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.
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!
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.
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!
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.
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.
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.
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!
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.
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!
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.
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!
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.
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!
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.
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.
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.
- Nevada 31.4% below peak
- Florida 22.5% below peak
- Arizona 22.0% below peak
- Connecticut 19.1% below peak
- 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:
- North Carolina
- New York
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:
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.
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.
September 2 - The monthly sales counts for August compare with August 2015 as follows (single family only):
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.
July 31 - Multi-family permits totalled 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 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 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.
Check out the chart below!
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.