The Cromford Report – Daily Observations April 2016

    April 30 – If we check out the weekly dollar volume chart today we see a very impressive spike with the highest total since April 2006. As unusually large as $2.687 billion is for a monthly dollar volume, we must remember that the month we are measuring on April 30 contains two end-of month monster days. This is because the last day of April falls on a Saturday. The irregular nature of the calendar generates a number of these anomalies where we sometimes get two and sometimes zero month end days inside the measured period. Having said that, the previous short term record in April 2006 benefitted from the same effect. The real record high occurred in June 2005 when we saw $3,339 billion dollars spent through ARMLS. This peak was not caused by an anomaly but represented the height of buying fueled by extremely loose lending standards. Given that a large amount of housing was purchased outside of ARMLS in 2005, this peak is really only a fraction of total spent that month.

    April 29 – After 4 full weeks in the second quarter we see that new listings are still arriving faster than normal. The count so far this quarter is 9.4% higher than last year and 8.7% above the 2014 level. The price ranges with the highest increase in new listings compared with last year are:

    1. $400,000 to $499,000 – up 19% from 650 to 772
    2. $225,000 to $249,999 – up 16% from 773 to 898
    3. $500,000 to $599,999 – up 14% from 348 to 395
    4. $175,000 to $199,999 – up 12% from 881 to 989
    5. $350,000 to $399,999 – up 11% from 611 to 681

    The extra supply below $200,000 will be welcomed by buyers, but it is not such a happy picture below $175,000

    1. Up to $99,999 – down 36% from 632 to 405
    2. $100,000 to $124,999 – down 34% from 465 to 306
    3. $125,000 to $149,999 – down 28% from 864 to 619
    4. $2,000,000 to $2,999,999 – down 17% from 52 to 43
    5. $1,500,000 to $1,999,999 – down 12% from 60 to 53

    The luxury market between $1.5M and $3M needs less supply, so the fall in new listings compared to last year is good news for sellers. The huge fall in supply under $175,000 is even worse than it looks for buyers in this range because we were already in a very weak supply situation last year.

    April 28 – We are taking another look at how the Cromford® Market Index has fared in the single family markets of our largest 17 cities.

    We see 12 cities with improved prospects for sellers compared with a month earlier and 7 that have deteriorated. Three of the latter are cities that have appeared weak for some time: Cave Creek, Fountain Hills and Paradise Valley, all dependent to some extent on the over-supplied luxury sector. To these we add a couple of Southeast Valley cities, Mesa & Chandler, in which the market is still very favorable to sellers but not quite as much as in March.

    Meanwhile the West Valley goes from strength to strength with the Southwest getting its turn in the spotlight. The top gainers since last month are:

    1. Buckeye – up 18%
    2. Goodyear – up 13%
    3. Avondale – up 10%

    April 27 – There are many different ways to measure the size of a real estate company. Taking stock of who has the most valuable active listings in Maricopa County, here are the standings as of yesterday:

    Rank Company Broker Total Price of Maricopa County Homes Listed for Sale on ARMLS Market Share by Listed $
    1 Russ Lyon Sotheby’s International Realty Deems Dickinson $1,633M 13.5%
    2 HomeSmart Trudy Moore $970M 8.0%
    3 Realty ONE Group Jim Sexton $705M 5.8%
    4 Realty Executives Gerry Russell $599M 4.9%
    5 Berkshire Hathaway Home Services Charles McLean $589M 4.9%
    6 Coldwell Banker Martha Appel $486M 4.0%
    7 West USA Realty Dale Hillard $388M 3.2%
    8 Launch Real Estate Suzanne Johnson $328M 2.7%
    9 RE/MAX Fine Properties Sandy Karpen $256M 2.1%
    10 Walt Danley Group Thomas Snyder $226M 1.9%
    11 RE/MAX Excalibur Gary Greenacre $209M 1.7%
    12 DPR Realty Matthew Deuitch $174M 1.4%
    13 Silverleaf Realty Mike Sweeney $146M 1.2%
    14 Keller Williams Arizona Realty Jim Dunning $144M 1.2%
    15 RE/MAX Platinum Living Jay Macklin $135M 1.1%
    16 West USA Realty Revelation Angela Fazio $134M 1.1%
    17 My Home Group Jereme Kleven $130M 1.1%
    18 Keller William Realty Phoenix Michelle Reed $113M 0.9%
    19 Keller Williams East Valley Shane Dodd $104M 0.9%
    20 North & Co. Michele Williamson $82M 0.7%

    There are another 1,473 companies with active listings, but the top 20 represent about 63% of active listings by total dollar value. The top 100 represent 81%.

    We plan to look at company market share in different dimension in future onservations.

    April 26 – The latest S&P/Case-Shiller® Home Price Index® numbers came out this morning, covering sales that closed between December 2015 and February 2016. The national number showed a very modest change month to month of 0.20% and a more substantial year over year change of 5.29%. The gains overall in the last several months have been very slight , only 0.27% in total over a period of 6 months. This unimpressive advance, however, was still higher than the change in the Consumer Price Index between the same period (August to February), which declined 0.5%. During the 6 months before that, the HPI jumped by 5.0% while the CPI increased by 1.5%.

    Over the past year the 20 metro areas reported by Case-Shiller rank as follows:

    1. Portland 11.9%
    2. Seattle 11.0%
    3. Denver 9.7%
    4. San Francisco 9.3%
    5. Dallas 9.0%
    6. Tampa 7.8%
    7. Los Angeles 6.8%
    8. Detroit 6.5%
    9. Las Vegas 6.4%
    10. San Diego 6.4%
    11. Miami 6.2%
    12. Atlanta 6.1%
    13. Phoenix 6.0%
    14. Charlotte 4.2%
    15. Minneapolis 4.0%
    16. Boston 3.7%
    17. Cleveland 3.6%
    18. New York 2.1%
    19. Chicago 1.8%
    20. Washington DC 1.4%

    The west coast continues to appreciate the fastest, with Denver also very strong. Phoenix is in the middle of this pack of 20, but beat the overall average for the USA.

    When we look at the month to month change we see:

    1. San Francisco 1.06%
    2. Seattle 1.06%
    3. Denver 0.94%
    4. Portland 0.75%
    5. Los Angeles 0.70%
    6. Tampa 0.59%
    7. Dallas 0.52%
    8. Atlanta 0.37%
    9. Charlotte 0.35%
    10. Phoenix 0.27%
    11. Las Vegas 0.21%
    12. Detroit 0.10%
    13. Miami 0.08%
    14. San Diego 0.06%
    15. Boston -0.08%
    16. Washington DC -0.20%
    17. Chicago -0.31%
    18. Minneapolis -0.44%
    19. New York -0.47%
    20. Cleveland -0.60%

    Here the strength of the west coast is even more obvious compared to the declines of the east coast and upper mid west. Phoenix is right in the middle of the pack once again.

    You can see both the long term and short trends in all 20 of the major metro areas here.

    April 25 – Comparing sales revenue for the the first quarter, we see a generally positive picture for 2016 over 2015. The following is for both single family and townhouse/condo sales:

    Below $150,000 sales fell due to a lack of supply, not a lack of demand. Between $1 million and $3 million the comparison is not so great, but it is hardly weak. The problem in the luxury market is not lack of demand but excessive supply. In fact above $3 million we saw very strong growth in sales revenue. Throughout the mid-range from $150,000 to $600,000, the picture looks very rosy with all segments growing by at least double figures and one ($250,000 to $275,000) growing by almost a third..

    April 24 – The always helpful Jim Belfiore has responded (on a Sunday too) and confirmed that the Census Bureau permit numbers for February in the downloaded text file are Year To Date. So here is the information we have for February:

    The total number of single family permits issued in February 2016 for Maricopa & Pinal counties is 1,405. This is 7 larger than the 1,398 shown for the Phoenix-Mesa-Scottsdale metro area, but it is not clear if part of these 2 counties does not count as part of the metro area, or if there has been a small clerical error. The total is up 37% from February 2015. It was up 30% for the whole of Arizona, which means it was up only 12% for the 13 counties outside of Maricopa and Pinal.

    The cities ranked as follows in February:

    1. Phoenix 170
    2. Mesa 158
    3. Gilbert 149
    4. Peoria 129
    5. Unincorporated Pinal County 122 (mainly San Tan Valley)
    6. Chandler 105
    7. Unincorporated Maricopa County 96
    8. Buckeye 91
    9. Queen Creek 84
    10. Scottsdale 70

    Gilbert seems to have lost the top spot that it held for several years, but the Southeast Valley as a whole is very strong with 4 cities in the top 10. Outside of Maricopa & Pinal counties, the strongest city for permits was Marana with 60.

    The 12 month average for Maricopa & Pinal counties has increased to 17,508, the highest figure since April 2008.

    April 23 – The Census Bureau is still struggling to repair its broken permit database and in the meantime they are making text files available. The numbers in this text file for February are so colossal I think they may have combined January and February together. I am checking with Jim Belfiore to see what he has for February and will publish the permit data as soon as I can confirm the data released by the Census Bureau is accurate.

    April 22 – The Ellie Mae Origination Insight Report shows that the average time to close a loan has fallen back in March 2016 to the same level as a year ago. This means we can safely assume the delay because of TRID are now behind us. On average, purchase loans take 3 to 4 days longer than refinance loans. VA loans typically take about 4 days longer than FHA or convention loans.

    April 21 – The Cromford® Market Index for the market as a whole appears to be stuck in a rut around 130 to 131. However there is much more action when we look at the single family market in the largest 17 cities (by dollar volume).

    This is a positive picture overall and we see very favorable trends for sellers in the least expensive cities, particularly the Southwest Valley and Pinal County:

    1. Goodyear – up 15%
    2. Buckeye – up 14%
    3. Maricopa – up 11% (but flattening out in the last week)
    4. Avondale – up 10%

    We see unfavorable trends for sellers in the most expensive cities, especially Paradise Valley, Fountain Hills and Cave Creek. North Scottsdale is also doing poorly due to excessive inventory levels, but is balanced by Central and South Scottsdale, both of which are enjoying strong demand and relatively weak supply. Hence Scottsdale as a whole has been able to generate a small improvement of 2% over the last month.

    Phoenix, Mesa, Chandler and Gilbert would all see higher rises in their CMI if they were not being dragged down by their luxury markets. For example Las Sendas and the Citrus Sub Area are having a negative effect on the figures for the City of Mesa while the Biltmore Distinct, Ahwatukee Foothills and Northeast Phoenix are affecting the City of Phoenix’s statistics negatively. Tempe too is being dragged down by its more expensive southern area (85284).

    It is all about supply or the lack of it. Demand is pretty good across all segments. The luxury segment has far too much supply and the affordable end of the market has far too little. The mid-range is the Goldilocks segment with just about the right amount for market balance.

    April 20 – For the Northeast Valley we see three very strong ZIP codes for single family appreciation between 1Q 2015 and 1Q 2016:

    1. Scottsdale 85251 – 19%
    2. Scottsdale 85257 – 17%
    3. Carefree 85377 – 17%

    The following were the weakest areas by the same measurement:

    1. Scottsdale 85266 – down 9%
    2. Scottsdale 85262 – down 3%
    3. Rio Verde 85263 – down 2%
    4. Cave Creek 85331 – down 1%
    5. Paradise valley 85253 – flat

    April 19 – In Phoenix and the North Valley there are a lot of ZIP codes showing very strong appreciation for single family homes when we compare 1Q 2016 with 1Q 2015:

    1. Phoenix 85031 – 28%
    2. Phoenix 85040 – 27%
    3. Phoenix 85033 – 24%
    4. Phoenix 85019 – 23%
    5. Phoenix 85008 – 23%
    6. Phoenix 85014 – 20%
    7. New River 85087 – 19%
    8. Phoenix 85009 – 18%
    9. Phoenix 85017 – 18%
    10. Phoenix 84042 – 18%

    The majority of these are relatively inexpensive ZIP codes, though 85008, 85014, 85087 and 85042 are all over $100 per sq. ft.

    All is not sweetness and light however. We see negative appreciation in 3 ZIP codes:

    1. Phoenix 85012 – down 5%
    2. Phoenix 85016 – down 3%
    3. Phoenix 85028 – down 2%

    While these are 3 of the most expensive locations in Phoenix, there are other expensive locations that saw good appreciation during the same period, namely:

    1. Phoenix 85020 – 14%
    2. Phoenix 85007 – 13%
    3. Phoenix 85003 – 13%
    4. Phoenix 85013 – 13%
    5. Phoenix 85018 – 9%
    6. Phoenix 85021 – 9%

    The market is getting very complicated with most segments advancing strongly while some retreat.

    April 18 – In the Southeast Valley we see the following high appreciation areas for single family homes comparing 1Q 2016 with 1Q 2015:

    1. Tempe 85281 – 16%
    2. Tempe 85283 – 16%
    3. Mesa 85201 – 15%
    4. Mesa 85204 – 13%
    5. Mesa 85205 – 12%
    6. Mesa 85208 – 12%
    7. Chandler 85224 – 12%
    8. Chandler 85225 – 10%
    9. Mesa 85210 – 10%
    10. Mesa 85202 – 10%

    While these are not quite as impressive as the West Valley areas we looked at yesterday, they are well above the valley average. Notice that these are mostly the older parts of Mesa, Chandler and Tempe with relatively little new construction.

    The worst performing ZIP codes for appreciation in the Southeast Valley are among the more expensive areas:

    1. Mesa 85207 – down 5%
    2. Phoenix 85045 – down 2%
    3. Tempe 85284 – down 1%
    4. Phoenix 85048 – flat
    5. Mesa 85215 – flat

    April 17 – In the West Valley we some impressive appreciation numbers when comparing 1Q 2016 with 1Q 2015. For the single family market the top ZIP codes were:

    1. Tonopah 85354 – 27%
    2. Glendale 85301 – 23%
    3. Youngtown 85363 – 21%
    4. Wittmann – 20%
    5. Sun City 85373 – 18%
    6. Glendale 85307 – 18%
    7. Sun City 85351 – 15%
    8. El Mirage 85335 – 15%
    9. Glendale 85303 – 14%
    10. Tolleson 85353 -13%

    However when we look exclusively at homes priced over $500,000, the picture has turned far more negative in the last month. First quarter sales are down 14% while active listings are up 24%. This means the situation for the, admittedly small, luxury market in the West Valley is now favoring buyers. The average price per sq. ft. for sales of homes over $500,000 has dropped 4% from $172 to $165 over the last 12 months..

    April 16 – While the low end of the market labors under weak supply conditions and the mid range continues to look strong, the upper end of the market has got a fair assortment of trouble spots. If we segment by price among the primary luxury areas of the valley, we see the following:

    A. $500K to $1M

    Supply is up 19% compared to April 2015 while sales during the first quarter were up a strong 16%. Despite the increase in sales the additional inventory is forcing sellers to agree to weaker pricing. The average price per square foot for first quarter sales was down 2.4% from $198 to $194 per sq. ft. compared with 1Q 2015.

    B. $1M to $2M

    Supply is up 18% while sales during the first quarter were up 9%. Despite this imbalance sellers seem to have more backbone in this price range and have eked out a 2.1% gain from $283 to $288 per sq. ft. between 1Q 2015 and 1Q 2016.

    C. Over $2M

    Supply is 7% higher than last year while first quarter sales were up 15%. This is the best of the three segments for sellers and they achieved a 2.5% gain from $426 to $437 per sq. ft. between 1Q 2015 and 1Q 2016.

    Since segment A is by far the largest in terms of unit sales, the overall appreciation for homes over $500,000 was an insipid -0.5% between 1Q 2015 and 1Q 2016.

    Note that all of the above numbers are for single family homes only.

    Based on 1Q 2015 to 1Q 2016 comparisons, the weakest ZIP codes for luxury price trends are currently 85016, 85048, 85142, 85207, 85213, 85262, 85266, 85286 and 85383.

    The strongest ZIP codes for luxury price trends are currently 85018, 85020, 85248, 85251, 85254, 86255, 85258, 85259, 85268, 85284 and 85377.

    April 15 – It is becoming clear that a lot of owners of re-sale homes over $500,000 are getting into a selling mood. In Maricopa County we have 11% more active listings over $500,000 than we had this time last (excluding new homes).

    I wondered if this increase in selling is because of

    • lifestyle changes, or
    • changes in investment outlook

    Remote owners will tend to look on their homes as investments. Owner-occupiers tend to regard their homes as where they live (what economists call shelter).

    I found that the number of remote owners who have their homes listed for sale is almost exactly the same as last year. However the owner-occupiers have increased their listings by 18%.

    This suggests that the growing motivation for listing a home for sale is some kind of lifestyle change, not a change in investment outlook. A lot of the owners of these higher priced homes are baby boomers. There are at least two effects which I think may be causing them to have more homes listed for sale:

    • empty nest downsizing
    • illness or death (moving in with relatives or leaving the home to beneficiaries)

    It is very hard to obtain hard numbers for these lifestyle changes, but if any subscribers have concrete examples to support (or disprove) my theory I would love to hear from them.

    April 14 – The worst areas for price appreciation at the moment are almost all at the most expensive end of the market. When we refer to the city ranking table, we see the following at the top:

    1. Paradise Valley +1.9%
    2. Carefree -0.9%
    3. Scottsdale +1.9%
    4. Fountain Hills -0.7%
    5. Cave Creek -0.3%
    6. Rio Verde +1.9%

    These locations, the six most expensive places in the Greater Phoenix area, all show lower appreciation than any of the other cities with 2 exceptions in Pinal County:

    1. Gold Canyon -3.7%
    2. Casa Grande +0.8%

    Of course, Gold Canyon is the most expensive location in Pinal County, but ranks only 9th in the overall table. It is bottom of the table for appreciation.

    This is convincing evidence of weakness in the luxury sector of the market in contrast to the entry-level and mid-range of the market which are seeing relatively strong appreciation.

    The top appreciating locations are all relatively small and inexpensive:

    1. Tonopah +27.9%
    2. Wittmann +18.0%
    3. Eloy +16.6%
    4. Youngtown +14.1%
    5. Sun City +10.4%
    6. El Mirage +10.4%

    April 13 – We are seeing the largest improvements in the situation for sellers in the lower priced and outer areas. Looking at the Cromford® Market Index and how it has moved over the last month for the single family market, the impressive locations are:

    • El Mirage – CMI up 38%
    • Apache Junction – CMI up 28%
    • Gold Canyon – up 21%
    • Sun City – CMI up 20%
    • Maricopa – CMI up 16%
    • Goodyear – CMI up 14%
    • Avondale – CMI up 12%
    • Litchfield Park – up 11%
    • Surprise – CMI up 10%
    • Buckeye – CMI up 10%
    • Arizona City – CMI up 10%
    • Glendale – CMI up 10%

    Some of these are improving from relatively weak situations, notably Maricopa & Gold Canyon, but the speed of the change is impressive.

    It is a story about the supply, mostly. There are so few properties available under $200,000 that buyers are having to search further and further from the center of the valley in order to find something to buy that does not already have piles of competing offers.

    April 12 – In contrast to yesterday’s observation, here are the most expensive places to rent a home in the Greater Phoenix area. The values are the average monthly rent per square foot for leases documented within the ARMLS database over the past 12 months (April 2015 to March 2016). The figures in parentheses are the rates for the 12 months from April 2014 to March 2015.

    1. Scottsdale 85251 – $1.39 ($1.30)
    2. Paradise Valley 85253 – $1.25 ($1.17)
    3. Phoenix 85004 – $1.24 ($1.21)
    4. Phoenix 85003 – $1.21 ($1.12)
    5. Phoenix 85012 – $1.18 ($1.21)
    6. Phoenix 85016 – $1.17 ($1.07)
    7. Scottsdale 85255 – $1.16 ($1.11)
    8. Phoenix 85018 – $1.16 ($1.07)
    9. Phoenix 85054 – $1.09 ($1.03)
    10. Scottsdale 85258 – $1.09 ($1.06)
    11. Scottsdale 85250 – $1.09 ($1.03)
    12. Tempe 85281 – $1.07 ($1.03)
    13. Scottsdale 85254 – $1.06 ($1.00)
    14. Scottsdale 85260 – $1.04 (99c)
    15. Scottsdale 85259 – $1.02 (96c)
    16. Scottsdale 85257 – $1.00 (94c)
    17. Scottsdale 85266 – 99c (96c)
    18. Phoenix 85014 – 99c (82c)
    19. Wickenburg 85390 – 98c (77c)
    20. Phoenix 85013 – 98c (92c)

    Since these are annual averages, the most recently documented rents have already increased in several areas. For example, in the last quarter we saw:

    1. Scottsdale 85251 at $1.45
    2. Scottsdale 85004 at $1.36
    3. Wickenburg 85390 at $1.33

    Rents in Wickenburg have risen the fastest, probably because of the extreme shortage of homes to rent. There are plenty of homes for sale in Wickenburg, but very few rental listings.

    April 11 – If you are seeking a rental property at the lowest possibly monthly lease rate, then here are the twenty locations that had the lowest average lease price per square foot over the past 3 months:

    1. Gila Bend 85337 – 45c
    2. Casa Grande 85122 – 46c
    3. Coolidge 85128 – 48c
    4. Arizona City 85123 – 49c
    5. Tonopah 85354 – 50c
    6. Maricopa 85138 – 51c
    7. Maricopa 85139 – 52c
    8. San Tan Valley 85143 – 52c
    9. Florence 85132 – 53c
    10. Buckeye -85326 – 55c
    11. Laveen 85339 – 56c
    12. San Tan Valley 85140 – 56c
    13. Surprise 85398 – 57c
    14. Tolleson 85353 – 58c
    15. Eloy 85131 – 59c
    16. Phoenix 85041 – 59c
    17. Waddell 85355 – 59c
    18. Surprise 85388 – 60c
    19. Surprise 85379 – 60c
    20. Phoenix 85043 – 60c

    April 10 – If we use the 12 month average sales price per square foot chart and filter the price ranges so that only homes listed at $500,000 or higher are shown, then we see that the average $/SF reached a peak of $237 in August last year and has been moving sideways to slightly lower since then. It was $233 last month and so far in April is running at under $232. This reflects the oversupply in the higher price ranges.

    Why are we seeing so many active listings above $500,000?

    A theory put forward by several national analysts, particularly Stephen Kim of Barclays, is that a long term secular change is under way. They believe a wave of empty nesters is seeking to downsize, and now that the market has recovered from the crisis of 2006-2009 they are planning to do so in growing numbers. If a large number of baby boomers want to sell their suburban luxury homes at the same time, we are going to see an imbalance of supply and demand. Today’s younger buyers appear to prefer density and proximity to urban facilities like shops, restaurants and entertainment. Far fewer of them play golf. In any case, can enough of the younger generations afford to live in suburban luxury even if they wanted too? Baby boomers are the ones with the equity. Generation X was badly hit by the foreclosure wave and many of the Millennials are still deciding what they want. We are seeing a rise in discretionary renting, where older homeowners sell their large homes and move into smaller rental homes. They appear to prefer upgrades and amenities to square footage. They are probably using their home equity as a source of funds to enjoy their retirement.

    What we are seeing from the Greater Phoenix numbers lends some credibility to this theory.

    April 9 – The monthly median sales price for all areas & types on ARMLS has hit its highest point since February 2008 at $217,900. However the monthly average sales price is currently at only $267,224, 2.4% below the 2015 peak of $273,818 reach on July 7 last year.

    It may seem strange that the median and average are doing different things, but this is because they are measuring different things. Since last year, the number of sales under $200,000 has dropped precipitously due to the shortage of homes for sale at this price level, The absence of all these inexpensive homes in the mix will cause the median to trend higher, even if there had been no change in home pricing. When calculating the median every home sold has equal impact, no matter how large and expensive it might be.

    When we calculate an average price, the more expensive a home is, the more it affects the average. Sales of expensive homes have not increased in number as much as the mid-range. This tends to pull the average down even if there had been no underlying change in pricing.

    In reality there has been a change in pricing, and this is best seen by examining the monthly average price per sq. ft.

    The median chart is giving us too optimistic a picture while the average chart is too pessimistic. The $/SF chart is a more balanced reflection of what is going on with pricing.

    April 8 – It looks as though the slowdown in new listings that we reported at the end of March was just a temporary lull. We are now seeing them rise again. We have seen over 10,000 new listings for every 28 day period in 2016 from January 30 onwards apart from 3 days – March 31 to April 2 – so the temporary lull coincided with the week after Easter.

    In 2015 we NEVER saw more than 10,000 new listings in any 28 day period, and the last time before that was April 17, 2014.

    Of course the supply of new listings continues to be poorly matched to the price ranges where they are most needed.

    Across Greater Phoenix, during the first quarter of 2016, we saw 7% more new listings than in the first quarter of 2015. However we also saw 7% more closed sales, so these numbers are nicely matched. They are not so nicely matched when we analyze by price segment:

    Price Range Change in New Listings Change in Closed Listings Comment on Change 2015 to 2016 Ratio of New Supply to Quarterly Sales Q1 2016
    Up to $100K -28% -28% balanced 1.4
    $100K-$125K -24% -24% balanced 1.3
    $125K-$150K -20% -16% new supply dropped relative to sales 1.2
    $150K-$175K -1% +14% sales rose much faster than new supply 1.3
    $175K-$200K +12% +15% sales rose slightly faster than new supply 1.5
    $200K-$225K +19% +22% sales rose slightly faster than new supply 1.5
    $225K-$250K +23% +19% new supply rose slightly faster than sales 1.6
    $250K-$275K +26% +32% sales rose faster than new supply 1.5
    $275K-$300K +15% +17% sales rose slightly faster than new supply 1.7
    $300K-$350K +15% +21% sales rose faster than new supply 1.8
    $350K-$400K +17% +3% new supply rose much faster than sales 2.1
    $400K-$500K +21% +22% balanced 2.1
    $500K-$600K +23% +18% new supply rose faster than sales 2.5
    $600K-$800K +33% +18% new supply rose much faster than sales 2.8
    $800K-$1M +10% +12% balanced 3.0
    $1M-$1.5M +16% -15% new supply rose while sales fell 3.7
    $1.5M-$2M +12% +22% sales rose faster than new supply 3.7
    $2M-$3M +6% +4% balanced 3.4
    Over $3M +27% +37% sales rose faster than new supply 5.5

    Supply shortages are most acute in the ranges where the ratio of new supply to closed sales is 1.6 or less. This includes all the ranges up to $275K but from $225K to $250K we did see some improvement for buyers over last year.

    Below $275K we therefore see continued strong appreciation, short times on market and low cancellation and expiry rates.

    From $275K to $350K we see very healthy market conditions with new supply and closed sales both up significantly from last year.

    From $350K-$400K the growth in supply was strong, but sales growth was much weaker than average, suggesting there may be a few problems developing for sellers. However from $400K to $500K the percentage growth in new listings was matched by the growth in closed sales. I would describe this sector of the market as normal, healthy and growing, with no major shortages of buyers or sellers.

    From $500K to $800K new supply outstripped the growth in sales, so even though there was a healthy increase in volume we see more competition building between sellers.

    From $800K to $1M the increases were balanced but we do see 3 times as many new listings as we see closed sales. This is likely to mean higher cancellation and expiry rates and long times to sell ahead. It also means minimal upward pressure on pricing.

    The issue for sellers with homes priced over a million is that the number of new listings outpaced sales by at least 3.4 to 1. This is not unusual for this segment, where new listings comfortably exceed closed sales at all times. The bad news is that sales were slightly down (-1.4%) from last year, primarily due to surprisingly poor performance by the segment from $1M to $1.5M. Yet new listings were up almost 15% for homes over $1M. This is a good situation for luxury home buyers, but it is not very good news for sellers who would like to see some appreciation. The current market environment over $1 million is consistent with a flat to slight downward trend in prices, long times on market and high rates of cancelled and expired listings. There some very fashionable locations (close to urban centers) where this does not apply, but the bulk of the luxury market has reasonably good demand but excessive supply. Because of the good demand, agents will be happy with the transaction volume, but sellers are likely to be disappointed with the sales prices that can be achieved, and how long it takes to achieve them. These sellers hear about prices rising both locally and nationally, but unfortunately it does not apply to them.

    There are currently 2,087 homes for sale priced over $1 million across Greater Phoenix. Last year’s peak was 1,880 and back in 2012 we had only 1,204. The current annual sales rate for homes listed over $1 million is 1,225, slightly down from a peak of 1,253 in August 2015. So that means we have more than 20 months of supply, more than enough to give buyers an excellent selection to choose from and a solid advantage in most negotiations.

    April 7 – Most of the city snapshots are overwhelmingly showing green, indicating that the market has improved for sellers since last month and last year. The main exceptions to this picture are:

    Particularly strong are:

    • Goodyear – only 7 red indicators out of 82
    • Glendale – only 11 red indicators out of 82
    • El Mirage – only 11 red indicators out of 72
    • Queen Creek – only 12 red indicators out of 82
    • Buckeye – only 12 red indicators out of 72
    • Maricopa – only 13 red indicators out of 72
    • Laveen – only 14 red indicators out of 72
    • Avondale – only 15 red indicators out of 82
    • Sun City – 15 red indicators out of 72
    • Sun City West – only 15 red indicators out of 72
    • Gilbert – only 15 red indicators out of 82
    • Apache Junction – only 16 red indicators out of 72

    The Cromford® Market Index for the single family market in the top 17 cities has moved favorably for sellers in most cases over the last month:

    Fountain Hills and Paradise Valley have gone backwards for sellers while Maricopa has yet again improved faster than anywhere else to jump to 15th place. This has also been a very good month for the West Valley with Goodyear, Avondale, Surprise, Buckeye and Glendale all coming on strong.

    13 improving cities out of 17 is a positive picture and following a very strong month for sales volume, this is shaping up to be a healthy spring for the housing market. The only big negative is that it is really tough going for anyone looking for an affordable home to buy or rent – not enough supply and too much competition from other buyers. Do not expect this to change any time soon. If you can work from home or tolerate a long commute, the easiest answer is to live in Buckeye, Maricopa, Florence or San Tan Valley, or other outer locations where homes and rents are still relatively cheap and supply is still available. This may change as more people get the same idea.

    Large, expensive homes in the outer suburbs are likely to see excessive supply for a long time as the down-sizing trend for baby boomers gathers momentum. This is particularly true for older homes. So another out-of-the-box option for people struggling to find somewhere affordable is to team up with several others and share the rent or purchase of a much larger home further from the downtown areas. This will probably be receiving far less attention from buyers or prospective tenants, so securing a home will be that much easier. Careful though. Joint tenancy can be tricky unless you all get along really well.

    April 6 – During the first quarter of 2016, Canadians purchased only 110 homes (single family or condo) in Maricopa County. This is the lowest quarterly total since 2007 and down 61% from the first quarter of 2015. The peak time for Canadian purchases was the second quarter of 2011 when we saw 1,454 deeds recorded for Canadian buyers and they represented 5% of the market. That suggests that Canadians are pretty smart, since 2Q 2011 was close to the cheapest time to buy a home in the last 20 years.

    Canadian sellers outnumbered Canadian buyers by almost 5 to 1 during the first quarter of 2016. There were 526 completed sales by Canadian owners in Maricopa County. This is not quite a record since the second quarter of 2015 was slightly higher at 561. I would expect Canadian sellers to set an absolute new record high during the second quarter of 2016.

    The 526 Canadian sales represent 2.3% of all sales during the quarter. So although Canadians are adding to the supply, they are not having an overwhelming impact. Almost all the other 97.7% of sales were by US residents and nationals. Apart from Canadians the impact of foreign buyers and sellers on the Maricopa County market is extremely small.

    April 5 – The basic March 2016 numbers are in for Maricopa County recordings with Affidavits of Value and they are looking very positive. We count a total of 9.639 closed transactions for single family and condo properties which represents a 12% increase over March 2015. Since March 2015 was 17% higher than March 2014, this is a big 31% increase over 2 years. The year over year unit volume increase was even more impressive for new homes, up a startling 50%, making the re-sale market’s gain of 8% look paltry in comparison. New home market share has risen from 9.7% in March 2015 to 12.7% in March 2016. Before getting too excited we should remember that this is nowhere the peak of the market, when new homes represented 40.6% of December 2006 transactions.

    The median sales price is up 8.4% from $211,320 in March 2015 to $229,000 in March 2016. The median sales price for new homes actually fell by 2% from $321,085 to $315,229, as there are now larger numbers of less expensive new homes below $300,000 entering the new home mix. Median sales prices are close to useless for measuring new homes. You have to use average price per sq ft to compensate adequately for the changes in the mix.

    The median sales price for resale homes rose from $200,000 in March 2015 to $217,00 in March 2016, an annual rise of 8.5%.

    Note that transactions without affidavits are excluded from all the above numbers. This includes HUD sales, trustee sales, and REO sales processed by the out of state title companies Quality Escrow and Servicelink. Both of these title companies continue to completely misunderstand Arizona law regarding exemptions from affidavits. If the county assessors ever notice, the title companies could be in legal trouble for claiming false exemptions for their lender clients.

    April 4 – The housing crash is starting to feel like a long time ago now, and when we look at the percentage of distressed sales among March 2016 closed transactions we see confirmation of this.

    There were only 3 cities with distressed transactions over 10%, and these were all in Pinal County: Arizona City, Coolidge and Florence. Apache Junction was just behind at 10%, which is mostly in Pinal County. The highest percentages in Maricopa County can be found in Glendale and Anthem, both at 9%.

    The lowest percentages of distressed sales were in Sun City West and Fountain Hills, both down to 2% of sales.

    You can check out the rest of the cities here.

    April 3 – There were 1,538 new homes added to the ARMLS listings during the first quarter of 2016, 26% more than in the first quarter of 2015. 185 of the added listings were for dwelling types other than single-family, these being up only slightly from 175 in the first quarter of 2015.

    This is still not a patch on the numbers we used to see between 2002 and 2008. The peak first quarter listing count for new homes was 3,446 in 2006 when homes started to become more difficult to move and inventory was piling up. However new home listings are up in volume by a much higher percentage than new re-sale listings, which are up 7% compared to last year). This still doesn’t change the fact that 3 out of 4 new homes do not get placed into the ARMLS database prior to closing.

    Generally, the hotter the market, the fewer homes get listed, but different developers have different policies too. Meritage, Taylor Morrison and DR Horton are the sources of the most listings since 2012. This does not necessarily mean they sold the most new homes, since we are counting listings not sales.

    April 2 – Yesterday we investigated the supply by price range. Today we look at the demand for single family homes, by examining the number of listings under contract:

    Price Range Under Contract (including UCB & CCBS) April 1, 2016 Year Ago % Change Comment Contract Ratio April 1, 2016 Contract Ratio March 1, 2016 Contract Ratio April 1, 2015
    Under $100K 155 360 -57% large decline 85.6 96.6 116.9
    $100K-$125K 214 513 -58% large decline 116.9 135.0 163.9
    $125K-$150K 738 1,116 -34% large decline 167.3 137.2 140.7
    $150K-$175K 1,163 1,186 -2% 153.0 127.2 111.9
    $175K-$200K 1,254 1,115 +12% 110.6 97.2 93.9
    $200K-$225K 886 795 +11% 89.8 92.3 86.7
    $225K-$250K 1,046 835 +25% strong growth 91.4 73.5 77.0
    $250K-$275K 725 598 +21% strong growth 79.5 72.5 73.6
    $275K-$300K 709 577 +23% strong growth 62.0 62.6 56.0
    $300K-$350K 899 723 +24% strong growth 55.1 52.2 46.5
    $350K-$400K 670 552 +21% strong growth 46.6 39.8 38.4
    $400K-$500K 723 600 +21% strong growth 38.0 35.9 37.5
    $500K-$600K 361 285 +27% strong growth 29.4 25.0 27.5
    $600K-$800K 309 297 +4% 23.1 21.6 27.9
    $800K-$1M 170 115 +48% strong growth 22.4 21.1 16.8
    $1M-$1.5M 103 111 -7% 12.7 12.8 16.4
    $1.5M-$2M 63 56 +13% 13.5 12.4 13.7
    $2M-$3M 33 39 -15% 8.1 8.1 10.2
    Over $3M 16 29 -45% large decline 4.9 6.0 9.7

    From $225,000 to $600,000 we have far more listings under contract that at this time last year. We also see very strong growth for the sector from $800,000 to $1 million.

    From $175,000 to $225,000 and from $1.5 million to $2 million we have moderate increases in listings under contract of between 10% and 15%. For the sector from $1.5 to $2 million this goes a little way to mitigating the increase in supply.

    The shortage of supply means the market under $175,000 is much smaller than last year, though the contract ratios are much higher between $125,000 and $175,000 showing there is no lack of buyer interest. Below $125,000 there is not much for sale and buyer interest is lower than last year too.

    There are significant problems for sellers between $1 million and $1.5 million as well as for those over $2 million. This is because the number of listings under contract is down from last year at the same time that supply is much higher. The contract ratios have slipped compared with April 2015 and this signifies a large shift of negotiation power away from sellers and towards buyers. We should not be surprised to see weaker pricing trends in these price ranges as a result.

    April 1 – When we examine the number of active single family listings by price range, we can clearly see the long term shortage of affordable homes, the adequate supply in the mid-range and the glut of luxury homes for sale.

    Price Range Active (excluding UCB & CCBS) April 1, 2016 Year Ago % Change Comment Days of Inventory
    Under $100K 181 308 -41% 46
    $100K-$125K 183 313 -42% 39
    $125K-$150K 441 793 -44% lowest level since 2005 40
    $150K-$175K 760 1,060 -28% 52
    $175K-$200K 1,134 1,188 -5% 73
    $200K-$225K 987 917 +8% 80
    $225K-$250K 1,144 1,084 +6% 87
    $250K-$275K 912 812 +12% 96
    $275K-$300K 1,144 1,031 +11% 115
    $300K-$350K 1,633 1,555 +5% 130
    $350K-$400K 1,438 1,439 0% 151
    $400K-$500K 1,903 1,601 +19% highest active count since Mar 2009 191
    $500K-$600K 1,229 1,036 +19% highest active count since Apr 2009 253
    $600K-$800K 1,337 1,065 +26% highest active count since Jun 2009 293
    $800K-$1M 760 683 +11% highest active count since Aug 2009 384
    $1M-$1.5M 808 677 +19% highest active count since Nov 2009 480
    $1.5M-$2M 465 408 +14% highest active count since Mar 2010 684
    $2M-$3M 407 382 +7% highest active count since Mar 2010 798
    Over $3M 327 300 +9% highest active count since Dec 2009 1,219

    From $400,000 upwards we have more active listings than we have seen in the last 6 years, so buyers have plenty of choice and therefore negotiating power.

    Below $200,000 we have a chronic shortage of homes available for purchase, and there is precious little to rent too. Here sellers have most of the negotiating power.

    The median sales price for single family homes is at $230,000.

    © 2016 Cromford Associates LLC

    The data used to create the Cromford® Report is obtained from public records and obtained under license from the Arizona Regional Multiple Listing Service, Inc (ARMLS). Cromford Associates LLC and ARMLS expressly disclaim and make no representations or warranties of any kind, whether express, implied or statutory, as to the accuracy of the data used or the merchantability or fitness for any particular purpose.

     

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