Saturday, June 12, 2010

May Residential Sales Statistics

The Tucson Association of Realtors has announced the Residential Sales Statistics for May.

Average sale price in Tucson in May was $194,838 and median sale price was $151,000. This was a decline of 3% in average price and 5% in median price from April.

This decline may indicate the increased prices we saw in April were due to the first time home buyer tax credit that expired April 30. Buyers needed to have an accepted contract by April 30, and they need to close by June 30, so we will continue to see the effects of the federal stimulus for another month. Because lenders are overwhelmed with buyers trying to get that $8,000 tax credit, some of the sales in escrow will not close by June 30. For this reason, the deadline to close may be extended.

The 6,603 active listings outnumbered the 1,227 sales in May 5.38 to 1. This is below the magic 6:1 ratio that is considered a balanced market. When we get below a six month supply of listings--which is another way of saying a ratio of six listings to one sale--we have what is considered a seller's market. Sellers of homes priced over $300,000 may find that hard to believe, but here's the explanation: 87% of the sales were of houses priced below $300,000 and 55% of the sales were under $160,000.

We had 2,080 active listings priced over $300,000 in May, of which only 164 sold, indicating a one year supply of houses in this price range. We have a 23 month supply of listings priced above $500,000.

First time home buyers and investors still dominate the market. Government-insured loans--VA and FHA--accounted for 36% of the sales, and 23% of the sales were cash.

Monday, June 7, 2010

A Sign of Home Value Recovery?

Catherine Ellinwood with Fairway Independent Mortgage (520-954-1907) sent me an email this morning saying the market's looking good because interest rates are low and "values are coming in under purchase price." The first part sounds good, but to me, the second part didn't.

When a property appraises for less than the price in the purchase contract, this is bad news to me, because the buyer can't get a loan for the purchase price. One of two things has to happen: the seller has to reduce the sale price to the appraised price, or the buyer has to pay the difference between the sale price and the contract price as additional down payment. The seller usually doesn't want to do this, and the buyer often is unable.

Catherine explained that when the contract price is more than the appraised price, it means buyers are willing to pay more than what the comparable sales would indicate the house is worth. This is how prices went up so quickly from 2003 to 2006.

Way too many of the comparable sales on appraisals today are distressed sales. These sales drag down the value of non-distressed properties. Now that buyers are realizing that there are bargains in this market, we are seeing bidding wars and serious offers. This renewed interest from buyers is bringing the sale prices up.

When the appraisal is lower than the contract price, cooperation between the seller and buyer can keep the sale on track. If the seller reduces his price a little, and the buyer brings a little more cash to the table, the house can sell for more than the appraised value. Although they may not feel like winners when making these concessions, this is a win-win situation. The seller sells, the buyer buys, and when the house has a new owner, everyone realizes that they got what they wanted.

When prices start going up (sloooowly, this time), fewer homeowners will be underwater, and more will be able to sell or refinance. Then we can start climbing out of this worrisome housing market.

The low rates Catherine referred to were 5% with 0 origination fee, or 4.75% with 1% origination fee for FHA loans. Conventional loans are a little higher. Ask Catherine about Fairway's contribution to the buyer's closing costs.