By Sherry Butler Special to Southeast Valley Ledger
The S&P/Case-Shiller Home Price Index was recently released and showed a gain of all 20 cities tracked by the index. This month we are seeing the latest index that includes sales during the months of April, May and June 2012.
Every city posted a month over month gain. Phoenix comes in at 114.68, which is up 2.5 percent on last month and up 13.9 percent from last year. For the annual change, Phoenix is the best performing of the 20 cities reported, with the closest rival being Minneapolis at 5.7 percent.
Some cities are still showing a decline over the previous 12 months but an improvement on a month to month basis with Detroit (up 6.0 percent), Minneapolis (up 4.8 percent), Chicago (up 4.6 percent), Atlanta (up 4.4 percent) San Francisco (up 2.8 percent), Portland (up 2.5 percent) all showing gains equal or better than Phoenix.
For the second month, all 20 cities showed month-to-month price increases. The associated press release states, the market may have finally turned around.
Queen Creek including the unincorporated county areas referred to as San Tan Valley has a contract ratio of 131, which is a number that measures how hot the market is for that city, according to The Cromford Report.
Normally this would be a respectably high number, but it is actually the lowest reading since April 2011 according to Michael Orr. The balance between supply and demand has changed significantly over the last three months.
Days inventory, another key measure of market balance has increased from a low of 55 on May 3 to 82. This area is a prime example of how pricing can cause such a rebalancing. The average price per square foot for monthly sales in Queen Creek has risen from $51.27 on May 19, 2011 to $74.29 on August 23, 2012, an increase over 45 percent over 15 months.
Such a large movement brings new sellers into the market and discourages buyers. The contract ratio has fallen from a peak of 312 as recently as April 25, 2012, but the current level of 131 should be compared with its value of 8.5 on October 2, 2007. As it stands, 131 is still higher than normal and buyers still exceed sellers at the moment.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 3.55 percent in July from 3.68 percent in June; the rate was 4.55 percent in July 2011; recordkeeping began in 1971.
Lawrence Yun, NAR Chief Economist, says housing affordability conditions are very good. “Mortgage interest rates have been at record lows this year while rents have been rising at faster rates. Combined, these factors are helping to unleash a pent-up demand,” he says. “However, the market is constrained by unnecessary tight lending standards and shrinking inventory supplies, so housing could easily be much stronger without these abnormal frictions.”