Tom Ruff has been tracking metro Phoenix’s housing market through daily analysis of property records and discussions — sometimes heated — with the real-estate industry’s top agents and executives since the 1980s.

Ruff, an analyst with the Information Market, a data provider owned by the Arizona Regional Multiple Listing Service, answered three questions for The Arizona Republic.

Question: Where do you see home prices heading?

Answer: In today’s Phoenix housing market, there is an imbalance between supply and demand. During the past three years, much of the available housing supply has come from bank foreclosures. In April, only 500 homes were foreclosed on and reverted to the bank. The banks will no longer be able to bolster the supply necessary to meet current demand.

This leads us to question where the necessary supply is going to come from. The logical response would be the builders. However, April’s numbers show that there were only 750 newly constructed homes sold in Maricopa County, making it clear the builders will not be able to fill the gap anytime soon. A 10 percent increase in home prices during the next year would not be unreasonable; in fact, it would most likely be a conservative estimate.

Q: How were you able to tell the height of the boom and bottom of the market?

A: I used two diverse methods to figure out when we reached the height of the boom in 2005 and to predict the market bottom in 2011. In 2005-06, our housing metrics were driven by analyzing demand only. To be able to say that I used complex analytics to recognize the peak in 2005 would be great, but honestly, it was a gut feeling based upon the public-records data that we analyzed daily.

After profiling the buyers, their stated intended uses and where they were having the recorded deeds returned, it became apparent there was a vast spike in buyers with California mailing addresses. With this buyer’s profile … we began to question the market.

We began to invest time into improving the way we viewed the housing markets, paying particular attention to monitoring the inventory levels and defining the groups of sales transactions taking place. Not only did we watch the MLS inventories, we also created our own Shadow Inventory, closely monitoring the REO and distressed housing levels. The declining distressed inventories observed were the leading indicator the bottom of the market was approaching. We believed as the distressed inventory fell, and the percentage of normal sales increased, prices had to rise. It was only a question of when.

Q: What’s going on with foreclosures?

A: I believe that the real-estate market is presently transitioning from the highest number of foreclosures in our history to a period where we’ll see the lowest number of foreclosures in our history. We’re going to bypass the point of normal and balanced and jump immediately to extremely low foreclosure rates.

The number of foreclosures, which I define as the homes sold at trustee’s sale, peaked in March 2010 when upwards of 5,000 homes were sold at auction. In April, there were by comparison 900 auctions, an 82 percent drop. With the four years’ trends of stringent loan guidelines, higher-than-normal cash purchases and two years of rapid appreciation, people who have bought homes during the past four years have equity. And with equity comes options.

Reach the reporter at catherine.reagor@arizonarepublic.com.

Great piece Catherine!

Bill  Salvatore

Realty Executives East Valley   Realtor

Direct:   602-999-0952