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Market Update

A market update for Las Sendas, North East Mesa, and East Valley residents who want to keep an eye on the market!

August 2018: Seller Price Reductions Up 7% in Popular Price Range

Connor Bearse

FOR BUYERS:

If your budget lies somewhere between $200,000 and $400,000 for a home, there’s good news for you.  Supply between $200,000 and $250,000 has been rising gradually over the past 12 weeks.  After dropping 15% from 2,300 listings in January to 1,944 in May, it has since risen 8.1% to 2,101 listings in August, placing it only 6.7% below last year’s count instead of 18% below like it was 3-4 months ago. Listings between $250,000 and $400,000 have also risen sharply 5.3% from 4,791 to 5,044 over the past 4 weeks, placing them only 0.2% below last year’s count of 5,053 listings. The increase in competition has resulted in a notable 7.3% increase in weekly seller price reductions from an average of 778 per week in June to 835 in July.  56% of year-to-date sales in Greater Phoenix have been between $200K-$400K so this increase in supply should come as a little bit of relief for the majority of buyers.

FOR SELLERS:

If you have a home listed between $200,000 and $400,000, then you make up 48% of everything that’s listed in the MLS.  Listings under contract in this price range have averaged 7.4% higher in volume than 2017 all year, until now.  Over the last two weeks, including the end of July through the first week in August, listings in escrow have dropped to 2.2% below last year’s level.  Buyer activity is expected to slow seasonally from the peak in April through the end of the year; however open contracts have dropped 26% since the 2018 April peak compared to a lower 20% drop in 2017 over the same time frame; all while corresponding supply has been rising.  Sellers haven’t seemed to notice this sharper decline as their average asking price per square foot has soared from just 3% higher than last year in March to as high as 7% higher in July.  The average sales price per square foot was up 5.9% in July, compared to 4.6% in June.  However, price is a lagging responder to shifts in supply and demand. We will have to wait and see if buyers accommodate sellers’ price expectations given that they have more to choose from in the marketplace right now.

Click HERE for the August market info-graphic!

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July 2018: Cost of Waiting to Buy Means Less Closet Space or Higher Payment

Connor Bearse

FOR BUYERS:

Hearing cries for more affordable housing supply, developers have sold more new homes in the low $200’s this year; selling 35% more than they did last year within the same time frame. However, the under $200,000 market remains neglected for additional supply.  As of May 2018, only 6% of new homes sold were under $200,000, 37% were between $200,000 and $300,000 and 41% were between $300,000 and $500,000. This means that properties under $200,000 will continue to appreciate faster than any other price point and homes sold in this price range are only getting smaller.  The annual average home size sold between $100K -$200K, new and resale combined, is currently 1,390sf compared to 1,454sf last year.  That’s a loss of 64sf and roughly the size of a couple of closets.  Since 2014, the annual average home size sold has consistently hovered around 1,975sf.  Those buyers who didn’t want to sacrifice living space paid an average of $22,000 more for a 1,975sf home in the past year.

FOR SELLERS:

Greater Phoenix is officially in the seasonal summer slowdown and contracts in escrow are expected to continue declining overall until the end of the year.  The peak of the market for contract activity usually hits at the end of April, as it did both this year and last year.  So far levels have dropped 17% from the peak, which is closely following last year’s drop of 18% between April and July.  If the 2018 market follows last year and previous years, we can expect contracts in escrow to drop about 4% per month until the end of the year.  This would be considered perfectly normal, anything more could indicate a non-seasonal drop in demand. 

Click HERE for July's market info-graphic!

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APRIL 2018: MLS Sales Outperform non-MLS Sales in Frenzy Market

Connor Bearse

FOR BUYERS:

2018 is not going to be any less competitive for buyers in general. The market is starting out with 14% fewer listings compared to 2017, however there are 35% fewer listings under $200K, a price range that commands 34% market share of all MLS resales in Greater Phoenix. 51% of MLS sales were between $200K-$400K in 2017, and supply in this range is down just 7%. 14% of sales were between $400-$1M and supply is down nearly 9%. Only the market over $1M is starting 2018 with 4% more for sale, 2017 sales over $1M were less than 2% of the market.

FOR SELLERS:

Over 51% of newly constructed condominiums, townhomes and single family residences sold in 2017 were between $275K-$500K as of November and approved single family permits are up nearly 12% going into 2018. Added inventory from new construction continues to keep mid-range property appreciation at sustainable levels at the current level of demand. The last wave of boomerang buyers are expected to rejoin the masses in home ownership this year after waiting 7 long years to qualify for conventional financing after foreclosure. These buyers span all price ranges and their return combined with positive inbound relocation and employment keep Greater Phoenix a positive environment for sellers.

Click HERE for April's market info-graphic!

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JANUARY 2018: Over 50% of 2017 Sales Were in this Price Range….

Connor Bearse

FOR BUYERS:

2018 is not going to be any less competitive for buyers in general. The market is starting out with 14% fewer listings compared to 2017, however there are 35% fewer listings under $200K, a price range that commands 34% market share of all MLS resales in Greater Phoenix. 51% of MLS sales were between $200K-$400K in 2017, and supply in this range is down just 7%. 14% of sales were between $400-$1M and supply is down nearly 9%. Only the market over $1M is starting 2018 with 4% more for sale, 2017 sales over $1M were less than 2% of the market.

FOR SELLERS:

Over 51% of newly constructed condominiums, townhomes and single family residences sold in 2017 were between $275K-$500K as of November and approved single family permits are up nearly 12% going into 2018. Added inventory from new construction continues to keep mid-range property appreciation at sustainable levels at the current level of demand. The last wave of boomerang buyers are expected to rejoin the masses in home ownership this year after waiting 7 long years to qualify for conventional financing after foreclosure. These buyers span all price ranges and their return combined with positive inbound relocation and employment keep Greater Phoenix a positive environment for sellers.

Click HERE for January's market info-graphic!

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NOVEMBER 2017: 23% of Listings Under $200K Sell Over List Price

Connor Bearse

FOR BUYERS:

There are currently 1,399 normal* single family listings between $100K-$200K in Greater Phoenix and supply levels are not expected to rise in this price range going into 2018. In the last half of 2017, an average of 1,396 normal single family new listings were added each month while 1,375 per month were sold in this price range. In November, 23% sold over list price compared to 27% last June and 28% closed with full price offers compared to 28% in June.

(*A normal listing is one that is not a short sale or foreclosure.)

FOR SELLERS:

The overall appreciation rate based on annual sale price per square foot in Greater Phoenix is 6.2%. However, supply and demand are not the same by price range. The greatest appreciation rates are under $200K due to a lack of new construction that would typically balance out the supply shortage. Sales under $200K are 33% of all sales this year, so their rate has a large effect on the overall average. New multi-family and single family homes are being added to the $200K-$500K price range to accommodate increased demand, but it’s still not quite enough. The market is balanced between $500K-$1M, while supply is still higher than demand over $1M despite a 10% rise in 4th quarter contracts. As a result, appreciation rates are as follows by price range:

Under $200K: 7.7%
$200K-$500K: 3.5%
$500K-$1M: 1.7%
Over $1M: 0.1%

Click HERE for November's market info-graphic!

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OCTOBER 2017: Sales Above 600K on the Rise!

Connor Bearse

FOR BUYERS:

The median home size sold through the MLS this year is 1,774 square feet. Interestingly, this measure has not fluctuated more than a couple square feet up or down since 2015. Considering the increasing cost per square foot, the fact that the median sized home sold has not fluctuated much means that buyers are willing to pay more for the right sized home if they have the choice. For buyers with less flexibility on price, the cost of waiting comes in the form of sacrificing extra closet space, work space, or even a bedroom. Last year, the median home size for buyers in the $150K-$175K price range was 1,470sf. This year it’s only 1,380sf, a difference of 90 square feet.

FOR SELLERS:

The first half of 2017 was more exciting than the second half is turning out to be so far for MLS sales. 1st Quarter 2017 MLS sales outperformed 2016 by 14% and 2nd Quarter sales were up 7%, so a 2% growth rate for the 3rd Quarter puts a damper on our excitement. Low supply in the lower price ranges is mostly to blame as it’s difficult to have record sales growth if there are fewer people willing to sell their home. There are more people willing to put their home on the market in the higher price ranges however. New listings over $600K were up nearly 10% in the 3rd Quarter and sales were up an impressive 27%.

Click HERE for October's market info-graphic!

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August 2017: Active Listings Between $150K -$200K Rise 10% in 4 Weeks | First-Time Home Buyers Get a Boost

Connor Bearse

For Buyers:

We have good news for first-time homebuyers!  A 10% rise in active single family homes between $150K-$200K over the last 4 weeks caught our eye.  Seasonally we expect supply to begin rising in late September, so a turn this early in the year is unusual. This price point has been decreasing nearly every week since November 2016 and is highly competitive amongst buyers and investors alike.  Listings appear to be growing the strongest in Pinal County and the West Valley, particularly noted within the freeway loop of I-17, I-10 and the 101.  This provides some slight relief for buyers, but put it in perspective.  Today we counted 1,361 single family homes listed for sale between $150K-$200K and there were 1,311 sold last July.  Listings under $200K make up 17% of inventory and 35% of sales so far this year.  The market is still very tight.

For Sellers:

The 10% rise in competition for the single family market between $150K-$200K equates to an extra 137 listings for buyers to view. Glendale, Peoria, Avondale and West Phoenix accounted for 60% of the increase while the City of Maricopa and San Tan Valley accounted for another 38%.  Weekly price reductions in this price range have risen 60% in the month of July and 40% of the sales over the last 4 weeks have involved seller-assisted closing costs.  Supply in this segment is still 23% below where it was last year, providing sellers a large negotiating advantage.  However, the gap between 2016 and 2017 supply has closed 8% in 4 weeks, indicating a slight softening.

Click HERE for August's market info-graphic!

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July 2017: Supply Stops Declining Between $150K-$300K

Connor Bearse

FOR BUYERS:

Good news for buyers, listings for sale between $150K and $300K stopped declining over the past 4 weeks.  This is good news because as the summer progresses, there are fewer buyers to compete with in the marketplace which offers a seasonal relief for those still willing to brave high temperatures and scalding door knobs to view homes.  Supply is still extremely low, but this slight improvement gives as much relief as a hot breeze on a July afternoon.  It’s not much, but it’s something.  Meanwhile, luxury buyers may notice fewer properties to look at this summer as demand was higher during the Spring season and overall inventory has been dropping due to a higher number of closings and seasonal cancellations/expirations.  Expect inventory in price ranges above $500K to continue declining seasonally until settling into a stagnant level in August and early-September.

FOR SELLERS:

There has been a lot of talk about the increased production of luxury apartments and what impact they will have on the residential real estate market.  One segment that is starting to see their influence is apartment-style condominium rentals leased through the Arizona Regional MLS.  While rents on single family homes and townhouses continue to rise, successful leases of apartment-style condominiums have dropped 11% in average rates from a high of $1.26/sf in January 2017 to $1.12/sf by June. The drop is consistent across all lease price ranges for this type of rental and is not seasonal.  Areas that have been particularly affected are Tempe, Old Town Scottsdale and the Central Corridor including Downtown Phoenix.  Considering the lack of supply for sale in affordable price ranges and the added competition from brand new apartment complexes, this may be a good time for landlords of apartment-style rentals to consider selling if they’re unwilling or unable to reduce their rental rate.

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May 2017: Phoenix is Hot, but a Bubble it’s Not

Connor Bearse

FOR BUYERS:

Multiple offer situations and homes selling for more than list price have been making home buyers nervous over the past month.  Returning boomerang buyers, having already suffered a short sale or foreclosure during the recession, are especially sensitive to memories of the infamous 2005 “bubble” where multiple offers over list price were a common everyday occurrence.  Flash sales, properties sold within a day or less on the MLS, saw the highest volume last March since August 2013.  However, a measure of 210 does not come remotely close to the 1,032 flash sales measured in March 2005.  There is a growing number of properties selling over list price as well.  But again, April 2017 only saw 16% of sales fit this category while April 2005 saw 37%.  So while our real estate environment is indeed competitive for buyers right now, thankfully it doesn’t resemble the same level of insanity experienced during the 2005 bubble.


FOR SELLERS:

Annual appreciation rates* have been consistently averaging close to 5% for nearly 2 years.  Compare this to the two years between August 2003 and August 2005 where the annual appreciation rate rose from 5% to a ridiculous 45%.  Between January and July 2005, unprecedented appreciation ranged between 4-7% PER MONTH compared to an average of 1% per month thus far in 2017.  Current prices are the highest they’ve been since  January 2008, over 9 years ago, and they’re comparable to April 2005, over 12 years ago.  However at an average of $152 per square foot, sale prices would need to appreciate another 25% to compare to the highest peak achieved in May 2006.  At the current rate, that could take another 4 years to reach.

*Comparing the average sales price per square foot for the most recent 12-month period to the prior 12-month period

Click HERE for May's market info-graphic!

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April 2017: Seller Concessions Have Risen Despite Buyer Frenzy

Connor Bearse

FOR BUYERS:

Buyers continue to find themselves in a frenzy of competition for homes as March recorded the highest number of non-distressed sales through the MLS since September 2005.  While supply has dropped a significant 12.7% overall compared to this time last year, it’s dropped a whopping 22% in the Southeast Valley and 27% in Pinal County! Despite the extreme lack of supply under $300K, 30% of closings in this price range are showing some form of seller-paid concession at close.  Compare this to 27% in March of last year and it indicates that even as demand and prices are on the rise, a larger percentage of sellers are contributing financially to closing costs, home warranties and repairs in order to get top dollar for their home.


FOR SELLERS:

March 2017 recorded the highest Listing Success Rate for normal listings since July 2005 at 81.8%, which means more homes are coming off the market because they successfully sold and not because they cancelled or expired. In a balanced market, the Listing Success Rate ranges between 60-65% for this time of year.  To compare, the lowest Listing Success Rate was recorded in December 2008 at 21% and the highest was in May 2005 at 87%.

Normal listings between $100K and $200K currently have the highest success rate at 90%, followed closely by the $200K-$300K range at 87% and $300K-$500K at an impressive 79%.  It’s a good time to be a seller!

Click HERE for April's market info-graphic!

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March 2017: Supply Shortage Giving Buyers Headaches

Connor Bearse

FOR BUYERS:

It’s extremely rough to be a buyer right now, especially for those looking for lower priced homes.  While active listings are down 15% overall in the Valley, listings under $200K are down a whopping 30% from this time last year and declining, and active listings between $200K-$300K are down 10% and not rising. Properties under $300K comprise 70% of all year-to-date sales, making areas such as the West Valley and Southeast Valley the most frantic and competitive for buyers.


FOR SELLERS:

March, April and May are typically the most active months for buyer contracts and this year is not expected to be any different.  Sellers are enjoying less competition for increasing demand, driven by more qualified buyers entering the market.  While the total number of listings under contract is not increasing due to fewer homes for sale, contracts on listings between $200K-$400K are up 12% compared to this time last year, and contracts between $400K-$800K are up 18%.  Over $800K, supply and demand are near identical to last year’s levels at this time.

Click HERE for March's market info-graphic!

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February 2017: Supply is Down 9.3%, Buyer Demand is Up 4.5%!

Connor Bearse

For Buyers:

Buyers be prepared for another year of increased competition for existing active listings in the Phoenix Metropolitan Area, partly because of over 50,000 more foreclosures due to be removed from credit reports in 2017. That’s in addition to the nearly 50,000 foreclosures that were removed from credit reports in 2016. A foreclosure can suppress a credit score by 100 points in many cases, so their removal is resulting in a higher number of qualified buyers and a 20% increase in the rate of approved mortgage applications over the past 2 years. Increases in buyer activity are expected across all price points under $1,000,000.


For Sellers:

It’s starting off very good for existing sellers thus far, as January was the 3rd slowest month for new listings on the market dating back to 2001. This, combined with increases in demand, is resulting in active listings remaining very low when it typically rises in the first quarter just before spring buyer season. New home builders have been creating new supply for buyers, mostly in the $300,000 to $500,000 price range, especially in North Phoenix, South Phoenix, Mesa, Gilbert, Peoria and Buckeye. With the supply and demand imbalance giving sellers a negotiating advantage, it’s reasonable to expect more appraisals coming in lower than negotiated sales price and buyers who are either unwilling or unable to cover the difference.

Click HERE for February's market info-graphic!

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Demand Increases November 15

Larry Bearse

November 15 - For anyone who wants to see a positive signal in demand, take a look at the daily chart for annual sales below. Ignore the short term zigs and zags and focus on the distinct change in the slope from mid October onwards. This is because 2016 has been stronger than 2015 for sales closed since mid October.

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Sales by Price Point November 10

Larry Bearse

November 2 - Today we are taking a look at the Contract Ratio to see which segments of the single family market are hotter or cooler than last year. The following table compares the contract ratio on November 1 for 2015 and 2016. Higher numbers mean either more homes under contract or fewer home available, or both. This is good for sellers. Lower number mean the opposite.

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Prices vs. the "Peak" November 8

Larry Bearse

November 1 - From time tome we like to check how Arizona is doing compared with the other states. For this purpose, the Core Logic Home Price Insights Report is a useful source.

According to Core Logic's report, which is based on data at the end of September, Arizona was one of the 5 states with the furthest to go to reach the height of pricing at the peak of the housing bubble.

  1. Nevada 31.4% below peak
  2. Florida 22.5% below peak
  3. Arizona 22.0% below peak
  4. Connecticut 19.1% below peak
  5. Maryland 18.7% below peak

There are now 15 states (plus the District of Columbia) which are making new price highs, having exceeded the levels at the peak of the bubble:

  • Arkansas
  • Colorado
  • Iowa
  • Indiana
  • Kansas
  • Kentucky
  • Louisiana
  • North Carolina
  • Nebraska
  • New York
  • Oregon
  • Tennessee
  • Texas
  • Utah
  • Washingt
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New Home vs. Resales October 19

Larry Bearse

October 18 - The biggest difference between 2015 and 2016 has been the market share gains made by new homes over re-sales. Based on year to date sales at the end of August, overall dollar volume is up by 13.6% for single family and townhouse / condo properties across Maricopa and Pinal Counties. However new home dollar volume is up by 34.6% while re-sales are up by only 10.3%. In market share terms new homes have grown from a 13.6% share to 16.1%. New home developers have done more in 2016 to address the lower price ranges and unit counts are up 33% year to date.  Analyzing by city we see the following unit sales growth:

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Cromford Market Index Update October 11

Larry Bearse

October 6 - It is time again to look at how the Cromford Market Index has fared for the single family market in the 17 largest cities.

Declining cities outnumber advancers by 10 to 7, but the picture is more balanced than that comparison suggests. 6 of the 10 declining cities fell by 2% or less leaving only Avondale, Surprise, Goodyear and Buckeye cooling by more than 2%. We note that these are all in the West Valley.

Strong advances can be seen in Cave Creek, Glendale, Chandler, Paradise Valley and Tempe. Overall we would say the market remains similar to a month ago with almost all areas and sectors in a seller's market.

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Sales by Price Ranges October 2

Larry Bearse

October 2 - The number of Greater Phoenix single family active listings (excluding UCB and CCBC) by price range on October 1, 2016 compared with October 1, 2015 is as follows (single family only):

The shortage of homes under $175,000 continues to drive prices up quickly at the bottom of the market.

After a pleasant fall in supply for luxury home sellers over the third quarter, they must brace themselves for the likelihood of a lot more competition arriving over the next 2 months and during the first quarter of 2017.

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July Doldrums August 2

Larry Bearse

August 1 - The average price of homes sold during July has tumbled over 4% compared with June but this need not set off alarm bells. We expect high end homes to take a lower share of the market during the summer and we note that the average sq. ft. fell by 2% over the same period. Sales volume is down 13% too, and even down 3% compared with July 2015. This is explained by the fact that July 2015 contained 2 more working days than July 2016, a 10% difference in the amount of time that title companies were processing deeds.

July's numbers make it difficult to tell the signal from the noise. However experience tells us that July always looks bad compared with June every year, so we should keep calm and wait for the summer to be over before drawing any conclusions. In fact just about all the other signals says most of the market remains in generally good shape.

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