Phoenix Real Estate Property Listings continue 7 month decline: May 2011

Phoenix real estate property listings have entered their 7th consecutive month of declines. At 27,075 property listings (seen in red on the chart), Arizona MLS homes/listings are now at a 5 year low point. To give a historical perspective, listings averaged around 25,000 when I first became a Realtor in1999.

Let me make a distinction for anyone who is an avid follower of the Cromford Report (as I am). Mike Orr looks at "active" listings differently than I do. I consider an active MLS property listing to be one that does not have any offers on it. Mike Orr also counts properties that have "contingent"offers on them as part of his active count. In the Arizona MLS such listings are defined as "AWC," or active with contingencies. In today's market AWC generally means that a seller has entered into a short sale agreement and the contingency is whether or not lien holders will approve the short sale. It can also mean the sale is contingent upon a successful home inspection. There are currently about 7,700 property listings in the Arizona MLS that are classified as AWC.

Regardless of whether you subscribe to Mike Orr's philosophy or mine, we will both show a 12,000 property decrease (seen in yellow) over the last 12 months. If you follow the real estate market you know that shadow inventory is the reason for the property listing declines. The banks understand basic economics and realize that if the demand for properties goes up and the supply goes down -- the price will go up. Apparently the banks have figured out that the cost of holding the shadow inventory is less than the losses they will sustain by flooding the market with foreclosures, thereby driving prices down even further than at present.

The chart also illustrates that both the number and percentage of foreclosures is declining (seen in the orange). The number of foreclosures reached a historical high in October 2010 with 20,097 REO homes and real estate short sales. At 11,698, as seen in May 2011, they are at a 20 month low point.

This this brings up two main points: 1.) will prices go up in the short term because of lower inventory and higher demand and 2.) how long can banks hold onto shadow inventory? I believe many investors have voiced their opinions by the increased competition at the trustee sales.

May 2011 chart indicating Phoenix real estate property listings