The Cromford Report – Daily Observations August 2017

    August 31 – The Cromford® Market Index table for the single-family markets in the largest cities by dollar volume looks like this:

    We see 10 cities improving for sellers over the last month and 7 cities showing deterioration.

    The most significant deterioration can be seen in Avondale (now down to 6th place after staying in number 1 position for well over a year). Other cities with major drops are Glendale and Cave Creek.

    Big improvements can be seen in Fountain Hills, Paradise Valley, Chandler, Scottsdale and Tempe.

    All of these cities except Buckeye are in a seller`s market. Mesa is now well out in front though we are no longer seeing a big change compared with last week.

    August 30 – The Cromford® Market Index for all areas & types has just about run out of upward momentum. Today it stands at 158.0, the same as 7 days ago. The Supply Index remains very low at 63.9 but shows little sign of going much lower. We usually start to see supply increase during September. Demand has been gently fading for some time and the Demand Index is close to normal at 100.9.

    This year there has very little fluctuation in demand. The high point was 106.3 in early April. We are now at the lowest demand level since March 8, 2016.

    Supply remains weak because we are simply not seeing enough new listings to replenish those that go under contract. However there has been a very slight increase in the number of new listings during the third quarter compared with last year. It would not surprise me if the current Supply Index reading of 63.9 turns out to be the lowest of the year. Last year the lowest point was 70.2 and was reached in mid September. If the Supply Index does drop further this year, it will no doubt be by a very small amount and it is very likely to be higher by the end of September.

    August 29 – The S&P / Case-Shiller® Home Price Index® report for the period April through June was published today and based on the month to month changes here is a ranking of the 20 cities covered in detail:

    1. Detroit 1.45%
    2. Seattle 1.45%
    3. Las Vegas 1.00%
    4. Minneapolis 0.98%
    5. Portland 0.88%
    6. Chicago 0.87%
    7. San Diego 0.85%
    8. Charlotte 0.82%
    9. Denver 0.79%
    10. Phoenix 0.77%
    11. Dallas 0.76%
    12. Boston- 0.74%
    13. Los Angeles 0.70%
    14. San Francisco 0.68%
    15. Washington DC 0.66%
    16. New York 0.61%
    17. Cleveland 0.58%
    18. Atlanta 0.57%
    19. Tampa 0.48%
    20. Miami 0.44%

    Phoenix is right there in the middle of the pack, but well below the national average of 0.95%.

    Looking at the year over year changes, here is the ranking:

    1. Seattle 13.39%
    2. Portland 8.16%
    3. Dallas 7.66%
    4. Denver 7.59%
    5. Detroit 7.56%
    6. Las Vegas 7.25%
    7. San Diego 7.08%
    8. Tampa 6.88%
    9. Boston 6.24%
    10. San Francisco 6.06%
    11. Charlotte 6.03%
    12. Phoenix 5.79%
    13. Minneapolis 5.70%
    14. Los Angeles 5.61%
    15. Atlanta 5.23%
    16. Miami 4.96%
    17. New York 3.88%
    18. Chicago 3.25%
    19. Washington DC 3.07%
    20. Cleveland 2.86%

    Phoenix is close to the middle again and almost exactly at the national average of 5.77%.

    So in the longer term view Phoenix is performing very close to the national average, and slightly below average over the short term. Nothing very exciting there. Seattle is now the runaway spot for high appreciation.

    August 28 – Though the single-family permit counts for July were healthy, the multi-family permit counts collapsed to just 85, down from 318 in July 2016.

    The 12 month total is still elevated at 8,862 but has fallen for 3 consecutive months.

    It is looking like April 2017 may have been the peak for multi-family permits in Maricopa and Pinal Counties. The 12 month total in April was 10,587, the fourth highest number in history.

    August 27 – The Census Bureau has published the permit counts for July and the total single-family number for Maricopa and Pinal Counties is 1,844. This is up over 33% from 1,382 in July 2016, a big bounce back after last month’s year over year decline. The average month over the last year has produced 1,629 permits so July has pulled us ahead of the the curve at last.

    Phoenix has overtaken Mesa in the year to date permit count and the top 10 looks like this:

    1. Phoenix – 1,618 (1,512)
    2. Mesa – 1,550 (1,263)
    3. Unincorporated Pinal County – 1,246 (902)
    4. Buckeye – 1,228 (803)
    5. Peoria – 1,121 (952)
    6. Gilbert – 1,048 (1,043)
    7. Queen Creek – 709 (657)
    8. Goodyear – 684 (620)
    9. Maricopa – 674 (329)
    10. Scottsdale – 424 (466)

    The numbers in parentheses are the equivalent counts from 2016 year to date. Only Scottsdale went backwards. The significant growth in Maricopa and Buckeye suggests that many builders are trying to address the supply shortage at the entry level.

    August 26 – The market is getting more interesting. We have trends in both directions in both supply and demand, depending on which segment we are looking at. One of the most useful ways of measuring demand is looking at annual sales rates. Using annual sales rates removes the distortions caused by seasonal effects that we see when we look at monthly or quarterly sales rates. In a healthy market we expect to see gradually increasing annual sales rates. However in some parts of the market a lack of supply is crimping sales, while other segments are increasing or decreasing for reasons which are not obvious.

    Annual sales rates are currently declining in the following:

    • Avondale
    • Chandler
    • Gilbert
    • Goodyear
    • Laveen
    • Sun Lakes

    Annual sales rates are currently increasing in the following:

    • Arizona City
    • Cave Creek
    • Glendale
    • Gold Canyon
    • Mesa
    • Paradise Valley
    • Peoria
    • Queen Creek
    • Scottsdale
    • Sun City
    • Sun City West
    • Surprise
    • Tempe

    Sun City is seeing the fastest rise in annual sales rates, up from 1,215 this time last year to 1,378 now.

    Inexpensive to mid-price homes targeted for the over 55 age group are definitely a hot item at the moment.

    August 25 – The Cromford® Market Index for the single-family markets in the 17 largest cities by dollar volume:

    Here we see 10 cities improving for sellers over the past month and 7 deteriorating. Like last week, we are seeing some large changes over the month. Big gains for Fountain Hills, Paradise Valley, Chandler, Scottsdale, Gilbert, Mesa and Surprise are balanced by steep declines for Avondale, Glendale and Cave Creek.

    16 of the 17 cities are seller’s markets, the only exception being Buckeye which is a balanced market.

    August 24 – Phoenix is the 5th largest city in the USA by population with 1,615,017 inhabitants according to the 2016 census estimate. It is the largest state capital city in the country by far, with Austin TX the next contender with only 947,890 inhabitants. Tucson is the next largest city in Arizona and ranks 33rd in the country with 530,706. Mesa is the 3rd largest city in Arizona and ranks 36th in the USA with 484,587. However Mesa is growing over 5 times as fast as Tucson and will probably overtake Sacramento, state capital of California within the next 5 years. Chandler is the 4th largest city in Arizona with 247,477 inhabitants and ranks 84th in the USA.

    Scottsdale is the 5th largest city in Arizona with a population of 246,645 and ranks 85th in the USA. From a housing market perspective, Scottsdale is more significant because at around $240 its average price per sq. ft. is 71% higher than Mesa. This makes is the 2nd largest market by dollar volume in Central Arizona. Here is how the various ZIP codes within Scottsdale compare on a similar basis to yesterday’s analysis of the days of inventory in Mesa:

    1. 85257 – 50.3 (65.9)
    2. 85250 – 55.0 (88.9)
    3. 85260 – 60.3 (98.7)
    4. 85251 – 80.5 (104.1)
    5. 85254 – 82.3 (90.0)
    6. 85258 – 85.1 (138.2)
    7. 85259 – 97.1 (147.1)
    8. 85255 – 151.5 (177.3)
    9. 85266 – 176.4 (216.4)
    10. 85262 – 260.9 (331.5)

    There is obviously a big change as we move north of Bell Road. There are far more homes available to the north of Bell Road than to the south. However all of the inventory numbers are lower than the long term averages.

    The situation in Scottsdale is very different from last year with far fewer homes available for sale especially below $1 million.

    August 23 – We already know Mesa is an extremely strong seller’s market at the moment with only 45.1 days of inventory. As the second largest city in our region by population, it makes sense to break it down into ZIP codes in the same way we did for Phoenix and try to figure out exactly what is going on.

    1. 85204 – 31.7 (43.4)
    2. 85206 – 36.6 (77.3)
    3. 85209 – 39.9 (70.1)
    4. 85205 – 39.4 (67.0)
    5. 85202 – 39.7 (46.8)
    6. 85201 – 40.8 (47.3)
    7. 85208 – 41.1 (94.0)
    8. 85210 – 42.7 (46.8)
    9. 85215 – 43.6 (120.5)
    10. 85203 – 49.6 (58.8)
    11. 85212 – 49.6 (73.8)
    12. 85213 – 65.0 (78.6)
    13. 85207 – 66.7 (99.7)

    It is NOT simply a story of the low priced areas having less supply than the higher priced one. 85204 is at the top of the table, but we usually see 85210 and 85201 behaving similarly. Compared with the normal level, an extraordinarily low supply situation exists in 85205, 85206, 85208, 85209 and especially 85215. 85215 is one of the more expensive areas of Mesa but it does have a lot of subdivisions focused on the over 55 age group. Just as we saw with Sun City and Sun City West, 85215 sellers are benefiting from a strong inward migration of retirement age population.

    The inventory chart for 85215 is one of the most remarkable collapses in supply we have ever seen. 85208 is not quite so impressive, but still a very scary chart for buyers. I recommend that you take a look at the Days of Inventory Tableau Chart and select 85215 or 85208 from the filters.

    85207 and 85213 are the most expensive areas of Mesa and they have a higher inventory number, but both numbers are well below normal which indicates that even here buyers have a much less choice than usual. Unlike Phoenix, Mesa has no ZIP codes where the current reading is higher than the long term average. Mesa is clearly experiencing a much more serious supply shortage than the City of Phoenix..

    August 22 – Phoenix is a big city and it landed yesterday at number 22 in the middle of our list based on days of inventory. So today let us break it down into ZIP codes and rank them according to the same measurement:

    1. 85027 – 24.8 (40.2)
    2. 85033 – 32.2 (51.6)
    3. 85019 – 33.0 (51.7)
    4. 85053 – 38.0 (48.2)
    5. 85031 – 41.5 (52.9)
    6. 85035 – 42.7 (50.1)
    7. 85037 – 45.0 (43.7)
    8. 85032 – 45.6 (64.1)
    9. 85040 – 47.0 (52.0)
    10. 85009 – 48.6 (70.0)
    11. 85029 – 49.1 (57.4)
    12. 85043 – 50.6 (46.9)
    13. 85022 – 51.7 (68.0)
    14. 85023 – 53.6 (62.2)
    15. 85017 – 55.6 (59.0)
    16. 85024 – 56.2 (55.6)
    17. 85042 – 56.5 (64.2)
    18. 85044 – 58.5 (72.5)
    19. 85051 – 58.5 (57.3)
    20. 85015 – 60.6 (72.8)
    21. 85041 – 60.8 (62.8)
    22. 85008 – 62.4 (63.1)
    23. 85014 – 62.4 (75.3)
    24. 85020 – 65.5 (82.9)
    25. 85028 – 70.1 (88.2)
    26. 85006 – 70.8 (64.6)
    27. 85083 – 71.6 (75.6)
    28. 85050 – 71.8 (69.8)
    29. 85013 – 76.2 (79.1)
    30. 85048 – 80.4 (82.1)
    31. 85021 – 85.2 (95.3)
    32. 85054 – 93.8 (138.8)
    33. 85085 – 96.6 (90.0)
    34. 85034 – 97.3 (80.9)
    35. 85016 – 99.7 (107.7)
    36. 85007 – 103.1 (110.7)
    37. 85018 – 103.7 (113.8)
    38. 85045 – 117.9 (105.5)
    39. 85012 – 167.4 (122.2)
    40. 85004 – 198.8 (154.7)
    41. 85003 – 203.1 (156.6)

    Here we see the West Side of Phoenix with the lowest inventory though 85032 and 85040 are in the top 10. The locations with the highest inventory relative to demand are downtown, uptown, West Ahwatukee, Arcadia & the Biltmore District..

    There are quite a few ZIP codes with more inventory than their long term average – unusual for the present time. These are 85037, 85043, 85024, 85051, 85006, 85050, 85085, 85034, 85045, 85012, 85004 and 85003. Phoenix contains more than its fair share of areas that are cool relative the overall market.

    August 21 – Let us take stock of the current situation by looking at one of our favorite metrics – days of inventory. Here we will use inventory excluding the thousands of UCB and handfuls of CCBS listings and count only the listings in active status with no caveats. We will however use all property types. We will rank the cities by current days of inventory, where the lower the number the better the market is for sellers. We also give the long term average for comparison:

    1. Youngtown 27.4 (41.6)
    2. Sun City West 28.8 (94.3)
    3. Sun City 30.3 (88.2)
    4. Tolleson 32.2 (54.3)
    5. El Mirage 33.2 (38.2)
    6. Sun Lakes 33.8 (110.6)
    7. Mesa 45.1 (long term average 71.8)
    8. Avondale 45.2 (48.2)
    9. Chandler 46.1 (64,2)
    10. Gilbert 46.6 (63.2)
    11. Glendale 48.0 (56.5)
    12. Coolidge 51.5 (107.8)
    13. Arizona City 52.1 (111.0)
    14. San Tan Valley (Queen Creek in Pinal County) 52.6 (70.8)
    15. Laveen 53.5 (62.0)
    16. Tempe 55.2 (66.6)
    17. Surprise 56.2 (79.5)
    18. Anthem 57.0 (84.7)
    19. Peoria 60.1 (74.1)
    20. Casa Grande 63.6 (110.7)
    21. Maricopa 64.7 (84.4)
    22. Phoenix 65.1 (71.1)
    23. Florence 69.2 (151.6)
    24. Apache Junction 70.0 (112.6)
    25. Waddell 70.8 (97.4)
    26. Queen Creek (Maricopa County) 72.4 (88.1)
    27. Litchfield Park 73.3 (84.4)
    28. Goodyear 76.0 (85.4)
    29. Buckeye 80.5 (84.6)
    30. Eloy 98.7 (180.2)
    31. Gold Canyon 100.8 (186.3)
    32. Scottsdale 103.1 (136.0)
    33. Cave Creek 114.5 (134.8)
    34. Tonopah 116.8 (132.2)
    35. Fountain Hills 119.5 (166.8)
    36. New River 131.2 (128.9)
    37. Wittmann 148.4 (132.3)
    38. Rio Verde 179.5 (414.1)
    39. Carefree 214.1 (343.3)
    40. Paradise Valley 238.3 (288.0)
    41. Wickenburg 243.3 (362.5)

    Areas that cater primarily to older buyers dominate the top of the chart for several reasons:

    • this is the time of year when listings are usually at their seasonal low point in these areas
    • population growth in Arizona is heavily skewed in favor of those over 50 and against those under 20
    • there is little to no new housing supply being built in these areas

    Almost all areas are well below their long term average days of inventory. The only exceptions in the list above are Wittmann and New River.

    There are several locations in Pinal County that are dramatically below their long term average, including Coolidge, Florence, Arizona City, Casa Grande, Eloy and Gold Canyon.

    August 20 – There are 37,463 people on the ARMLS roster, which is up 6.2% from a year ago when there were 35,280. There are 10 different types of people on the roster:

    1. Realtor (31,231)
    2. Designated Realtor (3,201)
    3. Office Staff (1,276)
    4. Affiliate Key (961)
    5. Appraiser (466)
    6. MLS Staff (200)
    7. Sales Person (91)
    8. Waiver (28)
    9. Affiliate (7)
    10. Vendor (2)

    Last year the counts looked like this:

    1. Realtor (29,424)
    2. Designated Realtor (3,187)
    3. Office Staff (1,138)
    4. Affiliate Key (866)
    5. Appraiser (435)
    6. MLS Staff (182)
    7. Sales Person (49)
    8. Affiliate (4)

    This shows a 6.1% growth in the Realtor category. Over the past year there has been 94,564 total closed listings through ARMLS, an 8.7% increase over the 86,975 in the year before that. In addition pricing has increased so that the total annual dollar revenue is running at $27,417,112,220, up from $23,616,060,825. The revenue is up 16.1%, which would tend to indicate that commissions are also up by a similar amount.

    If we include Designated Realtors and Sales Persons we see a total of 34,523 people earning commissions compared with 32,660 last year, an increase of 5.7%

    With 16.1% more commission shared by 5.7% more people, the average person is earning 9.8% more commission than this time last year.

    Average dollars per person is currently $794,169, up from $723,088 this time last year.

    So homes, having appreciated by an average of 6.6% are more affordable for the average realtor than they were a year ago, if not for everyone else.

    August 19 – There has been a very slight increase in the number of new listings coming onto the market compared with a year ago. We now have 0.79% more new listings year-to-date than at the same point in 2016 and 1.4% more than during the third quarter to date last year. It’s not much, just 204 more listings than in the July 1 to August 19 period last year, but there is a small sliver of comfort there for some buyers. We are not going to get excited though. We would probably need a sustained increase of around 5% to offer any substantial relief to the overall supply shortage. At the moment that is not looking likely.

    August 18 – It is time again to take a look at the Cromford® Market Index for the single-family markets in the largest 17 cities by dollar volume:

    There is much more change over the past month than than usual. It is change in both directions as the Southeast Valley and Northeast Valley get stronger while the Central Valley, West Valley and Pinal County get weaker.

    Among the West Valley cities, Avondale has slipped the most, falling from an almost unassailable first place to 4th in just 3 weeks. Glendale too is becoming more favorable for buyers while Buckeye continues to move towards a balanced market.

    Mesa and Chandler are leading the advance for the Southeast Valley with Gilbert and Queen Creek not far behind. They now dominate the top section of the chart with only Surprise putting up any resistance for the West Valley.

    Cave Creek is the exception, but the other Northeast Valley cities are improving for sellers at a good pace. This includes Scottsdale (up 9%), Fountain Hills (up 13%) and Paradise Valley (up 11%).

    Phoenix continues to slip gently lower with many of its less expensive areas losing some of the seller’s advantage they have enjoyed for many years.

    Maricopa is also slipping backwards and although they are not big enough to make the top 17, Casa Grande and Apache Junction are also deteriorating for sellers. Florence and Gold Canyon are improving however.

    The shifts in the market correspond with price ranges. More supply is coming on stream for the price ranges from $125,000 to $200,000 while homes priced between $250,000 and $600,000 are getting harder to find. The latter range particularly favors areas like Scottsdale, Gilbert, Chandler and Mesa.

    August 17 – Now that we have complete and corrected recordings for July 2016, I feel I should point out that the sales decline from June to July was the largest percentage we have seen in the last 7 years. So while supply remains a problem – it is stubbornly low – demand seem to be declining. Maybe buyers are getting discouraged by the lack of supply and the constant competition?

    Here are the declines in closings for July compared with June:

    • 2011 – down 14%
    • 2012 – down 4%
    • 2013 – up 3%
    • 2014 – down 5%
    • 2015 – down 7%
    • 2016 – down 14%
    • 2017 – down 18%

    This is not what happens in a bubble, but it is what happens when a market starts to run out of steam. It is far too early to be certain, but it would not be surprising if demand started to fade and get closer to the feeble supply. Rising prices are supposed to work like that. One month does not make a trend, however, and we shall have to see if the same sort of thing happens in August.

    August 16 – Home ownership is often claimed to be a key part of the American Dream, but according to Wikipedia the USA ranks 41st in the world for home ownership rates, with 64.5% of homes being owner-occupied. Mind you this is one rung better than the UK on 63.5%. Mexico is ranked 16th and has a 80.0% home ownership rate and Canada is ranked 35th at 67.6%. So the USA has the lowest home ownership rate in North America.

    You would probably not be likely to guess the top 10 ranking countries by home ownership.

    1. Romania 96.4%
    2. Singapore 90.8%
    3. Slovakia 90.3%
    4. Cuba 90.0%
    5. Croatia 89.7%
    6. Lithuania 89.4%
    7. India 86.6%
    8. Hungary 86.3%
    9. Russia 84.0%
    10. Poland 83.5%

    August 15 – The total number of active listings for all areas and types, including those in UCB and CCBS status, is 21,657. This is the lowest we have recorded since August 2013. Only in 2004, 2005, 2012 and 2013 have active listings been this low before. While some areas & price ranges are doing better than others, the overall supply is very low representing only 84 days of inventory. We consider 120 to 150 days normal.

    August 14 – There were 842 multi-family permits issued in June within Maricopa and Pinal Counties. This is a very similar number to the previous 3 months. However June 2016 had a colossal total of 2,131 permits, so the year over year comparison is rather weak. The year to date total at the half-way mark is 4,313, which is down 11% compared to last year. The 12 month rolling total stands at 9,095, which is high by historic standards but the lowest reading since October 2016.

    Could it be that the multi-family building boom has passed its peak?

    August 13 – It is time we looked at the rental market again. Across all areas & types we have 3,082 active listings (not including vacation rentals). That is only slightly lower (down 2.5%) than August 13, 2016 when we had 3,160. A year ago we were seeing 2,705 closed leases through ARMLS per month. This year we are closing 2,607 per month, down 3.6%, The supply stands at 1.2 months, the same as last year.

    So last year we were short of supply and nothing much has changed, except for prices.

    Last year the average lease was signed at 84.7 cents per sq. ft. per month This year we are looking at 88.3 cents. That is an increase of 4.3%. This is a significant increase when inflation is below 2%, and is very similar to the rate of increase we measured a year ago.

    In conclusion, the rental market looks remarkably similar to a year ago.

    August 12 – The Black Knight Financial Services Mortgage Monitor report for June tells us that all states are experiencing lower home loan delinquency than last year, with the exception of Alaska. For Arizona, we have 2.7% of first homes loan with some form of delinquent payment, whether it be a trivial or serious amount. Less than 90 days late is normally not considered seriously delinquent. We also have another 3% of loans that already in the foreclosure process. Last year these figures were 3.0% and 0.4% respectively.

    States with extremely strong home appreciation are seeing some of the lowest delinquency rates (Washington, Colorado, Oregon, Idaho, California).

    The worst states for loan delinquency are in the deep south – Mississippi, Louisiana and Alabama,

    August 11 – Although it is subject to seasonal effects, the contract ratio is a useful tool for examining the state of a segment of the market. If the contract ratio is rising then the market is heating up and if it is falling the market is cooling. It is quite normal for the market to cool during the third quarter since the second quarter is when the peak buying takes place. So anywhere where the contract ratio is higher in August than it was at the beginning of June is bucking the trend and doing well. Here are how the price ranges compare (August 10 versus July 1, all property types):

    Price Range Contract Ratio Jul 1, 2017 Contract Ratio Aug 10, 2017 % Change Comments
    Under $100K 69.3 67.7 -2.3% cooling off as normal
    $100K-$125K 114.9 122.0 +6.2% getting hotter
    $125K-$150K 145.2 130.6 -10.0% cooling off more than normal
    $150K-$175K 140.4 122.4 -12.8% cooling off more than normal
    $175K-$200K 117.5 117.8 +0.2% steady
    $200K-$225K 98.0 97.3 -0.7% steady
    $225K-$250K 82.9 103.3 +24.6 heating up much more than normal
    $250K-$275K 76.9 80.0 +4.1% heating up
    $275K-$300K 71.4 68.4 -4.2% cooling off as normal
    $300K-$350K 62.8 62.5 -0.5% steady
    $350K-$400K 51.6 54.0 +4.8% heating up
    $400K-$500K 41.9 43.6 +4.1% heating up
    $500K-$600K 33.0 36.5 +10.6% heating up much more than normal
    $600K-$800K 28.7 30.3 +5.6% heating up
    $800K-$1M 22.3 25.5 +14.1% heating up much more than normal
    $1M-$1.5M 19.8 19.6 -1.0% steady
    $1.5M-$2M 14.8 13.5 -9.0% cooling off as normal
    $2M-$3M 10.0 8.1 -18.6 cooling rapidly
    Over $3M 8.2 7.6 -8.2% cooling off as normal

    We mentioned (on August 7) signs of cooling in the $150K to $200K price range for single family homes. However this is swamped by the heating up in several of the higher markets, particularly $225K-$250K and $350K-$1M.

    Overall this table is unusually positive with the exception of the market over $1 million and between $125K and $175K.

    August 10 – Let us take another look at the Cromford® Market Index for the single-family markets in the 17 largest cities by dollar volume:

    Mesa has consolidated its lead over Avondale at the top of the table and we have 10 cities showing improvement for sellers and 7 showing deterioration. The West Valley again dominates the cities going backwards, with Avondale, Glendale, Peoria and Buckeye in retreat. However Surprise and Goodyear continue to improve.

    The Northeast Valley is doing much better than at the start of the year, with Paradise Valley, Fountain Hills and Scottsdale all up sharply over the last month. Only Cave Creek has retreated.

    The Southeast Valley is looking particularly healthy for sellers with Mesa, Chandler, Gilbert, Tempe and Queen Creek all posting strong advances. However Maricopa is now weakening.

    Phoenix itself has been moving quietly backwards for many weeks now but remains a seller’s market by a wide margin. Buckeye, adrift from the others at the bottom of the table, is looking like a balanced market with its exceptionally strong supply.

    August 9 – Delving further into average time on market for monthly sales, we can see the following ZIP codes have the lowest average time on market for single-family homes:

    1. Phoenix 85004 – 19 (no sales in July 2016)
    2. Phoenix 85006 – 26 (down from 63 in July 2016)
    3. Phoenix 85009 – 28 (down from 50)
    4. Surprise 85378 – 29 (down from 40)
    5. Chandler 85224 – 30 (down from 52)
    6. Glendale 85307 – 31 (up from 28)
    7. El Mirage 85335 – 32 (down from 34)
    8. Mesa 85202 – 32 (down from 49)
    9. Mesa 85204 – 34 (down from 44)
    10. Avondale 85323 – 34 (down from 47)

    At the other end of the scale we find:

    1. Rio Verde 85263 – 305 (up from 152)
    2. Scottsdale 85262 – 199 (down from 298)
    3. Paradise Valley 85253 – 190 (up from 143)
    4. Scottsdale 85266 – 179 (down from 226)
    5. Fountain Hills 85268 – 154 (up from 126)
    6. Casa Grande 85194 – 152 (up from 129)
    7. Wickenburg 85390 – 151 (up from 94)
    8. Phoenix 85003 – 150 (up from 88)
    9. Scottsdale 85255 – 138 (up from 128)
    10. Wittmann 85361 – 132 (up from 108)

    August 8 – Average time on market for monthly sales across all areas & types is down to 66 days. This is the lowest level since 2013 and confirms the current market strength. Days on market is useless as a predictive tool but it is a reliable trailing indicator. It also allows us to compare different sectors:

    • Northeast Valley – 122 (129 last year)
    • Phoenix – 59 (61 last year)
    • Southeast Valley 56 (65 last year)
    • West Valley 60 (63 last year)

    The above numbers are for single-family detached homes only.

    All areas have improved but the Southeast Valley has improved the most.

    August 7 – When the market is as strong as it has been of late, it is even more important to keep an eye out for any small signs of weakness, lest we get complacent. The bellwether locations are generally in the less expensive parts of the valley. For example, Maricopa and what we now call San Tan Valley (but was then still referred to as Queen Creek) both started to show very significant market weakness during the second half of 2005. It is still too early to determine its significance, but there are some signals to watch coming from these locations again.

    Active listing counts (excluding UCB and CCBS) have been growing for the price range between $150,000 and $200,000 across the whole valley in the last few weeks, but in particular Maricopa 85138, San Tan Valley 85140 and 85143 have shown a sudden surge upwards from 191 to 253 in a matter of just 5 weeks. This is still not a lot of listings, since we had 311 this time last year, but the trend had been solidly downwards since the end of 2014. The size of the increase (32%) and the speed (5 weeks) makes us take notice and try to find out the underlying details. The Days of Inventory chart shows 32 days on July 1 turning into 41 days on August 5 and crossing the Annual Average line (35), a negative signal. July sales were 158, down from 178 in July 2016, an 11% drop and the first year over year decline in the sector since 2014. Indeed, we haven’t seen negative signals in this small market sector since 2014.

    The recent trend is nothing to get alarmed about just yet, but it is something to watch to see if it develops further or fades away.

    August 6 – Here is a warning to anyone who is trying to count lender owned / REO properties on ARMLS. Fannie Mae has launched a doublethink campaign to force all its listing agents to delete the “Lender Owned/REO” special listing condition from Fannie Mae listings. This is apparently on the basis that Fannie Mae is not a lender. They just buy millions of mortgages.

    Just as in George Orwell’s 1984, “war is peace”, “ignorance is strength” and now “Fannie Mae owned homes are not REOs”.

    Actually Fannie Mae does agree that they are REOs, but there is no special listing condition for REOs, only “Lender Owned/REO” and Fannie Mae is unable to interpret the slash as an OR, for reasons only they understand.

    In Cromford Report statistics, all Fannie Mae listings are counted as REOs, whether they are marked as such in the listing or not. This is because we scan every listing remarks (both public and private) for the key words: Homepath, Fannie, Freddie, Homesteps, etc. We do not take the Special Listing Conditions as anything more than a suggestion. We are increasingly glad we do this.

    In Cromford Public charts, we distinguish between 3 subtypes of REOs:

    1. HUD owned homes
    2. GSE owned homes (Fannie Mae, Freddie Mac, etc)
    3. Bank owned homes

    The further down this list you go, the higher the average sales price.

    August 5 – The preliminary numbers are in for Maricopa County recordings in July. We see a total of 9,167 single-family and townhouse/condo sales, which is a 4% increase over July 2016. This is the second lowest year over year increase we have seen in 2017. The year over year sales increase appears to be diminishing as we go through the summer months. There were 1,215 new home sales, an increase of 24% over the 980 in July 2016, so no lack of growth in that department. It was the re-sale count that could be considered a bit disappointing, only 2% higher than in 2016.

    The overall median sales price was $252,000, up 7.2% from a year earlier. For new homes the median only rose 1.7% from $318,660 to $324,135.

    August 4 – Very interesting changes are afoot in the Cromford® Market Index world. Below is the table for the largest single-family markets comparing today with this time last month.

    The first big news is that we have a new number one at last. Mesa has finally displaced Avondale which until this week had sat at the top of the table ever since we first published it in January 2016. Avondale is the fastest deteriorating market over the past month, from a seller’s perspective, though with a CMI of 183.5 it is still not a welcoming spot for buyers just yet. Demand has been weakening in Avondale while supply has been increasing, but they are still nowhere near the balance point.

    Neighboring Glendale is also looking weaker and has slipped from third to fifth place. Buckeye is weaker too, adrift from the other 16 cities at the bottom of the table. Phoenix too is down, though only by a modest 3% over the last month. On the west side, Surprise is still doing well while Goodyear is making slow progress.

    In the Eastern half of the valley, the market is gaining significant strength:

    1. Paradise valley up 14%
    2. Scottsdale up 9%
    3. Fountain Hills up 8%
    4. Tempe up 7%
    5. Gilbert up 6%
    6. Queen Creek up 6%
    7. Mesa up 5%
    8. Chandler up 5%

    Other market indicators also suggest that we are seeing market strength shifting upmarket from the lowest price ranges to the mid-ranges. The price range from $300,000 to $500,000 is very healthy at the moment. For single-family homes in July 2017, it represented 31.2% of all dollars spent, up from 29.1% in July 2016, 26.9% in July 2015 and 24.7% in July 2014. The price ranges below $150,000 are now insignificant in size, with only 1.7% of the spending, but they are also in a cooling trend.

    August 3 – We now have the Census Bureau counts for building permits in Arizona during June. For single-family permits, there was a slight slowdown despite the ongoing housing supply shortage. The census counted only 1,800 permits across Maricopa and Pinal Counties during June, which is down 7.5% compared with June 2016.

    The 12 month total is 19,086, down from 19,232 last month.

    The year-to-date (half-year) total is 10,423, which is up 7.2% compared with 2016 at this point, but still a long way behind the years 1996-2007. The lowest June year-to-date total during that period was 1997 when we saw 15,475. To be fair though, 2017 had the biggest first half-year since 2007.

    Phoenix is making a brave attempt to catch up with Mesa in the permit stakes. Here are the year-to date numbers by city or named place:

    1. Mesa – 1,376
    2. Phoenix – 1,318
    3. Buckeye – 1,019
    4. Unincorporated Pinal County – 1,016
    5. Gilbert – 946
    6. Peoria – 920
    7. Goodyear – 607
    8. Queen Creek – 604
    9. Maricopa – 590
    10. Scottsdale – 367
    11. Surprise – 337
    12. Unincorporated Maricopa County – 335
    13. Chandler – 275
    14. Avondale – 112
    15. Glendale – 100
    16. Florence – 97
    17. Wickenburg – 92
    18. Eloy – 60
    19. Casa Grande – 51
    20. Paradise Valley – 42
    21. Litchfield Park – 40
    22. Fountain Hills – 37
    23. Tempe – 19
    24. Carefree – 18
    25. Cave Creek – 16
    26. Apache Junction – 15
    27. El Mirage – 5
    28. Tolleson – 3
    29. Coolidge – 1

    It is easy to see why Buckeye has a lower Cromford® Market Index than most large cities. It is expanding its housing supply much faster relative to its existing population (64,629 in 2016). Buyers will find it much easier to buy in Buckeye than almost anywhere else in the valley.

    Mesa is number one in permits but it remains under-supplied for homes and ranks second in our weekly CMI table for large cities. Although relatively unknown outside Arizona, Mesa’s population is ranked 38 in the top 100 cities in the USA by population (it had 484,587 inhabitants in 2016). Mesa is larger than Atlanta GA, Miami FL, Minneapolis MN, Cleveland OH and New Orleans LA. It ranked only 53rd in 1990.

    It is also see why San Tan Valley might feel it deserves to be incorporated. It is the dominant factor in the numbers for Unincorporated Pinal County and ranks almost as big as Buckeye for new home permits.

    For large cities, Chandler and Glendale have issued very few single-family permits in 2017.

    August 2 – The overall number of active listings (excluding UCB and CCBS) on ARMLS as of August 1 was 17,412. This is down 12% from 19,711 on August 1, 2016, so the overall trend is very much downwards, providing little relief or hope for buyers faced with the chronic shortage of properties for sale across all but the highest price levels. However there are some areas where active listing counts have increased over the past 12 months. The ZIP codes below are going against the overall trend in a big way, counting their single-family active listings (excluding UCB and CCBS):

    1. Fort McDowell 85264 – up 400% from 1 to 5
    2. Phoenix 85004 – up 150% from 2 to 5
    3. Phoenix 85051 – up 86% from 37 to 69
    4. Superior 85173 up 75% from 12 to 21
    5. Gila Bend 85337 up 67% from 3 to 5
    6. Phoenix 85037 – up 66% from 44 to 73
    7. Phoenix 85006 – up 53% from 32 to 49
    8. Mesa 85201 – up 48% from 23 to 34
    9. Phoenix 85033 – up 44% from 39 to 56
    10. Phoenix 85040 – up 43% from 21 to 30
    11. Phoenix 85024 – up 42% from 57 to 81
    12. Phoenix 85012 – up 41% from 22 to 31
    13. Phoenix 85031 – up 32% from 25 to 33
    14. Phoenix 85043 – up 32% from 47 to 62
    15. Peoria 85345 – up 27% from 62 to 79
    16. Tempe 85281 – up 25% from 44 to 56

    This list is not long and includes some ZIP codes with tiny numbers (which means they can easily see a large percentage change). However it is biased towards the West Valley and Phoenix. It also includes a couple of previous areas in the Southeast Valley which have been through periods of very low inventory (85201 and 85281) and 3 spots way out of town (Superior, Gila Bend & Fort McDowell).

    August 1 – While we all know that inventory is low, it is much lower in some areas than others. Examining the change in single-family active listing counts (excluding UCB and CCBS) for the various ZIP codes, we some enormous declines over the past 12 months in the following locations:

    1. Coolidge 85128 – down 50% from 70 to 35
    2. Gilbert 85233 – down 49% from 123 to 63
    3. Tonopah 85354 – down 43% from 21 to 12
    4. Mesa 85215 – down 41% from 83 to 49
    5. Casa Grande 85122 – down 40% from 203 to 122
    6. Glendale 85305 – down 39% from 41 to 25
    7. Chandler 85249 – down 38% from 272 to 170
    8. Chandler 85286 – down 38% from 179 to 111
    9. Gilbert 85234 – down 38% from 152 to 94
    10. Sun Lakes / Chandler 85248 – down 35% from 196 to 128
    11. Mesa 85212 – down 35% from 162 to 105
    12. Mesa 85208 – down 33% from 63 to 42
    13. Mesa 85206 – down 33% from 83 to 56
    14. Phoenix 85008 – down 33% from 67 to 45
    15. Apache Junction 85119 – down 32% from 97 to 66
    16. Scottsdale 85260 – down 32% from 162 to 111
    17. Glendale 85306 – down 32% from 50 to 34
    18. Phoenix 85013 – down 31% from 67 to 46
    19. Mesa 85207 – down 30% from 247 to 172
    20. Phoenix 85054 – down 29% from 24 to 17
    21. Phoenix 85027 – down 29% from 51 to 36
    22. Mesa 85209 – down 28% from 95 to 68
    23. Florence 85132 – down 27% from 151 to 110
    24. Gilbert 85296 – down 27% from 136 to 100
    25. Chandler 85226 – down 26% from 91 to 67
    26. Scottsdale 85259 – down 26% from 202 to 150
    27. Surprise 85388 – down 25% from 119 to 89

    These are the only ZIP code with reductions of 25% or more. We note that there is a very strong representation from the Southeast Valley, while the West Valley and Phoenix are under-represented. The Northwest Valley is also largely absent, though 85259 and 85260 are notable exceptions. Coolidge, Casa Grande and Florence in Pinal County are places seeing a large drop over the last 12 months.

    In previous years it has been the lowest price areas seeing the biggest drops in inventory. This is no longer the case and some of those areas have more homes for sale than they did a year ago. The list above is dominated by areas with mid-range house prices.

     

    © 2017 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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    No small part of this deal working out was due to the intense negotiations and juggling of our real estate agent, Denise Pruitt with Arizona Best Real Estate. She acted in our best interest at every turn, taking the brunt of the unpleasantness and making it work out. WE WOULD NOT BE IN THIS HOUSE WITHOUT HER. I think she is owed a bedroom, at least. Maybe a portion of the pool. – Eric & Kathryn (clients of Denise Pruitt)

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