to go back into the pockets of homeowners that had been harmed by fraudulent foreclosure processes put in place by the banks. This is also seen as great economic news for the state of Arizona. Arizona residents are expected to receive nearly 2 Billion dollars from the banks settlement, that money will go directly into the Arizona economy.

So with all this good news, what is this 90 day window we are talking about? Before we explain why all this good news might not last, let me give you one more piece of good news. Take a look at the three charts below, for the first time since the market collapsed all of the major market trends are pointing in the right direction.

Average Sales Price In Arizona.

We have now seen the average sales price rise for 4 consecutive months. The metric jumped nearly $15,000 in 4 short months. So what are the reasons for the turn around?

Why is Arizona the only state that is seeing this kind of improvement? The economy is partially to thank, but the real secret is the shortage in houses for sale.

Arizona Housing Inventory

The housing inventory in Arizona has been steadily declining now for the past year, this has more to do with the lack of foreclosures being processed by the banks than anything else, but we will get to that in a moment. At the height of the housing crisis, there were over 57,000 homes on the market in Arizona, as of the writing of this article there are just above 16,000. We have not seen inventories this low since the height of the market back in 2005 and 2006.

Days on market

The average days on market has been nearly cut in half over the past year, this is truly incredible when you consider this is not the amount of days that it takes to receive an offer, but instead it reflects the amount of days necessary to complete the entire transaction. Still not stunned? Consider this, the days on market metric also includes short sale listings, which can take upwards of 6 months to get closed. Yet the DOM is still under 90 for the first time in years.

The Clouds In The Distance

Yet Troy Reeves is quoted as saying “There is a 90 day window to get your home sold before the market conditions change.” What is it that Troy and his team are seeing that most of the media must be missing?

Fallout from the bank settlement

The truth is all of these current factors, the low inventory, the rising home values, and in some part the economic turnaround are due to one forgotten truth. While the banks were in negotiations with the federal government they basically quit foreclosing on properties. They did this because they knew they were going to have to pay out a sum of money for every house they foreclosed on between 2009 and when the agreement was reached.

So the banks made a strategic decision to halt foreclosures and save themselves the penalty they would eventually be paying. So many homeowners that were late on payments never received a foreclosure date, and many of those that had already been issued a foreclosure date saw that date pushed back until after a settlement could be reached.

Short Term Gain

This dramatic decrease in foreclosures eventually helped dry up the houses for sale in Arizona, which in turn increased competition for the current homes on the market and drove up prices. There is however a flip side of the coin. Even though these huge banks were not processing as many foreclosures, it does not mean that homeowners were not still falling behind on their payments.

Long Term Pain

So as the banks begin to ramp back up their foreclosure process, they will not only be dealing with the foreclosures to come, but they will also be cleaning up all the foreclosures they let slip through the cracks during the bank negotiations. Its possible, because of these circumstances prices might not only fall, but fall back even further than they were just 4 or 5 months ago.

What got the banks into trouble in the first place was moving to quickly, and not paying enough attention. Lets hope that the banks have learned their lesson and will take their time getting these foreclosure homes back on the market. While we can’t predict the banks, one thing is clear, with the banks ramping up their foreclosure process again the inventory levels can’t stay this low. More homes on the market means less competition, and less competition typically means lower prices.

Now that we know the banks have come to an agreement and will resume the foreclosure process, we expect it will take nearly 90 days before the market will see a major impact. Let us know in the comments below how long you think it will take, and if you disagree with us completely please let us know, we value your opinion.

The foreclosure nightmare that has plagued the U.S. and Arizona in particular over the last few years will eventually come to an end, but what we are seeing now is not that end, but it paints a good picture of what the end will look like. We here at the Reeves Team like what we see!

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26 Replies to “Market Update: Is There A 90 Day Window That May Slam Shut?”

  1. Hi, I have recently tried to buy a home in the West Valley and someone has over bid me each time, even when I bid a little over the asking price.We are now in June and I have not seen any more homes on the market as of yet.I really do hope that we will start to see more homes on the market again because as of now the average home buyer just looking to buy a home to live in is getting pummeled by these crazy multiple offers, when just a few months ago it was not this bad. Does anyone have an idea of when they think we may see more homes on the market? I am not sure at this point if it is best to keep trying to compete for each home or wait a little while and see if the market becomes a little more (normal)..any thoughts are greatly appreciated..

  2. I have been working with Remax Alliance, Troy and his team for years and have never been let down. I have referred many many clients to them and they have taken care of them and all of their dynamic needs very professionally. They just helped my little sister buy a home in a very competitive market price and they have been there every step of the way. I depend on Troys team to take care of my clients and they have have been a great asset to us and our growth as well. Clint Mesa AZ

  3. I have had the fortunate privilege of working with the Reeves Team at ReMax Alliance Group for the past 15 years. Their professionalism and work ethic is beyond excellent! Troy Reeves and his Team have assisted hundreds of homeowners over the years achieve their dreams. They are experts in the field of short sales, foreclosure homes and traditional sales.

    The Reeves Team stays consistently busy with a steady stream of referrals and repeat clients. Their success and achievements have consistently earned them Top Achievement awards at all ReMax Conventions.

    If you are considering purchasing or selling real estate, Troy Reeves and his Team will assist you in achieving your goals. You will be extremely impressed with their level of knowledge and service.

  4. This is a great article. I can always count on the Reeves Team to keep me informed on what’s going on in my community.

  5. If your analysis is correct, then I should be considering selling sooner rather than later.

    I am also gathering from this that you are pegging the influx of new inventory for mid or late May which will dilute the market causing homes to not sell as quickly as they currently are. Will that translate into a decrease in prices as well?

  6. Troy, I found the report to be very insightful. It seems apparent that with the lower supply and higher demand that prices would continue to increase. Increased supply with the forthcoming foreclosures could reverse the recent trends seen in the market however this will be driven by how aggressive the banks are with their problem loans.
    I would recommend that the analysis should be looking at where the demand side of the equation is coming from and what segment of the market is showing the improvement. Is demand being generated from foreign dollars, first time buyers, investors, or people looking to upsize? Is the lower end of the market seeing the most activity? One thing is for certain, we still have challenges to work through.

  7. As we enter this new year in real estate, we see signs of light peering through only to have that light shadowed by the banks ugly games. how ever this is what appears to be the road to recovery but it will not come with out a few bumps. Great Article Troy I think you are on the money.

  8. I feel that the theory Troy has may be accurate in certain areas and above a certain price range. The market I primarily work could use more inventory and still easily absorb new listings coming to market. Remember the power of sunshine will always attract buyers to our beautiful state. The demand is so high here in Maricope that my last few offer were for more than asking price. Even if the inventory doubled I think home prices would remain steady. I feel the banks are pricing homes higher and are discounting much less. Thanks Troy for your thoughts and I sure hope you are wrong.

  9. Great Article! Is there shadow inventory or not? And if there is, how much in AZ? Glad to see the banks getting aboard and more efficient on short sales. Short Sales are a win, win for all – they appear to have less of a negative impact for all parties involved. I will be keeping my eye on cash sales and investors. If these numbers decrease, our landscape will definitely change. Should be an interesting year!

  10. The biggest difference I see now is that the banks have figured out how to dispose of these foreclosed homes at the court house steps by drop bids instead of taking them back into inventory. When investors purhcase these homes and fix them up they often sell at the top of the market not at the bottom where most of the severely distressed bank owned properties sell. Some of these foreclosed properties will end back up in the banks hands but not anywhere at the level we saw in 2008-2009. This leads me to believe we will not see any sort of drastic drop in home prices.

    While inventory will rise over the next several months…it needs to. We should not being seeing 5-10 offers on every good listing that goes on the market. This certainly did not happen when our market was “normal”. I believe that our market is still regulating but is well on it’s way to recovery.

  11. As a real estate attorney, I have been negotiating short sales for clients, and helping them avoid foreclosure for the last three years. In the last 12-18 months, I have seen the banks significantly improve their ability to process these transactions. It’s likely that they will encourage even more short sales in the days, weeks and months to come. Foreclosure activity may or may not ramp up. In either case, we’re talking about more inventory on the market, which supports your argument that this under-supply of inventory (which is the cause of the recent slow, steady increase in pricing) may be short lived.

  12. Working with buyers is tough these days, because there’s either foreclosed on homes that are in bad condition or the good, move-in ready homes that are getting snatched up in hours/days. Buyers today really need to be ready to pull the trigger when shopping for a home and put their best offer out first. Thanks for the analysis Troy.

  13. I put my dad’s house in Tempe on the market & it sold the next day. So, when it was previously on the market, we did not get one offer, this time we had 4 offers in 2 days!

  14. I’m leaning a bit toward Mark on this and agree with his comments. My “inside info” from the lenders side also agrees that short sales are more in our future than foreclosures.

  15. I think investors will understand this prediction and only buy properties that are still a bargain now and then will leave the market for the next three or four months to see if the rate of foreclosures does increase and exert downward pressure on the prices due to a higher inventory of houses for sale. I watch this supply/demand curve and the related politics to decide when and where to invest. If AZ is fortunate enough to sustain the upward direction of the market then that will be good for all of us. Thanks for a good analysis and prediction.

  16. Thanks for including me! Very interesting and informative. One other interesting thing is that HARP 2.0 is kicking into gear in March giving the Fanny and Freddie homeowners another incentive to ride the market out and not walk from thier homes.

  17. If you listen to Mike Orr, (Cromford) and Fox News, the 1.3 billion BofA and the $600 million from the rest of the banks which will be infused into Arizona for loan mods, foreclosure rebates, etc. will help. However, there seems to not be the shadow inventory everyone thought was there. Bank of America claims they will be increasing their workforce to handle an additional 60-70% more short sales this year. All banks are now enticing homeowners with extra money over and above the HAFA $3,000 teaser.

    I think your analysis of the market is very good. But, I don’t think there is a 90 day window to get your “traditional” home sold. I feel we will see more of the same as last year, except there will be much more short sales and less foreclosures in this state. New home sales will keep increasing as more new jobs are created. And, resales will become more available as short sales and less likely as foreclosures. The banks are finally getting the word, they need to shorten the process on short sales. And it’s happening. Traditional sales and flips will remain popular.

  18. There are still alot of vacant homes and now the banks should be able to move forward with the foreclosures and I agree with your timeline!

    1. I have not seen our inventory this low for years. Right now is a great time to be on the market and I am seeing that homes in good condition that are priced competitively are selling in a matter of days. If we see an increase amount of homes on the market due to additional foreclosed properties I would anticipate that selling a home will become even more challenging and price will decrease. I do agree.

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