The overall market continues to deteriorate. If we compare some key indicators with the same time last month and last year we see that:

   1. Active listings are up slightly (1.7%) from June and 11% higher than last year.
   2. Pending listings are down 17% from June and 18% lower than last year.
   3. Listing success rate is down to 63.5% compared with 65.5% last month and 62.7% last year.
   4. Sales price % of list has fallen to 96.07% from 96.22% in June and 96.11% last year.
   5. Days inventory rose from 156 to 159 in June, but was 177 last year.
   6. Months supply rose from 4.3 to 4.7 in the last month but was 4.1 last year.

- We now have a market where supply is roughly equivalent to demand. The period when demand outstripped supply lasted from May 18, 2009 to July 1, 2010.
-The significant danger now is that this trend will continue, and we think this is most likely at the bottom end of the market.
- A piece of good news is that the deterioration in the Greater Phoenix market seems to be less than that reported in most other parts of the US.

Individual cities that show the weakest Cromford Market Index™ readings (as of July 1) include:
    * Maricopa (67)
    * Chandler (85)
    * Cave Creek (88)
    * Sun City West (88)
    * Sun City (91)
    * Queen Creek (91) - (includes San Tan Valley)
    * Gilbert (92)
    * Laveen (94)
    * Scottsdale (95)

The market for lender owned properties has deteriorated the most:
   - Active listings are up 15% over June 3, 2010 and 24% over July 3, 2009.
   - Pending listings are down 17% from June and 39% lower than last year.
   - Days inventory rose from 44 to 53 in the last month and was 41 last year.
   - Months supply rose from 1.4 to 1.8 in the last month and was only 0.9 last year.

Since there are fewer properties going into foreclosure while the rate of trustee sales remains flat, the inventory of pending foreclosures is falling fast. We can see here that the peak (just over 51,000) was reached at the end of 2009 and since March the fall has been accelerating, We now have 42,586 properties in Maricopa County pending foreclosure, down about 17% in six months. This tells us that the foreclosure tsunami is finally starting to flow back out.

The media is once again full of phrases like "collapse", "plummet", or even "carnage". Talk of "mild to moderate deterioration" does not make good headlines, but it is an accurate description of what is currently happening in Greater Phoenix.

We shall have to wait until the effects of the tax credit have worked their way through the market. By the end of August we should be able to confirm whether there is additional underlying weakness in demand and, if there is, examine its possible causes by investigating the locations and price ranges most affected.

© 2010 Cromford Associates LLC

State of the Market
It appears the worst is over, that 2009 will be viewed as the bottoming period for Phoenix area real estate. Not that 2010 is a recovery year, the hemorrhage is over yet the patient is still bleeding. Scottsdale continues to have challenges with excess inventory in mid to higher priced homes, where demand continues to outpaced the supply. ASU report: Scottsdale home prices remain in free fall. Good news... Scottsdale is still selling at bargain prices.

Phoenix
- Sales remained steady with May volume at 9118, relatively same as April
- Distressed sales represented 58.5% of volume, 37% were foreclosures - a downward trend
- Active listings 41,425 declined from April, new listings dropped by 18% from the previous month
- Pending sales were 14,285... 21,511 of total "under contract listings", a decline in the record high yet very strong pipeline activity
- Bank owned listings grew 11% from 5,087 to 5,626; Short Sales/Pre-foreclosure listings stable at 16,347
- Foreclosure sales and Notice of Trustee sales declined, note the comments in "Industry Experts Speak Out"

Scottsdale
- 702 homes sold, relatively the same level over the previous two months. Seasonally, it means a decline in activity
- Distressed sales represent 44% of sales volume
- Active listings 4,003 and growing, a 19% increase over April inventory. Expect further inventory growth in June.
- Pending sales at 913, total of 1,542 listings under contract.
**The result of Scottsdale increased active listings, explosive growth of short sales representing 25% of all listings

New Market Information and Statistics
ARMLS STAT Report from Arizona Multiple Listing Services, Inc. offers additional insight into current market conditions as well as forecasts future price trends (Included in side bar).

CHECK THIS OUT - NetValueCentral chart  - the relationship of owner to owner versus lender home sales. The trend is away from foreclosures. Owner to owner represents traditional sales and short sales. June 2010 data incomplete yet chart shows the pattern/trend of the market.

It appears the worst is over, that 2009 will be viewed as the bottoming period for Phoenix area real estate. Not that 2010 is a recovery year, the hemorrhage is over yet the patient is still bleeding. Scottsdale continues to have challenges with excess inventory in mid to higher priced homes, where demand continues to outpaced the supply.

Industry Experts Speak Out

W. P. Carey School of Business associate professor Jay Butler's latest report shows foreclosures declining. "We're sort of at a break point," Butler said. "Are we now going to see foreclosures decline, or is it simply for other reasons this is just a respite and we're going to see an increase? Because we've not been here before, it's hard to say which fork in the road we're going to take." Report shows Phoenix-area foreclosures declining.

Mike Orr of Cromford Reports
"The end of the REO market is certainly not here yet but in the last few months we have seen a significant drop in the flow of new Notices of Trustee Sales. An increase in canceled Trustee Sales also suggests that the supply of bank-owned properties is starting to dry up and will fall back to more normal levels over the next two to three years. However the situation that creates short sales (negative equity) is here for the foreseeable future...The analysis by price range and of the ZIP codes with the highest penetration by short sales both suggest that short sale pricing is getting increasingly competitive with REOs."

Comments:
Foreclosure activity is declining because more lenders and homeowners are turning to the short sale to solve the "upside-down" problem.
1. Homeowners are educated with utilizing the short sale to avoid foreclosure
2. Lenders are educated, facilitating and support the short sale; forestalling foreclosure actions
3. The worst is over in 2009 and again, will will continue to see a steady stream (not a flood) of foreclosures; unsold short sale properties, strategic defaults, poor job market.

The question for experts to answer: Will demand continue to keep up with supply in the coming months? The tax credit ends July 1 and was that the driving force behind demand?

Signs of stability are beginning to surface, yet market indicators continue to be unpredictable. Basic economic rules seem to not apply and it's more of a guessing game with the experts. Previous predictions have failed:
1. When the Fed's stop buying mortgage-backed securities in March 2010, interest rates will rise. Didn't happen in fact today rates are as low as they have even been in recent history.
2. When the ARM's reset for homeowners in 2009 and 2010, a flood of foreclosures will fill the market. Hasn't happened in fact, new foreclosure noticess are declining. The reason is demand continues strong and short sale properties are gaining popularity.