The Cromford Report – Daily Observations January 2017

    January 26 – The Cromford® Market Index for the single-family markets in the 17 largest cities now looks like this:

    Overall we still see a very positive picture for most sellers with only 5 out of the 17 deteriorating over the last month.

    Top among the improving cities for sellers was Cave Creek, followed by Queen Creek, Tempe, Glendale & Peoria.

    Paradise Valley and Fountains Hills were weaker again, joined by Buckeye, Maricopa and Chandler. However the last 2 of these are taking a breather after strong improving trends over the past few months.

    January 20 – Daily observations will be delayed and less frequent while Mike is travelling throughout the UK until January 31. Normal service will resume as soon as possible.

    January 19 – Let us take another look at the Cromford® Market Index for the 17 largest cities and their single-family markets:

    This is another pretty sight for sellers and not very promising for buyers. 13 cities out of 17 improved their seller’s negotiating power over the last month, several by quite large amounts.

    The big positive swings were:

    1. Cave Creek +19%
    2. Tempe +11%
    3. Queen Creek +10%
    4. Glendale +7%
    5. Mesa +7%
    6. Gilbert +6%
    7. Phoenix +6%

    Chandler has cooled off a bit in the last 2 weeks so allowing the next few cities a chance to catch up.

    The balance continues to lie in buyer’s favor in Paradise Valley, though while it stays above 90, I would still describe it as a balanced market.

    Cave Creek has overtaken Fountain Hills, replacing it as the most seller-friendly part o the Northeast Valley.

    January 18 – In contrast to yesterday’s post, here are the locations that were below average in terms of annual sales growth:

    Most areas saw at least some growth, but sellers in Carefree appear to have a few demand problems to worry about (not so Carefree after all, then).

    New River also stands apart from the crowd with a substantial fall in annual sales.

    January 17 – Here is a table of the areas where the home sales in 2016 exceeded 2015 by more than the average for the Greater Phoenix area as a whole:

    This is based on sales recorded in Maricopa and Pinal Counties.

    January 16 – We all seem to be talking about interest rates as if they have moved substantially higher, but the latest report from Freddie Mac shows that so far in 2017 they have only moved lower.

    • Jan 12, 2017
      • 30 year Fixed 4.12%
      • 15 Year Fixed 3.37%
      • 5 Year ARM 3.23%
    • Jan 5, 2017
      • 30 Year Fixed 4.20%
      • 15 Year Fixed 3.44%
      • 5 Year ARM 3.33%
    • Dec 29, 2017
      • 30 Year Fixed 4.32%
      • 15 Year Fixed 3.55%
      • 5 Year ARM 3.30%

    At the beginning of 2016 they were:

    • Jan 7, 2016
      • 30 Year Fixed 3.97%
      • 15 Year Fixed 3.26%
      • 5 Year ARM 3.09%

    So the latest rates are up year over year by only 0.15% for 30 year fixed rate loans, 0.11% for 15 year fixed and 0.14% for 5 year ARMs. Admittedly rates were lower during much of 2016 with a sharp tick upwards in November, but we can hardly expect major market movements from these tiny year over year changes. Once again, I must point out that no-one has proven to be very good at interest rate forecasts. We seem to have pundits surprised more often than we have the pundits’ views confirmed.

    In any case the loan application approval rate is far more important factor in determining demand than the interest rate, and that approval rate continues to have a favorable trendline.

    January 15 – Today we will try to rank the major, secondary and small cities by the movement in days of inventory between mid-January 2015 and now. This is for single-family homes only.

    1. Coolidge – down 44%
    2. Wickenburg – down 33%
    3. Maricopa – down 30%
    4. Litchfield Park – down 27%
    5. Queen Creek – down 25%
    6. Sun Lakes – down 25%
    7. Chandler – down 24%
    8. Gilbert – down 24%
    9. Fountain Hills – down 21%
    10. Florence – down 19%
    11. Laveen – down 19%
    12. Casa Grande – up 18%
    13. Gold Canyon – down 16%
    14. Wittmann – down 16%
    15. Mesa – down 15%
    16. Goodyear – down 14%
    17. Anthem – down 14%
    18. Cave Creek – down 12%
    19. Tolleson – down 12%
    20. Peoria – down 10%
    21. Tonopah – down 10%
    22. Rio Verde – down 9%
    23. Tempe – down 7%
    24. Phoenix – down 4%
    25. Sun City West – down 4%
    26. Scottsdale – down 2%
    27. Sun City – down 1%
    28. Arizona City – up 1%
    29. Apache Junction – up 2%
    30. Buckeye – up 5%
    31. Paradise Valley – up 5%
    32. El Mirage – up 7%
    33. Glendale – up 8%
    34. Waddell – up 12%
    35. Eloy – up 16%
    36. Surprise – up 17%
    37. Avondale – up 18%
    38. Carefree – up 28%
    39. New River – up 121%
    40. Youngtown – up 146%

    Those cities with a high percentage decrease have the largest shift towards favorable conditions for sellers.

    Once again, we are seeing the most favorable trends for the Southeast Valley and many parts of Pinal County. However Litchfield Park, Wickenburg, Fountain Hills, Laveen, Wittmann, Goodyear, Anthem and Cave Creek are looking good by this analysis too.

    Several cities at the bottom of the list had extremely favorable conditions for sellers this time last year but have cooled off a bit over the last 12 month. These include Youngtown, Avondale, Surprise, Glendale. and El Mirage.

    Those who have written off Coolidge for the past 10 years might want to take a second look.

    January 14 – Now that the weekly charts have 2 measurement points for the year, it makes sense to check how 2017 is doing compared with previous years 2001 through 2016.

    • for the monthly sales rate, 2017 is running in 4th place out of 17, beaten by the bubble year of 2005 and the REO-dominated years of 2011 and 2012. There is a notable increase in sales volume over 2013 through 2016
    • the monthly average price per sq. ft. is standing at $145.36 , placing 2017 in 4th place after 2006, 2007 and 2008.
    • listings under contract are looking strong compared with 2014 through 2016, but weaker than 2010 through 2013 when they were affected by large number of short sales hanging around forever awaiting approval
    • the dollar volume chart looks much stronger than every other year except 2006
    • for days of inventory, 2017 ranks fourth with 2005, 2012 and 2013 showing even tighter supply versus demand

    January 13 – It is time to pay some attention to some of those small cities that rarely get a mention. A few of them are showing interesting developments:

    Showing strongly positive trends are:

    1. Coolidge – every single indicator in the Coolidge snapshot is showing green in the year over year column. Annual average $/SF is up almost 13% and we have only 2.2 months of supply.
    2. Florence – the annual sales rate has increased from 461 to 578 over the past year and the annual average $/SF has risen a solid 9%. Supply is reasonable at 4.1 months, but down from 7 last year at this time.

    Looking like sellers are having a rough time in:

    1. Wickenburg – annual average $/SF is down nearly 5% over the past year even though annual sales volume rose from 133 to 155. Wickenburg’s snapshot is dominated by red indicators.

    January 12 – Let us take our second look in 2017 at the Cromford® Market Indexes for the single-family markets in the 17 largest cities:

    For 13 of the 17 cities we see a green circle indicating an improving situation for sellers. Since they are already in a seller’s market this is clearly bad news for buyers, who are losing more of what little negotiation power they had.

    In line with everything we have seen for the past 3 months, there is nothing but good news for the Southeast Valley and Pinal.

    1. Tempe – up 13%
    2. Queen Creek – up 9%
    3. Gilbert – up 8%
    4. Mesa – up 6%
    5. Chandler – up 6%
    6. Maricopa – up 2%

    Supply is looking tighter across all 6 of these cities.

    The Northeast Valley is looking a bit more like rough sailing for sellers, with the notable exception of Cave Creek. It appears that Paradise Valley is in danger of slipping below 90 which would represent a buyer’s market. Fountain Hills has deteriorated fast from its former high flying position at number 2 as recently as November, One bright spot is that Scottsdale managed a small 1% improvement and looks like it is safe from slipping into the balanced zone below 110, at least for now.

    In the West Valley it is favorable news for Avondale, Glendale, Goodyear and Peoria, but not so good for Buckeye and Surprise.

    Overall this table indicates a very good start for the year from a seller’s perspective, and for the majority of agents who are seeing a high level of activity for the time of year.

    January 11 – We have been noting relative strength in the Southeast Valley for a few months now, and this trend is underscored by a detailed examination of the high end market over $500,000. Comparing average price per square foot for the fourth quarter of 2016 with the fourth quarter of 2015, we see the following impressive price advances:

    1. Mesa 85213 – up 34% to $168.45
    2. Scottsdale 85251 – up 18% to $362.27
    3. Tempe 85284 – up 15% to $196.85
    4. Sun Lakes 85248 – up 13% to $193.02
    5. Queen Creek 85142 – up 12% to $159.15
    6. Mesa 85207 – up 11% to $176.55
    7. Cave Creek 85331 – up 11% to $207.62

    For the Southeast Valley to have 5 entries in the top 7 is very unusual. Although the luxury sales volume is very modest in the Southeast Valley compared with the Northeast Valley, the buying public appeared to be giving more respect to some of the lesser known luxury locations, such as Mesa’s Citrus Area (85213), Las Sendas (85207), South Tempe and Queen Creek.

    On the other hand, the Ahwatukee area of 85048 is a little out of favor, with the average $/SF slipping 6% to $181.13 between Q4 2015 and Q4 2016.

    We also note that Old Town Scottsdale (85251) is far outperforming the rest of Scottsdale.

    January 10 – In the latest issue of the Black Knight Financial Services Mortgage Monitor, some surprising facts are revealed:

    • 39 million Americans with home loans now owe less than 80% of their home’s value
    • There is a total of $4.6 trillion in untapped home equity (below 80% of home value)
    • The amount of untapped home equity is the highest since 2006
    • At current rates of growth we are within 6 months of the previous high point in 2006

    As interest rates rise we should expect lenders to start becoming aggressive in the marketing of HELOC products to allow home owners to tap into this untapped equity.

    January 9 – In the Southeast Valley, the differences in appreciation rates between price ranges started to disappear during the fourth quarter of 2016. Looking at the single-family market during October to December 2016, we see the following numbers compared with the same period in 2015:

    Below $250,000 From $250,000 to $500,000 Over $500,000 All Price Ranges
    Change in Active Listing Counts (excluding UCB & CCBS) -26% -13% +7% -13%
    Change in Quarterly Sales -2% +35% +48% +18%
    Change in Average Price per Square Foot +8% +5% +6% +7%


    We have been seeing drops in inventory for the low end for a very long time and active counts were again down by 26% at the end of December. This shortage of supply has made it hard to keep sales volume growing and indeed quarterly sales slipped by 2%. In the mid-range, supply was down slightly but sales volume grew by 35% so there was still upward pressure on pricing. At the high end over $500,000 we saw increased supply, but sales volume jumped by 48% so here too we saw much stronger appreciation than we were experiencing 12 months ago.

    Overall we saw a very healthy increase of 7% across the entire market. However we now see all price ranges participating, not just the low end. In fact the high end slightly out-performed the mid-range.

    The top ZIP codes for appreciation in average $/SF between 4Q 2015 and 4Q 2016 were:

    1. Mesa 85201 +16.9%
    2. Mesa 85204 +13.4%
    3. Mesa 85213 +11.6%
    4. Mesa 85210 +10.4%
    5. Chandler 85249 +9.5%
    6. Gilbert 85233 +9.0%
    7. Gilbert 85298 +8.6%
    8. Queen Creek 85142 +8.3%
    9. Sun Lakes 85248 +7.8%
    10. Mesa 85208 +7.7%

    The weakest appreciation was seen in:

    1. Phoenix 85044 -0.4%
    2. Mesa 85202 +1.3%
    3. Mesa 85205 +1.9%
    4. Gilbert 85297 +2.0%
    5. Phoenix 85045 +2.3%
    6. Phoenix 85048 +2.8%
    7. Mesa 85206 +3.1%
    8. Gilbert 85296 +3.4%
    9. Tempe 85283 +3.5%
    10. Tempe 85281 +3.6%

    January 8 – A whole week has gone by in the new year, so we can start looking at the new listings to see what the most recent supply looks like. There are actually two different ways to count new listings. The first is based on when the listings first become visible after an MLS number is assigned (first download date) and the second is when the listing is created (list date). Downloading all the listings every day means that we can see new listings as they become visible. Using the value given for list date gives us somewhat different numbers since listings are often created some time in advance of being made active and therefore visible. A single listing may be created on December 28, for example, but not become visible until January 5.

    2,317 listings have become newly visible in 2017 so far which is 13.3% higher than last year and 19.1% higher than 2015. Clearly we are seeing more sellers than in the last 2 years.

    Based on the list date, we see 2,191 new listings across Greater Phoenix date in 2017, which is up 4.7% from 2,092 last year and up 8.6% from 2,017 in 2015. These are still quite modest numbers by historic standards. The 2015 number is the lowest we have ever seen and the 2017 is the fourth lowest for the years 2001 through 2017.

    Nevertheless, buyers will be pleased to have a few more listings to choose from. Sellers need not be too concerned about the extra supply since the annual sales rate is up about 7.5%, so we really need about 10% more listings just to stay where we are. We need more new listings than we get sales because some 20% to 25% of all listings get cancelled or expire.

    January 7 – My favorite charts for monitoring the market, and making sure it does not surprise me, are the weekly charts that are updated every Saturday. Of special interest to me are:

    We can see that the active listings are starting off 2017 at almost the same point as they did in 2016. You could be forgiven for thinking this means that inventory is roughly the same. However there are 2 points to make here:

    1. the active listing count is the same but the annual sales rate is much higher (90,336 versus 84,066), so the same number of listings will sell out faster
    2. the active listings are not in the same locations as last year; we have more in the West Valley and fewer in the Southeast Valley, for example.

    We can see that the days of inventory chart starts off the year at a lower point than last year (94 instead of 100) because the annual sales rate was significantly higher in 2016 than it was in 2015. This also influences the Cromford® Market Index which starts the year noticeably higher than it did in 2016.

    We also see the the number of listings under contract is a little higher than it was at the start of 2016 (8,049 versus 7,734), suggesting that demand is a little higher too.

    You might think that the monthly sales chart would be more useful than the annual sales chart. However the monthly sales counts are influenced by seasonality and the number of working days in each month. This causes the monthly sales numbers to give us a lot of noise in the signal. The annual sales rate numbers are almost all signal and barely any noise. This is the way analysts like their data. My advice is to watch the annual sales rate closely.

    January 6 – The initial numbers are in for Maricopa County recordings in December. The first thing that struck me about them was the new home sales total. At 1,535 this was the highest monthly total since 2007. Who says December is a quiet month?

    The median sales price for new homes was $324,227, up 4.8% from 309,299 in December 2015. However it was only 3.7% above the monthly median for December 2014 and 1.4% above the median sales price in December 2013. New homes have not seen a lot of movement if we are looking only at the median sales price. However the average new home has got smaller over the past few years so the average price per square foot shows a more positive picture, and we shall come back to review this on another day.

    The resale median sales price came in at $225,000 yet again. Although we have bounced around a bit, we ended the year with the same median sales price as in May.

    Because new homes are gaining considerable market share from re-sales, the overall median made good progress over the past 12 months, rising 5.9% from $230,000 to $243,500. New homes took 17.7% of the unit sales, up from 15.6% in December last year and the highest percentage since October 2008.

    Given the strong increase in closed sales, you would think new home builders would be celebrating. However they are struggling to make good margins even with the higher volume because land prices have risen faster than home prices and labor costs are escalating due to the chronic shortage of construction labor. With the proposed massive increase in government infrastructure construction (not to mention the border wall), we could find the construction labor shortage becomes even more extreme over the next few years.

    January 5 – The first Cromford® Market Index comparison of 2017 is a positive one for most sellers. Here is the table showing how the single-family markets in the largest 17 cities have fared over the past month:

    Things are great for the top 9 cities in the table. They are not only in the top 9, but they are improving too. The Southeast Valley is really making life easy for sellers and hard for buyers with Tempe up 16%, Gilbert up 9%, Chandler up 8% and Mesa up 4% and squeezing into the top 4 by overtaking Glendale. The West Valley is mixed with Avondale still way out on top and improving by another 11%. Glendale, Peoria and Goodyear made small improvements, but Surprise continued to look relatively weak and Buckeye slipped another 6%.

    The Northeast Valley is the under-performing area with Paradise Valley slipping below 100 and in last place. Fountain Hills continues to deteriorate fast while Scottsdale sees only slight deterioration. The most positive move in the Northeast was in Cave Creek which improved by a strong 12%.

    Maricopa continues its progress up the chart slowly but steadily, while the most important city of all, Phoenix showed a strong positive move, up 6%.

    Given the less attractive interest rates buyers are facing, this is a reassuring picture for sellers. We must remember that higher interest rates do not just discourage buyers. They discourage sellers too, since in many cases they would be paying off low interest loans and taking out higher interest loans, not something to be done lightly. We therefore expect both supply and demand to be affected negatively by higher rates. It is the balance between supply and demand that is crucial. It is the cities with CMI values over 130 that are in the strongest shape for price increases over the next several months..

    January 4 – At this time of year a crucial thing to watch is the number of new listings being added to the ARMLS database. We have to be careful since it is unfair to compare any period of less than 7 days. This is due to the weekly cycle, where far more listings are added on Thursday and Friday than on other days of the week. Over the past 7 days (Dec 29 to Jan 4) we have seen 1,447 new listings, which is a middle-of-the-road number compared to prior years. The equivalent in 2016 was 1,266 and in 2015 we saw 1,306. But in 2014 there were 1,528, in 2013 1,549 and in 2012 1,534. So we are seeing more listings over the past week than in 2015 and 2016 but less than 2012 through 2014.

    An even more reliable indicator is the 28 day count of new listings. This is currently at 5,628, whereas last year we saw 5,118 and in 2015 we had 5,054. So we are up 10% from 2015 and 11% from 2016. In 2014 we had 5,495, in 2014 we saw 5,886 and in 2013 we had the most at 6,489.

    If we continue with this current pace then we should have enough new listings to cope with the increased sales rate, which is up by about 7% from last year. In 2016 we saw strong flow of new listings during the first 2 months of the year and by the beginning of March we were up 8% over 2014. However the pace dropped during March and we ended 2016 with only 5% more new listings than 2015. This was inadequate to match the 7% increase in sales rate, meaning that the market favored sellers by a greater amount at the end of 2016 than at the start of the year.

    We generally need more new new listings than we have closed sales since about 20% to 35% of listings get cancelled or expired instead of closing. In stronger markets the percentage closing increases but rarely exceeds 80% for extended periods.

    January 3 – How does December 2016 compare to all the other Decembers we have measured over the years?

    • Monthly Sales Count = 7,191 – 5th highest (after 2010, 2004, 2011 and 2009)
    • Annual Sales Count = 90,027 – 3rd highest (after 2005 and 2004)
    • Average Sales Price = $282,067 – 4th highest (after 2006, 2005 and 2007)
    • Median Sales Price = $225,000 – 4th highest (after 2006, 2005 and 2007)
    • Monthly Average Price per Square Foot = $144.79 – 4th highest (after 2005, 2006 and 2007)
    • Annual Average Price per Square Foot = $141.43 – 4th highest (after 2006, 2007 and 2005)
    • Dollar Volume = $2.028B – 2nd highest (after 2005)

    So, thanks to the 5th strongest sales count and the 4th strongest pricing, we just had the second best December for dollar volume in the last 16 years.

    January 2 – Yesterday we looked at the overall supply and demand numbers. Today we will look at specific price ranges to see how the supply situation differs. Here we are looking at the total number of active listings (including UCB and CCBS) for single family homes.

    Once again the big percentage annual declines in supply are in the lower price ranges:

    • Under $25K – down 25%
    • $25K to $50K – down 25%
    • $50K to $75K – down 38%
    • $75K to $100K – down 45%
    • $100K to $125K – down 42%
    • $125K to $150K – down 40%
    • $150K to $175K – down 21%

    Below $125K the annual sales rate has dropped by a larger percentage than the drop in active listings. This sector has become so small that it is no longer of any great significance to us. It is only 1% of the market by value. Back in 2010 45% of all unit sales were under $125K. The extent of the change between 2010 and 2017 is remarkable.

    If we look only at homes priced over $175,000, supply is up 3%, even though overall supply is down 2%. There is a complex pattern for the increases. The largest percentage increases are for the following:

    • $600K to $800K – up 15%
    • $175K to 4200K – up 10%
    • $1.5M to $2M – up 10%
    • $200K to $225K – up 7%
    • Over $3 M – up 7%
    • $400K to $500K – up 6%
    • $500K to $600K – up 4%

    The following ranges are barely changed:

    • $225K to $250K – up 2%
    • $800K to $1M – up 2%
    • $250K to $275K – up 1%
    • $1M to $1.5M – no change
    • $275K to $300K – down 1%

    Supply has also declined for these:

    • $300K to $350K – down 3%
    • $350K to $400K – down 4%
    • $2M to $3M – down 4%

    With the background of an overall 7% increase in the annual sales rate, there are no price ranges that are looking dramatically over supplied. The least favorable range is $600K to $800K where the annual sales rate is up only 9% while the supply is up 15%.

    For sellers, the situation is most favorable for the price ranges $250K through $350K. Here we see little change in the total supply compared with the beginning of last year, but the annual sales rate has gone up more than 24%. In that context, the same supply level as last year starts to look rather meager.

    January 1 – The year 2017 has started with 19,397 active listings (excluding UCB and CCBS) for all areas and types. This is down 3.4% from 20,073 on January 1, 2016. There was a sudden drop of 2.8% of all listings between December 31 and January 1, an effect which occurs in all years due to a large number of expirations at the end of the year. The effect was slightly smaller than last year when 3.5% of all listings disappeared.

    So supply is starting a little weaker than it was last year, at a time when the annual sales rate is up by just over 7%. It is hard to see prices stabilizing in this environment unless demand drops. We started the year with 4,885 pending listings, barely changed from 4,865 in 2016. However we have 2,916 listings in UCB status, compared with 2,810 in January 2016. That is almost a 4% advantage to 2016.

    Weaker supply and stronger demand suggest appreciation rates may be a little faster in 2017 than 2016. However the segments affected may very well be different from last year.


    © 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.


    Thank you for helping me find my beautiful home.  I knew it was hard work, but it was worth it.  Thanks again for everything and for being such a good friend. – Kristin (client of Denise Pruitt)

    Contact Us Now

    Any questions, comments, or feedback