Trend Chart of the Day: REO Demand & Phoenix Home Prices

August 10, 2011

by Scott Sambucci

1 comment

[08/15/11: Author “told-you-so” update – We saw rising home prices in Phoenix from foreclosure activity much earlier this year.)

From HousingWire: “Rise in REO value cuts Freddie Mac holding expenses by 90%

“The decrease in REO operations expense was primarily driven by an improvement in both REO holding period write-downs and disposition losses as REO fair values stabilized during the second quarter,” Freddie said in its second-quarter earnings report.

There’s demand out there leading to overall market price stability.

Using Phoenix – a REO-laden market – we’ve seen this story before with the tax credit in 2009-10:

"Percent Price Decreased" measures the percentage of on-market sellers that have taken at least one price reduction in the most recent 90-day period. Fewer price reductions result from sellers observing increased demand at their ask price

Phoenix is less seasonal and inventory is constrained compared to recent years, yielding short-term price support:

Ask Prices & Active Inventory since March 2008: Phoenix MSA

When the remaining shadow inventory hits the active market, the tide might change, but for now, there’s a clear indication that short-term demand is supporting prices across the board.

 

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