Residential real estate prices are up 25% since the bottom. What's driving this dramatic V-shaped turnaround?

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

4. 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