When all is said and done, Real Estate 2008 might best be remembered as the year that logic forgot. Because every time you turn around, something happens that makes next to little sense.
We’ll be taking a walking tour of life down the rabbit hole in the near future, most likely next week, but for now let’s look at the absorption rate numbers.
Everyone knows that sales slow precipitously at the end of the year. Add in the dire news from some quarters that openings (accepted contracts) were down in October and the logical assumption is closed sales likewise would be slowing.
So, naturally, the 2,142 closed sales over the preceding 30 days represents a 17% increase over the 1,819 closed sales over the 30 days ending last week.
Sure, why not.
Inventory of single family detached homes in the Phoenix real estate market fell off by about 200 homes and now stands at 38,501. Combine this with the sales and you have an absorption rate of 9.39 months of inventory – roughly speaking, half of what it was a year ago at this time.
For this there’s an easy explanation – bank owned homes were just starting to come on the market in numbers a year ago and as of today the REO inventory for single family homes in Maricopa County stands at 9,675 with 2,142 closed sales over the past 30 days. That shaved about two weeks off the absorption rate, to 4.5 months.
Two oddities of note (there are more, but two will suffice for now):
1) There are many predicting and expecting a flood of foreclosures to hit the market after the first of the year. That still may be true but my question is when did the flow of homes ever stop? If the predictions are based on these barely-noticeable moritoriums on the foreclosure process by some lenders, then we’re looking at more of a gradual increase in the water level, as we’ve had for months, than a tsunami. And for the most part, the market has continued to absorb these additional listings with little trouble.
2) For all the talk of the economy, people still are buying homes. A recent survey seemed to send a shiver down the spine of some because about three-quarters of people surveyed have put their plans to buy on hold. Which means 25 percent haven’t, and we’re seeing these folks still buying, still looking.
There’s still money on the sidelines, kids – withdrawn from the stock market (hopefully, mostly intact) and not likely to return, looking for the next place to land. The financial planners of one of my clients essentially told her that looking at real estate might not be the worst option in an environment where the Dow gains and loses a few percent on any given day.
It’s not the best option for everyone. But for some, it’s a place to park their cash if they can find the right investment. It’s tricky because there are some pitfalls that haven’t existed in several years, but it’s a possibility for many.
Logic would say otherwise. But as we’ll discuss further, logic is on holiday.
Enjoy your Christmas, my friends. Or the continuance of Hanukkah.
[tags]Phoenix real estate, absorption rate[/tags]