The Cromford Report – Daily Observations June 2016

    June 30 – The market seems to be behaving quite nicely for sellers. When we look at the Cromford® Market Index for the single family market in our 17 largest cities we see a pretty picture:

    14 out of the 17 cities are improving for sellers with only 3 moving slightly backwards (Glendale, Gilbert & Paradise Valley).

    There has been a nice recovery in Cave Creek and Fountain Hills taking both above the 100 mark but still within the neutral zone between 90 and 110.

    Avondale is still desperately short of inventory,a situation that also applies to some of the smaller cities in the West Valley, such as El Mirage. However we have seen more listings arrive in El Mirage over the last month and its market index is down from a ridiculous 395 to to a merely crazy 281.

    11 of the 17 cities are seller’s markets now that Queen Creek has joined that club. Only Paradise Valley remains a buyer’s market with Maricopa having moved into the neutral zone since last month.

    June 29 – There has been much discussion about Brexit in the last week. I am flattered that so many people care about the dysfunctional politics of my native land. However it is my opinion that the effect of Brexit on the Greater Phoenix housing market will be minimal. Among the possible minor impacts:

    • interest rates are more likely to stay low
    • interest rates are more likely to change slowly
    • the luxury market may take a small temporary hit due to perceived risk in the stock market
    • businesses highly dependent on exports to Europe may see lower revenues due to currency fluctuations (there are very few of these in Arizona)

    The Greater Phoenix housing market is in an expansionary phase and demand from the UK is barely noticeable at the best of times. Demand from the whole of Europe is very small. So any fall in demand from Europe will be barely detectable.

    I would agree that the effect of Brexit will be significant for the UK and in my opinion it will be strongly negative for the UK economy as a whole. It will be mildly negative for the other 27 EU countries too. On the bright side, if you have any interest in British real estate it just got significantly cheaper for people holding US dollars, and it could get quite a bit cheaper yet. London and the South East is prohibitively expensive even with the weaker pound, but as you move north and west, property gets much more affordable. Wales and Scotland plus the North East and North West of England are now quite attractively priced, especially if you are looking in rural locations and fancy a large piece of land to go with your home.

    Many aspects of Brexit are up in the air (almost all of them in fact) so we shall have to wait and see how this shambles works out. At the moment there is a vacuum of leadership across the entire political spectrum. After the UK has scored an “own goal” against its economy and England has lost to Iceland in the Euro 2016 soccer championship, there is much hand wringing going on. That a country with a population of over 65 million people playing a sport they invented should be soundly beaten by a tiny country with fewer inhabitants than the City of Mesa is a major disgrace. Not since England lost to the United States in the 1950 soccer world cup have we been so deservedly ashamed of ourselves.

    Maybe I will pretend I am from Australia from now on

    June 28 – A word of warning from Mike Orr – if you are ever tempted to rent a satellite internet link to stay in touch with work from a remote location (like Lake Powell) my strong advice it to forget about it. I did this last week while on a week’s vacation and it was a very painful experience. In under 65 minutes I checked about 10% of my incoming emails and managed to rack up a data usage bill of almost $1,300. At about $20 per minute, it is just impossible to justify. On the bright side it makes the normal cell phone company charges seem like a bargain. Unfortunately cell phone coverage is zero in most of the Lake Powell side canyons, so satellite is the only option. Better to go off the grid, in my opinion, so that is what I did. My apologies to anyone who wished I had responded more quickly to emails. I hope Tina Tamboer looked after you well.

    In the meantime, I am back and we have a new S&P/Case-Shiller® Home Price Index® report to consider. This one covers the three months February through April 2016.

    Phoenix price movements are lackluster compared to the other 19 cities than Case-Shiller reports.

    The 20 cities rank as follows based on the month to month change in the HPI:

    1. Seattle +2.1%
    2. Chicago +2.0%
    3. Minneapolis +1.9%
    4. Washington +1.8%
    5. Portland +1.7%
    6. Charlotte +1.7%
    7. Boston +1.5%
    8. San Francisco +1.5%
    9. Denver +1.4%
    10. Detroit +1.3%
    11. Atlanta +1.3%
    12. Dallas +1.3%
    13. Miami +1.1%
    14. Cleveland +1.0%
    15. Tampa +0.9%
    16. San Diego +0.8%
    17. Los Angeles +0.8%
    18. Phoenix +0.7%
    19. Las Vegas +0.6%
    20. New York +0.3%

    We note that Phoenix is only 2 rungs off the bottom of the ladder, the same position as last month.

    Here is how the cities rank based on the annual change in the HPI:

    1. Portland +12.3%
    2. Seattle +10.7%
    3. Denver +9.5%
    4. Dallas +8.7%
    5. Tampa +7.8%
    6. San Francisco +7.8%
    7. Atlanta +6.5%
    8. Miami +6.4%
    9. San Diego +6.3%
    10. Los Angeles +5.9%
    11. Detroit +5.7%
    12. Las Vegas +5.7%
    13. Boston +5.7%
    14. Phoenix +5.5%
    15. Charlotte +5.0%
    16. Minneapolis +4.8%
    17. Chicago +3.1%
    18. Cleveland +2.9%
    19. New York +2.6%
    20. Washington +1.9%

    Phoenix has slipped from 13th to 14th place. We note that the top 3 cities are all favorites with Millennials, underscoring how Millennial behavior is becoming increasingly important to the housing market. Phoenix is growing its population but is attracting fewer young adults and has a much weaker birth rate than we were used to for the years from 1945 to 2005. We are seeing strong growth in people over 65, but this does nothing to improve the birth rate and is a much less positive development for our local economy than a similar growth in those of child bearing age.

    June 27 – Yesterday we looked at the median sized home purchased by price range. Today we look at the median sized home purchased by Major City over the same time frame. Interestingly, even at the height of sales price per square foot in 2006, buyers still purchased larger homes in many cities. Scottsdale has seen the only decline in median size since 2002. Everywhere else buyers are purchasing larger homes today compared to 14 years ago. To see more size trends by price and city, check out the “Median Sized Home Sold” tab at the top of the Sales Price Per Square Foot chart HERE.

    MEDIAN SQUARE FEET PURCHASED BY MAJOR CITY – All Property Types 2002 2006 2011 2016
    Avondale
    1,716sf
    1,691sf
    1,857sf
    1,909sf
    Chandler
    1,615sf
    1,714sf
    1,789sf
    1,836sf
    Gilbert
    1,884sf
    1,917sf
    1,991sf
    2,041sf
    Glendale
    1,667sf
    1,623sf
    1,689sf
    1,710sf
    Goodyear
    1,778sf
    1,871sf
    2,038sf
    2,090sf
    Mesa
    1,470sf
    1,460sf
    1,524sf
    1,569sf
    Peoria
    1,606sf
    1,657sf
    1,781sf
    1,870sf
    Phoenix
    1,503sf
    1,472sf
    1,504sf
    1,584sf
    Queen Creek
    1,812sf
    1,916sf
    2,011sf
    2,066sf
    Scottsdale
    2,020sf
    1,987sf
    1,988sf
    1,954sf
    Surprise
    1,536sf
    1,722sf
    1,898sf
    1,870sf
    Tempe
    1,545sf
    1,498sf
    1,485sf
    1,592sf
    Phoenix Metropolitan Area
    1,607sf
    1,632sf
    1,715sf
    1,762sf

     

    June 26 – The size of home buyers can afford for their budget has changed over the last 15 years since the peak of price in 2006 and the bottom in 2011. Here’s a brief history on the median sized homes sold by price range during those times. When prices and/or interest rates fluctuate, buyers adjust what they buy in terms of size or location. While the square footage purchased fluctuates within price ranges, the overall median sized home purchased has been increasing over time. To see more size trends by price and city, check out the “Median Sized Home Sold” tab at the top of the Sales Price Per Square Foot chart HERE.

    MEDIAN SQUARE FEET PURCHASED BY PRICE RANGE – All Property Types
    2002
    2006
    2011
    2016
    Under $150K
    1,335sf
    984sf
    1,513sf
    1,186sf
    $150K – $200K
    1,805sf
    1,184sf
    2,021sf
    1,548sf
    $200K – $250K
    2,154sf
    1,434sf
    2,275sf
    1,715sf
    $250K – $300K
    2,413sf
    1,673sf
    2,541sf
    1,976sf
    $300K – $400K
    2,733sf
    1,963sf
    2,783sf
    2,294sf
    $400K – $500K
    3,035sf
    2,279sf
    3,053sf
    2,647sf
    $500K – $600K
    3,380sf
    2,615sf
    3,400sf
    2,942sf
    $600K – $800K
    3,750sf
    2,871sf
    3,760sf
    3,263sf
    $800K – $1M
    4,109sf
    3,348sf
    4,173sf
    3,750sf
    $1M – $2M
    5,035sf
    3,950sf
    5,167sf
    4,407sf
    $2M – $3M
    6,205sf
    5,309sf
    6,500sf
    5,963sf
    Over $3M
    8,306sf
    7,300sf
    8,436sf
    7,267sf
    Overall
    1,607sf
    1,632sf
    1,715sf
    1,762sf

    June 25 – Year-to-date new listings are up 5.3% over week 26, 2015. So far ARMLS has recorded 60,228 new property listings compared to 57,201 this time last year. The most dramatic measure is the drop in new listings under $150,000 at 25.2% below last year and equating to 3,036 fewer new listings for buyers to choose among. This loss was made up in new listings between $200,000 and $300,000 which increased 20% over last year equating to an increase of 2,969 more new properties for sale. This shift in inventory composition is one reason why the median sales price has been rising faster than the sales price per square foot.

    YTD New Listings Week 26, 2015 Week 26, 2016 % Change # Change
    Under $150K
    12,052
    9,016
    -25.2%
    -3,036
    $150K – $175K
    5,666
    5,665
    No Change
    -1
    $175K – $200K
    5,603
    6,135
    +9.5%
    +532
    $200K – $250K
    8,730
    10,446
    +19.7%
    +1,716
    $250K – $300K
    6,277
    7,530
    +20.0%
    +1,253
    $300K – $400K
    8,070
    9,104
    +12.8%
    +1,034
    $400K – $500K
    3,918
    4,569
    +16.6%
    +651
    $500K – $600K
    2,163
    2,492
    +15.2%
    +329
    $600K – $800K
    1,963
    2,308
    +17.8%
    +345
    $800K – $1M
    1,011
    1,099
    +8.7%
    +88
    $1M – $1.5M
    854
    926
    +8.4%
    +72
    $1.5M – $2M
    387
    418
    +8.0%
    +31
    $2M – $3M
    326
    312
    -4.3%
    -14
    Over $3M
    181
    208
    +14.9%
    +27
    Total
    57,201
    60,228
    +5.3%
    +3,027

     

    June 24 – Continuing the discussion regarding the “bubble talk” in our media this month, overall price appreciation in the Phoenix Metropolitan area is not close to the appreciation rate of 2005. Even the current 11.1% appreciation rate for sales under $175,000 from June 2015 to June 2016 is lower than 2005’s past overall rate of 33%. Currently the average sales price per square foot is where it would have been had our market experienced a 2-3% annual appreciation rate every year since January 2002.

     

    June 23 – There’s been more talk about housing bubbles in the media again, such as this article on CNBC written earlier this month, Experts sharply divided over whether surging home prices signal new bubble. There are key differences between today’s market and the price surge of 2005, which was followed by the crash of 2008. Here are a few:

    100% FINANCING vs. Down Payments
    Bubble 2005: 100% financing was easily attainable for investors and consumers alike with little verification of income. This reduced the risk for investors. With none of the investors’ money invested, the lenders took on all the financial risk when the investments failed.

    TODAY: 100% financing is scrutinized. Most investors have purchased with cash in last 7 years, and most borrowers are required to contribute a down payment. As a result, if there is a downturn in appreciation, equity positions will encourage homeowners to stay put instead of abandoning their investment.

    ADJUSTABLE RATES vs. Fixed Rates
    Bubble 2005: Adjustable rates and interest only payments were rampant between 5.5-6.5%, available at purchase or through refinancing. When interest rates rose, consumers’ payments rose with them to unaffordable levels. Since all of their payments went to interest instead of equity, many owed more than their home was worth and were forced into foreclosure instead of selling through traditional methods.

    TODAY: The majority of loans issued are fixed between 3-4%, either through purchase or refinance over the last 6 years. If rates increase, these interest rates and payments will stay the same. Payments include both principal and interest to ensure a build up of equity. This, combined with positive appreciation over the past 6 years, provides a significant equity buffer to weather a potential downturn and reduce the risk of abandonment.

    APPRAISALS
    Bubble 2005: Appraisals and appraisers were not scrutinized by lenders, removing a significant barrier to unsustainable price appreciation. Many appraisers were uncharacteristically liberal in their valuations as they were dependent on referrals from the real estate community, not the underwriters.

    TODAY: Appraisals are highly scrutinized and appraisers are conservative with valuations, creating a resistance to unsustainable, unverifiable appreciation. Appraisers are chosen by the underwriter, not the borrower or any commissioned party dependent on the close of the sale. This removes any undo pressure on the appraiser to value the property at contract price.

    INVESTORS
    Bubble 2005: Investors purchased homes with no intention of living in them or renting them out, often selling vacant properties amongst themselves at soaring profits with no monetary investment on their part.

    TODAY: The vast majority of homes owned by investors are either free-and-clear or have significant equity. Instead of being vacant, they are rented and providing cash flow. The fear of investors “dumping” their real estate investments en masse and abandoning vacant properties is irrational when vacancy rates are at historical lows . There are few reasons for an investor to abandon a free-and-clear property while it’s generating income.

    June 22 – The ARMLS membership continues to grow since we began tracking it more closely in March. As of today, there are 36,336 total members. Of those members, 91.6%, or 33,275, are classified as a Designated Realtor, Realtor or Sales Person in the state of Arizona. This segment has grown by 4.8%, 1,532 members, in 15 weeks. That’s an average of 102 per week.

    Overall, there are more sales and more listings under contract, which is good news for the industry. However, more Realtors and affiliates entering the marketplace increases the competition for those sales.

    June 21 – Listings Under Contract (which include Pending, UCB and UCCB statuses) as of the end of Week 25 this year are coming in 7.2% higher compared to Week 25 of last year. The most obvious change is a 30.8% drop in listings under contract under $150,000 equating to 833 fewer contracts. Offsetting the loss of transactions under $150,000 is the increase in those between $200,000 and $300,000, up 27% combined and equating to 844 more contracts in escrow. Listings Under Contract is an indicator for future sales volume, so expect good news for summer closings in June.

    Listings Under Contract
    Week 25 2015
    Week 25 2016
    % Diff
    # Diff
    Under $150K
    2,701
    1,868
    -30.8%
    -833
    $150K – $175K
    1,306
    1,366
    +4.6%
    +60
    $175K – $200K
    1,215
    1,469
    +20.9%
    +254
    $200K – $250K
    1,835
    2,302
    +25.4%
    +467
    $250K – $300K
    1,265
    1,642
    +29.8%
    +377
    $300K – $400K
    1,499
    1,710
    +14.1%
    +211
    $400K – $500K
    682
    837
    +22.7%
    +155
    $500K – $600K
    322
    394
    +22.4%
    +72
    $600K – $800K
    314
    364
    +15.9%
    +50
    $800K – $1M
    139
    148
    +6.5%
    +9
    $1M – $1.5M
    104
    116
    +11.5%
    +12
    $1.5M – $2M
    49
    57
    +16.3%
    +8
    $2M – $3M
    42
    40
    -4.8%
    -2
    Over $3M
    24
    16
    -33.3%
    -8
    Total
    11,497
    12,329
    +7.2%
    +832

    June 20 – West Phoenix, South Phoenix and the Southeast Valley continue to have the majority of fastest selling times in the Phoenix Metro area.

    85034 in Phoenix (surrounding Sky Harbor Airport) currently has the lowest average days on market for sales in the last 90 days at 18.5 days followed by Youngtown 85363 at 21.8 days

    85264 Fort McDowell and 85263 Rio Verde have the two highest average days on market at 302 and 205 days respectively closely followed by 85377 Carefree at 202 days.

    June 19 – The Southeast Valley is another area that illustrates the contrast between the entry level, mid range and high end sectors for appreciation. Using ARMLS single family sales for March through May in 2016 and comparing with the same 3 months in 2015 we see the following appreciation rates based on average price per sq. ft.

    • under $250,000 – up by 8.4%
    • between $250,000 and $500,000 – up by 2.0%
    • over $500,000 – down by 0.9%

    The only ZIP code that is showing negative appreciation is Phoenix 85045 (West Ahwatukee) with -0.6%. Others with appreciation well below average are:

    • Mesa 85207 – up 1.4%
    • Mesa 85215 – up 1.4%
    • Phoenix 85048 – up 1.9%

    The fastest upward movement over the last 12 months can be found in:

    • Tempe 85281 – up 19.2%
    • Chandler 85224 – up 13.7%
    • Mesa 85204 – up 12.5%
    • Mesa 85203 – up 10.8%
    • Mesa 85208 – up 10.7%

    June 18 – If we look at the average price for ARMLS closings it looks as though we are experiencing a strong increase in price over the past month. The same message jumps out from the median

    June 17 – The West Valley is a good illustration of the difference between 3 price segments in the single family home market. During the 3 months March through May 2016 we saw the following changes in average price per square foot compared with a year earlier:

    • Below $250,000 – up 10.1%
    • Between $250,000 and $500,000 – up 1.2%
    • $500,000 and over – down 3.0%

    The overall average appreciation rate is 7.3%. but this is obviously misleading. It is too low to represent the entry range accurately and far too high for the rest of the market.

    Among the top performing ZIP codes for appreciation we find:

    1. Glendale 85301 – up 20.3%
    2. Youngtown 85363 – up 15.6%
    3. Sun City 85351 – up 14.2%
    4. Tolleson 85353 – up 14.0%
    5. Glendale 85303 – up 13.7%

    The top 2 ZIP codes were the lowest price areas one year ago, but they are catching the rest of the pack.

    Even though Glendale had the highest appreciating ZIP code, it also had the lowest – Glendale 85310 went backwards by 5.6%. It was the only ZIP code in the West Valley with negative appreciation. Last year it was the most expensive ZIP code with an average price of $142.74. This year it has fallen back to $134.70 and been overtaken by Peoria 85383 at $136.76, Goodyear 85395 at $135.52 and Glendale 85308 at $136.27.

    We can see that in general the lowest priced areas are appreciating the fastest and the highest priced areas are usually appreciating the least.

    June 16 – We are taking another look at the single family markets in the 17 largest cities to see how their Cromford® Market Index values have changed over the past month:

    We see a strong advantage for sellers, and it is getting stronger in 14 out of 17 cities. Paradise Valley remains the weakest market and it is not improving fast enough to catch up. However the usual lower supply during the third quarter will help a bit.

    Cave Creek and Fountain Hills have improved quickly for sellers over the past month and are now above the neutral 100 mark, as is Scottsdale.

    Maricopa is on an improving trend and its snapshot is looking very positive.

    Avondale continues to open up a lead on all the other major cities, with a contract ratio of 164.8 and just 1.2 months of supply. Very tough to be a buyer in Avondale.

    All in all, the bulk of the market is still looking strong and on an improving trend. 11 cities are seller’s markets, 4 are neutral and 2 are buyer’s markets.

    June 15 – If we look at the single family market in the Northeast Valley over the last 3 months (March through May) and compare with the same period one year ago, we can see that the market under $500,000 remains quite healthy. Admittedly sales are down 2% but active listings are also down 2% and appreciation averages 5% based on price per sq. ft. Between $500,000 and $1 million sales are up 4% but supply is up a strong 16%, so appreciation is fairly weak at 1%. It is in the market over $1 million where the bad news is concentrated. Sales are down 5% while active listings are up 10%. As you would expect, prices have a hard time in this environment and they have declined an average of 4% since last year.

    South Scottsdale (85257) and Old Town (85251) are doing very well indeed, with pricing up 12% in the former and 16% in the latter. However the pricing picture is discouraging for sellers for several northeastern ZIP codes:

    • 85266 – down 10%
    • 85260 – down 4%
    • 85253 – down 3%
    • 85259 – down 1%
    • 85258 – flat

    June 14 – The Census Bureau Quickfacts table for Arizona has some interesting statistics.

    The total population estimate for July 1, 2015 is stated to be 6,828,065. This is up 1.4 % from 6,731,484 on July 1, 2014, Although this represents a total of 96,581 added to Arizona’s population in 12 months it is also a lower percentage rate than many would like to see. Population growth fuels the economy, especially the economy tied to housing. The population figure for April 1, 2010 (census count rather than estimate) is 6,392,307. We have therefore seen a growth of 435,758 in just over 5 years, or 6.8%. This is better than many other states but far below the rates of growth that Arizona experienced between 1945 and 2007.

    The balance in the population has been shifting dramatically away from children and towards retirees. The percentage of the population by age group changed as follows between April 1, 2010 and July 1, 2014:

    • Persons under 5 years of age – down from 7.1% to 6.4% – a 10% fall in just over 4 years
    • Persons under 18 years of age – down from 25.5% to 24.1% – a fall of 5.5% in just over 4 years
    • Persons 65 years and over – up from 13.8% to 15.9% – a rise of over 15% in just over 4 years

    So although we added 339,177 people between April 1, 2010 and July 1, 2014, we ended up with 23,039 fewer children under 5 and 7,751 fewer children under 18. At the same time we added 188,168 people aged 65 and over and 158,760 people between 18 and 65.

    We may be in danger of following in the footsteps of Japan with plummeting fertility rates and falling school head counts.

    June 13 – One way to measure supply is to calculate the ratio of homes for sale to the total number of homes in an area. For example, in Maricopa County, 1 in 75 single-family homes are for sale. We can see that the supply of homes for sale (without a contract) is abundant in the following locations:

    Rank City ZIP Code Homes for Sale
    1 Aguila 85320 1 in 11
    2 Scottsdale 85262 1 in 14
    3 Carefree 85377 1 in 16
    4 Paradise Valley 85253 1 in 17
    5 Rio Verde 85263 1 in 18
    6 Scottsdale 85266 1 in 23
    7 Morristown 85342 1 in 24
    8 Wickenburg 85390 1 in 24
    9 Scottsdale 85255 1 in 27
    10 Fort McDowell 85264 1 in 29
    11 Fountain Hills 85268 1 in 31
    12 Buckeye 85396 1 in 31
    13 Scottsdale 85259 1 in 33
    14 Phoenix 85018 1 in 35
    15 Phoenix 85054 1 in 36

    In most of these areas, sellers are having a hard time due to the competition from other sellers. Phoenix 85018 is an exception because demand is stronger than ever for homes in this increasingly trendy area. Nearby 85008, 85014, 85251 and 85257 are also seeing strong demand and fast turnover.
    At the other end of the scale, supply is chronically weak in the following areas:

    Rank City ZIP Code Homes for Sale
    116 Glendale 85302 1 in 229
    117 Gila Bend 85337 1 in 241
    118 Phoenix 85051 1 in 241
    119 Phoenix 85037 1 in 249
    120 Mesa 85210 1 in 250
    121 Phoenix 85031 1 in 253
    122 Glendale 85306 1 in 254
    123 Phoenix 85017 1 in 258
    124 Mesa 85201 1 in 295
    125 Phoenix 85033 1 in 309
    126 Glendale 85307 1 in 311
    127 El Mirage 85335 1 in 314
    128 Phoenix 85019 1 in 328
    129 Phoenix 85040 1 in 344
    130 Phoenix 85004 1 in 473

    Even with weak demand, prices will rise when supply is as scarce as this.

    June 12 – We already know that appreciation is strongest for the least expensive homes at the moment. Contrary to what you might expect, prices are rising the fastest in areas with the highest crime rates, worst performing schools and worst reputations. Most areas with the highest levels of desirability and either appreciating very slowly or depreciating. There are a few exceptions; Arcadia springs to mind.

    In the same way the least expensive dwelling types (on a price per sq. ft. basis ) are appreciating the fastest and those with the highest price per sq. ft. are slowest to rise in price. Comparing the annual average $/SF between June 1 2015 and June 1, 2016 we see the following:

    1. Twin homes – up 12% from $89 to $99 per sq. ft.
    2. Mobile homes – up 11% from $68 to $76 per sq. ft.
    3. Townhouses – up 9% from $123 to $134 per sq. ft.
    4. Single family detached – up 5% from $131 to $138 per sq. ft.
    5. Apartment-style homes – up 4% from $141 to $146 per sq. ft.
    6. Patio homes – up 1% from $156 to $157 per sq. ft.

    June 11 – Fix and flips appear to be attracting attention again after a quiet period during the first half of 2015. Mind you we are nowhere near the peak that we saw in 3Q 2012 when flip sales were 12% of the total market across Maricopa and Pinal counties. In the spring of 2015 we reached a low of below 5% of the market and have since recovered to around 6%.

    Since 2012 the median acquisition cost for a flip has risen 55% from $91,250 to $141,250, while the median sq. ft. has dropped from 1,650 to 1,545. On the other hand the median gross profit has increased 22% from $35,144 to $43,150.

    June 10 – Examining the market at $800,000 and over we see some interesting trends in the size of the market in various cities.

    The overall revenue for January through April, including all recorded deeds in Maricopa & Pinal, changed as follows over the last 2 years:

    • 2014 – $1.012B
    • 2015 – $1.113B (up 10% year over year)
    • 2016 – $1.134B (up 2% year over year)

    Strong growth in luxury home spending between 2014 and 2015 was followed by very modest growth between 2015 and 2016. However the growth was outstanding in the following cities between 2014 and 2016:

    1. Gilbert – up 168% from $9.6M to $25.8M
    2. Chandler – up 163% from $12.9M to $34.0M
    3. Cave Creek – up 106% from $11.3M to $23.2M
    4. Phoenix – up 73% from $115.5M to $199.6M

    Of course these are relatively small markets for the price range of $800,000 and over, compared with Scottsdale and Paradise Valley. These did not expand much at all however:

    1. Scottsdale – up 3% from $522M to $536M
    2. Paradise Valley – down 1% from $220M to $218M

    Several other secondary luxury markets lost steam between 2014 and 2016:

    • Glendale – down 45% from $5.4M to $2.9M
    • Mesa – down 43% from $27.9M to $15.9M
    • Peoria – down 38% from $13.3M to $8.2M
    • Rio Verde – down 100% from $3.4M to zero
    • Fountain Hills – down 12% from $30.8M to $27.2M
    • Carefree – down 12% from $19.0M to $16.8M

    We must remember this is a comparison for January through April only, as we do not have all the deeds for May just yet.

    June 9 – The Cromford Market Index for the single family market in the largest 17 cities is still looking positive:

    We have 12 cities improving over the last month, with the following most significant:

    1. Fountain Hills – up 19%
    2. Avondale – up 16%
    3. Cave Creek – up 9%
    4. Mesa – up 7%
    5. Paradise Valley – up 6%
    6. Goodyear – up 5%

    Only Buckeye saw a significant deterioration for sellers, down 5%, but another 4 cities saw slight moves towards neutrality.

    Overall the market is improving for sellers with the high end market helped by a large number of cancellations, as sellers take their homes off the market, probably just for the summer.

    June 6 – Looking at the Greater Phoenix super luxury market at $6 million and above we see 5 sales through ARMLS so far this year:

    1. sold for $7,400,000 (original list $9,495,000) in February – 15,112 sq ft – $490 per sq. ft. – 165 days on market
    2. sold for $7,200,000 (original list price $8,750,000) in April – 7,181 sq. ft. – $1,003 per sq. ft. – 2,141 days on market
    3. sold for $6,250,000 (original list price $6,750,000) in February – 10,567 sq. ft. – $591 per sq. ft. – 27 days on market
    4. sold for $6,175,000 (original list price $8,750,000) in February – 12,929 sq. ft. – $478 per sq. ft. – 386 days on market
    5. sold for $6,000,000 (original list price $7,195,000) in January – 9,221 sq. ft. – $651 per sq. ft. – 427 days on market

    There were another 2 sales between $5 million and $6 million

    There were 6 sales of $6 million or more in the same period in 2015 and another 5 between $5 million and $6 million.

    The dollar volume for homes over $5 million has declined 38% year over year from $71.6 million to $44.1 million.

    We are not the only location that is seeing a drop in buying activity for the highest price sector of the market. Reports from other locations suggest that big mansions in the rest of the USA and in part of the UK are seeing much lower activity.

    June 5 – In an interesting development, the percentage of home purchases that were all-cash in Maricopa County fell to its lowest level since October 2008 in May 2016. The percentage was 19.5%, down from 20.9% in April.

    In May 2015 this percentage was 21.3%, so this supports the theory that some lenders are being a little less restrictive in their loan underwriting.

    June 4 – The number of Realtor® agent records in the ARMLS database has grown significantly over the last year. Here are the counts we have seen over the past few years:

    Year Agent Count in June Annual Sales Rate Sales per Agent Annual Dollar Volume Dollars per Agent Average Commission per Agent (assuming average of 6% per closing)
    2010 27,362 90,073 3.29 $15.372 B $561,801 $33,708
    2011 25,445 100,482 3.95 $15.826 B $621,969 $37,318
    2012 24,733 89,030 3.60 $17.195 B $695,225 $41,714
    2013 25,018 85,070 3.40 $19.828 B $792,549 $47,553
    2014 26,829 76,538 2.85 $19.194 B $715,420 $42,925
    2015 28,109 84,080 2.99 $22.133 B $787,399 $47,244
    2016 30,156 85,902 2.85 $23.057 B $764,591 $45,876

    We note that 2013 was the “best” year for average commissions and that 2014 was probably the most disappointing. Despite the increase in volume between 2015 and 2016, average commissions per agent are likely to be down about 3% this year compared with last year, because we have 7% more agents and only 4% more sales revenue. Since we are less than half way through 2016, it is possible the 2016 numbers may change significantly by year end.

    Of course a large number of agents process no sales at all each year and a small number of agents is responsible for a very large percentage of the total revenue.

    June 3 – The recorded deeds for Maricopa County in May show continued strong growth for new homes, up 39% from May 2015. The median sales price of $321,108 is also up a healthy 4.1% from May 2015.

    Re-sales, meanwhile, are up a modest 6% in unit volume and a more impressive 7% in median sales price.

    New homes took an 11% percent share of the market, up from 9% a year ago.

    All these numbers are for sales that recorded with an Affidavit of Value and include condos and townhomes as well as single family homes.

    June 2 – Taking another look at the single family markets in the 17 largest cities we find that the Cromford® Market Index has changed as follows over the last month:

    This is another pretty picture with only 3 of the 17 cities showing any deterioration for sellers. Buckeye is this week’s biggest loser dropping from a seller’s market to a balanced market, thanks to weaker demand and a slight increase in supply measurements.

    Fountain Hills and Paradise Valley have improved a lot, but they really needed to. Paradise Valley remains a buyer’s market but Fountain Hills has risen from a buyer’s market to the balanced zone between 90 and 110.

    Mesa has jumped to third place while Avondale is still opening up an even greater lead at the top of the table.

    June 1 – A couple of statistics that came out this morning suggest a stronger market.

    Only 182 homes were purchased by third parties at trustee sales in Maricopa County during May. However this represents 65% of all the auctions, so only 98 properties went back to the beneficiary (or lender). This is the lowest monthly total of REOs created since October 2006, almost 10 years ago. Also 65% is the highest percentage of properties catching a bid since April 2006, more than 10 years ago.

    The total dollar volume of homes closed through ARMLS during May was $2.464 billion. This is up 10% from May 2015 and the highest monthly total since June 2006.

     

    © 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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