February is great month for apocalyptic real estate writing.
January is the worst month for Arizona real estate closings and median home prices. Even though the real estate market, in fact, turns the corner in January every year, those sales won’t close until February and that data won’t be seen until mid-March.
So now is a good time to indulge your fears about the real estate market. After this, the news will be more upbeat for several months.
The median home price (green line) in metro Phoenix dropped, and I mean dropped like a rock, $9,800 from December to January. I don’t have the data but I’m guessing that was the largest one month drop in the median home price in metro Phoenix since Jack Swilling crossed the Salt.
I will predict that January will be the largest one month decline in the Phoenix median home price that we will see in this cycle and probably my lifetime. [Note: I made a spectacularly wrong prediction 14 months ago so take my predictions for what they’re worth.]
Closings will increase seasonally February through May. Normally, prices buck up too. This year I don’t know. With such strong downward momentum, I wonder if we’ll see much of a winter/spring bump in prices.
The blue line is the number of listed homes sold by month. The total number of sales in January is the lowest sales month since sometime in the 1990’s.
Notice that every year sales go up early in the year and then flatten out, more or less, before declining after the high season. It’s a very predictable pattern. That means by mid-April we’ll probably have a good idea about how the entire year will play out for home sales.
Last month I said, “I don’t see anything to make me think the inventory of homes listed for sale won’t start climbing again in February like it did last year.” And that’s what happened.
Certainly given the intense downward momentum entering 2008, it’s possible we could see price declines this year similar to or larger than those in 2007.
The median home price in metro Phoenix fell from $250,000 in January 2007 to $220,000 in January 2008. That’s a decline of $30,000 or 12% for the year.
The last time the median home price was $220,000 was in April 2005. Now for a little trip down real estate memory lane. Two months earlier in February 2005, the median home price in metro Phoenix was $190,000. That’s right, the median home price increased $30,000 (16%) in 2 months.
“MLS Listings” are measured at one point in time, usually the 15th day of the current month. “Median Price” of homes sold and the total number of home “MLS Sales” are for the entire preceding month.