Statistics of Real Estate-not always what they seem

Read enough about the Phoenix (or elsewhere) housing market, and someone will begin spouting statistics. And while market statistics are important to understand, one should exercise extreme caution in interpreting them or hear other interpretations.

Let's take a look at "market days" (DOM), or "inventory" or "months of supply". Whatever you prefer to call it, is an oft quoted indicator of general market conditions. And, in General, it's not a bad indicator. The supply of homes available for sale is a key component to understand the overall housing market conditions.

It is important to understand a few things though:
Our current market actually consists of three major categories of inventory: Bank/lender 1) possessed homes (also known as REOs). 2) pre/short sale real estate. and 3) "normal" properties (houses that is proprietary investor/owner and not in a State pre).


Real estate is local. And the Phoenix metropolitan area is a great place. Statistics of time or price indices are quoted throughout the Phoenix area, you have to understand that conditions throughout the Valley can vary dramatically. Even within a suburb, conditions may vary from one subdivision to another. Within a single grand master planned Community, conditions may vary from neighborhood to neighborhood.

The supply of homes is a perfect example. The general consensus in the industry of real estate is a six month supply of houses is considered a "balanced market". Less than one month six provides means that are more than a source of six months is an indicator that we are in a market buyer and a seller's market.

Now, if you look at inventory of homes throughout the Phoenix Metro area, there is an offer of 5. 2 month of houses.

If you're a seller, you might be thinking, "Hallelujah! Phoenix is a seller's market! "and if you are a buyer you may be thinking, "crap. I should have bought a House a couple of months ago, when I was a buyer's market and would have had more negotiating power. "

Let's look at the categories of inventory which comprise this number ...

If you extract the data for the creditor only properties property, you will see a very different picture.

Currently, in the Phoenix Metro area, there is only one 1 month. the provision of excluded homes. That indicates a very strong sellers ' market for deleted homes. A close examination of the data shows that the closing inventory is low, sales are above and pending sales (homes under contract but not yet closed) are also above.

OK, now you need to understand why these numbers are what they are. And sometimes the numbers just don't tell the whole story. Nothing in the numbers tell you that some big lenders and Government sponsored entities Fannie Mae and Freddie Mac imposed foreclosures moratoria on that are in the process of being lifted. Nothing in the numbers tell you that there are still a lot of/pre-foreclosure short sale inventory-much of which slips into the lender category property when it does not sell on the open market.

There are almost 12000 homes listed in a sales position. And it would take 15. 2 months to sell all the existing properties of short sale-if not more properties placed on the market.

The simple fact is that no House has a duration of 15 months in a sales position. The lender will end long before the time expires.

And if you're a seller "normal"? Only the guy who owns your House and wants/needs to sell it. You're not in trouble with payments, and you have enough equity to sell at current values and pay your loan (and hopefully Pocket some money on close).

There is an offer of 11. 9 months of "normal" houses. You my seller normal still looking for a strong buyer's market. Yes, sales and pending sales are trending up, but nothing are near where they were last year and the previous year. On average you can expect to have almost a year to sell your House. And guess what? You can also compete with that prevented for House on the street. The seller there is a bank that probably already took shorts, they have no emotional investment in the home, and they've very aggressive pricing to get him out of his books.

The bottom line

Not all statistics are as they appear, nor any stat tell the whole story. Consolidating all types of lists in an area the size of Phoenix metro in a number is usually very misleading. Look closely at all real estate statistics, bearing in mind that the variations in local market segments and can swing wildly (and quickly change). You should try to understand what the housing market is on your site, for your kind of home in your situation. Just keep in mind that it is very easy to generalize and misinterpret the real estate market stats, particularly data that aggregate large areas of completely different property types.

Jay Thompson is a Realtor in Phoenix, Arizona. He is the http://www author of the blog.PhoenixRealEstateGuy.com, a blog about all things real estate of prized widely read. The blog pulls no punches and not sugar coating the facts. It's not your typical blog real estate agent shouting "Now is a great time to buy!"