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Phoenix Housing Price …

     … Variance Analysis
                Ron Nawrocki
                July 18, 2012
Price Increase Questions

 Prices are up over 25% since the bottom …
  Are all prices up over 25%?
  This rate beats 2004-5 increases … are we
   starting the next bubble?
  What’s driving this dramatic V-shaped
   turnaround?



July 18, 2012
April 2012 Data


                             Are all Price
                              Changes
                               equal?



Source:
Arizona State University


July 18, 2012
July 18, 2012
43%   28%
                            17%
                 6%


                51%         56%




July 18, 2012
Price Variance Analysis

                         Sept‘11     June’12     Change
 Sales - Normal           31.9%       55.7%       23.8 pp
   - Pre-Foreclosure      25.4%       27.7%       2.3 pp
   - Lender Owned         42.7%       16.6%      (26.1) pp
 $/sf - Normal             $102        $119       16.7%
   - Pre-Foreclosure       $73         $77         5.5%
   - Lender Owned          $62         $78        25.8%
 Total change*                                    29.7%

      * Price increase for 9 months = 39.7% annualized
 July 18, 2012
Explanation
    With price increases of 5.5 - 25.8% … how can
     overall increase by 29.7%?
    By holding mix (volume sold) constant – we compute
     Price variance = 17.1%
    By holding price constant – we compute Mix variance
     = 12.6%
    Even if Prices would NOT have changed … Average
     Price would have increased 12.6% as REO’s
     become scarce
    Short Sale Price barely increased = Opportunity

 July 18, 2012
                                          Analyst – Ron Nawrocki
Price Variance Analysis

                               Sept‘11       June’12         Change
     Sales - Normal              31.9%         55.7%         23.8 pp
       - Pre-Foreclosure         25.4%         27.7%          2.3 pp
       - Lender Owned            42.7%         16.6%         (26.1) pp
     $/sf - Normal               $102          $119           16.7%
       - Pre-Foreclosure          $73           $77           5.5%
       - Lender Owned             $62           $78           25.8%
     Total change*                                            29.7%
       - Due to Price                                         17.1%
       - Due to Mix                                           12.6%

          * Price increase for 9 months = 39.7% annualized

 July 18, 2012

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Housing Price Variance

  • 1. Phoenix Housing Price … … Variance Analysis Ron Nawrocki July 18, 2012
  • 2. Price Increase Questions Prices are up over 25% since the bottom …  Are all prices up over 25%?  This rate beats 2004-5 increases … are we starting the next bubble?  What’s driving this dramatic V-shaped turnaround? July 18, 2012
  • 3. April 2012 Data Are all Price Changes equal? Source: Arizona State University July 18, 2012
  • 5. 43% 28% 17% 6% 51% 56% July 18, 2012
  • 6. Price Variance Analysis Sept‘11 June’12 Change Sales - Normal 31.9% 55.7% 23.8 pp - Pre-Foreclosure 25.4% 27.7% 2.3 pp - Lender Owned 42.7% 16.6% (26.1) pp $/sf - Normal $102 $119 16.7% - Pre-Foreclosure $73 $77 5.5% - Lender Owned $62 $78 25.8% Total change* 29.7% * Price increase for 9 months = 39.7% annualized July 18, 2012
  • 7. Explanation  With price increases of 5.5 - 25.8% … how can overall increase by 29.7%?  By holding mix (volume sold) constant – we compute Price variance = 17.1%  By holding price constant – we compute Mix variance = 12.6%  Even if Prices would NOT have changed … Average Price would have increased 12.6% as REO’s become scarce  Short Sale Price barely increased = Opportunity July 18, 2012 Analyst – Ron Nawrocki
  • 8. Price Variance Analysis Sept‘11 June’12 Change Sales - Normal 31.9% 55.7% 23.8 pp - Pre-Foreclosure 25.4% 27.7% 2.3 pp - Lender Owned 42.7% 16.6% (26.1) pp $/sf - Normal $102 $119 16.7% - Pre-Foreclosure $73 $77 5.5% - Lender Owned $62 $78 25.8% Total change* 29.7% - Due to Price 17.1% - Due to Mix 12.6% * Price increase for 9 months = 39.7% annualized July 18, 2012