Each month about this time we look back at the previous month, analyze how pricing has behaved and report on how well our forecasting techniques performed. We also give a forecast for how pricing will move over the next 30 days.
For the monthly period ending August 15, we are currently recording a sales $/SF of $126.73 averaged for all areas and types across the ARMLS database. This is 1.3% lower than the $128.40 we now measure for July 15. Our forecast range was $124.72 to $129.82 with a mid-point of $127.27. Last month’s forecast proved to be fairly accurate, with the midpoint just 54c above the actual result.
On August 15, REO sales across Greater Phoenix (all types) averaged $90.12 per sq. ft. (up 2.1%). Pre-foreclosures and short sales averaged $101.00 (up 8.1%) while normal sales averaged $129.91 (down 1.6%). The market share of normal sales fell slightly over the last 31 days, moving from 90.0% to 89.3% of sales. REOs gained market share from 6.2% to 6.6%. Short sales and pre-foreclosures gained market share from 3.8% to 4.1%.
On August 15 the pending listings for all areas & types showed an average list $/SF of $128.08, 2.9% below the reading for July 15. Among those pending listings we have 81.1% normal, 7.8% in REOs and 11.0% in short sales and pre-foreclosures. The average pricing for pending listings within Greater Phoenix on August 15 in each category was: $135.05 for normal, $91.23 for short sales & pre-foreclosures and $91.29 for REOs. The latter is slightly higher than last month while the other two are lower, far lower in the case of normal listings.
Our mid-point forecast for the average monthly sales $/SF on September 15 is $123.52, which is 2.5% lower than the August 15 reading. We have a 90% confidence that it will fall within ± 2% of this mid point, i.e. in the range $121.05 to $125.99. Our forecast this month is for a fairly large decline in pricing over the next month. Given that our last three forecasts have all proven optimistic it will be interesting to see if this breaks the pattern. Month to month forecasting has been hazardous this year with no clear direction despite considerable volatility from one month to the next. However the large drop in the the average price per square foot for pending listings between July and August strongly suggests weaker sales prices are imminent.
The price range between $125 and $135 per sq. ft. has been a natural resting point after the rapid rise from $78 that occurred since September 2011. With demand remaining weak, we expect the natural range to settle a little lower and lie between $120 and $130 in the next few months.
In the current conditions we expect the strongest pricing of the year to have already occurred between March and June. Pricing is likely to show some weakness during the second half of the year due to the usual seasonal increase in supply and lower sales volumes. Despite the paucity of new supply, it will take a strong recovery in demand to change this expectation and so far we have seen very little to suggest such a recovery is imminent.