The Cromford Report – Daily Observations February 2017

    February 28 – The new S&P/Case-Shiller® Home Price Index® was published today and covers sales during the period October to December 2016. The ranking for month to month price movements was as follows:

    1. Tampa 1.13%
    2. Miami 0.33%
    3. Seattle 0.59%
    4. Boston 0.56%
    5. Chicago 0.55%
    6. Washington 0.52%
    7. Cleveland 0.36%
    8. New York 0.35%
    9. Portland 0.30%
    10. Las Vegas 0.26%
    11. Los Angeles 0.25%
    12. San Diego 0.22%
    13. Dallas 0.20%
    14. Phoenix 0.18%
    15. Atlanta 0.16%
    16. San Francisco 0.14%
    17. Denver 0.11%
    18. Charlotte 0.08%
    19. Minneapolis -0.10%
    20. Detroit -0.19%

    Phoenix fell below the national average of 0.21% and slipped down the table from 7th to 14th place.

    For the year over year changes the table looks like this:

    1. Seattle 10.8%
    2. Portland 10.0%
    3. Denver 8.9%
    4. Tampa 8.4%
    5. Dallas 8.1%
    6. Miami 6.8%
    7. Boston 6.3%
    8. Atlanta 6.3%
    9. Detroit 6.2%
    10. Las Vegas 5.8%
    11. Minneapolis 5.7%
    12. San Francisco 5.7%
    13. Charlotte 5.6%
    14. San Diego 5.4%
    15. Los Angeles 5.4%
    16. Phoenix 4.9%
    17. Chicago 4.9%
    18. Cleveland 4.4%
    19. Washington 4.2%
    20. New York 3.1%

    Rising in this table are Miami, Boston, Minneapolis and San Francisco. Seattle, Portland and Denver continue to hold the top 3 spots. Phoenix stayed in 16th place but unlike last month, fell below the national average of a 5.3% annual increase. So although we are still in a strong seller’s market, Phoenix is not appreciating quite as fast as the average for the USA as a whole. We are not making much of a splash these days unlike 2011-2013 during the “coiled spring rebound era”.

    February 27 – Yesterday we looked at the ZIP codes that had seen a decline in supply since the start of the year. Today we will do the opposite and look at the ZIP codes with the highest growth in supply since Jan 1:

    1. Phoenix 85009 – up 73%
    2. Phoenix 85004 – up 45%
    3. Scottsdale 85250 – up 32%
    4. Phoenix 85035 – up 32%
    5. Fountain Hills – up 30%
    6. Phoenix 85007 – up 27%
    7. Mesa 85212 – up 25%
    8. Scottsdale 85266 – up 23%
    9. Wittmann 85361 – up 22%
    10. Phoenix 85045 – up 21%
    11. Sun City West 85375 – up 21%
    12. Phoenix 85048 – up 21%
    13. Rio Verde 85263 – up 20%
    14. Phoenix 85053 – up 20%
    15. Gilbert 85297 – up 19%
    16. Tempe 85284 – up 19%
    17. Phoenix 85006 – up 19%
    18. Phoenix 85003 – up 18%
    19. Phoenix 85050 – up 18%
    20. Phoenix 85018 – up 18%

    Generally we are seeing the largest growth in supply in the more expensive parts of town. Geographically, Central Phoenix, Ahwatukee and the Northeast are getting plenty of new supply.

    Interesting that 85035 is up while neighboring 85031 is down. The same applies to 85297 and 85296 and also 85284 and 5283.

    The highest growth in Pinal County is for Maricopa 85139 (16%) and San Tan Valley 85140 (10%).

    February 26 – The number of active listings (excluding UCB and CCBS) has increased by 5.3% since January 1. Last year the same period gave us an increase of 14.5%. We can conclude that buyers are going to have a harder time this spring than in 2016 due to less choice in many areas. We have more buyers competing for fewer properties. There are in fact many locations where we have fewer active listings than when we started the year. The biggest declines in supply are in:

    1. Youngtown 85363 – down 48%
    2. Phoenix 85031 – down 30%
    3. Glendale 85306 – down 29%
    4. Casa Grande 85122 – down 29%
    5. Surprise 85378 – down 27%
    6. Phoenix 85017 – down 25%
    7. Glendale 85302 – down 24%
    8. Glendale 85307 – down 24%
    9. Superior 85173 – down 24%
    10. Glendale 85304 – down 22%
    11. Gilbert 85296 – down 21%
    12. Waddell 85355 – down 21%
    13. Phoenix 85040 – down 20%
    14. El Mirage 85335 – down 19%
    15. Glendale 85303 – down 18%
    16. Surprise 95379 – down 16%
    17. Apache Junction – down 16%
    18. Tempe 85283 – down 15%
    19. Maricopa 85138 – down 14%
    20. Phoenix 85034 – down 14%

    The West Valley is heavily represented here, especially the northwest including Glendale, Surprise, El Mirage & Youngtown. Pinal County is also seeing lower supply in Casa Grande, Apache Junction, Maricopa & Superior.

    February 25 – After almost catching up with 2016 two weeks ago, new residential listings added to the ARMLS data have started to fall behind last year again. As of this morning we have seen 19,301 additions since the start of the year and this is 1.6% lower than last year. However we must remember that the first quarter of last year was very strong for new listings, so the rate in 2017 is still pretty healthy. It is 5.5% higher than the 2015 year to date number and very similar to the 2014 year to date number.

    The shortfall has mostly come in the last week with a 10% drop in the number of new listings compared to a year ago. The 4 week total is a less volatile measure and is currently 3.6% below the rate of 2016.

    It would not normally be a big problem that active listings were running 3.6% below the prior year rate, but with sales currently running 17.4% higher than 2016 year to date, the shortfall in supply should be a concern for most buyers.

    February 24 – Using days of of inventory as our guide we can see the following changes since last year:

    Price Range Days of Inventory Feb 24, 2016 Days of Inventory Feb 24, 2017 Change
    Under $100K 68 65 -3%
    $100K – $125K 49 42 -15%
    $125K – $150K 43 36 -15%
    $125K – $175K 49 37 -25%
    $175K – $200K 63 47 -25%
    $200K – $225K 67 50 -26%
    $225K – $250K 77 57 -26%
    $250K – $275K 85 60 -29%
    $275K – $300K 92 73 -22%
    $300K – $350K 120 83 -31%
    $350K – $400K 130 106 -18%
    $400K – $500K 169 130 -23%
    $500K – $600K 231 173 -25%
    $600K – $800K 277 236 -15%
    $800K – $1M 378 338 -11%
    $1M – $1.5M 456 418 -8%
    $1.5M – $2M 643 579 -10%
    $2M – $3M 765 746 -2%
    Over $3M 1178 1342 +14%

    Only one price range is weaker than last year – homes over $3 million. The greatest improvement (-31%) from a seller’s perspective was for homes between $300K and $350K.

    February 23 – It is time once again to take a look at the Cromford® Market Index for the single family markets in the 17 largest cities.

    At first sight this is a little discouraging for sellers who are now used to a market favoring them so strongly.

    Only 5 of the 17 cities are showing improving market conditions for sellers and 4 out of these 5 are in the West Valley.

    Paradise Valley has improved by 4% but this is a consolation prize because it is still stuck firmly in last place. Plentiful supply and weak demand growth means it is still below the balanced 100 number.

    Fountain Hills continues to trend lower and could easily join Paradise Valley below the 100 mark in the near future.

    However, let us remember anything over 110 is in a seller’s market and 14 of the cities qualify for that designation. The top 6 cities I would describe a heavily favoring sellers over buyers.

    The market is still looking healthy overall and it could just be taking a breather before advancing once more during the critical spring season. Supply is low except for the high end but demand is a little patchy, so we are watching it closely.

    February 22 – We are starting to get the first estimates from the US Census Bureau for population changes between July 2015 and July 2016. The only data released so far is statewide, but shows:

    • Total population of Arizona grew by 113,506 (up from 99,282 in for July 2014 – July 2015)
    • There were estimated to be 87,204 births (down from 87,385)
    • There were estimated to be 56,564 deaths (up from 53, 233)
    • Natural increase (births minus deaths) was 30,640 (down from 34,152)
    • Net domestic migration was 61,544 (up from 45,934)
    • Net international migration was 14,861 (down from 17,344)

    The Census Bureau also provides the cumulate total for the period April 2010 to July 2016 (6 years and 3 months)

    • Total population of Arizona grew by 538,770
    • There were estimated to be 539,307 births
    • There were estimated to be 320,404 deaths
    • Natural increase (births minus deaths) was 218,903
    • Net domestic migration was 223,380
    • Net international migration was 81,853

    Total population growth is increasing with the most recent 12 month period contributing 21% of the 6.25 year total. The main reason for this is inward domestic migration, especially for retirees. Florida and Arizona are becoming major destinations for those reaching the age of 65. This is confirmed by reports from the moving companies.

    Natural growth is on a downtrend in Arizona. With a drop of 10% in a single year we are seeing the same effects as elsewhere in the developed world. Lower birth rates and increasing death rates are to be expected for the foreseeable future. At the moment the rise in the death rate is more significant than the drop in the birth rate. This is because our median age is rising fast as the retired population expands extremely quickly.

    Net international migration is volatile, but is well below the 20,542 we saw in 2011. It is becoming less significant to the overall population growth.

    The latest net domestic migration number is huge and is the primary driver of increased housing demand. 61,544 is up 34% from the prior year and up almost 9-fold from the figure in 2011.

    The Arizona housing market is benefitting greatly from net domestic migration, but for every person who moves here from elsewhere in the USA, there is a corresponding negative effect to the housing demand in some other state.

    States with declining populations between July 2015 and July 2016 include:

    • Connecticut
    • Illinois
    • Mississippi
    • New York
    • Pennsylvania
    • Vermont
    • West Virginia
    • Wyoming
    • and Puerto Rico (not a state but treated like one by the Census Bureau) – this had by far the fastest decline at 1.8%

    Over the longer term since April 2010, only Puerto Rico (-8.4%), West Virginia (-1.2%), Vermont (-0.2%) and Illinois (-0.2%) have seen declines, but the list of states with declining population is likely to grow over the next 20 years.

    The top states for population growth between July 2015 and July 2016 are:

    1. Utah 2.03%
    2. Nevada 1.95%
    3. Idaho 1.83%
    4. Florida 1.82%
    5. Washington 1.78%
    6. Oregon 1.71%
    7. Colorado 1.68%
    8. Arizona 1.66%
    9. Washington DC 1.61%
    10. Texas 1.58%

    Over the longer term since April 2010, the top ten look like this:

    1. Washington DC 13.2%
    2. North Dakota 12.7%
    3. Texas 10.8%
    4. Utah 10.4%
    5. Colorado 10.2%
    6. Florida 9.6%
    7. Nevada 8.9%
    8. Arizona 8.4%
    9. Washington 8.4%
    10. Idaho 7.4%

    The states with heavy dependence on energy production (North Dakota and Texas) have experienced decelerated growth.

    Arizona has not changed places in the table, but Utah, Nevada, Idaho, Oregon, Florida and Washington have all seen rises in their ranking.

    February 21 – Examining the single family market over $1 million, we see the annual average $/SF moving up between 2015 and 2016 for the following areas:

    • Scottsdale 85251 – $405.60 (up 9%)
    • Scottsdale 85255 – $373.14 (up 4%)
    • Phoenix 85018 – $367.93 (up 5%)
    • Scottsdale 85250 – $338.27 (up 13%)
    • Carefree 85377 – $313.84 (up 11%)
    • Scottsdale 85254 – $266.34 (up 10%)
    • Fountain Hills 85268 – $265.41 (up 4%)

    But we also see declines here:

    • Paradise Valley 85253 – $361.97 (down 3%)
    • Scottsdale 85262 – $351.73 (down 1%)
    • Phoenix 85016 – $300.99 (down 10%)
    • Cave Creek 85331 – $293.55 (down 1%)
    • Scottsdale 85266 – $271.02 (down 12%)

    Beware of reading too much into the percentage changes for 85377 and 85250, because these ZIP codes have very low sales volumes over $1 million (14 and 6 respectively in 2016). The pricing can be volatile due to the low number of samples.

    Generally I would say areas very close to shops, restaurants and entertainment are attracting more buyers than usual.

    February 20 – The average rent for homes leased through ARMLS last month was 84.9 cents per square foot. This is up 8% from February 20, 2016 when it was 78.6 cents. Obviously a lot of rentals are leased outside of ARMLS, but with 2,345 leases closed on ARMLS per month this represents a decent sample for analysis. The number of closed leases is down 8% from a year ago. The number of active listings (excluding vacation rentals) is currently 2542, up 11% from 2,290 a year ago. However this still only represents 1.1 months of supply. For prospective tenants, that is not a good number, but at least it is better than the 0.9 months that we experienced this time last year.

    A more typical supply for our market is between 2 and 3 months, which is what we measured between 2010 and 2012. Supply of rental listings on ARMLS was still 2 months at the start of 2014 but declined that year and has been much lower since then.

    Demand exceeds supply and continues to do so, though not quite to as great extent as in the first half of 2016.

    You can see the resultant effect on lease rates here.

    February 19 – Examining January’s sales through ARMLS for single family homes within Greater Phoenix, we see some big swings in market share by price range over the last year. We are comparing dollar volume between January 2017 and January 2016.

    • Dollar volume for homes below $150,000 has collapsed from 6.0% market share to just 3.3%
    • Dollar volume for homes from $150,000 to $250,000 has remained constant at roughly 28% market share
    • Dollar volume for homes between $250,000 and $400,000 has grown from 28.7% to 31.1%
    • Dollar volume for homes between $400,000 and $1,000,000 has also grown from 24.9% to 26.3%
    • Dollar volume for homes over $1 million has dropped from 12.1% to 10.8% market share

    The above does not quite explain all the complexity. We also note that:

    • From $175,000 to $300,000 we are seeing growth in market share.
    • From $300,000 to $350,000 market share is stable at just over 9%
    • Market share grows again for $350,000 up to $1.5 million
    • Market share falls for $1.5 million and upwards.

    Overall, the top and bottom end of the market are both losing market share while the mid range all the way from $175,000 to $1.5 million is growing market share.

    The strongest growth in market share was for homes between $350,000 and $400,000 – these increased their share of the market by 22%

    Among the luxury ranges the price sector from $1.5 million to $2 million lost the most market share – down by 24%.

    February 18 – Yesterday we looked at the annual change in the number of listings under contract by price range. Today we will home in on the geographic areas that are seeing the highest and lowest percentage changes.

    The top gainers over 2016 are:

    1. Gold Canyon – up 85% from 33 to 61
    2. Wittmann – up 85% from 13 to 24
    3. New River – up 82% from 17 to 31
    4. Waddell – up 69% from 16 to 27
    5. Carefree – up 55% from 11 to 17
    6. Tonopah – up 54% from 13 to 20
    7. Eloy – up 42% from 12 to 17
    8. Sun City West – up 41% from 107 to 151
    9. Youngtown – up 39% from 13 to 18
    10. Avondale – up 36% from 107 to 146

    Some excellent news there for Gold Canyon and Carefree, neither of which had a particularly good year in 2016.

    At the other end of the scale we find:

    1. Fountain Hills – down 31% from 113 to 78
    2. Rio Verde – down 29% from 21 to 15
    3. Tolleson – down 26% from 70 to 52
    4. Paradise Valley – down 16% from 55 to 46
    5. Laveen – down 6% from 115 to 108
    6. Gilbert – down 5% from 529 to 500
    7. Chandler – down 5% from 497 to 474
    8. Coolidge – down 5% from 22 to 21
    9. Anthem – down 1% from 67 to 66
    10. Florence – flat at 74 both years

    February 17 – Listings under contract is another useful measure for determining demand. However you need to compare today’s figure with that from previous February 17s, because the number varies a lot by season and during the month. Historical data counts are almost impossible to find unless you log all the ARMLS data every day as we do.

    For all areas & types within the ARMLS database we can see that today’s number of 11,615 is 3% higher than February 17, 2016 when it was 11,305. This tells us that overall demand is slightly higher than last year, but not dramatically so.

    If we restrict our analysis to normal listings within Greater Phoenix, we see an increase from to 9,907 to 10,546. This is a more significant 6%. Excluding short sale and pre-foreclosures helps a lot because these listings tend to stay under contract for a long time awaiting approval from lenders. Over the last year, those under contract have dropped from 959 to 628, a fall of 35%.

    We can use these numbers to see how demand has changed by price range:

    Price Range Under Contract Feb 17, 2016 Under Contract Feb 17, 2017 Change %
    Under $100K 593 402 -32%
    $100K TO $125K 507 353 -30%
    $125K to $150K 996 714 -28%
    $150K to $175K 1,392 1,115 -20%
    $175K to $200K 1,322 1,456 10%
    $200K to $225K 976 1,096 12%
    $225K to $250K 956 1,195 25%
    $250K to $275K 736 792 8%
    $275K to $300K 696 776 12%
    $300K to $350K 870 927 7%
    $350K to $400K 568 773 36%
    $400K to $500K 683 850 24%
    $500K to $600K 355 435 23%
    $600K to $800K 288 370 28%
    $800K to $1M 153 152 -1%
    $1M to $1.5M 111 111 0%
    $1.5M to $2M 49 47 -4%
    $2M to 43M 36 38 6%
    Over $3M 18 13 -28%

    We note that contracts under $175K are well down on last year, probably constrained by the lack of supply in these price ranges.

    We also see that the healthiest growth in demand is between $350K and $800K. Above this mark demand drops off sharply and is down 2% overall. Under contract counts are 28% down for homes over $3 million. For homes over $5 million they are down 80% from 5 to 1.

    February 16 – Let us have another look at the Cromford® Market Index for the single family markets in the 17 largest cities (by dollar volume):

    11 out of 17 cities saw at least some deterioration in the market from a seller’s perspective over the last month, though that is to be expected during a period when new listings tend to arrive in large numbers. The most significant changes were:

    • Fountain Hills – down 15%
    • Maricopa – down 12%
    • Goodyear – down 5%
    • Phoenix – down 5%

    6 cities saw improvement in the market from a seller’s perspective, most of these being in the West Valley, with Surprise and Glendale deserving special mention.

    The Southeast Valley remains very strong, though there has not much change over the past month in any of the cities in this area.

    Paradise Valley is still the weakest city from a seller’s perspective, but it has shown some improvement over the past month.

    February 15 – The most recent Ellie Mae Origination Insight Report covers loans closed in January 2017 and is the first to reflect the higher interest rate environment. You might expect refinances to drop in relation to purchase loans, but that is not what Ellie Mae is reporting. The re was little change between December and January with re-finances increasing from 46% to 47% of all closed loans.

    Adjustable rate mortgages almost always gain popularity when rates increase and at 5.4% of all loans, this is the highest percentage since October 2015. The average 30 year loan interest rate was 4.31%, up from a low of 3.75% in September, but not much different from the 4.30% we saw in January 2016.

    Overall there is not much sign of a significant change despite the increased interest rates.

    February 14 – Probably the most under-used statistic that we really like is the annual sales rate. Most people look at it once per year, given that it is an annual measurement. However, we recalculate it every day and study it on a weekly basis to detect changes in the market.

    The overall annual sales rate for all areas & types in the ARMLS database is 90,739 as of Feb 14, up 7.4% from 84,464 last year on the same date. This is a healthy increase over 12 months and shows that the market is expanding. The primary reason is that people have been improving their credit scores and are qualifying for home loans more readily as a result. This is a result of all the foreclosures and short sales that are now getting old enough to drop out of the credit score formula.

    For Greater Phoenix only, the ARMLS annual sales rate has increased from 82,695 to 88,748, a rise of 7.3%, almost the same percentage as for all areas & types.

    Lender owned sales (REOs) have however dropped from 3,071 to 1,981 per year, down 35%, while short sales and pre-foreclosures have fallen from 2,568 to 1,950 per year, a somewhat less dramatic decrease of 24%. To compensate for these falls, the normal transactions have increased from 77,056 to 84,817, a rise of 10%.

    The rise in sales volume has not been consistent across all areas. Here are the cities ranked by annual sales increases in single family homes:

    1. Coolidge 41.0%
    2. Wittmann 32.5%
    3. Florence 23.1%
    4. Wickenburg 21.5%
    5. Gold Canyon 18.5%
    6. Laveen 16.3%
    7. Buckeye 13.6%
    8. Chandler 13.2%
    9. Casa Grande 13.0%
    10. Maricopa 12.8%
    11. Queen Creek 11.5%
    12. Mesa 9.6%
    13. Apache Junction 9.4%
    14. Sun City 9.1%
    15. Goodyear 8.8%
    16. Gilbert 8.4%
    17. Cave Creek 8.0%
    18. Sun City West 7.9%
    19. Tonopah 7.9%
    20. Sun Lakes 7.4%
    21. Waddell 7.2%
    22. Tempe 6.6%
    23. Eloy 6.6%
    24. Peoria 6.3%
    25. Youngtown 5.2%
    26. Scottsdale 5.0%
    27. Surprise 4.5%
    28. Rio Verde 4.5%
    29. Phoenix 4.3%
    30. Anthem 4.2%
    31. Avondale 2.5%
    32. Tolleson 2.5%
    33. Litchfield Park 2.4%
    34. Glendale 1.8%
    35. Fountain Hills -0.6%
    36. Arizona City -3.0%
    37. El Mirage -4.2%
    38. Paradise Valley -9.5%
    39. Carefree -10.0%
    40. New River -17.8%

    Many remote locations are showing remarkable growth in sales activity, particularly in the far northwest and far southeast.

    Six of the 40 cities have markets that are contracting, particular noteworthy being Paradise Valley and Carefree, our 2 most expensive cities.

    February 13 – A major statistical record was broken in January 2017 when MLS listing 5522429 changed to closed status. At $12,750,000 this is the most expensive residential sale ever recorded in the ARMLS database.

    The property was 5901 E Edward Lane in the Tilyou Ranchito subdivision in Paradise Valley, built in 2007.

    Congratulations to Robert Joffe of Launch Real Estate who represented the seller and Jay Pennypacker of Russ Lyon Sotheby’s International Realty who represented the buyer. It was listed at $13,500,000 and you might be surprised to see for a home in this price range, that it was only on the market for 37 days. However it had been listed twice previously starting in May 2015 and at one time the price requested was $14,500,000, so the story is really a little more complicated.

    The previous record of $12,500,000 had held since September 2000 and belonged to a property in Cave Creek with 225 acres.

    At just over $900 per square foot, 5901 E Edward Lane does not top the table on a price per sq. ft. basis. In fact it ranks only 56th in Maricopa County by that measure.

    February 12 – In Maricopa County we now have the fewest foreclosures pending that we have ever recorded (and we started in 2001). The county total stands at 2,248 and the lowest record previously was 2,253 in May 2006.

    Not only do we have the lowest foreclosure activity, the trend is for it to get quieter still. We have seen pending foreclosures decline 26% in the last year and 4% in the first 6 weeks of 2017.

    February 11 – We count how many new residential listings are added to the ARMLS database each day and as of this morning there has been 14,462 new additions year to date in 2017. This is almost exactly the same as on February 11, 2016 when we had counted 14,469. Both of these are 6% higher than in 2015 when we had seen only 13,668.

    Unfortunately for buyers, the same number of new listings as last year will not be adequate, since the sales rate in 2017 is much higher than 2016. As of yesterday we had seen 16% more closed listings year to date than in 2016.

    During the period Jan 1 to Feb 11, 2016, the number of active listings (excluding UCB and CCBS) grew from 20,073 to 22,455, a rise of 12%. This year the count grew from 19,397 to 20,424 a rise of only 5%.

    Homes for sale are going to seem thinner on the ground than last year. Although this is bad for buyers, it is good for sellers and will provide fuel for home price inflation. The appraisal industry can only apply limited braking power when supply and demand are out of balance.

    February 10 – Using the deeds recorded by Maricopa County in January 2017 we can deduce the following facts:

    • Total recordings for single family homes & condos were up 21% over January 2016
    • The median sales price was up 5.4% since last year from $223,000 to $235,000
    • New home closings were up 47.5% from 602 to 888
    • The median sales price for new homes was up 9.4% from $302,498 to $330,874
    • Re-sales closings were up 17.7%
    • The median sales price for re-sales increased 5.2% from $212,000 to $223,000
    • The median sales price for re-sales was at its lowest mark since April 2016

    February 9 – After a strong start to the year, the market is hesitating to decide where it goes next. We can see this in the Cromford® Market Index table for the single-family markets in the largest 17 cities:

    Here we see 9 cities with deteriorating conditions for sellers compared to January 9, primarily because supply has increased while demand has remained flat, However there are almost as many cities with improving conditions for sellers. There are only a handful of big swings over the last month

    • Fountain Hills continues its descent from the heights of the fall of 2016 and is now in the balanced zone
    • Maricopa is not doing as nicely for sellers as it was in the fourth quarter of 2016, but remains a seller’s market
    • Surprise is bouncing back after a weak fourth quarter
    • Glendale is challenging Chandler for the number 2 spot

    February 8 – The S&P/Case-Shiller® Home Price Index® that was published last week covers sales during the period September to November 2016. The ranking for month to month price movements was as follows:

    1. Tampa 0.79%
    2. Denver 0.56%
    3. Miami 0.49%
    4. Boston 0.44%
    5. New York 0.40%
    6. San Diego 0.34%
    7. Phoenix 0.32%
    8. Las Vegas 0.31%
    9. Charlotte 0.27%
    10. Seattle 0.24%
    11. Washington 0.21%
    12. Dallas 0.17%
    13. Portland 0.16%
    14. Los Angeles 0.15%
    15. Minneapolis 0.11%
    16. Atlanta 0.02%
    17. Cleveland 0.00%
    18. Detroit -0.05%
    19. San Francisco -0.06%
    20. Chicago -0.82%

    Phoenix comfortably beat the national average of 0.24%.

    For the year over year changes the table looks like this:

    1. Seattle 10.4%
    2. Portland 10.1%
    3. Denver 8.7%
    4. Tampa 8.1%
    5. Dallas 8.1%
    6. Detroit 6.6%
    7. Miami 6.1%
    8. Atlanta 6.1%
    9. Las Vegas 6.0%
    10. Charlotte 5.9%
    11. San Diego 5.8%
    12. Los Angeles 5.5%
    13. Minneapolis 5.5%
    14. Boston 5.5%
    15. San Francisco 5.3%
    16. Phoenix 5.2%
    17. Chicago 4.0%
    18. Cleveland 3.8%
    19. Washington 3.7%
    20. New York 2.4%

    In this picture, Phoenix is in the bottom 25% of the pack, but close to the national average of 5.3%.

    February 7 – The other side of the coin from yesterday’s post – the table of ZIP codes with the lowest single-family Contract Ratios indicates where there is the most choice for buyers and sellers have the least bargaining power:

    1. Gila Bend – 0.0
    2. Aguila – 0.0
    3. Stanfield – 0.0
    4. Fort McDowell – 0.0
    5. Carefree 85377 – 10.0
    6. Scottsdale 85266 – 10.1
    7. Wickenburg 85390 – 12.0
    8. Scottsdale 85262 – 12.8
    9. Paradise Valley – 13.0
    10. Congress – 16.7
    11. Morristown 85342 – 18.8
    12. Casa Grande 85194 – 19.1
    13. Rio Verde 85263 – 19.2
    14. Black Canyon City – 20.0
    15. Fountain Hills – 20.1
    16. Scottsdale 85255 -22.3
    17. Superior 85173 – 23.1
    18. Gold Canyon 85118 – 24.2
    19. Phoenix 85004 – 25.0
    20. Scottsdale 85259 – 25.2
    21. Phoenix 85013 – 26.5
    22. Cave Creek 85331 – 28.0
    23. Phoenix 85003 – 28.6
    24. Eloy 85131 – 28.9

    Here we see no appearance by any Southeast Valley ZIP codes and none in the West Valley until we reach as far as Morristown. There are a few cold spots in Central Phoenix and a lot of cold spots in the Northeast Valley, especially a long way north of the 202. Many tiny towns on the fringes of the valley are also seeing very low contract ratios. Pinal County has a smattering of cold spots too. Paradise Valley appears at number 9 in this table, but because there are no inexpensive single-family homes in the 85253 ZIP-code, we never see high contract ratios in PV, even in a booming market. The highest we have recorded was 32.3 in June 2012, and PV has not been higher than 20 since August 2015.

    If you are a buyer looking for a bargain and fed up with competing against other buyers, you have your best chance of a successful offer in the 24 locations above.

    February 6 – Let us take a look at the ZIP codes with the highest single-family Contract Ratios. These will generally be the most difficult spots for buyers to find what they want and the easiest for sellers to achieve a sale:

    1. Mesa 85202 – 148.5
    2. Mesa 85210 – 147.6
    3. Peoria 85345 – 137.5
    4. El Mirage – 136.8
    5. Glendale 85304 – 129.7
    6. Glendale 85302 – 122.0
    7. Youngtown 85363 – 117.6
    8. Surprise 85378 – 117.2
    9. Chandler 85225 – 115.2
    10. Phoenix 85040 – 113.3
    11. Mesa 85201 – 109.1
    12. Phoenix 85031 – 107.3
    13. Phoenix 85027 – 106.4
    14. Phoenix 85053 – 104.7
    15. Phoenix 85037 – 104.5
    16. Gilbert 85296 – 103.7
    17. Phoenix 85032 – 103.2
    18. Chandler 85224 – 101.9
    19. Mesa 85204 – 101.8
    20. Chandler 85226 – 94.5
    21. Tempe 85283 – 93.8
    22. Mesa 85208 – 90.6
    23. Phoenix 85006 – 90.2
    24. Gilbert 85233 – 84.9
    25. Phoenix 85041 – 84.9
    26. Chandler 85286 – 82.7
    27. Gilbert 85234 – 82.6
    28. Glendale 85306 – 82.2
    29. Apache Junction 85120 – 81.6
    30. Avondale 85392 – 80.8

    The North and Northeast are conspicuous by their absence and we have only one entry in the top 30 from Pinal County. However the inner West Valley and inner Southeast Valley are both well represented, along with South Phoenix.

    February 5 – December 2016 was another strong month for multi-family building permits, with a total of 1,127 units across Maricopa & Pinal counties. This brings the 12-month total to 9,645, the highest since January 2008 and well above most forecasts.

    The annual totals for cities with more 20 permits were:

    1. Phoenix 4,493
    2. Tempe 1,486
    3. Chandler 1,143
    • Gilbert 938
    1. Mesa 711
    2. Scottsdale 400
    3. Pinal County 162
    4. Goodyear 134
    5. Surprise 100
    6. Paradise Valley 46

    It is not often we report multi-family permits for Paradise Valley.

    February 4 – The US Census Bureau has withdrawn its building permit survey web pages as part of a “streamlining” exercise. Fortunately they are still making the underlying permit data available for download in data files and we are able to compile these files into several different interactive charts for our Cromford Public subscribers.

    There were 1,421 single-family permits issued for Maricopa and Pinal counties in December 2016. For the first time since January 2015 we saw a negative year-over-year change, because December 2015 gave us 1,433 permits. The relatively meager total for December is surprising given that new home closings have been growing much faster than permits. Total new home sales grew from 10,661 to 14,080 between 2015 and 2016, an increase of 32%. However single-family permits grew from 16,768 to 18,387, an increase of only 10%.

    Unless there is a substantial increase in permit rates, we should expect longer lead times for new homes, coupled with prices rising more swiftly.

    We know that land prices are currently too high for many builders to achieve their planned gross margins, and labor costs are rising because of shortages of skilled workers throughout the construction trades. It should not be surprising that developers are unwilling to meet the growing demand for new homes if they are unable to generate the profits that their executives and shareholders expect. For us, this will probably mean more supply constraints which will be bad news for buyers and good news for sellers of existing homes, at least those in the price ranges primarily served by developers, namely $200,000 to $600,000.

    Footnote: The census bureau uses a different definition of “single-family” from the rest of us. Generally, detached, semi-detached, duplex and townhomes are all counted as single-family by the census bureau. Condos are also included among single-family if they do not share utilities and have ground to ceiling walls separating the units. Multi-family permits, according to the census bureau, are those issued for apartment buildings and for condos that share utilities or do not have ground to ceiling walls separating the units.

    February 3 – Today we take another look at the Cromford® Market Index for the single-family market in each of the 17 largest cities

    The picture is still a positive one with 10 out of the 17 cities showing an improvement in the negotiating power for sellers over the last month. However there also 7 cities showing some deterioration in that negotiation power. The most significant of these negatives moves was in Fountain Hills which has fallen all the way from 2nd place to 15th over the past 3 months.

    Most improved was Glendale which has moved up to third place. Surprise is also recovering from a weak patch and has overtaken Scottsdale. Maricopa has faded after a strong move during the fourth quarter of 2016, while Tempe and Queen Creek are still improving nicely.

    Paradise Valley is still below 100, but has improved since last week so is looking less likely to become a buyer’s market with a reading below 90 in the immediate future.

    February 2 – Yesterday we looked at the most improved ZIP codes for sellers using the contract ratio. Today we will do the opposite – search for the weakest contract ratio trends by ZIP code:

    For the single-family markets, here are some of the ZIP codes with negative trends for sellers:

    Rank City ZIP Contract Ratio Feb 1, 2016 Contract Ratio Feb 1, 2017 Percentage Change
    130 Youngtown 85363 900 118 -87%
    129 Phoenix 85017 113 43 -61%
    128 Glendale 85303 90 48 -47%
    127 Scottsdale 85266 18 10 -45%
    126 Phoenix 85043 118 67 -43%
    125 Glendale 85307 125 71 -43%
    124 Phoenix 85013 45 26 -41%
    123 Phoenix 85027 179 106 -40%
    122 Phoenix 85035 66 40 -39%
    121 Phoenix 85033 83 52 -37%
    120 Mesa 85203 110 73 -33%
    119 Phoenix 85042 87 58 -33%
    118 Phoenix 85009 77 53 -31%
    117 Surprise 85378 167 117 -30%
    116 Phoenix 85014 81 57 -29%
    115 Phoenix 85050 75 54 -28%
    114 Chandler 85226 131 95 -28%
    113 Phoenix 85034 100 75 -25%
    112 Phoenix 85004 33 25 -25%
    111 Mesa 85201 144 109 -24%

    Some formerly hot spots in the Southeast Valley have cooled down, like 85201, 85203 and 85226, but many of these weaker areas are in Phoenix, particularly West and Central Phoenix.

    Scottsdale 85266 looks particularly weak with a contract ratio of 10, the lowest in the Northeast Valley and the lowest we have seen for 85266 since 2009.

    February 1 – We are seeing interesting contrasts between areas. Some have seen a drop in active listings coupled with a rise in listings under contract. This clearly indicates improving conditions for sellers, and the drop in active listings is unusual for a January to February comparison. A statistic that captures these trends is the Contract Ratio, which compares the number of listings under contract with the number of active listings. By comparing the contract ratio on February 1, 2017 with its value on February 1, 2016, we can see which areas are seeing the strongest or weakest trends.

    For the single-family markets, here are some of the most improved ZIP codes for sellers:

    Rank City ZIP Contract Ratio Feb 1, 2016 Contract Ratio Feb 1, 2017 Percentage Change
    1 Avondale 85395 24 47 +96%
    2 Chandler 85286 44 83 +87%
    3 Phoenix 85021 30 56 +86%
    4 Mesa 85215 31 57 +81%
    5 Phoenix 85031 59 107 +80%
    6 Glendale 85305 44 79 +79%
    7 Phoenix 85048 28 50 +75%
    8 Peoria 85345 81 138 +70%
    9 Maricopa 85138 33 54 +65%
    10 Casa Grande 85122 33 54 +63%
    11 Tempe 85283 57 94 +63%
    12 Glendale 85302 75 122 +63%
    13 Phoenix 85008 43 70 +62%
    14 Sun City 85373 43 69 +60%
    15 Phoenix 85044 49 77 +59%
    16 Chandler 85225 74 115 +56%
    17 Phoenix 85085 32 50 +54%
    18 Scottsdale 85260 31 47 +51%
    19 Maricopa 85139 45 67 +49%
    20 Mesa 85202 100 148 +48%

    Some of these, such as 85202 and 85345 were already hot last year, so a strong improvement percentage suggests that buyers are going to have a hard time in these ZIP codes.

     

    © 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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