Wednesday, September 19, 2007

Desert Ridge Year-to-Date Analysis

When looking at statistical analysis for anything it's always good to have some perspective. If I tell you that in the month of August 2007 over 4,300 homes had been sold, it might not mean a whole lot to you if you don't know what the numbers were the month before or how many sold in the same month in years prior. Being able to compare numbers from this year with the numbers from previous years enables us to gain some perspective and come to some kind of conclusions.

That is what I have done for the Desert Ridge area. I've looked at a couple of different aspects of the market that will show how this year is comparing so far to previous years. We all know that 2004 – 2005 were boom markets and we will be able to see that in my analysis. We also know that 2006 – 2007 have been down markets, and you'll be able to see this as well. The four items that I looked at were: 1. number of closed transactions year to date through August for the years 2003 – 2007, 2. the average days on market for those closed transactions, 3. the average price per square foot of the closed transactions, and 4. the list price to sales price ratio.

First, here is the number of closed transaction for each of the years 2003 – 2007 year-to-date through August. This one actually surprised me a little bit. I expected to see closed numbers for 2007 to be less than previous years, but that isn't the case. As you can see there have been 207 closed transactions in the Desert Ridge area so far this year, compared to 164 last year, and even more surprising, 177 in '04 and 195 in '05. I certainly didn't expect the numbers from this year to be more than our two boom years. I dug a little bit deeper and found that 27 of the 207 sales so far this year are new construction. The condominium development at 56th St. & Deer Valley, Toscana at Desert Ridge accounted for 19 of the 27, 2 were out of the Villages at Aviano condominium community, and the other 6 were newly built single family detached homes in Aviano as well. With new construction still taking place in the Desert Ridge area we should continue to see increased sales numbers each year, barring any additional downturn in our market of course.

Second, I wanted to look at the average days on market (DOM) for the closed transactions in each of the previous years. This one turned out just how I had expected. Homes are taking much longer to sell simply due to the fact that there is so much inventory available.

I also wanted to look at the average price per square foot. As you can see it peaked in 2005 and then has gradually been decreasing in '06 and '07. For the Desert Ridge area the average price per square foot is up over 22% from 2004, which is better than the average of 5% per year in the Phoenix area.

Lastly I wanted to look at the list price to sales price ratio. This shows us that sellers have been much more willing to negotiate with their price. Again, no surprise here. I predict that over the next few months the list price to sales price ratio will hold steady if not increase slightly. The reason for this is that many sellers are beginning to realize that you must price a home very competitively in order to stand out among the competition, thus starting the price negotiations at a much more reasonable number. If a buyer makes an offer on a home that is already priced at or below the last comparable sale they are much less likely to low ball the seller. Even at the list price in this scenario, the buyer is seeing some value in a home that it is priced below the last comparable sale.

Now you can see just how 2007 is comparing so far this year to the years previous. I'll continue to analyze all of the data as it comes in and publish follow-up posts as needed.

-Steve Nicks

[tags] Desert Ridge real estate, market analysis, Phoenix real estate [/tags]