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Good report and seems reasonable to me. No big news here. Like most investors have indicated, the bottom is not here but probably close. Whenever the market does pick up steam again who is really going to care if you bought a great deal for $40 per sq.ft. vs. $50. What is important is to buy the best property for the lowest possible price. The cost to build these houses is higher than both figures and that is what you have to consider in the long run.
Good report and seems reasonable to me. No big news here. Like most investors have indicated, the bottom is not here but probably close. Whenever the market does pick up steam again who is really going to care if you bought a great deal for $40 per sq.ft. vs. $50. What is important is to buy the best property for the lowest possible price. The cost to build these houses is higher than both figures and that is what you have to consider in the long run.
. I assume you are referring to this point in that link:
"The predicted median sales price for December should remain steady at $115,000, rise in January 2011 to $118,000 and fall dramatically in February to $100,000. The February’s prediction is the least reliable at this point because it is based on lower number of closings scheduled ninety days into the future."
So you think this it seems "reasonable" that the median sales price is going to drop > 13% in two months???
. I assume you are referring to this point in that link:
"The predicted median sales price for December should remain steady at $115,000, rise in January 2011 to $118,000 and fall dramatically in February to $100,000. The February’s prediction is the least reliable at this point because it is based on lower number of closings scheduled ninety days into the future."
So you think this it seems "reasonable" that the median sales price is going to drop > 13% in two months???
No-way-no-how will it drop 13%!
This "index" is far from a reliable indicator. It has not been terribly accurate in general and has been gawd awful on the longer range "predictions". It is sort of like saying "based on no data, we predict...". Pretty flaky, but it gives housing pessimists something to cling to while ignoring improving economic data.
. I assume you are referring to this point in that link:
"The predicted median sales price for December should remain steady at $115,000, rise in January 2011 to $118,000 and fall dramatically in February to $100,000. The February’s prediction is the least reliable at this point because it is based on lower number of closings scheduled ninety days into the future."
So you think this it seems "reasonable" that the median sales price is going to drop > 13% in two months???
No-way-no-how will it drop 13%!
We'll have data for February at the end of that month so lets post the data here and we'll see what the prices actually end up being. I doubt you'll see a 13% drop in two months. I might expect a 5% drop though. As I've said before we're playing in the bottom and there will be ups and downs all year long. Like most investors we're in it for the long haul so who really cares if you end up buying a bit higher than the "low" actually ends up being. At the end of the day investors are going to do quite well in Arizona. Just a side note, now that Arizona threw all the Mexicans out we'll see home prices increase because you're not going to get Americans to build houses in 115 degree weather. If the locals do build homes they won't be cheap.
We'll have data for February at the end of that month so lets post the data here and we'll see what the prices actually end up being..
So do we really think we have to wait till February to see how that model is doing??
From July: http://www.armls.com/Libraries/STAT/...2010.sflb.ashx: “The Median sales price shows more volatility rising fractionally in July and then falling back a bit in August (to $125K) and more in September before recovering in October.”
From August: http://www.armls.com/Libraries/STAT/...2010.sflb.ashx : “The Median sales price shows a counter trend, falling fractionally (only $100) in August and significantly (-3.9%) in September, then recovering strongly October (2.1%) and November (2.0) to finish right where it started four months earlier.”
From Sept: (Cannot find).
From October:http://www.armls.com/Libraries/STAT/...2010.sflb.ashx :
“The Median Sales Price in October is expected to increase only slightly from September ($119,500) to $120,000. November Median Sales Price is predicted to increase to $127,000, only to fall in December to $110,000, and then rally to $115,000 in January.”
From November http://www.armls.com/Libraries/STAT/...2010.sflb.ashx:"The October PPI predicts Median Sales Price to remain relatively unchanged in November at $120,000, fall in December to $117,000, rise in January back to $120,000, only to take a 12% decrease in February to $105,000. This is a typical bounce-around-the-bottom pattern typical of fragile markets reaching for recovery. Note that predictions have less reliability the further into the future they go."
And the ARMLS guy or gal who wrote this November as a matter of a fact "This is a typical bounce-around-the-bottom pattern". Oh I see, a 12% drop in a MONTH is some sort of "typical bounce pattern". A 12 percent drop in one month is "typical"!!!!!!
He was off on all of his predictions yet was attempting to pretend that his "proprietary model" was worth something. Now to me, it's as obvious as possible. To others who are statistically challenged or simply closed minded, I suppose they are going to digest this as gospel.
Here is the problem with all of this. A person who isn't good with numbers or cannot dig into statistics might actually believe these guys can predict something a measly three months out. And my above quotes show that they cannot. Not even close! I'm not a gambler. But I'd lay heavy odds that this model is so deeply flawed that it's laughable. If for one moment I thought the market was going to do down even by 3% by February I'd wait. That's $6K on a $200K home (that I don't "need" till over a year from now). And how about a 13% drop as predicted by the December model?? Does that mean if I wait to buy that $200K (in January) for $174K in February?? A $26K drop on one single month!! My gut feel is it will be UP in February because of the economy and because of the traditional seasonal pattern. I suspect their model doesn't account for those two extremely important variables.
So my question is, why are we bothering putting ANY stock into this "proprietary" ARMLS prediction tool? IMHO it's JUNK! Garbage! If I was them, I would pull their flawed model before they lose additional credibility. The right approach is to look at their raw data and ignore their predictions. IMHO, the most accurate tool is the Cromford report.
Last edited by MN-Born-n-Raised; 12-24-2010 at 06:36 AM..
So do we really think we have to wait till February to see how that model is doing??
From July: http://www.armls.com/Libraries/STAT/...2010.sflb.ashx: “The Median sales price shows more volatility rising fractionally in July and then falling back a bit in August (to $125K) and more in September before recovering in October.”
From August: http://www.armls.com/Libraries/STAT/...2010.sflb.ashx : “The Median sales price shows a counter trend, falling fractionally (only $100) in August and significantly (-3.9%) in September, then recovering strongly October (2.1%) and November (2.0) to finish right where it started four months earlier.”
From Sept: (Cannot find).
From October:http://www.armls.com/Libraries/STAT/...2010.sflb.ashx :
“The Median Sales Price in October is expected to increase only slightly from September ($119,500) to $120,000. November Median Sales Price is predicted to increase to $127,000, only to fall in December to $110,000, and then rally to $115,000 in January.”
From November http://www.armls.com/Libraries/STAT/...2010.sflb.ashx:"The October PPI predicts Median Sales Price to remain relatively unchanged in November at $120,000, fall in December to $117,000, rise in January back to $120,000, only to take a 12% decrease in February to $105,000. This is a typical bounce-around-the-bottom pattern typical of fragile markets reaching for recovery. Note that predictions have less reliability the further into the future they go."
And the ARMLS guy or gal who wrote this November as a matter of a fact "This is a typical bounce-around-the-bottom pattern". Oh I see, a 12% drop in a MONTH is some sort of "typical bounce pattern". A 12 percent drop in one month is "typical"!!!!!!
He was off on all of his predictions yet was attempting to pretend that his "proprietary model" was worth something. Now to me, it's as obvious as possible. To others who are statistically challenged or simply closed minded, I suppose they are going to digest this as gospel.
Here is the problem with all of this. A person who isn't good with numbers or cannot dig into statistics might actually believe these guys can predict something a measly three months out. And my above quotes show that they cannot. Not even close! I'm not a gambler. But I'd lay heavy odds that this model is so deeply flawed that it's laughable. If for one moment I thought the market was going to do down even by 3% by February I'd wait. That's $6K on a $200K home (that I don't "need" till over a year from now). My gut feel is it will be UP in February because of the economy and because of the traditional seasonal pattern. I suspect their model doesn't account for those two extremely important variables.
So my question is, why are we bothering putting ANY stock into this "proprietary" ARMLS prediction tool? IMHO it's JUNK! Garbage! If I was them, I would pull their flawed model before they lose additional credibility. The right approach is to look at their raw data and ignore their predictions. IMHO, the most accurate tool is the Cromford report.
And it makes more sense to look at $/sf than median for watching market trends, although I'll readily admit that is far from perfect as well. Really, trying to distill the complex housing market into a single metric is fraught with peril.
My own preference is none of the direct measures but looking at the macroeconomic indicators that influence the economy and, eventually, housing prices. These are strong, stronger than they have been in several years. Robust retail this Christmas suggests that even the timid consumer is regaining confidence. This is crucial to housing recovery. The unknowns remain unknown, of course, but based on economic trends in the larger economy, the bottom is in and price recovery is baked in for next year.
(I'm a little concerned about energy costs, though)
Good report and seems reasonable to me. No big news here. Like most investors have indicated, the bottom is not here but probably close. Whenever the market does pick up steam again who is really going to care if you bought a great deal for $40 per sq.ft. vs. $50. What is important is to buy the best property for the lowest possible price. The cost to build these houses is higher than both figures and that is what you have to consider in the long run.
I can understand some of what you are saying. However given the choice, most people will choose to wait a few months if it means saving 20% or more on a major purchase. Most people don't want to throw away $25,000+ or pay off a loan with this amount. It does matter when prices are falling dramatically.
Following the declines, the only way in the long run there will be any appreciation is if wages appreciate as well. With Phoenix losing population since 2007 (check the recent census), and wages and unemployment at 2000 or lower levels, this is what housing levels will be based off of.
Following the declines, the only way in the long run there will be any appreciation is if wages appreciate as well. With Phoenix losing population since 2007 (check the recent census), and wages and unemployment at 2000 or lower levels, this is what housing levels will be based off of.
Well, EnicAirConcerns, (as usual) if you'd actually read a little about it, instead of spouting off more non-sense, you would have learned that the population of Phoenix has been growing. What you are actually referring to is the "estimated" populations that the census bureau publishes every year in-between the once-a-decade censuses. They were using a flawed model for Phoenix metro (and some other cities) in which they counted homes built that were not actually occupied as "people" in their estimation. So the population estimates from roughly 2005-2009 were not accurate.
However, the data from the 2010 census shows that Phoenix continues to grow at a fast pace (2.5x the national average), just not as fast as the "estimate populations" from 2005-2009 were indicating. Census to let Arizona reset flawed data Census: Arizona population up 25%, state gains house seat | Phoenix Business Journal
Quote:
Originally Posted by EnicAZ
I can understand some of what you are saying. However given the choice, most people will choose to wait a few months if it means saving 20% or more on a major purchase. Most people don't want to throw away $25,000+ or pay off a loan with this amount. It does matter when prices are falling dramatically.
I think it's possible that homes at the top end of the market (say, $500,000+) could drop 20% "in a few months" (because the top-end hasn't hit bottom yet--it was the last to begin to fall, it will be the last to recover), but homes at the bottom or even middle will not fall anywhere near that amount, and are just as likely to gain in value. So, depending on what price range and city one is looking at, a home could actually increase in value 4%-5% "in a few months".
Not to mention potential climbing interest rates....
Focusing on short term price movements and ignoring longer term supply/demand trends can lead one into the same trap that caught the speculators in 2005-2006.
Pending Listings are simply a rough guide as to the number of Sales that may occur during the next 30-60 days. (A very short term "number of Sales indicator")
Most escrows will close within 60 days of going Pending. Many Pending transactions fall out of escrow.
Short Sales are typically placed in AWC-1 after seller signs contract, and in Pending after the short sale is approved by the lenders. Then the escrow closes within 30-60 days.
I still don't understand how ARMLS is predicting prices from the Pending Listings.
Forecasting price movements in housing should be done using a lot of data including but not limited to:
National economic factors
Local economic factors
Consumer Confidence
Employment rate changes
Supply and Demand
Pending Listings
With Pending Listings, one should factor in Seasonality
Contract Ratio
Supply and Demand (Inventory and Sales) will be a short term (about a year) leading indicator. It may take a year or more of increasing sales and declining inventory for any appreciable price movement.
Contract Ratio is the ratio of Closed sales to Listings.
30 is a normal market as used by the Cromford Report
Below 30 is a declining market.
Below 20 is a Buyers market.
Above 30 is an improving market
Above 40 is a Sellers market
The current ratio is 41.6 and has been rising since September
Cromford Market Index (CMI) uses trends in pending, active and sold listings compared with historical data over the previous four years.
100 is a Balanced market
Below 100 is a Buyers market
Above 100 is a Sellers market
In September the CMI was 85.3
As of Dec 23 the CMI has increased steadily to 97.1
Supply and Demand always move in advance of price.
At some point, Price will follow.
In April 2005 the CMI peaked at 312.0 and began a steep decline.
This means that the supply had exceeded the demand.
Prices kept increasing, and peaked at $265,000 median price in June 2006.
Prices remained above $250,000 until August 2007.
August 2007 the CMI had declined to 32.6 with about a 14 month supply of inventory. (57,300 homes)
The supply peaked in Feb 2008 at 20.3 months
As of Dec 19 2010 the inventory is 6.4 months
6 months is considered a balanced market
Other things to consider:
Many homes are priced below the cost to build
Prices today are about 28% below the price they should be at when factoring in inflation since 2001
The Case-Schiller chart graphically shows the undershoot, as well as the 2005 overshoot of prices
Interest rates are at a historical low, which is making it more affordable for many people
The low prices are making it more affordable for Canadian and northern US states buyers to buy AZ winter vacation homes
Investors are still buying. More buy/hold/rent investors have entered the market to hold and rent, looking at a 5 to 10 year investment for appreciation. (These are not the speculators of 2005)
Some brokers are setting up companies in California and Arizona to market AZ properties to CA investors. One CA broker was in my recent AZ Broker class getting his AZ Broker license for that purpose.
There is pent up demand by people who have moved to AZ ahead of selling their homes in the north, and by people who are waiting in their northern homes until they sell.
The homes in the north don't sell well in the winter, so in the spring after those people sell their homes they will be buying here.
In my opinion, it's important to keep track of all the data that can affect real estate prices in the short term, and especially in the longer term. If one is not watching the long term trends by using the lessons learned from 2005, then one will miss some very important signals.
There are many favorable factors operating today, including the Contract Ratio and the CMI. However, they have not set up a long term trend. I still see them as still skirting along the bottom as they have been since April 2009.
If I see the CMI get above 100 and stay on a gradual incline, then I'll get more excited.
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. I assume you are referring to this point in that link:
If I was them, I would pull their flawed model before they lose additional credibility. The right approach is to look at their raw data and ignore their predictions. IMHO, the most accurate tool is the Cromford report.
