The Cromford Report – Daily Observations July 2016
July 31 – Multi-family permits totaled 2,131 in June which is the highest monthly total since February 2007. It is also more than twice as high as any of the previous 5 months of 2016. The year to date total is 4,863 which comfortably exceeds the 3,426 of June YTD 2015 but falls a little shy of the 2014 number.
Tempe (790 units), Phoenix (637) and Gilbert (615) were the big participants in June. This is a notable event for Gilbert as this city does not normally report a significant number of new multi-family permits.
July 30 – June was a bumper month for single family building permits. There were 1,665 for Maricopa County and 281 for Pinal. The total of 1,946 is the largest we have seen since August 2007 almost 9 years ago.
The increase over July 2015 was 17%. For the first half of 2016 we have a total of 9,724, up 18% from the first half of 2015. The 12 month rolling average is now 1,522 which equates to 18,264, though I would not be surprised if we exceeded 20,000 for the whole of 2016.
For the last 6 months the top areas for single family permits have been:
- Phoenix 1,305
- Mesa 1,097
- Gilbert 940
- Peoria 845
- Unincorporated Pinal County 756
- Chandler 753
- Buckeye 706
- Queen Creek 572
- Goodyear 533
- Unincorporated Maricopa County 499
July 29 – I recommend taking a look at the interactive visualization tool at the following web site:
This population pyramid shows clearly the distribution of population by age group (and gender), for the past and present as well as future projections. This is a useful since population growth is the most fundamental driver of housing demand. The chart above covers all countries of the world, but does not allow us to dig deeper into how the different states within the USA are doing.
For developing countries, the pyramid tends to have a wide base and a thin top. This is due to high birth rates and lower life expectancy. An example would be Burundi:
The population of Burundi is projected to grow from the present 11,552,000 to 62,661,000 by 2100. This will create massive demand for housing in Burundi, especially as life expectancy rises and economic well being improves.
In contrast, the United States of America looks like this:
A falling birth rate means there are fewer children under 20 than we would have expected in the past. We also see the bulge of the baby boomers between 50 and 59 and the Millennials (echo boomers) between 20 and 29. This looks very different from the USA of 1961 when baby boomers were still children:
The consequences of the change in balance between children and adults are important. If this trend gets out of hand we could end up like Japan where the base of the pyramid is too thin to support a healthy economy.
With its very low immigration rate, Japan’s population is projected to fall from the present 126,323,000 to 83,174,000 by 2100. This is a decline of 34%. It is already suffering a glut of abandoned, decaying, unwanted houses (akiya).
A healthy housing market needs a steadily growing population. If that population growth is not powerful enough through births exceeding deaths then inward migration is the alternative driver. However that inward migration is most beneficial to the economy when it is made up of younger people. Migration of retirees is not a long term solution due to their lower life expectancy. At the country level, immigration needs to exceed emigration if the total fertility rate drops below the replacement level of 2.075 per female. The total fertility rate rate of the USA is 1.8 and falling. The population of the USA is projected to rise from the present 324,118,000 to 450,384,000 by 2100, but almost all of this rise is due to immigration being forecast to exceeding emigration. If Americans were to rely on births alone, the population would decline, with negative consequences for housing.
Any change which reduces population can have negative consequences for the housing market. This includes major wars, epidemic illnesses (e.g. influenza in 1918), mass exodus (e.g. Detroit down 60% since 1950) and severe curbs on immigration. Changes that promote population growth increase the long term health of the housing market.
July 28 – The Cromford® Market Index for the single family markets in each of the largest 17 cities looks like this:
We see an improving situation for sellers in 12 of the 17 cities. Bottom of the table Paradise Valley has at last changed direction and so has top of the table Avondale. 14 of the 17 are in a seller’s market.
The huge improvement for sellers in Fountain Hills is caused by the drastic fall in active listings (excluding UCB and CCBS). These peaked at 331 at the end of March but the count is down to just 203 today. When selling it is great to have less competition, even if this is a relatively quiet time for buyers.
Maricopa and Goodyear are also seeing large positive moves over the past month.
July 27 – Comparing the first half of 2015 and the first 6 months of 2016, we see the following trends by price range, based on all recorded deeds in Maricopa & Pinal counties for single family and condo/ townhomes:
- Under $200K – sales are down 5.9% but average price per sq. ft. is up 8.4% to $100.36 – price segment suffers from inadequate supply
- Between $200K and $500K – sales are up 24.7% and average price per sq. ft. is up 2.5% to $136.98 – demand and supply are both booming
- Between $500K and $1M – sales are up 18.2% but average price per sq. ft. is down 0.3% to $199.64 – demand is up but supply is excessive
- Between $1M and $2M – sales are flat and average price per sq. ft. is also flat at $298.12 – demand and supply are both flat with supply excessive
- Over $2M – sales are down 8.1% but average price per sq. ft. is up 3.1% to $460.68 – excessive supply, weaker demand but average $/SF holding thanks to new home sales gaining share
If we exclude new homes, re-sales over $3M are still holding their price with a rise of 0.6%, but sales are down over 12%.
The new home sector helps to make price trends look better in all sectors except under $200K. If we exclude new homes then
- Between $200K and $500K – sales are up 21.9% and average price per sq. ft. is up 2.2% to $138.10
- Between $500K and $1M – sales are up 15.2% but average price per sq. ft. is down 0.7% to $202.43
- Between $1M and $2M – sales are down 3.3% and average price per sq. ft. is down $295.52
However, we note that excluding new homes surprisingly increases the average $/SF for the ranges from $200K to $1M, but reduces it under $200K and over $1M.
People tend to assume that new homes are more expensive than re-sales. This is very true for the small custom sector over $1M and for homes under $200K. In fact for homes over $2M the $/SF premium for new builds was as much as 30% during the first half of 2016. However builders may be surprised to learn that the average price per sq. ft. of new homes between $200K and $1M closed during the first half of 2016 was lower than the average price for re-sales:
- Between $200K and $500K – re-sales averaged $138.10 while new homes averaged $132.46
- Between $500K and $1M – re-sales averaged $202.43 while new homes averaged $188.64
This is probably partly because new homes in these prices ranges are concentrated in those areas with land that builders can afford (e.g. Mesa, Gilbert, Peoria, Pinal County, etc.). Re-sales have a much stronger market share in locations with expensive land like Scottsdale, Phoenix and Tempe.
July 26 – Another S&P/Case-Shiller® Home Price Index® report has been released this morning. This one covers sales in the 3 month period March through May 2016. Based on the annual change in the HPI here is the ranking table for the 20 cities covered by the report:
- Portland 12.5%
- Seattle 10.7%
- Denver 9.5%
- Dallas 9.0%
- Tampa 7.7%
- Miami 6.6%
- San Francisco 6.5%
- San Diego 6.4%
- Atlanta 6.3%
- Boston 5.6%
- Detroit 5.6%
- Los Angeles 5.4%
- Phoenix 5.4%
- Las Vegas 5.2%
- Minneapolis 5.2%
- Charlotte 5.0%
- Chicago 3.7%
- Cleveland 2.5%
- Washington DC 2.4%
- New York 2.0%
We looked at the CoreLogic index for the states a few days ago and the Case-Shiller numbers released today have the same story – the hottest parts of the country for housing are the Pacific Northwest and Colorado. Dallas and Florida are also strong and California above average.
Phoenix is pretty much average with its 5.4%, given that the national HPI increase is 5.1% and the 20 city HPI increased 5.2%. The Northeast and Mid-West are under-performing.
Taking a longer term view, here is how the index has changed since May 2016, 10 years ago:
- Denver 32.9%
- Dallas 32.8%
- Portland 15.2%
- Seattle 14.3%
- Charlotte 12.3%
- Boston 6.0%
- San Francisco 4.2%
- Atlanta -1.3%
- San Diego -9.7%
- Los Angeles -8.9%
- Cleveland -9.2%
- Minneapolis -10.9%
- Detroit -13.9%
- Washington DC -14.0%
- New York -16.1%
- Chicago -18.8%
- Tampa -23.3%
- Miami -23.5%
- Phoenix -29.5%
- Las Vegas -36.2%
The USA as a whole is down just 2.0% from May 2006. However the areas with the biggest speculative bubbles, Las Vegas, Phoenix and Miami, are the furthest away from their 2006 pricing levels. The biggest success stories over the last 10 years are Denver, Dallas, Portland, Seattle and Charlotte, This has a lot to do with the kind of jobs that have been created in these cities.
July 25 – We have been forecasting a fall in the average price per sq. ft. for the third quarter and there is now strong evidence to back this up. Take a look at the short term chart for list and sales $/SF. There is no doubt that the peak occurred in the third week of June and we have dropped from almost $143 to around $138 over the past 4 or 5 weeks. With the pending listing $/SF also trending slightly lower we would not expect any significant signs of buoyancy in the pricing numbers until the daily maximum temperatures drop below 100 degrees again.
July 24 – It has been a while since we looked at the rental statistics. The average closed lease rate across all areas & types within ARMLS is 85.1 cents per sq. ft. per month. Last year it was 81.0 cents so that is an annual increase of 5.1%. Two years ago the number was 75.0 cents and in July 2013 it was 69.6 cents. So we have seen rents rise 22.3% in the last 3 years, dramatically faster than the increase in average wages. Consequently the typical tenant has a lot less to spend on things other than housing.
Obviously this situation is very good for landlords and creates some motivation for tenants to become home owners. However high rents reduce disposable income and so impairs the ability to exercise that motivation to buy. It also reduces the demand for other goods and services. Tenants tend to feel less wealthy than they did 3 years ago unless they have improved their earnings through promotion or job switching. This goes some way to explain why a significant number of people think the economy is doing poorly when almost all the actual numbers are quite positive. Wealth is draining away from tenants but expanding for real estate property owners. With that background it is counter-intuitive that renting has become more popular even for people who can afford to own.
There were 2,998 active rental listings yesterday, down from 3,291 on July 23, 2016 and 4,474 on July 23, 2014. In 2008 at this point there were 8,525. Supply appears to be very tight and failing to improve.
The average asking price for active rentals is $2,046, up from $1,822 last year and $1,643 the year before that. Supply of affordable rentals (at least through the MLS) is unusually low.
July 23 – Occasionally it is useful to compare the market in Arizona with the other states and we turn to CoreLogic’s MarketPulse Report to see how prices are behaving. Ranking the states by the year over year change in their Home Price Index we see for May 2016:
- Oregon 11.0%
- Washington 10.1%
- Colorado 9.4%
- Nevada 7.8%
- Utah 7.5%
- Florida 7.3%
- Idaho 7.0%
- Texas 7.0%
- California 6.3%
- Arizona 5.8%
- Tennessee 5.8%
- Michigan 5.7%
- Georgia 5.6%
- Rhode Island 5.4%
- Montana 5.3%
- South Carolina 5.2%
- Minnesota 5.1%
- Hawaii 5.0%
- Nebraska 4.6%
- Massachusetts 4.5%
- West Virginia 4.5%
- Wisconsin 4.3%
- Missouri 4.1%
- North Carolina 4.0%
- Wyoming 4.0%
- Indiana 3.9%
- Kansas 3.9%
- Kentucky 3.8%
- Maine 3.8%
- Louisiana 3.6%
- Mississippi 3.6%
- Iowa 3.5%
- New Hampshire 3.4%
- New York 3.4%
- New Mexico 3.3%
- South Dakota 3.3%
- Illinois 3.0%
- Ohio 2.8%
- Arkansas 2.5%
- Washington DC 2.3%
- Alaska 2.2%
- Alabama 2.1%
- Oklahoma 2.0%
- Virginia 2.0%
- Vermont 1.9%
- North Dakota 1.1%
- Maryland 1.0%
- Delaware 0.2%
- Pennsylvania -0.1%
- New Jersey -0.2%
- Connecticut -0.9%
Arizona is placed in the top 20%. However we are a long way behind Oregon, Washington & Colorado. These states are on top because they are very popular with the Millennial generation. Population growth is the most fundamental driver of housing demand. The age group that is producing children is the most important one for the housing market. Although Millennials have alarmingly low fertility they make up for that in the top 3 states through in-migration.
Arizona’s headline population growth number is strong, but it is disturbing that the growth is so concentrated in the older age groups. Our population growth for the under 18 is negative and for the Millennial generation it is very disappointing. If we want a very healthy long term housing market we need to be successful at attracting more younger people, not retirees like me.
July 22 – June was another great month for new home sales with a total of 1,431 closed recordings across Maricopa and Pinal counties. This was up 24% from 1,150 in June 2015. Counting cities with sales of 20 units or more per month, the strongest growth rates over last year were in the following:
- Chandler – up 136% from 50 to 118
- Mesa – up 91% from 106 to 202
- Florence – up 85% from 20 to 37
- Buckeye – up 61% from 70 to 113
- Peoria – up 53% from 105 to 161
- Laveen – up 50% from 24 to 36
- Scottsdale – up 37% from 43 to 59
- Queen Creek – up 24% from 71 to 88
- San Tan Valley – up 17% from 69 to 81
- Phoenix – up 8% from 119 to 129
Mesa was the top city for total new builds, with a strong showing from Eastmark (70 closings by AV Homes, CalAtlantic, Maracay, Mattamy, Meritage, Taylor Morrison, Woodside and William Ryan). Lehi Crossing (William Lyon & Taylor Morrison) saw 26 closings.
Former star Gilbert dropped 32% from 172 to 117. Maricopa was also down 29% from 35 to 25 while Goodyear declined 26% from 91 to 67 and Surprise down 16% from 50 to 42..
July 21 – At first sight the Cromford® Market Index table for the single family markets in the top 17 cities looks a little less positive than last week.
There are 7 cities with deteriorating markets for sellers and 10 improving. This compares with 5 and 12 last week. However most of the deteriorations were by very small percentages of 1 or 2%. Only Avondale and Tempe dropped by a significant percentage. In contrast there were some huge positive changes:
- Fountain Hills +36%
- Maricopa +18%
- Goodyear +13%
- Scottsdale +10%
Fountain Hills jumped from 9th place to 7th, swapping places with Chandler. Queen Creek swapped places with Tempe. Maricopa swapped places with Cave Creek.
Avondale remains way out in front with only 1.5 months of supply (including UCB) while Paradise Valley remains detached at the bottom with 17.2 months of supply.
Overall we are still in an improving trend for sellers, even though most of this is due to a drop in supply rather than an improvement in demand.
July 20 – Part 2 of our investigation about OpenDoor’s operation sin Greater Phoenix shows that for the homes sold so far, the total dollars received less total dollars paid for those 570 homes was $5,216,037. Why were there only 570 when yesterday we counted 572? Well two of the recorded deeds were duplicated at the county. This is not an uncommon occurrence, but it is not always easy to detect.
So we see an average gross margin of $9,151 per home. Obviously it is not OpenDoor’s business model to make the majority of their income from the difference between the amount paid and the amount received for the homes, since the gross margin comes out at 3.8%. This is less than the fee that OpenDoor charges to the sellers which varies between 6% and 12% of their offer price, depending on ZIP code and home type.
The largest positive gain was $190,580 and largest loss was $83,000. The median difference was $9,990.
The average time between acquisition and disposal was 118 days. The minimum was 20 days and maximum 412 days.
The most expensive home purchased was $550,000 and the least expensive was $89.300.
The most expensive home sold was $566,375 and the least expensive was $112,800.
The average time that an unsold home had been in inventory is 64 days.
July 19 – The start-up company OpenDoor started its operations in Phoenix with its first purchase of a home in August 2014. We took a look at the recorded transactions within Maricopa and Pinal and found:
Up to the end of June 2016 OpenDoor had purchased 981 homes in Maricopa and Pinal counties with a total purchase price of $235,539,721. The average price was $240,102.
Up to the end of June 2016 OpenDoor had sold 572 of those homes to new owners with a total sales price of $145,449,368 – the average price being $254,282.
So as of July 1, this implies OpenDoor had 981-572 = 409 homes in inventory.
July 18 – You should not conclude that the whole of the UK is priced like Central London. Once you get beyond the commuter zone for London (which is now about 100 miles), rural properties can be relative bargains.
If I were to try buy 88 acres of attractive buildable land in a nice part of Gilbert (say) I could easily be looking at $15,000,000 or more. For about one third of that price I could be the owner of 88 acres in rural Shropshire, England and get as a free bonus:
- a huge historic mansion dating from the early 1700s
- 64 bedrooms and nearly 40,000 of living space
- a dedicated private chapel that seats 150
- 2 residences for the grounds keepers
- private lake
- amazing halls and library
At $121 per sq. ft. of living space, this is cheaper than Gilbert pricing and you get about 81 extra acres that you don’t need for the house and garden.
For those interested here is the listing information:
July 17 – The currency exchange rate between the US dollar and British pound remains about 14% lower than it did immediately before the Brexit referendum. This means that to buyers with US currency, real estate in London has dropped 14% in price. This does not mean it is necessarily a bargain. For example here is a big newly built apartment in Knightsbridge opposite Hyde Park:
This is $10 million cheaper than it was a month ago, but it is still a $82.5 million apartment.
The price per sq. ft. is $9,181, over 15 times the price we normally see for the most expensive homes in Phoenix.
July 16 – At this stage of the year it is becoming very noticeable that 2016 is remarkably similar to 2015 so far. In fact we have not seen 2 consecutive years so similar before. This is apparent when you compare the weekly charts for days inventory, dollar volume, months of supply, active list price per sq. ft., listing success rate, listings under contract, pending listings, and sales per month.
The weekly days inventory chart shows almost identical readings for 2015 and 2016 from week 22 to week 29 (now).
The months of supply chart has both years readings almost the same from week 9 to week 29 (now)
July 15 – Appreciation rates are one of the most important and talked-about subjects in real estate. However there are many different ways to define and measure them, so it is possible for someone to select the method to get the best or worst result according to their desires. We try to be as fair as possible to give a realistic guide to how prices are moving.
Essentially, we are trying to determine how much a home has increased or decreased in value over 12 months. The problem is that almost never is a specific home sold or appraised on 2 dates that are 12 months apart, so we almost never really measure what we are seeking. Instead we measure the prices of homes that did sell and then try to compare those prices with the prices of a different set of homes that sold 12 months earlier.
Questions then arise:
How do we measure prices for the set of homes that sold?
- average price
- median price
- average price per square foot
- median price per square foot
All of these have pros and cons, but usually we prefer to use average price per square foot
How large a set of homes are we going to consider for comparison? If we are looking at the whole of Greater Phoenix we have enough samples in a month (usually 5,000 to 10,000) to get a reasonably consistent measure from one date to the next. However if we are looking at a small market segment, the readings will be horribly volatile and appear to be almost random over time . The answer is to extend the time period for the sales to 3 months, 6 months or even a year.
In general we believe the fairest way to measure appreciation is to use the annual average price per square foot and compare it with the same data point 12 months earlier. The change in the two numbers gives us our appreciation rate.
Here are some examples for single family homes, using our preferred method and for comparison using the annual median:
|City||Appreciation Using Annual $/SF||Appreciation Using Annual Median|
|Sun City West||8.2%||10.9%|
We draw your attention to how different the two columns are for certain cities.
July 14 – We are taking another look at the Cromford® Market Index for the single family markets in the 17 largest cities.
We have 12 cities improving for sellers and 5 deteriorating. Avondale has increased its lead out in front while Paradise Valley is falling even further behind.
Avondale has only 141 active listings (excluding UCB & CCBS) with 198 under contract and a monthly sales rate of 138. Even including the UCB & CCBS listings we have just 1.5 months of supply.
Paradise Valley has 348 active listings (excluding UCB & CCBS) with 45 under contract and a monthly sales rate of 23. Including the UCB & CCBS listings we have 17.2 months of supply.
The other 15 cities are clustered between 101 and 155, with Fountain Hills, Maricopa, Goodyear and Scottsdale the standout gainers this week.
The Southeast Valley has cooled a little with Tempe, Mesa & Chandler all moving slightly backwards.
July 13 – The Black Knight Financial Services Mortgage Monitor report for May 2016 is here and shows us that loan delinquencies have been falling in 50 out 51 states (+DC). The sole exception is North Dakota. It has seen a 7.1% rise in non-current loans since May 2015, but since it has the lowest delinquency rate of any state, it is not time to panic.
Arizona has 3.0% of first home loans with a late payment (30 days or more) but not yet in foreclosure. To that we can add 0.4% of loans that are already in foreclosure, for a total of 3.4% of loans that are non-current. This is down by 13.9% since last year when we saw 4.0% non-current. There are just 8 states in a better position than Arizona for loan delinquency and these are California, Idaho, Alaska, Montana, South Dakota, Minnesota, Colorado and North Dakota.
Excluding North Dakota’s negative showing, Wyoming has had the lowest positive change over the past year, undone by the fall in the price of coal.
July 12 – In the Central and North Valley (Phoenix, Anthem, New River) the luxury market numbers are looking better than elsewhere thanks to the local popularity of the Anthem area, much of which falls within ZIP code 85018.
All the following ZIP codes are reporting an average price per sq. ft. for single family home sales in Q2 2016 that is at least 8% higher than 2015:
- 85034 +26.0%
- 85031 +25.5%
- 85009 +23.7%
- 85007 +21.&%
- 85040 +21.7%
- 85017 +19.9%
- 85019 +18.2%
- 85035 +18.0%
- 85006 +17.1%
- 85042 +15.7%
- 85004 +15.5%
- 85033 + 15.5%
- 85008 +14.0%
- 85037 +13.2%
- 85029 +12.1%
- 85015 +11.9%
- 85013 +11.4%
- 85032 +11.1%
- 85051 +10.9%
- 85043 +10.5%
- 85022 +10.0%
- 85018 +9.9%
- 85087 +9.6%
- 85020 +9.4%
- 85027 +9.0%
July 11 – In the West Valley, the single family market below $250,000 has 4% less supply than in July 2015 and the second quarter saw 5% fewer closed sales. Nevertheless, pricing jumped almost 10% between Q2 2015 and Q2 2016.
Pricing increases were modest between $250,000 and $500,000, up just 1.2%. This despite sales moving up by 27% compared with Q2 2015. Despite the increase in sales, we finished the second quarter with 19% more supply than in July 2015.
Above $500,000 sales volume jumped from 79 in Q2 2015 to 118 in Q2 1016, a rise of 49%. Supply also rose, but only by 11%. Despite the large increase in sales, pricing drifted lower by 0.7% between Q2 2015 and Q2 2016.
July 10 – In the Southeast Valley, the single family market is looking strong. The luxury market over $500,000 is dominated by homes under $1 million, so the problems over $1 million are having very little effect on the market in the southeast. Due to a lack of supply (down another 8% compared with July 2015) Q2 2016 sales under $250,000 are down by 7% but appreciation is almost 8%.
In the mid-range between $250,000 and $500,000, supply is good, up by 7% compared to July 2015. However Q2 sales are up by an impressive 21%. This has led to an annual appreciation rate of 3.5%.
Above $500,000 supply is up 6% but demand has improved in the last 2 months leading to an increase of 29% in Q2 closed sales compared with Q2 2015. Appreciation has jumped from -0.9% last month to 2.0% this month.
Overall it has been a very satisfactory quarter for sellers in the Southeast Valley.
July 9 – The market below $500,000 is still doing very well, but above this price point things are not so good for sellers. Recently the market below $1 million has improved a little, but unfortunately the market over $2 million has deteriorated. If we divide the single family luxury home market into 3 price ranges:
- $500,000 to $1 million
- $1 million to $2 million
- Over $3 million
Then we see the following:
|Price Range||Annual Change in Active Listings||Annual Change in Quarterly Sales Rate||Annual Appreciation in $/SF||Comments|
|$500,000 to $1 million||+17%||+16%||+0.7%||Demand has risen almost as much as supply – reasonable market for sellers|
|$1 million to $2 million||+18%||-1%||-1.2%||Significant rise in supply is not matched by a rise in demand – poor market for sellers|
|Over $2 million||+10%||-14%||-2.9%||Significant rise in supply and an even more significant drop in demand – very poor market for sellers|
Until recently the problem was mostly excess supply, but in the second quarter demand dropped for homes over $2 million compared to the same period in 2015.
The ZIP codes with the weakest price trends for luxury homes (based on the second quarter prices for 2016 versus 2015) are:
- Phoenix 85016
- Phoenix 85021
- Queen Creek 85142
- Paradise Valley 85253
- Scottsdale 85255
- Scottsdale 85258
- Scottsdale 85259
- Scottsdale 85260
- Scottsdale 85262
- Scottsdale 85266
- Chandler 85286
- Cave Creek 85331
All of these are showing negative appreciation rates overall for the price range over $500,000.
There are some brighter spots in:
- Phoenix 85018
- Phoenix 85020
- Phoenix 85028
- Phoenix 85048
- Phoenix 85050
- Anthem 85086
- Mesa 85213
- Sun Lakes 85248
- Fountain Hills 85268
- Tempe 85284
- Carefree 85377
- Peoria 85383
In these areas we see appreciation rates of 7% or more for homes over $500,000. However most of these have relatively low sales volumes for homes over $500,000. The big 3 ZIP codes for luxury (85253, 85255, 85262) are all in the first group above, with appreciation rates of -8%, -2% and -3% respectively.
July 8 – In Maricopa County during June there were 1,908 all-cash purchases and 8,377 financed purchases. The latter is the highest total of loans closed since March 2007. The all-cash purchases represented 18.6% of the unit sales which is the lowest percentage since September 2008.
Interest rates remain extremely low, so we should not be surprised that financing is gaining market share. It is probably more surprising that the all-cash rate is still almost 19% when a typical number between January 1999 and the end of 2007 was between 6% and 12%
July 7 – We are taking another look at the Cromford® Market Index for the single family markets in the largest 17 cities:
Lots of good news here for sellers, particularly in Fountain Hills, Maricopa, Goodyear, Avondale, Cave Creek and Scottsdale. All of these have seen a strong percentage increase in their CMI ratings. You can instantly tell how much Maricopa has improved by looking at its Snapshot:
Notice the predominance of green symbols in both the short term and long term columns
The really rough spot is Paradise Valley which has a contrasting snapshot with overwhelmingly negative symbols.
Not only is Paradise Valley at the bottom of the CMI table of 17, it had the worst month to month change of -4%. It is now a serious buyer’s market and further price depreciation can be expected.
The lower end of the luxury market has been improving recently and this has helped the CMI scores for Scottsdale, Fountain Hills and Cave Creek. It does not help Paradise Valley very much because the vast majority of homes in Paradise Valley are priced well above the “lower end of the luxury market”.
July 6 – The Maricopa County Recorder processed 10,285 residential sales deeds in June (single family & condo), which is the highest monthly total since August 2006. 88% of those were re-sales while 12% were new homes. The new home total was up 27% from June 2015, while the re-sale total was up only 3%. The combined total was up 6%.
Median prices continue to increase, with $229,000 the latest number, but a large part of that is due to the fall off in low end volume caused by the very short supply of homes for sale
Home values are not going up as fast as the median sales price. In fact the average price per sq. ft. is starting to fall slightly at the same time that the median is rising, something that tends to happen during each third quarter. The average price per sq. ft. is usually a more accurate guide to changes in home values than the median sales price.
July 5 – Now we have the annual appreciation by ZIP code charts available, we can review the top and bottom ZIP codes for price appreciation for single family homes.
Some ZIP codes have so few sales that even an annual average is extremely volatile. Examples of this include 85004 and 85034. Among the major ZIP codes with reliable appreciation readings we see prices have risen the fastest in the following:
- Phoenix 85031 +23.2%
- Phoenix 85009 +23.0%
- Phoenix 85017 +21.0%
- Phoenix 85040 +19.9%
- Phoenix 85008 +19.3%
- Glendale 85301 +19.2%
- Youngtown 85363 +18.7%
- Phoenix 85019 +18.5%
- Phoenix 85006 +18.3%
- Wittmann 85361 +17.5%
- Phoenix 85035 +17.4%
- Phoenix 85033 +17.4%
- Phoenix 85015 +14.6%
- Tempe 85281 +14.0%
- Phoenix 85042 +13.5%
- Glendale 85303 +12.8%
- Phoenix 85037 +12.3%
- Surprise 85378 +12.3%
- Sun City 85851 +12.2%
- Phoenix 85051 +12.2%
Here we are dominated by the inner Northwest Valley and Central, West and South Phoenix. North Tempe and Wittmann also make an appearance.
The lowest appreciation can be seen in the following:
- Scottsdale 85266 -4.2%
- Gold Canyon 85118 -3.8%
- Paradise Valley 85253 -3.6%
- Phoenix 85045 -2.5%
- Scottsdale 85262 -2.4%
- Scottsdale 85260 -1.5%
- Rio Verde 85263 -1.4%
- Phoenix 85054 -0.7%
- Phoenix 85016 -0.5%
- Scottsdale 85255 +0.1%
- Wickenburg 85390 +0.5%
- Scottsdale 85258 +1.4%
- Phoenix 85012 +1.4%
- Scottsdale 85259 +1.4%
- Mesa 85215 +1.6%
- Eloy 85131 +1.6%
- Cave Creek 85331 +1.8%
- Sun Lakes 85248 +1.9%
- Fountain Hills 85268 +2.5%
- Tempe 85284 +2.6%
Clearly the weakest appreciation is currently found in the most expensive locations. There are a few exceptions to this rule. Phoenix 85016 is running at a healthy +6.3% and Phoenix 85020 (+8.7%) and Phoenix 85021 (+8.1%) are doing even better. In Scottsdale, 85257 is doing great at +10.4% while 85250 is also doing well at +8.3%. 85251 has cooled off a little down from 9.7% to 4.7% over the last month.
July 4 – We can already see signs of the usual weakness in pricing during the summer, in the daily list price and price per sq. ft. charts. For most cities, prices remain comfortably higher than at this time last year, but there are two notable exceptions:
- at $338.18 the annual average $/SF for Paradise Valley single family homes is 3.6% down from $350.77 in early July 2015. The annual average in Paradise Valley has been trending slowly but steadily lower since August 2015 and appears to be headed back to 2014 levels in the mid $330s.
- at $148.95 the annual average $/SF for Gold Canyon single family homes is 3.8% down from $154.87 in early July 2015. The annual average in Gold Canyon have been trending lower since February 2016 and is now barely above the level of December 2014.
A few months ago it looked like Fountain Hills and Cave Creek might be headed the same way, but both of these have seen stronger pricing in the past 2 months. All the other major and secondary cities are seeing their annual average $/SF continue to move higher to varying degrees. Scottsdale would have a pricing problem if we were to look only at North Scottsdale, but pricing in South and Old Town Scottsdale is sufficiently buoyant to counteract the issues in the North.
July 3 – We are getting mixed signals from the single family permits from May. There was a total of 1,658 across Maricopa & Pinal counties, which is up only 4% from 1,591 in May last year. There has a slight decline since we peaked at 1,797 in March. The current 12 month rolling average is 1,498 per month which implies an annual total of 18,000. Based on the strong growth in the first 3 months of the year we were hoping to exceed 20,000 for the year. That is starting to look rather optimistic.
So far this year the totals by city have been as follows (with last year’s YTD numbers in parentheses):
- Phoenix – 1,065 (813)
- Mesa – 886 (636)
- Gilbert – 815 (831)
- Chandler – 646 (367)
- Peoria – 620 (620)
- Unincorporated Pinal County – 567 (547)
- Buckeye – 538 (374)
- Queen Creek – 452 (368)
- Goodyear – 427 (553)
- Unincorporated Maricopa County – 367 (274)
- Scottsdale – 338 (389)
Strong growth can be seen in Phoenix, Mesa, Chandler. Buckeye, Queen Creek and Unincorporated Maricopa County.
Declines compared to last year are appearing in Scottsdale and Goodyear.
July 2 – We often see a swift decline in the average list price per square foot for active listings during the third quarter each year and this trend usually starts during June. Looking at the 12 major cities we see the following changes for single family homes over the past 120 days:
- Avondale – up 2.8% from $103.18 to $106.02
- Chandler – up 2.0% from $155.30 to $158.36
- Gilbert – up 0.8% from $145.91 to $147.02
- Queen Creek – up 0.6% from $118.14 to $118.79
- Goodyear – up 0.4% from $128.32 to $128.88
- Peoria – up 0.3% from $145.12 to $145.49
- Tempe – down 0.1% from $176.80 to $176.71
- Glendale – down 0.2% from $133.74 to $133.49
- Mesa – down 0.6% from $149.27 to $148.33
- Phoenix – down 0.7% from $184.35 to $182.99
- Scottsdale – down 3.1% from $317.83 to $307.93
- Surprise – down 3.8% from $124.25 to $119.49
It is not a surprise to see the weakness in Scottsdale, but the decline in average asking prices in Surprise is quite startling and out of line with the other West Valley cities.
As usual Avondale makes it to the top of the table again. It is the most affordable of the major cities by quite a large margin.
July 1 – A useful comparison tool for housing markets is the average percentage of final list price achieved by closed sales over the last 12 months. For single family homes we currently rank the cities as follows:
- Tolleson – 99.34%
- El Mirage – 98.95%
- Avondale – 98.83%
- Laveen – 98.67%
- Waddell – 98.56%
- Queen Creek – 98.43%
- Buckeye – 98.35%
- Surprise – 98.30%
- Youngtown – 98.29%
- Glendale – 98.26%
- Apache Junction – 98.25%
- Gilbert – 98.23%
- Goodyear – 98.11%
- Maricopa – 98.09%
- Peoria – 98.03%
- Litchfield Park – 97.97%
- Mesa – 97.95%
- Chandler – 97.92%
- Tempe – 97.81%
- Anthem – 97.77%
- Florence – 97.71%
- Wittmann – 97.66%
- Desert Hills – 97.66%
- Sun City West – 97.61%
- Sun City – 97.57%
- Phoenix – 97.54%
- New River – 97.42%
- Casa Grande – 97.13%
- Coolidge – 97.11%
- Sun Lakes – 97.06%
- Arizona City – 96.85%
- Eloy – 96.79%
- Cave Creek – 96.48%
- Gold Canyon – 96.18%
- Fountain Hills – 95.95%
- Scottsdale – 95.94%
- Tonopah – 95.38%
- Rio Verde – 94.50%
- Carefree – 94.36%
- Wickenburg – 93.87%
- Paradise Valley – 91.91%
We note that 9 out of the top 10 cities are in the West Valley and 6 out of the bottom 10 are in the Northeast valley.
© 2016 Cromford Associates LLC
The data used to create the Cromford® Report is obtained from public records and obtained under license from the Arizona Regional Multiple Listing Service, Inc (ARMLS). Cromford Associates LLC and ARMLS expressly disclaim and make no representations or warranties of any kind, whether express, implied or statutory, as to the accuracy of the data used or the merchantability or fitness for any particular purpose.
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