Cromford Report

 

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Daily Observations from The Cromford Report

April 23 - A quick look at the rental market on ARMLS shows we currently have 1.1 months of supply, the same as this time last year. The average rent per sq. ft. per month stands at 90.3 cents. On April 23, 2017 it stood at 85.8 cents, so the annual i

April 25 - The latest S&P Case-Shiller® Home Price Index® was published yesterday and includes sales between December 1, 2017 and February 28, 2018.

Here are the month to month change percentages:

  1. Seattle 1.74%
  2. Denver 1.23%
  3. San Diego 1.11%
  4. Detroit 1.10%
  5. Los Angeles 1.03%
  6. Las Vegas 1.03%
  7. San Francisco 1.02%
  8. Phoenix 0.92%
  9. Charlotte 0.77%
  10. Boston 0.74%
  11. Dallas 0.57%
  12. Miami 0.56%
  13. New York 0.50%
  14. Cleveland 0.44%
  15. Portland 0.42%
  16. Atlanta 0.40%
  17. Washington 0.39%
  18. Tampa 0.34%
  19. Minneapolis 0.34%
  20. Chicago 0.05%

In 8th place, Phoenix has improved from 12th last month but not quite joined the upper echelons. It is well ahead of the national average of 0.42%

Seattle's pace is extreme again, gaining close to 2% in a single month.

Here are the year over year changes:

  1. Seattle 12.7%
  2. Las Vegas 11.6%
  3. San Francisco 10.1%
  4. Detroit 8.4%
  5. Denver 8.4%
  6. Los Angeles 8.3%
  7. San Diego 7.6%
  8. Tampa 7.1%
  9. Portland 6.7%
  10. Atlanta 6.5%
  11. Charlotte 6.4%
  12. Phoenix 6.4%
  13. Dallas 6.4%
  14. New York 6.0%
  15. Minneapolis 5.8%
  16. Boston 5.7%
  17. Miami 4.6%
  18. Cleveland 4.1%
  19. Chicago 2.6%
  20. Washington 2.4%

Phoenix is still in the middle of the pack, moving up from 14th place last month, and very close to the national average of 6.3%.

ncrease is 5.3%.

Fewer listings are being placed through ARMLS. We currently have 2,102 active compared with 2,566 last year. Closed leases have dropped from 2,186 per month down to 1,868.

It appears that a higher percentage of the rental market is taking place outside of ARMLS listings.

The average rent for active listings on ARMLS is $2,323, up from $2,155 last year, an increase of 7.8%. This is higher than one would expect and is because many listings below $2,000 are leased without recourse to ARMLS advertising.

April 21 - For the first 3 weeks of April we have seen 3% more new listings added than last year. This is not a huge number (238 to be exact) but it is a change. During the first 3 months of 2018 we saw 1.3% fewer new listings than in 2017. On its own this will not have much significance, but if new listings continue to run ahead of last year it may start to ease the supply shortage just a little.

Another change in April is that the Cromford® Market Index has started to decline. This is the first time since 2007 that we have seen a decline during April. The decline is being driven by a fall in the Cromford® Demand Index. This has dropped from a peak of 103.1 on March 23 to 100.7 on April 21. The Cromford® Supply Index has also fallen slightly during this period from 64.1 to 63.7. The change in the Demand Index is the more significant of the two and it now stands well below last year at this time when we saw 105.3. Remember that demand includes the purchases by Cerberus who are acquiring most of their rental homes from ARMLS for-sale listings. So the underlying demand from owner occupiers appears to be noticeably weaker than last year at this point.

Of course, with supply remaining very low, it is difficult to detect weaker demand in the real world. Only careful day by day study of the numbers reveal the weakening trend. The trend has not lasted long so far, but if it continues for a few months then it could become more significant. It could then show up as fewer homes under contract and lower closings. With 5.2% more agents active than last year, this could become a problem for agent productivity and earnings.

We are not sounding an alarm here, just keeping a close watch on data signals that are a little surprising.

April 19 - For the first time in many weeks we have more cities with a downward than upward trend in their Cromford® Market Index:

10 cities deteriorated for sellers over the last month while 7 improved. Once again, Fountain Hills did very well while Buckeye and Maricopa pleased sellers too.

Paradise Valley slipped below 110 and is now in the balanced market zone. Tempe, Scottsdale, Goodyear, Peoria and Surprise were the other cities with significant trends lower.

Avondale consolidated its position at the top of the table.

There are two modest trends influencing the action:

  1. New listings are now running slightly ahead of 2017 for April
  2. Sales and listings going under contract are slightly less strong (compared with normal) than they were during the first quarter

This has caused a slight downward trend in the overall market CMI, which stands at 158.3 today, down from 160.2 last month.

April 18 - Another investment corporation has moved into the Phoenix market, buying 52 single family homes in one transaction. The buyer is Luxor Capital Group which spent $13.1 million in cash on the rental properties. The seller was Living Well Homes, a Canadian investor who bought them during the ideal period in 2011. Luxor is similar to Cerberus but much smaller. Cerberus took a bit of a breather in the first 2 weeks of April but surged back into action this week. Its current run rate is about 190 homes purchased per month, down from 270 last month. Cerberus is also very active buying single family homes in Las Vegas, though its real estate business remains small compared to its other lines of business. For example, it is currently in talks attempting to purchase the Italian national airline Alitalia.

At present, Opendoor is buying about 280 homes per month while OfferPad is buying about 65 per month. Of course the homes purchased by Opendoor and OfferPad come back onto the re-sale market pretty quickly. So far homes purchased by Cerberus and Luxor become or stay part of the single family rental market. Almost all of Cerberus purchases come from MLS listings, so the reduction in available homes for purchase is significant and not good news for buyers at the affordable end of the market..

The only good news for buyers is that demand trends are drifting down a little, but so far not nearly enough to compensate for the lack of inventory. The drift down may be associated with higher interest rates, though the connection is not conclusive.

April 16 - It was recently reported that a new record high of $18,800,000 was recorded for a single family home sold in Scottsdale 85255 during March. This sale did not go through the MLS so it does not affect the MLS record of $17,500,000 set earlier this year.

A glance at the Affidavit of Value also shows that the purchase price included $2,500,000 in personal property, so the price for the home itself was only $16,300,000 and would therefore not set a new record anyway. The seller was based in California and the buyer in Oregon, intending to use the Silverleaf home as a non-primary or secondary residence.

April 15 - OfferPad sold a total of 359 homes in Maricopa & Pinal Counties during the first quarter of 2018 at an average price of $254,221. This is a 162% increase in unit volume over 2017, with market share (by unit) growing from 0.5% to 1.2%.

The average price paid rose 6.4% compared to the first quarter of 2017. Since OfferPad focuses exclusively on low to medium priced homes, the market share by dollar volume is a little lower, but grew from 0.4% to 1.0% between 1Q 2017 and 1Q 2018.

OfferPad achieved $91.4 million in home sale during 1Q 2018, while Opendoor sold $161.2 million

Total sales dollars from all sellers was $9,448.0 million, up from $8,282.3 million in 1Q 2017, an increase of 14.4%

Since the market was expanding so quickly over the last year (especially in terms of dollar volume), the impact of iBuyers on traditional agents was less than if the market had been stable and prices growing at normal inflation rates.

It is not yet clear if there is a limit on iBuyer market penetration, and if so, what that limit might be.

April 14 - I am sure almost everyone has noticed Zillow`s announcement that they intend to start operating as an iBuyer in Phoenix. However they have not yet started so we have no statistical data to share about them. I somehow doubt that they will be using Zestimates as the basis for their instant offers, given that, in general, Zestimates are rather high compared with estimates produced by other automated valuation models.

What we can share is information about how the existing iBuyers fared during the first quarter of 2018, although the data for March is still preliminary rather than final.

Opendoor sold a total of 665 homes in Maricopa & Pinal Counties during the first quarter of 2018 at an average price of $242,449. This is a 46% increase in unit volume over 2017, with market share (by unit) growing from 1.6% to 2.2%.

The average price paid jumped 9.5% compared to the first quarter of 2017. Since Opendoor focuses exclusively on low to medium priced homes, the market share by dollar volume is a little lower, but grew from 1.2% to 1.7% between 1Q 2017 and 1Q 2018.

Opendoor had a rather quiet patch during 2Q 2017, when it appeared to experiment to determine price elasticity. However it it growing fast again now.

Total quarterly unit sales were up 4.8%, so traditional agents were able to grow their business despite the impact of Opendoor and OfferPad, who we will examine tomorrow.

April 13 - Our regular look at the Cromford® Market Index for the single-family markets in the largest 17 cities shows a wide range from 111 to 226. However all of these represent seller's markets. 90-100 is the balanced range and below 90 represents a buyer's market.

We see 9 cities showing improvement for sellers and 8 showing deterioration.

Fountain Hills is the stand-out performer over the last month with supply dropping sharply and buoyant sales. The other cities showing strong trends are predominantly lower-cost areas such as Buckeye, Maricopa, Queen Creek (which includes San Tan Valley) and Avondale.

The most expensive areas, Paradise Valley and Scottsdale, have weakened over the last month.

Still very much favoring sellers, the Southeast Valley has changed very little since March 12.

Phoenix has continued to improve gradually although that trend seems to have run out of steam in the last 10 days.

April 10 - Yesterday we looked at the highest ranked ZIP codes for long term appreciation since 2001. Today we do the reverse and look at the weakest ZIP codes by the same measure,

Here are the top 20 for low long term appreciation.

RankZIP CodeLong Term RateStarting $/SFCurrent $/SF
1 Fort McDowell 85264 -2.42% $280.00 $183.52
2 Morristown 85342 -1.75% $164.08 $120.99
3 Laveen 85339 0.59% $97.79 $108.28
4 San Tan Valley 85143 0.83% $87.66 $101.19
5 Maricopa 85139 0.99% $73.77 $87.38
6 Scottsdale 85262 1.01% $230.05 $273.47
7 Tonopah 85354 1.34% $74.93 $94.32
8 Waddell 85355 1.39% $93.48 $118.63
9 Casa Grande 85122 1.48% $70.39 $90.63
10 San Tan Valley 85140 1.52% $88.62 $114.89
11 Queen Creek 85142 1.80% $94.30 $128.20
12 Casa Grande 85193 1.91% $63.92 $88.56
13 Arizona City 85123 1.95% $62.34 $86.99
14 Rio Verde 85263 2.00% $133.41 $187.70
15 Litchfield Park 85340 2.00% $92.14 $129.70
16 Carefree 85377 2.02% $168.79 $238.31
17 Goodyear 85338 2.08% $86.49 $123.40
18 Phoenix 85085 2.09% $101.88 $145.48
19 Wickenburg 85390 2.10% $108.38 $155.08
20 Phoenix 85045 2.10% $106.17 $154.27

 

For owners, the least impressive areas for return on investment over the long term from 2001 onwards have been:

  • Pinal County (85122, 85123, 85139, 85140, 85142, 85143, 85193)
  • The Far Northeast Valley (85262, 85263, 85264, 85377)
  • Southwest Valley (85338, 85339, 85340, 85354, 85355)
  • Outer Northwest Valley (85342, 85390)

Past performance is not a guarantee of future returns, as they often say.

April 9 - We can rank ZIP codes by their long term appreciation rate. We use the annual average price per sq. ft. and calculate the average appreciation rate between January 2001 and today. We used only single-family detached homes for this exercise.

Here are the top 20. Some of them might surprise you.

RankZIP CodeLong Term RateStarting $/SFCurrent $/SF
1 Stanfield 85172 6.26% $39.91 $113.73
2 Phoenix 85034 6.04% $48.12 $132.49
3 Gila Bend 85337 5.93% $22.76 $61.54
4 Scottsdale 85251 5.19% $114.17 $273.48
5 Phoenix 85006 5.18% $82.53 $197.30
6 Eloy 85131 5.04% $49.39 $115.33
7 Scottsdale 85257 4.92% $88.83 $203.42
8 Phoenix 85003 4.51% $119.29 $255.52
9 Phoenix 85008 4.50% $78.89 $168.60
10 Phoenix 85018 4.49% $139.67 $298.07
11 Phoenix 85014 4.47% $96.42 $205.16
12 Phoenix 85013 4.26% $96.38 $198.13
13 Tempe 85281 4.26% $89.90 $184.64
14 Phoenix 85015 4.22% $73.17 $149.27
15 Scottsdale 85250 4.18% $119.65 $242.39
16 Phoenix 85004 4.12% $106.23 $213.33
17 Phoenix 85012 4.11% $112.01 $224.39
18 Tempe 85282 4.04% $79.84 $158.24
19 Scottsdale 85254 3.97% $105.78 $207.20
20 Black Canyon City 85324 3.91% $70.65 $136.89

 

For owners, the best areas for return on investment over the long term from 2001 onwards have been:

  • Central and East Phoenix (85003, 85004, 85006, 85008, 85012, 85013, 85014, 85015, 85018)
  • South and Central Scottsdale (85250, 85251, 85254, 85257) including the "magic" ZIP code 85254
  • North Tempe (85281, 85282)
  • A handful of areas on the outer fringes (Gila Bend, Stanfield, Eloy, Black Canyon City), none of which tend to be on investor target lists

Many areas are missing from the top 20 list. The best performers in their respective areas are:

  • Southeast Valley: Chandler 85224 (3.87%)
  • West Valley: Glendale 85306 (3.70%)
  • Northeast Phoenix: 85032 (3.84%)
  • North Scottsdale: 85255 (3.71%)

April 6 - Below is the table of Cromford® Market Index values for the single-family markets in the 17 largest cities:

We have 10 cities improving for sellers, 6 deteriorating and 1 neutral. This is a positive picture overall but the size of the movements are unusually large. On the positive side we have:

  1. Avondale up 18%
  2. Fountain Hills up 17%
  3. Buckeye up 11%
  4. Maricopa up 10%
  5. Queen Creek up 9%
  6. Glendale down 7%

Then on the negative side we also have some sizable moves:

  1. Tempe down 12%
  2. Surprise down 10%
  3. Paradise Valley down 9%
  4. Peoria down 8%
  5. Scottsdale down 6%

With our largest city Phoenix showing a 4% rise, the trio of Chandler, Gilbert and Mesa slightly up (and already very high), the market is showing continued strength. All cities are still in the seller's market zone (over 110).

Some parts of the USA are reporting slowing price rises, but we are not seeing that in Greater Phoenix. Appreciation is higher in 2018 than it has been for several years. The annual $/SF for all areas & types is 7.3% above this time last year. The increase last year was 5.2%, with 5.5% the year before that while 2015 gave us 5.3%. Back in 2014 we were still experiencing the coiled-spring effect and $/SF had jumped 17.7%.

Recent weakness on Wall Street could possibly impact demand in the high end luxury market, but the remainder of the market is showing few (if any) signs of weakness.

April 5 - Unfortunately the activities of Cerberus makes a terrible supply shortage even worse. As of April 1, the low-end of the market looks like this:

Price RangeActive SFD (not UCB or CCBS)Annual Sales RateDays of InventoryNormal Days of InventoryWorst Affected
Up to $100K 64 466 50 76  
$100K - $125K 38 641 22 81  
$125K - $150K 87 2,102 15 79 Yes
$150K - $175K 184 5,305 13 78 Yes
$175K - $200K 547 9,476 21 81 Yes
$200K - $225K 642 8,142 29 103  
$225K - $250K 934 9,048 38 113  
$250K - $275K 713 6,773 38 116  
$275K - $300K 844 6,570 47 128  

Anything single-detached below $275K is now extremely hard to find, and remember the above numbers are for the whole of Greater Phoenix. In the more central areas the supply is negligible.

April 4 - Now we have more details available about Cerberus purchases in March we can take a look at where the homes they have purchase are located.

So far they are very concentrated in Phoenix, Glendale and Tempe, these 3 cities representing 77% of all purchases. Mesa, Chandler and Peoria add another 16%. There is a scattering of homes in Surprise, Scottsdale, San Tan Valley, Gilbert & Queen Creek, but it is clear that Cerberus want to be near the center of the valley. Scottsdale is mostly too expensive for them. There are no purchases in Buckeye, Maricopa, Casa Grande, Sun City or Anthem. However there is just 1 in Florence, easily the furthest out we have seen.

Popular ZIP codes include 85032 (47 homes purchased), 85282 (35), 85051 (38), 85015 (30), 85304 (30) and 85302 (29). These numbers represent a significant share of the homes bought during the last 4 months.

If you are buying a home in the ZIP codes targeted by Cerberus, it would be realistic to expect a competing offer.

April 3 - Back in 2012 and 2013 everyone was asking the Cromford Report when the institutional investors would dump their single-family holdings and cause a glut of homes to appear on the market. When I gave the answer "not anytime soon, maybe never" a lot of people looked dubious. But in fact, very few of those rental homes have come back onto the open market even today. A few have changed ownership as consolidation of companies took place, but the total number of institutional investor homes has changed very little since those days.

Now things are changing again. However it is not causing homes to come onto the market - quite the reverse. A new very large operator entered the Phoenix market in late November and has been buying up lower priced homes to turn them into rentals. It is already very tough to buy a home below $250,000, now buyers have Cerberus Capital Management to contend with as a competitor.

Purchase quantities:

  • Nov 2017 - 4
  • Dec 2017 - 28
  • Jan 2018 - 66
  • Feb 2018 - 222
  • Mar 2018 - 263

So we can see that Cerberus is purchasing almost as many homes now as Opendoor, representing about 3% of the market by unit. In doing so they are reducing inventory available for sale and increasing inventory available for rental.

Cerberus is privately held and probably the second institutional investor that can accurately be called a hedge fund company. Although many of the early institutions to invest in single-family homes were referred to as hedge funds, most were REITs and all but a few were publicly traded. Blackstone is publicly traded but is otherwise in a similar place to Cerberus, even bigger and heavily diversified.

Cerberus is also huge, managing over $30 billion in invested capital and focusing on high return (and high risk) distressed investments. Former vice-president Dan Quayle and former treasury secretary John Snow are among the executives, along with founder Stephen Feinberg. They have investments in retail, banking, weapon manufacturing, health care, government services, financial services, apparel, paper, transport, autos and real estate, to name just a few. One of their biggest real estate holdings is in Spain. There they own 80% of a joint venture holding the former assets of bank BBVA - bought at a 61.5% discount from book value and including a large number of foreclosed homes. This mirrors a slightly earlier transaction where Blackstone purchased real estate holdings from Santander, for 10 billion euros.

About 70% of their purchases up to the end of February came from normal listings on ARMLS. Almost all the rest were from other investors as the second part of a fix and flip. In fact 20 of their homes were purchased from Opendoor and OfferPad. The average sales price was $231,746 and median $228,000. All were recorded as cash sales.

April 2 - Dollar volume of residential sales through ARMLS exceeded $3 billion in March. This is only the third time a single month has exceeded $3 billion in home sales.

The other 2 months were nearly 13 years ago in June and August 2005.

April 1 - Not so long ago the market was dominated by bank sales and short sales, and misinformed sources predicted this would continue for a long time thanks to the "shadow inventory" myth. In fact the banks were never "hiding" inventory but the myth spread because of incorrect calculations a large data corporation and the media's delight in a negative conspiracy theory.

Now we have a large number of ZIP codes with not one single-family REO for sale and no short sales either:

  • Phoenix 85003 85004 85006 85007 85024 85034 85053
  • Stanfield 85172
  • Valley Farms 85191
  • Casa Grande 85193
  • Mesa 85201 85203 85210
  • Scottsdale 85251
  • Fort McDowell 85264
  • Tempe 85281 95282 85283
  • Glendale 85301 85306 85307 85310
  • Aguila 85320
  • Arlington 85322
  • Gila Bend 85337
  • Morristown 85342
  • Palo Verde 85343
  • Youngtown 85363
  • Surprise 85378

The list of ZIP codes with no REO listings (but 1 or more short sales is somewhat longer. However REO activity is extremely low even compared with before the bubble of 2004-2006.

In addition to the above, the following have no single-family REOs:

  • Phoenix 85012 85013 85014 85016 85017 85019 85020 85021 85022 85027 85029 85033 85043 85048 85054 85083 85085
  • Apache Junction 85119
  • Queen Creek / San Tan Valley 85142 85143
  • Superior 85173
  • Mesa 85203 85207 85209 85210 85212
  • Scottsdale 85250 85257 85259
  • Paradise Valley 85253
  • Rio Verde 85263
  • Tempe 85284
  • Gilbert 85295 85296 85297
  • Glendale 85302 85303 85304 85305
  • Litchfield Park 85340
  • Waddell 85355
  • Wittmann 85361
  • Carefree 85377
  • Peoria 85381
  • Buckeye 85396

These lists include some of the ZIP codes that were most affected by the wave of bank sales. For example Phoenix 85043 had 272 REOs listed on ARMLS in February 2009 along with 142 short sales or pre-foreclosures. Now it has just 1 short sale and only 73 listings in total.

These days the ZIP codes with the highest number of REOs are some of those that were least affected during the crash. Scottsdale 85255, Sun City 85351 and Peoria 85353 each have 5. This is not because they have unusual levels of distress (they don't). It is just because they are very large ZIP codes with much higher numbers of homes than the average ZIP code.

March 2018

March 30 - The Cromford® Market Index table for the single-family markets in the 17 largest cities is shown below:

We still have slightly more cities (10) showing improvement for sellers than deterioration (7).

A pattern emerges where cities with the cheapest homes have seen great improvement. These include Avondale (+21%), Buckeye (+8%) and Maricopa (+9%).

Those with more expensive homes have done less well, including Paradise Valley (-10%), Scottsdale (-5%) and Cave Creek (-0%). Fountain Hills is an exception, rising 12% since last month.

March 29 - OfferPad, the second largest iBuyer in Phoenix, purchased another 76 homes during February. This is an increase over February 2017 which saw 63 purchases, but not as dramatic a growth as for Opendoor, which was experiencing something of a lull during the first half of 2017. Here are a few things we can deduce from the recorded deeds and affidavits of value.

  1. Total expenditure was $16.3 million. ($11.9 million 2017)
  2. Average purchase price was $214,972. ($188,335 in 2017)
  3. 82% of purchases were single-family homes, while 18% were condos or townhomes. In February 2017 the split was 83% and 17%. OfferPad appears to neutral about whether a home is attached or not.
  4. 77% of purchases were in Maricopa County, while 23% were in Pinal. This means Pinal is relatively stronger for OfferPad than Pinal. February 2017 saw a 84% / 16% split which is neutral.
  5. Maximum price paid was $385,000. OfferPad avoids higher priced homes as a deliberate strategy. The maximum in February 2017 was $382,000.
  6. Average price paid was $115.56 per sq. ft. in February 2018. The average price paid per sq. ft. was $102.96 in February 2017. This is an 12% increase, and clearly OfferPad is staying focused on cheaper properties than Opendoor, despite the scarcity of sellers at the low end. This may be a reason their acquisition volume grew by a lower percentage.
  7. Average age of a home purchased was 2000, up from 1995 last year..

We have to assume that the price stated is the gross purchase price and this has not been reduced by any of the seller-paid fees. If anyone knows any different, please let us know too.

The Greater Phoenix market had 9,297 sales during February 2018, so OfferPad acquisitions represented 0.8% of the total market. Last year saw a 0.7% share.

Like Opendoor, OfferPad files its Affidavits of Value with the intended use "to be used as a non-primary or secondary residence". Most investors use the option "to be rented to someone other than a qualified family member". This means an analysis of the data will count OfferPad purchases as second home purchases and not as investor purchases. We will all therefore under count investment activity and overcount second home activity. Once the home is resold it will be captured as a flip.

Since OfferPad`s HQ is in Gilbert, these purchases count as in-state transactions.

All of the recording for OfferPad is handled by First American Title.

The bulk of these purchases state there is no lender involved. However First International Bank and Trust is occasionally mentioned.

March 28 - Opendoor, the largest iBuyer in Phoenix, purchased another 245 homes during February. This is a huge increase over February 2017 which saw only 65 purchases. Here are a few things we can deduce from the recorded deeds and affidavits of value.

  1. Total expenditure was $60.2 million. ($13.3 million 2017)
  2. Average purchase price was $245,624. ($205,332 in 2017)
  3. 91% of purchases were single-family homes, while 9% were condos or townhomes. In February 2017 the split was 97% and 3%.
  4. 90% of purchases were in Maricopa County, while 10% were in Pinal. This means Maricopa is relatively stronger for Opendoor than Pinal. February 2017 saw a 75% / 25% split which favored Pinal County.
  5. Maximum price paid was $450,000. Opendoor avoids higher priced homes as a deliberate strategy. The maximum in February 2017 was $324,200.
  6. Average price paid was $131.02 per sq. ft. in February 2018. The average price paid per sq. ft. was $111.16 in February 2017. This is an 18% increase, so clearly Opendoor is having to move more upmarket in order to increase its volumes, thanks to the scarcity of sellers at the low end.
  7. Average age of a home purchased was 1997.

We have to assume that the price stated is the gross purchase price and this has not been reduced by any of the seller-paid fees. If anyone knows any different, please let us know too.

The Greater Phoenix market had 9,297 sales during February 2018, so Opendoor acquisitions represented 2.6% of the total market. Last year saw a 0.8% share.

Unlike most fix and flip operations, Opendoor files its Affidavits of Value with the intended use "to be used as a non-primary or secondary residence". Most investors use the option "to be rented to someone other than a qualified family member". This means an analysis of the data will count Opendoor purchases as second home purchases and not as investor purchases. We will all therefore under count investment activity and overcount second home activity. Once the home is resold it will be captured as a flip.

Since Opendoor`s HQ is in San Francisco, this tends to overstate our counts of out-of-state purchases.

Most of the recording for Opendoor is handled by Fidelity National Title with Chicago Title picking up most (but not quite all) of the remainder. Of course, both are part of the FNF corporation.

The bulk of the lending on these purchases (51%) is from Deutsche Bank, though Goldman Sachs is also mentioned (9%). However 35% of affidavits state that the home was purchased with all cash. 5% were financed by a "private lender".

March 27 - The S&P / Case-Shiller Home Price Index is published today and covers sales that were recorded between November 2017 and January 2018.

Here is how the 20 urban areas stack up for the month to month change in their index:

  1. San Diego 0.76%
  2. Seattle 0.73%
  3. Atlanta 0.68%
  4. Denver 0.66%
  5. Miami 0.61%
  6. Las Vegas 0.60%
  7. Los Angeles 0.57%
  8. Tampa 0.45%
  9. Portland 0.43%
  10. San Francisco 0.39%
  11. Charlotte 0.38%
  12. Phoenix 0.34%
  13. Dallas 0.24%
  14. Boston 0.21%
  15. Detroit 0.12%
  16. Minneapolis 0.09%
  17. New York 0.04%
  18. Cleveland 0.03%
  19. Chicago -0.04%
  20. Washington -0.44%

Phoenix has slipped from 9th place last month to 12th this month, but beat the US national average which was only 0.05%

Taking the year over year view we see the following:

  1. Seattle 12.9%
  2. Las Vegas 11.1%
  3. San Francisco 10.2%
  4. Denver 7.6%
  5. Los Angeles 7.6%
  6. Detroit 7.6%
  7. San Diego 7.4%
  8. Portland 7.1%
  9. Dallas 6.9%
  10. Tampa 6.7%
  11. Atlanta 6.5%
  12. Charlotte 6.0%
  13. Minneapolis 5.9%
  14. Phoenix 5.9%
  15. Boston 5.3%
  16. New York 5.2%
  17. Miami 4.0%
  18. Cleveland 3.5%
  19. Washington 2.4%
  20. Chicago 2.4%

The national average was 6.2% and Phoenix fell slightly below that. For those who are concerned that Phoenix prices are rising too fast, consider that we remain below average for the country in absolute prices and in the rate of increase.

March 26 - The multi-family permit count for February was 782, bringing the count for the past 12 months to 9,950 units. This highlights the continuing strength of multi-family construction. Unlike the single-family market, multi-family is fully recovered back to pre-crash levels.

However the multi-family market is dominated by far fewer cities. Over the past 12 months the counts are as follows:

  1. Phoenix 4,472
  2. Tempe 1,608
  3. Chandler 1,602
  4. Mesa 706
  5. Scottsdale 630
  6. Peoria 456
  7. Goodyear 348
  8. Surprise 135
  9. Gilbert 115
  10. Unincorporated Pinal County 104
  11. Paradise Valley 43
  12. Fountain Hills 6
  13. Guadelupe 5
  14. Apoache Junction 4

In Phoenix, Tempe and Chandler, we now have more multi-family units being planned than single-family. This is particularly true for Tempe which has almost exited single-family new construction.

March 23 - At 1,593, single-family permits in Maricopa & Pinal counties were down slightly in February from January, but up 8.7% from February 2017. The new home market continues to expand, but it is revealing to look back at the permit counts from 20 years ago. February 1998 saw 2,557, which was unexceptional at the time.

Year to date numbers for 2018 show dramatic changes from 2017:

Place2018 YTD2017 YTDChange
Phoenix 611 373 +64%
Buckeye 355 301 +18%
Unincorporated Pinal County 336 255 +32%
Maricopa 225 172 +31%
Peoria 222 259 -14%
Gilbert 214 187 +14%
Goodyear 213 176 +21%
Unincorporated Maricopa County 204 69 +196%
Surprise 194 85 +128%
Queen Creek 149 226 -34%
Scottsdale 109 100 +9%
Chandler 67 40 +68%
Mesa 65 376 -83%

Mesa has dropped from first place to 13th and with Chandler at low levels in both years and Queen Creek going backwards, this does not bode well for the availability of new homes in the Southeast Valley. New home buyers in that area will find more if they head further out to either Maricopa or San Tan Valley.

San Tan Valley provides the bulk of permits classified under Unincorporated Pinal County. With the effort to incorporate San Tan Valley now stalled and the town of Queen Creek annexing more parts of Pinal County that San Tan Valley "claims", the geographic borders of this part of the valley are going to get even more confusing than they already are.

Phoenix is now growing faster than it has for 10 years, measured by new home permits, while the ambitious city of Buckeye is now number 2 in the valley for year-to-date permits and one of the 10 fastest growing cities in the USA.

March 22 - Here again is the table of Cromford® Market Index values for the single-family markets in the largest 17 cities:

Avondale is back at the top again, thanks to two favorable trends for sellers - lower inventory and higher demand. Glendale and Goodyear are also higher, but by relatively small amounts. However Surprise and Peoria are lower, especially the former which saw the opposite trends to Avondale with lower demand and increased supply.

The Southeast Valley saw little change over the month while the Northeast Valley deteriorated, except for Fountain Hills.

Maricopa and Buckeye both improved significantly, the least expensive cities in the list and both relatively well-supplied with active listings. Buckeye is seeing its highest CMI since 2013.

Phoenix, representing about 25% of the market, continued to improve and also hit its highest CMI since 2013. Because of its size, it is hard for the market to deteriorate when Phoenix is improving steadily. Although the balance is nearly even with 9 cities improving and 8 deteriorating, the strong performance of Phoenix keeps the overall market direction positive for sellers.

March 20 - The primary characteristic of the current housing market in Greater Phoenix is a lack of inventory. Part of the problem is that, despite having 5.5% more agents, we are getting 2.5% fewer new listings than last year.

Measuring year-to-date as of March 18:

  • Greater Phoenix has seen 2.8% fewer new listings than last year
  • Out of Area new listings have grown by almost 8% (not much use to people looking for a home in Greater Phoenix)

The dwelling type that is worst affected is Single Family Detached - these are down 3.4%. Condos and townhomes are down only 1.1% and mobile and manufactured homes are up 7.4%.

Here are the cities that have seen the biggest drop in new listings:

  1. Laveen - down 17.3%
  2. Fountain Hills - down 15.8%
  3. Sun City West - down 11.0%
  4. Avondale - down 10.1%
  5. Gilbert - down 7.4%
  6. Gold Canyon - down 6.3%
  7. Mesa - down 6.1%
  8. Tempe - down 4.8%
  9. Sun City - down 4.7%
  10. Casa Grande - down 4.7%

Buyers might want to know where new listings have grown since last year, giving them more opportunities:

  1. Paradise Valley - up 12.4%
  2. Florence - up 11.6%
  3. Cave Creek - up 10.2%
  4. Queen Creek - up 4.8%
  5. Anthem - up 2.0%

That is the complete (short) list.

So to get to see more new listings than in 2017, buyers will have to either plan to spend more than $1 million in PV, or head up to the northern hills in Cave Creek or Anthem or the far southeast in Queen Creek and Florence.

Everywhere else there has been a drop in new listings since year. The biggest 2 cities for listings are Phoenix and Scottsdale, where new listings are down 2.5% and 2.6% respectively, close to the average for the area as a whole.

March 19 - A new record high was set for residential sales through ARMLS at the end of February. 20450 N 108th Pl., Scottsdale 85255 closed for $17,500,000. The previous record was $15,650,000, set as recently as last December.

This property was originally listed at $24,500,000 in 2011 when newly constructed and the listing was cancelled in 2017 after 2011 days, having had its price cut to $19,950,000 in 2016. It was then relisted at $17,995,000 in June 2017. Cumulative days on market was 2,261 (6.2 years).

It boasts 5 kitchens, 2 elevators and 8 garages and was constructed by custom home builder Linthicum.

Congratulations to the listing agents Mike Domer & Delania Munro and the selling agent Frank Aazami.

DC Ranch Community must be delighted to receive the $87,500 community transfer fee.

The buyers (from Regina Saskatchewan in Canada) got a discount of 29% off the original list price. Not bad for a new home. Also not bad for a second home. I wonder what their primary residence is like.

March 18 - Are conditions improving for buyers? No. They are improving for sellers though. The overall listing success rate has just reached 84.1%. This is the highest reading since July 2005.

In the last 20 years there have only been 4 months with a higher listing success rate - between March 11, 2005 and July 10, 2005. Those were also months where almost half the closed transactions did not even hit the MLS.

Ten years ago in January 2008, the listing success rate reached an all-time low of 20.4%. Remember how bad that felt when 4 out 5 listings expired or were cancelled?

Sellers should enjoy the current conditions. They will not last forever.

March 16 - The CMI table we showed yesterday ranks the top 17 cities by the current balance between buyers and sellers. This is a leading market indicator. A good trailing indicator is the annual appreciation rate based on the annual average sales price per square foot. Here is how the same 17 cities stack up:

  1. Avondale 9.3% (9.0% this time last year)
  2. Queen Creek 8.3% (7.3%)
  3. Maricopa 8.3% (10.1%)
  4. Surprise 7.8% (6.4%)
  5. Buckeye 7.7% (9.8%)
  6. Glendale 6.9% (6.7%)
  7. Mesa 6.8% (6.9%)
  8. Peoria 6.8% (5.9%)
  9. Phoenix 5.7% (6.9%)
  10. Goodyear 5.8% (6.8%)
  11. Gilbert 5.5% (5.4%)
  12. Tempe 5.1% (5.8%)
  13. Chandler 5.0% (6.1%)
  14. Cave Creek 5.0% (4.9%)
  15. Scottsdale 4.5% (1.8%)
  16. Paradise Valley 3.3% (1.1%)
  17. Fountain Hills 3.2% (2.8%)

March 15 - Taking another look at the Cromford® Market Index for the single-family markets in the 17 largest cities and how they have changed over the last month:

We have 9 cities showing improvement for sellers and 8 showing deterioration. All 17 are in a seller's market but some much more than others. The slight change in favor of sellers is reflected in the overall CMI for all areas & types which has edged up from 157.9 to 160.3 over the past 4 weeks. This is the highest reading since August 2013.

For those thinking back to 2005, we reached a peak of 312.9 on April 4, 2005, so we are still a long way below that. Back in 2004 it took only 11 months to go from 160 to 313, fueled by almost unlimited availability of finance and buyers' irrational expectations. At the moment we don't see the same easy finance or buyer enthusiasm, but the market is very hot and the current cryptocurrency craze proves the human race still is very skilled in self-deception.

Over the last month, the stand-out performer has been Avondale where demand has strengthened at the same time as supply has dwindled. Other winners include Maricopa, Buckeye and Goodyear, while Phoenix continues its long improving trajectory.

Paradise Valley, Surprise and Cave Creek are all weaker than last month though Cave Creek has managed to stay above the 110 level which represents the top of a balanced market.

The Southeast Valley is treading water with only small changes over the past month. Its cities still dominate the top half of the table.

March 14 - The single-family luxury market (over $500,000) has improved quite a lot since this time last year. Supply is not the problem that it is under $500,000, but the sales rate has risen significantly across all the luxury segments.

Over the last 3 months we have seen 25% more closings than during the same period last year. Sales are up most between $1 million and $2 million with an increase of 37%. The supply of active listings (excluding UCB & CCBS) is up 2% in this range but it is down 4% for all homes over $500,000. The higher sales rate means the supply feels much lower even though it is only down slightly. This is good for pricing which has increased just over 5% (in $/SF) compared with a year ago.

Average days on market are down 13% and days of inventory (a key measurement) is down 18% from 282 to 231.

The listing success rate is higher too, with only Carefree and Fountain Hills below 50%. Unusually high success rates are to be seen in parts of the Southeast Valley (85048, 85248, 85249).

March 13 - We still see occasional claims that pricing is back to the levels during the bubble years but we refute these claims. We still have quite a long way to go in most segments of the market, with just a handful of special exceptions.

First of all, people make the mistake of using median sales prices. This is NOT a fair way to compare 2018 with 2006. In 2006 the median single-family house size across Greater Phoenix was far smaller (1,741 sq. ft.) than the median house size in 2018 (1,886 sq. ft.). That is a difference of 8%, so the median sales price in 2018 would need to exceed that in 2006 by at least 8% before we could realistically claim pricing had recovered to 2006 levels.

It is also not fair to use monthly average price per sq. ft. because this is a volatile measure and if one month pops up the next may drop back down again. We can call a recovery only when prices are consistently higher than they used to be.

We need to use a long term measure and one that incorporates the change in home sizes. For this reason we like the annual average price per square foot. With this measure in mind we can examine the pricing by ZIP code for single-family-homes. Such a chart can be found here.

The following ZIP codes have an annual average price per square foot for single-family homes that exceeds the maximum achieved in 2005-2009.

  1. Phoenix 85006 - $195.45 versus the peak of $192.44 in July 2007
  2. Eloy 85131 - $114.80 versus the peak of $111.08 in December 2007
  3. Scottsdale 85251 - $271.92 versus the peak of $252.02 in September 2007
  4. Scottsdale 85257 - $202.07 versus the peak of $193.68 in November 2006.

The following are within 5% of recovery:

  1. Phoenix 85008 - $168.93 versus the peak of $177.47 in April 2007
  2. Phoenix 85013 - $197.84 versus the peak of $207.02 in April 2007
  3. Phoenix 85014 - $203.29 versus the peak of $212.21 in December 2007
  4. Scottsdale 85250 - $240.93 versus the peak of $251.14 in February 2007
  5. Tempe 85281 - $184.28 versus the peak of $193.90 in January 2007

The following are within 10% of recovery:

  1. Phoenix 85003 - $253.68 versus the peak of $273.60 in February 2008
  2. Phoenix 85015 - $147.76 versus the peak of $160.91 in April 2007
  3. Phoenix 85018 - $294.17 versus the peak of $315.83 in April 2007
  4. Mesa 85202 - $146.49 versus the peak of $159.38 in October 2006
  5. Mesa 85204 - $141.33 versus the peak of $155.00 in November 2006
  6. Chandler 85224 - $158.38 versus the peak of $175.41 in September 2006
  7. Tempe 85282 - $157.25 versus the peak of $166.70 in August 2006
  8. Chandler 85286 - $154.05 versus the peak of $168.13 in September 2007 (note that this ZIP code did not exist in 2006)

All the other ZIP codes are adrift of their peak levels by more than 10%. Looking at a few of the largest in terms of the number of existing homes, we see

  1. Phoenix 85032 - $165.37 versus the peak of $189.08 (12% below)
  2. Phoenix 85041 - $111.21 versus the peak of $146.24 (24% below)
  3. Mesa 85207 - $161.92 versus the peak of $201.16 (19% below)
  4. Chandler 85225 - $151.67 versus the peak of $171.16 (11% below)
  5. Gilbert 85234 - $147.71 versus the peak of $178.08 (17% below)
  6. Chandler 85249 - $148.14 versus the peak of $182.04 (19% below)
  7. Scottsdale 85255 - $281.60 versus the peak of $325.31 (13% below)
  8. Scottsdale 85262 - $269.89 versus the peak of $374.69 (28% below)
  9. Paradise Valley 85253 - $357.25 versus the peak of $479.21 (25% below)
  10. Scottsdale 85254 - $204.45 versus the peak of $237.63 (14% below)
  11. Glendale 85308 - $147.51 versus the peak of $178.63 (17% below)
  12. Buckeye 85326 - $105.00 versus the peak of $153.92 (32% below)
  13. Goodyear 85338 - $122.49 versus the peak of $167.59 (27% below)
  14. Peoria 85345 - $126.58 versus the peak of $156.04 (19% below)
  15. Surprise 85374 - $137.52 versus the peak of $168.66 (18% below)
  16. Sun City West 85375 - $134.07 versus the peak of $154.94 (13% below)
  17. Peoria 85383 - $147.54 versus the peak of $187.56 (21% below)

The strongest recovery has been in Scottsdale 85251 where the average $/SF is now 8% higher than during the bubble.

More generally, locations close to the intersection of the 101 and 202 in Tempe have recovered better than average, as well as several areas north and east of Central Phoenix.

March 12 - A gap is starting to open up in 2018 new listings compared with 2017 and 2016.

Today represents a whole number of weeks since the start of the year so we can do a fair comparison. We have seen 24,701 new residential listings across all areas & types. This is down 1.1% from the March 12 reading in 2017 and down 3.0% from 2016. So total supply is down, but the picture is even worse if we are looking purely at affordable homes, say those under $250,000 (which is almost 50% of the market, by units).

Year to date we have seen only 10,103 new listings of all types across Greater Phoenix with an asking price below $250,000. Last year there were 12,018 and in 2016 there were 13,383. The best year for homes under $250,000 was 2010 when we had seen over 25,000 new listings by March 12.

Is supply of affordable homes going to get better? I don't think so.

There are several factors working against generating more supply at the moment:

  1. Many homes are being taken out of the purchase and long-term-rental markets to feed the short-term-rental market, thanks to the success of Airbnb and similar offerings.
  2. Mobile home parks are being purchased for development into more expensive housing (e.g. Tempe Mobile Home Park (42 sites) recently sold to the Treehouse Group).
  3. Rising interest rates mean that existing loans start to look much more attractive than new loans, encouraging owners to stay where they are instead of moving.
  4. Prices are still rising at 7% or more, so today's $240,000 house is likely to be next year's $257,500 house, so no longer affordable by our definition.

Despite an upward trend in permits, we are unlikely to see affordable supply growing in the short or medium term, unless we start to redefine our thoughts about what is affordable: $300,000, or maybe even $350,000.

March 9 - The Contract Ratio is our favorite way of measuring the heat of a market, although it does not correct for seasonality. To overcome this defect we like to compare contract ratios for the same date each year. Below we look at how the cities compare with each other and with how they were 12 months ago:

CityContract Ratio March 8, 2018Contract Ratio March 8, 2017Change
Avondale 148.0 138.7 +6.7%
El Mirage 135.6 260.0 -47.8%
Gilbert 128.2 94.0 +36.4%
Chandler 125.0 97.8 +27.8%
Tolleson 116.7 103.9 +12.3%
Sun City West 115.5 48.4 +138.6%
Mesa 110.1 88.2 +24.8%
Queen Creek 109.7 77.9 +40.8%
Buckeye 103.8 71.0 +46.2%
Glendale 102.1 102.7 -0.6%
Apache Junction 94.9 76.9 +23.4%
Laveen 92.4 77.8 +18.8%
Surprise 88.7 93.6 -5.2%
Sun Lakes 88.6 56.9 +55.7%
Tempe 86.5 91.1 -5.0%
Phoenix 84.8 73.7 +15.1%
Sun City 83.4 66.0 +26.4%
Florence 81.9 68.7 +19.2%
Peoria 77.5 67.3 +15.2%
Maricopa 72.6 99.2 -26.8%
Anthem 67.6 64.2 +5.3%
Arizona City 66.7 54.7 +21.9%
Goodyear 65.0 58.8 +10.5%
Casa Grande 63.0 67.2 -6.3%
Litchfield Park 61.0 48.5 +25.8%
Scottsdale 37.8 30.1 +25.6%
Gold Canyon 34.8 32.2 +8.1%
Cave Creek 34.5 36.6 -5.7%
Fountain Hills 28.1 24.2 +15.2%
Paradise Valley 19.5 17.1 +14.0%

With the contract ratio we are comparing how many homes are already in escrow with the number of homes still freely available. It therefore measures current demand versus current supply and the higher the number, the more it favors sellers over buyers.

The vast majority of locations are hotter than last year, but there are notable exceptions - El Mirage, Glendale, Surprise, Tempe, Maricopa, Casa Grande and Cave Creek.

The rise of Sun City West and Sun Lakes suggests that a lot of demand is coming from older people, many moving here from out of state.

Buckeye and Queen Creek are also much hotter than last year at this time.

March 8 - The single-family Cromford® Market Index chart for the 17 largest cities is looking like this:

The West Valley continues to improve with Avondale up an astonishing 19% over the last month and Buckeye & Peoria up 7% and 6% respectively.

The Southeast Valley is stable and very favorable to sellers, but Chandler at the top is giving up a little ground.

The deteriorating cities include Cave Creek and Paradise Valley, with the former in danger of slipping into a balanced market.

March 7 - Looking at the recordings in Maricopa during February we can see some significant changes in 2018 versus 2017.

16.6% of buyers were investors. This is the highest percentage for 2 years and much higher than the 14.5% we observed in February 2017.

Second homes are back in fashion. 17.9% of owner-occupied homes were second homes rather than primary residences. This is the highest percentage since March 2014, almost 4 years ago. In February 2017 the percentage was only 13.9%

It seems that traditional primary residence buyers are fading a little, dropping from 75% in February 2017 to 70% of purchases in February 2018.

March 4 - Prices are moving upwards faster than last year or 2016. The rate of appreciation, based on the annual average price per square foot across all areas & types within the ARMLS database, reached 7% on March 3, 2018. The last time we saw an overall number of 7% or more was in February 2015, when the appreciation rate was declining fast.

Now it is has been on a clear upward trend since November 2017.

Previous periods where appreciation has exceeded 7% were:

  • April 2004 to Feb 2007 (bubble rise and fall)
  • July 2012 to Feb 2015 (rebound after collapse)

Overall appreciation rates over 7% are abnormal and we therefore need to monitor the market closely for signs of over-heating. You can monitor the overall appreciation rate using our weekly chart.

March 3 - A little late with the Cromford® Market Index table for the largest 17 cities, but here it is. Only single-family homes are included.

Clearly the Southeast Valley is out-performing the rest of the valley, holding the top 4 spots. However, both Chandler and Queen Creek saw slight declines and only Tempe retains much momentum.

The West Valley has started to catch up with significant improvements for sellers in Avondale, Peoria, Buckeye and Peoria. At number 12, Buckeye is now in the highest position we have seen for a very long time.

The Northeast Valley is bringing up the rear with all components weaker than they were a month ago. The situation in Cave Creek is the least favorable for sellers, although it remains in the seller`s market zone (over 110).

The Central Valley (Phoenix) has been on a long slow improving trend and is looking very promising for sellers.

March 2 - Multi-family permits were very strong in January, almost entirely thanks to a huge project in Tempe. We have 1,300 multi-family units year-to-date which is the second highest total in history. 2006 remains the record holder with 1,322

March 1 - January saw much stronger single-family permit counts than last year. The Census Bureau reports 1,613 units across Maricopa and Pinal County, up 21% and the highest January total since 2007.

Big totals came in from:

  1. Phoenix - 326
  2. Buckeye - 161
  3. Unincorporated Pinal County - 124
  4. Gilbert - 121
  5. Peoria - 116
  6. Maricopa - 110
  7. Unincorporated Maricopa County - 106

February 2018

February 28 - The S&P Case-Shiller Index report for the 3 months ending December 2017 was released yesterday. Here are the changes in the index over the last month:

  1. Las Vegas +0.76%
  2. Los Angeles +0.68%
  3. Seattle +0.57%
  4. Denver +0.55%
  5. San Francisco +0.53%
  6. Tampa +0.31%
  7. Atlanta +0.26%
  8. San Diego +0.22%
  9. Phoenix +0.21%
  10. Portland +0.17%
  11. Charlotte +0.15%
  12. Dallas +0.06%
  13. New York +0.01%
  14. Miami -0.11%
  15. Detroit -0.02%
  16. Boston -0.20%
  17. Washington -0.21%
  18. Cleveland -0.29%
  19. Minneapolis -0.38%
  20. Chicago -0.60%

Phoenix increased by a very modest 0.21% but this was enough to place us above the middle of the pack. The US national index increased by 0.23%.

Our closest neighbor Las Vegas is currently enjoying much stronger appreciation.

When we examine the year over year changes we find:

  1. Seattle +12.7%
  2. Las Vegas +11.1%
  3. San Francisco +9.2%
  4. Los Angeles +7.5%
  5. Denver +7.4%
  6. San Diego +7.4%
  7. Detroit +7.1%
  8. Dallas +6.9%
  9. Portland +6.8%
  10. Tampa +6.2%
  11. Charlotte +5.9%
  12. Phoenix +5.6%
  13. Boston +5.5%
  14. New York +5.4%
  15. Atlanta +5.4%
  16. Minneapolis +5.2%
  17. Miami +3.6
  18. Cleveland +3.5%
  19. Washington +2.8%
  20. Chicago +2.6%

Over the last 12 months Phoenix has appreciated by less than the national average , which was 6.3%.

This means that Phoenix is getting relatively more affordable, despite being less affordable in absolute terms. Prices have been rising much faster in the large California cities of San Francisco, Los Angeles and San Diego.

February 27 - Turning to the West Valley, here are the ZIP codes ranked by annual average $/SF. We have included the western most parts of Phoenix.

We will use an extended definition of the Southeast which includes parts of Pinal County

RankCityZIP2017 $/SF2016 $/SF% Change
1Wickenburg 85390 $152.07 $126.76 +20.0%
2Peoria 85383 $150.33 $140.88 +6.7%
3Glendale 85310 $148.06 $137.42 +7.7%
4Goodyear 85395 $145.19 $139.30 +4.2%
5Glendale 85308 $143.09 $134.86 +6.1%
6Peoria 85382 $137.50 $131.74 +4.4%
7Surprise 85387 $137.11 $129.42 +5.9%
8Surprise 85374 $134.32 $126.99 +5.8%
9Peoria 85381 $132.41 $123.45 +7.3%
10Litchfield Park 85340 $130.34 $121.60 +7.2%
11Sun City West 85375 $129.50 $123.51 +4.8%
12Wittmann 85361 $129.09 $120.98 +6.7%
13Buckeye 85396 $128.31 $126.46 +1.5%
14Glendale 85306 $126.98 $120.12 +5.7%
15Goodyear 85338 $123.30 $115.58 +6.7%
16Peoria 85345 $122.81 $112.12 +9.5%
17Surprise 85378 $120.66 $106.75 +13.0%
18Glendale 85307 $120.62 $109.21 +10.4%
19Glendale 85304 $120.55 $113.25 +6.4%
20Glendale 85305 $120.29 $113.61 +5.9%
21Waddell 85355 $117.30 $110.88 +5.8%
22Avondale 85392 $115.24 $105.65 +9.1%
23Glendale 85303 $113.97 $104.94 +8.6%
24Sun City 85373 $113.81 $107.04 +6.3%
25Glendale 85302 $112.28 $102.55 +9.5%
26Surprise 85379 $111.92 $104.06 +7.6%
27Surprise 85388 $111.03 $103.67 +7.1%
28Sun City 85351 $109.90 $97.05 +13.2%
29El Mirage 85335 $108.79 $98.27 +10.7%
30Avondale 85323 $107.70 $99.84 +7.9%
31Phoenix 85043 $107.64 $95.23 +13.0%
32Phoenix 85035 $106.95 $96.95 +10.3%
33Phoenix 85037 $106.42 $96.35 +10.5%
34Buckeye 85326 $104.70 $95.63 +9.5%
35Tolleson 85353 $102.95 $96.15 +7.1%
36Phoenix 85033 $102.54 $89.15 +15.0%
37Youngtown 85363 $101.77 $90.82 +12.1%
38Phoenix 85009 $99.06 $84.85 +16.7%
39Phoenix 85031 $92.60 $80.45 +15.1%
40Glendale 85301 $90.55 $81.77 +12.1%
41Tonopah 85354 $88.59 $90.21 -1.5%
42Arlington 85322 $77.19 $71.98 +7.2%

Tonopah sticks out like a sore thumb here with the only negative appreciation. Most of the West Valley looks strong though Northern Buckeye (85396) is relatively weak.

At first, Wickenburg looks like it is being helped by the new 55+ homes being built by Trilogy. But in fact this is not the case since Trilogy at Wickenburg Ranch is in Yavapai County and sales are not included in our Cromford Public data.

February 24 - We are now going to compare ZIP codes within the Southeast Valley region to see which are the most expensive and most affordable and report on how much prices have changed over the past year. To do this with the greatest accuracy we will use the county recordings from Cromford Public and include all single-family, condos and townhomes. We will use the annual average $/SF for 2017 and compare with 2016.

We will use an extended definition of the Southeast which includes parts of Pinal County

RankCityZIP2017 $/SF2016 $/SF% Change
1Tempe 85281 $183.02 $168.02 +8.9%
2Tempe 85284 $175.46 $170.61 +2.8%
3Chandler / Sun Lakes 85248 $164.22 $155.89 +5.3%
4Phoenix 85044 $163.29 $156.35 +4.4%
5Chandler 85226 $163.04 $155.55 +4.8%
6Mesa 85207 $162.16 $155.08 +4.6%
7Phoenix 85045 $159.56 $143.93 +10.9%
8Phoenix 85048 $159.50 $156.29 +2.1%
9Gold Canyon 85118 $156.90 $151.68 +3.4%
10Chandler 85286 $156.56 $147.82 +5.9%
11Chandler 85224 $152.44 $145.65 +4.7%
12Mesa 85215 $151.75 $138.23 +9.8%
13Gilbert 85298 $151.71 $145.33 +4.4%
14Tempe 85283 $151.56 $143.03 +6.0%
15Tempe 85282 $150.65 $139.36 +8.1%
16Chandler 85249 $150.18 $143.65 +4.5%
17Gilbert 85233 $149.55 $141.79 +5.5%
18Chandler 85225 $147.86 $135.72 +8.9%
19Gilbert 85234 $147.28 $138.91 +6.0%
20Gilbert 85296 $146.20 $136.06 +7.5%
21Gilbert 85297 $141.66 $135.20 +4.8%
22Mesa 85213 $140.24 $130.62 +7.4%
23Gilbert 85295 $139.45 $131.98 +5.7%
24Mesa 85209 $139.08 $130.58 +6.5%
25Mesa 85205 $137.38 $128.47 +6.9%
26Mesa 85212 $136.35 $126.69 +7.6%
27Mesa 85204 $135.04 $122.79 +10.0%
28Apache Junction 85119 $135.02 $121.93 +10.7%
29Mesa 85206 $134.28 $124.54 +7.8%
30Mesa 85202 $132.50 $121.89 +8.7%
31Mesa 85203 $132.35 $119.92 +10.4%
32Mesa 85208 $130.38 $119.63 +9.0%
33Mesa 85201 $129.89 $114.16 13.8%
34Mesa 85210 $129.75 $119.83 +8.3%
35Queen Creek 85142 $127.13 $119.93 +6.0%
36Apache Junction 85120 $124.86 $114.60 +9.0%
37San Tan Valley 85140 $117.58 $112.27 +4.7%
38San Tan Valley 85143 $98.45 $90.28 +9.0%
39Florence 85132 $97.18 $87.63 +10.9%
40Maricopa 85138 $93.84 $86.01 +9.1%
41Maricopa 85139 $84.69 $80.35 +5.4%

We can see that 85045 has recovered well from the temporary slump caused by the building of the 202 freeway extension.

Tempe 85281 is the most expensive location based on average $/SF, but many of its homes are relatively small apartments, so it does not have a particularly high average or median sales price.

Mesa 85201 is the fastest appreciating ZIP code, ideally placed at the intersection of 101 and 202 freeways, though with many older properties in need of renovation. Several years ago I suggested to the Mesa City authorities that this area of West Mesa had the most potential for gentrification and increases in property value.

We note that Florence and Apache Junction are among the fastest appreciating areas of the wider Southeast Valley.

February 23 - The table of Cromford® Market Index values for the single-family markets in the 17 largest cities looks like this today:

Here we see a mixed picture. 10 cities improved but only one (Tempe) by more than 10%. 7 cities deteriorated including 3 (Fountain Hills, Cave Creek and Maricopa) by more than 10%.

The Southeast Valley dominates the top of the table due to very low supply. This includes 4 major cities over 200 which is quite unusual.

On the other hand we now have 3 cities below 120 having had zero just a few weeks ago.

February 20 - Now let us compare new build pricing with re-sales for the Northeast Valley.

Again we will use the county recordings from Cromford Public and include all single-family, condos and townhomes. We will use the annual average $/SF for 2017 and compare with 2016.

Note that this process will NOT include the few custom homes where the owner purchases the vacant lot before the homes is constructed. These homes do not appear in the county records until they are eventually re-sold. Since no land changes hand after new construction completes there is no recorded deed that includes the improvements. The price paid is known only to the builder and the buyer, not to you, me or the county assessor. We only know the price paid for the land.

RankCityZIPResale 2017 $/SFNew Build 2017 $/SF% New Premium
1Paradise Valley 85253 $334.17 $568.63 +70%
2Phoenix 85018 $259.12 $335.70 +30%
3Scottsdale 85262 $262.37 $310.37 +18%
4Scottsdale 85255 $267.05 $317.54 +19%
5Scottsdale 85251 $231.31 $338.05 +46%
6Scottsdale 85266 $236.39 $277.71 +17%
7Rio Verde 85263 $180.08 $290.16 +61%
8Scottsdale 85258 $228.81 $312.29 +36%
9Carefree 85377 $223.06 $288.92 +30%
10Scottsdale 85259 $222.61 $279.17 +25%
11Phoenix 85016 $210.01 $371.08 +77%
12Phoenix 85054 $207.70 $244.95 +18%
13Scottsdale 85260 $208.86 $323.27 +55%
14Scottsdale 85254 $207.72 $355.88 +71%
15Scottsdale 85250 $205.63 $376.80 +83%
16Fountain Hills 85268 $193.20 $325.01 +68%
17Cave Creek 85331 $185.70 $208.66 +12%
18Scottsdale 85257 $187.52 $252.15 +34%
19Phoenix 85028 $187.87 $194.51 +35%
20Fort McDowell 85264 $187.05 N/A N/A
21Phoenix 85050 $177.02 $210.09 +19%
22Phoenix 85032 $154.28 $255.52 +66%

The average $/SF numbers for new homes in most of the Northeast Valley exceed re-sales by much larger percentages than in the rest of the Greater Phoenix area.

Luxury buyers tend to be willing to pay much higher premiums for homes that fit the latest styles and fashions and for the privilege of being the first owner.

February 19 - We are going to compare ZIP codes within a region to see which are the most expensive and most affordable and report on how much prices have changed over the past year. To do this with the greatest accuracy we will use the county recordings from Cromford Public and include all single-family, condos and townhomes. We will use the annual average $/SF for 2017 and compare with 2016.

We will start with the Northeast Valley (including Northeast Phoenix):

RankCityZIP2017 $/SF2016 $/SF% Change
1Paradise Valley 85253 $367.50 $329.45 +11.5%
2Phoenix 85018 $271.92 $255.32 +6.5%
3Scottsdale 85262 $271.83 $262.16 +3.7%
4Scottsdale 85255 $270.80 $275.28 -1.6%
5Scottsdale 85251 $244.06 $230.10 +6.1%
6Scottsdale 85266 $242.81 $228.50 +6.3%
7Rio Verde 85263 $231.69 $202.32 +14.5%
8Scottsdale 85258 $230.78 $221.76 +4.1%
9Carefree 85377 $229.91 $226.34 +1.6%
10Scottsdale 85259 $228.52 $219.23 +4.2%
11Phoenix 85016 $220.25 $198.47 +11.0%
12Phoenix 85054 $213.80 $202.23 +5.7%
13Scottsdale 85260 $210.56 $199.58 +5.5%
14Scottsdale 85254 $208.73 $194.21 +7.5%
15Scottsdale 85250 $207.29 $184.63 +12.3%
16Fountain Hills 85268 $198.60 $190.37 +4.3%
17Cave Creek 85331 $191.60 $186.41 +2.8%
18Scottsdale 85257 $188.13 $170.60 +10.3%
19Phoenix 85028 $187.89 $172.32 +9.0%
20Fort McDowell 85264 $187.05 $201.60 -7.2%
21Phoenix 85050 $184.78 $180.71 +2.3%
22Phoenix 85032 $155.92 $145.42 +7.2%

The average $/SF numbers for 85253, 85263 and 85016 were boosted by new homes which are often selling for much higher prices than similar sized re-sales. We will look at this phenomenon tomorrow, before we move on to other areas.

February 18 - The market for single-family homes over $500,000 has changed quite a bit over the past year. Total sales through ARMLS were up over 25% from 460 in Jan 2017 to 576 in Jan 2018. The annual sales rate is also up significantly from 6,560 to 7,980, an increase of just under 22%. Of course, some of that increase is due to homes under $500,000 increasing in price enough to join the over $500,000 crowd.

Supply is up, but only by 1.3%, so the days of inventory number has fallen over the past year from 266 to 221.

Buyers still have plenty of choice over $1,000,000, but the increased sales rate means the over-supply situation is less pronounced than it was in 2016 and 2017. Average price per sq. ft. has moved very little for homes over $1 million in the past 3 years, but the outlook is improving. Over the last 3 months the sector over $2 million has seen sales rise by 45% compared with 12 months earlier. The ARMLS database shows us 84 closed sales in Nov 2017 - Jan 2018 compared with just 58 for Nov 2016 -Jan 2017.

Above $500,000 but under $1 million, prices are showing a more favorable trend with the quarterly average sales price per sq. ft. increasing by 3% compared to a year earlier.

February 17 - We note that the monthly median sales price for all areas and types has finally moved above the $245,000 to $248,000 zone in which it has been stuck since last June. During this same period the average price per sq. ft. has moved significantly higher but the median did not follow suit.

The latest reading is $249,900, which is the highest point since September 2007. The monthly median is not far below its maximum level of $265,000 which was reached in June 2006. It would have to increase by just over 6% to reach that record level. Since it has increased by over 10% during the last 12 months, it is not unreasonable to expect it to achieve a new record high during the next year.

This does NOT mean that home prices will have recovered to the levels of the housing boom of 2004-2006. The problem is that the median home being sold in 2004-2006 was smaller than the median home being sold in 2018. This means a comparison of median sales prices is unfair. In 2018 you get more home for the median sales price. Comparison of the median sales price of new versus re-sale homes is unfair for a similar reason - the median new home is much larger than the median re-sale home.

To tell whether prices have recovered to the levels of 2004-2006 we need to study average price per sq. ft. instead. This measurement takes into account the change in the average home size.

February 13 - January 2018 was a particularly strong month for second-home purchases in Maricopa County. We saw 15.1% of sales classified in their Affidavit of Value as owner-occupied but not primary residences. This is the highest percentage we have recorded since March 2014 and it is up from 12.2% in January 2017. After a distinct lull between 2013 and 2017, second home purchases appear to back on an up-trend.

With investor purchase high and second-homes also high, January was a very weak month for the dominant sector - owner-occupied primary residences. These came in at just 70.0% of transactions, down from 73.9% in January 2017, 74.2% in January 2016 and the weakest percentage since January 2015.

February 12 - Just as we observed yesterday that cash sales were strong last month, purchases by investors were also hitting a high point.

The percentage of single-family homes in Maricopa County that were purchased by investors jumped to 13.2%. This is the highest reading we have seen since February 2016 and is up from 12.3% in January 2017.

The investor percentage for townhouse / condo properties is almost always much higher than for single-family homes. The percentage on January 2018 was 24.1%, the highest reading since October 2016 and up from 23.1% in January 2017.

There was a significant jump in the percentage of new homes purchased for investment in January 2018. This was 4.7% of new homes in Maricopa County which is the highest we have seen since June 2013.

We also note that the percentage of Maricopa County sales that were attached homes increased to 17.8%. This is the highest reading since January 2015. It has not been true every month, but the market share for attached homes has been on an increasing trend in Maricopa County since April 2017. Pinal County is still dominated by single-family homes and mobile homes with relatively few townhouse or condo sales. However, these have begun to grow from a very small base as Active Adult communities in Pinal have added a few attached homes to their product mix..

February 11 - The percentage of homes purchased with all-cash in Maricopa County was on a downward trend between February 2011 and July 2016. Since then the trend has reversed and the percentage has been gradually increasing. We suspect this is due to the increased market share by fix and flip investors and the introduction of the i-Buyers, Opendoor and OfferPad. Most flip transactions will have their first stage financed by cash. We also see cash used in many of the highest value luxury purchases as the very wealthy see no need to go through the hassle of applying for a home loan.

You can see the percentage of homes purchased with cash in this chart.

There is a seasonal tend with January and February usually being strong months for cash purchases and July and August being relative weak (i.e. strong for financed purchases).

The percentage of homes purchased with all-cash in January 2018 was 25.3%, our highest observed reading since February 2015 and up from 23.4% in January last year.

Thanks to the strong contribution from the high-end of the luxury market, the percentage of dollars from all-cash transactions was even higher at 26.7%, up from 25.5% a year ago.

February 10 - The annual sales rate is no longer growing and has reached a plateau at just over 96,000 for all areas & types. Single-family sales are declining in the following areas, in most cases due to inadequate supply of affordable homes:

  • Anthem (peaked May 2017)
  • Apache Junction (peaked January 2018)
  • Arizona City (peaked November 2017)
  • Avondale (peaked May 2017)
  • Casa Grande (peaked June 2017)
  • Cave Creek (peaked August 2017)
  • Chandler (peaked April 2017)
  • Gilbert (peaked February 2017)
  • Glendale (peaked August 2017)
  • Goodyear (peaked April 2017)
  • Laveen (peaked July 2017)
  • Maricopa (peaked January 2018)
  • Mesa (peaked October 2017)
  • Sun City (peaked December 2017)
  • Sun City West (peaked August 2017)
  • Sun Lakes (peaked May 2017)
  • Tempe (peaked December 2017)
  • Tolleson (peaked July 2017)

Some of these declines are very gentle, others more severe.

New highs for the annual sales rate are still being set in the following areas:

  • Buckeye
  • El Mirage
  • Fountain Hills
  • Gold Canyon
  • Litchfield Park
  • Paradise Valley
  • Peoria
  • Phoenix
  • Queen Creek
  • Scottsdale
  • Surprise

February 9 - Here is the table showing the Cromford® Market Index values for the single-family markets in the largest 17 cities:

We have 11 cities showing improvement for sellers over the last month and 6 showing deterioration.

3 cities show significant deterioration - Maricopa, Fountain Hills and Cave Creek, all 3 at the bottom of the table. In Fountain Hills, the supply index increased at the same time as the demand index fell, which is never a popular combination with sellers. It was a similar story in Cave Creek and Maricopa. Goodyear too went backwards, but the here the fall in the demand index was less significant and the main reason for the lower market index was an increase in the supply index.

Tempe was the outstanding city for sellers this week with demand almost flat but a large decrease in the supply index. The current supply index level (52.3) is the lowest we have recorded for Tempe since June 2005. It is a tough spot for buyers right now.

The other Southeast Valley cities also improved, though not as dramatically. Chandler`s supply index remains very low at 41.8 while the demand index increased to 96.2, its highest level since last September. It remains comfortably at the top of the table, although its CMI has not changed very much over the last 2 weeks.

Paradise Valley improved by 9% despite an increase in its supply index. This is because its demand index has jumped to 129.3, second only to Buckeye at 132.0. Demand in Buckeye remains very strong, but it is balanced by a supply index that is the only one we see above 100 at the moment. Scottsdale also has a relatively strong demand index, but went backwards over the past month because of increasing supply.

February 6 - Here is how the townhouse / condo annual average $/SF has changed over the past 12 months:

  1. Queen Creek +60.5%
  2. Paradise Valley +56.4%
  3. Wickenburg +33.5%
  4. Casa Grande +23.4%
  5. Arizona City +22.6%
  6. Litchfield Park +15.9%
  7. Sun City +13.7%
  8. Phoenix 12.8%
  9. Avondale +12.2%
  10. Anthem +11.6%
  11. Surprise +11.4%
  12. Mesa +11.3%
  13. Gilbert +9.7%
  14. Glendale +9.5%
  15. Apache Junction +9.3%
  16. Fountain Hills +9.2%
  17. Peoria +8.6%
  18. Chandler +8.5%
  19. Buckeye +8.3%
  20. Scottsdale +8.1%
  21. Eloy +7.8%
  22. Tempe +7.1%
  23. Florence +7.0%
  24. Maricopa +7.0%
  25. Sun City West +6.0%
  26. Cave Creek +5.2%
  27. Goodyear +5.1%
  28. Gold Canyon -0.7%
  29. Sun lakes -1.8%
  30. Carefree -2.0%
  31. Rio Verde -2.0%
  32. Youngtown -3.0%

The top two cities were favorably influenced by new builds that were not marketed until 2017. The overall appreciation for attached homes has been stronger than for detached single family homes.

February 4 - We have seen a very strong upward movement in average price per square foot for closed listings over the last 3 months, even though median prices have not followed through to the same extent.

Here is how the single-family annual average $/SF has changed over the past 12 months:

  1. Coolidge +20.7%
  2. Arizona City +14.8%
  3. Wickenburg +13.7%
  4. El Mirage +12.7%
  5. Apache Junction +10.4%
  6. Avondale +9.3%
  7. Sun City +9.3%
  8. Queen Creek +8.3%
  9. Florence +8.1%
  10. Youngtown +8.0%
  11. Surprise +7.9%
  12. Casa Grande +7.8%
  13. Sun Lakes +7.8%
  14. Wittmann +7.7%
  15. Maricopa +7.5%
  16. Desert Hills +7.4%
  17. Mesa +7.3%
  18. Litchfield Park 7.3%
  19. Tolleson +7.1%
  20. Peoria +6.9%
  21. Glendale +6.8%
  22. Buckeye +6.8%
  23. Eloy +6.7%
  24. Laveen +6.2%
  25. Goodyear +5.9%
  26. Rio Verde +5.9%
  27. Phoenix +5.4%
  28. Gilbert +5.2%
  29. Chandler +5.1%
  30. Tempe +4.7%
  31. Anthem +4.2%
  32. Scottsdale +4.2%
  33. Sun City West +3.9%
  34. Cave Creek +3.5%
  35. New River +3.0%
  36. Waddell +2.7%
  37. Fountain Hills +1.4%
  38. Gold Canyon +1.1%
  39. Paradise Valley -0.2%
  40. Carefree -1.6%
  41. Tonopah -2.8%

Pinal County and the Northwest Valley look particularly strong in this list, while the North and Northeast look relatively weak.

You will generally find the most affordable areas at the top of the list and the least affordable towards the bottom.

February 3 - Here are a few observations on the rental market based on the ARMLS database.

  • new rental listings are being added at a rate which is roughly 15% lower than in 2017.
  • we have seen 2,838 new listings in 2018 so far, compared with 3,298 in 2017 at the same point
  • we have 2,431 active rental listings, down from 2,726 in 2017, 2,485 in 2016, 3,712 in 2015, 5,188 in 2014 and 7,339 in 2013
  • the average asking price for active rentals is $2,021, up from $1,980 in 2017, $1,931 in 2016, $1,709 in 2015 and $1,454 in 2014
  • the latest monthly average lease rate is 87.2 cents per sq. ft., up from 84.5 cents last year, an annual increase of 3.2%
  • the average rent agreed is $1,512 per month, up from $1,465 last year, $1,405 in 2016, $1,296 in 2015, $1,251 in 2014 and $1,235 in 2013
  • the average rent agreed is 99.46% of the rent asked, little changed from 99.50% last year

A new record high rent of $28,000 per month was recorded as signed in January for a 12,547 sq. ft. home on 46th Street in Paradise Valley.

February 2 - The table below compares active single-family listings (excluding UCB and CCBS) for Feb 1, 2018 with Feb 1, 2017

Price RangeActive Feb 2017Active Feb 2018Change
Under $100K
120
48
-60.0%
$100K-$125K
128
48
-62.5%
$125K-$150K
328
110
-66.5%
$150K-$175K
727
384
-47.2%
$175K-$200K
1,207
710
-41.2%
$200K-$225K
895
763
-14.7%
$225K-$250K
1,101
1,037
-5.8%
$250K-$275K
874
798
-8.7%
$275K-$300K
974
812
-16.6%
$300K-$350K
1,394
1,216
-12.8%
$350K-$400K
1,286
1,111
-13.6%
$400K-$500K
1,619
1,483
-8.4%
$500K-$600K
977
928
-5.0%
$600K-$800K
1,159
1,087
-6.2%
$800K-$1M
715
640
-10.5%
$1M-$1.5M
709
739
+4.2%
$1.5M-$2M
408
445
+9.1%
$2M-$3M
385
360
-6.5%
Over $3M
326
333
+2.1%
All
15,322
13,052
-14.9%

There were only 3 price ranges that increased over last year - those between $1M and $2M and over $3M.

Of course the largest declines were at the low end below $200,000 where a long term extinction event appears to be developing. However supply dropped significantly for the lower end of the luxury sector between $500K and $1M too.

February 1 - Let us take another look at the Cromford® Market Index for the single-family markets in the 17 largest cities:

This is not quite a positive for sellers as in January with 5 cities showing some deterioration, although Avondale's is very small. All cities remain above 120 and firmly in the seller`s market zone.

The Southeast Valley cities are consolidating their dominant position at the top of the table. A huge 25% increase for Tempe has allowed it to join with Mesa, Gilbert and Chandler. All are suffering from extreme shortages of affordable supply. Queen Creek seems to be in something of a hurry to join them.

Paradise Valley and Glendale also improved significantly for sellers over the last month.

 

January 2018

January 30 - The latest S&P / Case-Shiller® Home Price Index® numbers were released today. These include sales recorded between September and November 2017.

The month to month changes are as follows:

  1. San Francisco +1.40%
  2. Tampa +0.99%
  3. Las Vegas +0.71%
  4. Los Angeles +0.66%
  5. Denver +0.35%
  6. Seattle +0.18%
  7. New York +0.16%
  8. Miami +0.15%
  9. Washington +0.15%
  10. Dallas +0.12%
  11. Atlanta +0.05%
  12. Portland +0.00%
  13. Phoenix -0.06%
  14. Minneapolis -0.07%
  15. Boston -0.08%
  16. Detroit -0.26%
  17. Charlotte -0.30%
  18. San Diego -0.32%
  19. Chicago -0.42%
  20. Cleveland -0.45%

8 out of 20 cities declined from the August through October 2017 reading. Phoenix was one of those 8 but had the smallest decline. This should not be too much of a surprise since we have seen a similar decline in 4 out of the last 5 years. It is a seasonal effect.

The national index increased 0.24%. Only 5 of the 20 cities above did better than the national index, but San Francisco saw a very strong increase of 1.4% in a single month.

Year over year the changes were as follows:

  1. Seattle +12.70%
  2. Las Vegas +10.58%
  3. San Francisco +9.09%
  4. San Diego +7.42%
  5. Tampa +7.07%
  6. Dallas +7.04%
  7. Los Angeles +7.03%
  8. Denver +6.96%
  9. Detroit +6.95%
  10. Portland +6.93%
  11. Boston +6.27%
  12. Charlotte +5.81%
  13. New York +5.72%
  14. Phoenix +5.56%
  15. Minneapolis 5.40%
  16. Atlanta +5.20%
  17. Cleveland +4.11%
  18. Miami +4.08%
  19. Chicago +3.59%
  20. Washington +3.30%

Las Vegas has accelerated in the last year and is now approaching the point where its index may overtake Phoenix. This was last the case in May 2009.

The national index increased 6.21%, so Phoenix fell slightly below that measurement.

We saw significant increases in the average $/SF during December and January, so anticipate a rather stronger performance from Phoenix when the next Case-Shiller numbers are released.

January 29 - We are now ready to publish the top 10 brokers of 2017 for the Greater Phoenix area, based on dollar volumes. They are:

  1. Trudy Moore - Homesmart - $4,228,555,613
  2. James Sexton - Realty ONE Group - $3,221,208,166
  3. Dale Hillard - West USA Realty - $2,140,449,668
  4. Deems Dickinson - Russ Lyon Sotheby's International Realty - $2,080,129,311
  5. Gerry Russell - Realty Executives - $1,582,959,964
  6. Martha Appel - Coldwell Banker - $1,443,263,018
  7. Jereme Kleven - My Home Group - $1,258,531,285
  8. Angela Fazio - West USA Realty Revelation - $1,168,493,262
  9. Charles McLean - Berkshire Hathaway - $1,157,944,006
  10. Sandy Karpen - RE/MAX Fine Properties - $655,477,321

January 27 - The Census Bureau provides multi-family permit counts each month and these are featured in new charts published by us under the Cromford Public subscription.

The total for Maricopa & Pinal counties in 2017 was 8,873 units, down from 9,645 in 2016 but still the 5th highest total in history.

The 2017 ranking of the cities for multi-family permits looks like this:

  1. Phoenix 3,916 (4,493 in 2016)
  2. Chandler 1,616 (1,143)
  3. Mesa 716 (711)
  4. Tempe 636 (1,486)
  5. Glendale 471 (10)
  6. Peoria 456 (0)
  7. Goodyear 339 (134)
  8. Scottsdale 317 (400)
  9. Surprise 135 (100)
  10. Gilbert 115 (938)

January 26 - With the final December housing permit numbers from the Census Bureau we now know that 20,455 single-family permits were issued in 2017. This is the highest annual total since 2007 when there were 25,352. However it is somewhat below most analysts' forecasts for 2017. My forecast was among the lowest at 20,750 and it still turned out to be too high. The 2016 total was 18,387, so we are looking at a growth rate of 11.2%.

December's total was 1,498, not far above the 1,421 of December 2016.

The ranking of the cities for 2017 looks like this:

  1. Phoenix 2,852 (2,462 in 2016)
  2. Mesa 2,261 (2,116)
  3. Buckeye 2,195 (1,521)
  4. Unincorporated Pinal County 2,089 (1,529)
  5. Peoria 1,741 (1,636)
  6. Gilbert 1,606 (1,601)
  7. Maricopa 1,096 (532)
  8. Goodyear 1,095 (994)
  9. Queen Creek 1,076 (1,090)
  10. Unincorporated Maricopa County 869 (1,027)

Surprise, Scottsdale and Chandler failed to make the top 10

We note the very large percentage increases in Buckeye, Unincorporated Pinal County (primarily San Tan Valley) and Maricopa. These are some of the cheapest places to buy a new home so there is clearly a lot of demand for lower-priced new homes anticipated in 2018. Not at all surprising given the dearth of low-end re-sales coming to the market.

January 25 - The Cromford® Market Index table for the 17 largest cities and their single-family markets is shown below:

January 22 - After 3 complete weeks we can again validly compare the number of new listings with prior years.

There have been a total of 7,142 new residential listings added to the ARMLS database. The third week saw some acceleration so that this total is 1.4% higher than in 2017 when we counted 7,041. This reverses the situation a week ago when we were down 1.4%. Year to date 2018 is up 0.8% compared with 2016 and up 4.6% compared with 2015.

So the good news for buyers is that we do have slightly more homes coming onto the market.

The bad news is that this is not enough to ease the supply shortage. In fact it is not even enough to compensate for the higher sales rate in 2018 over 2017. Closings are so far up 3.2% year over year so a 1.4% increase is less than half what is required to replace homes sold.

Looking specifically at Greater Phoenix we have 6,859 listings with a list date of Jan 1 through Jan 21, 2018. Compared with last year we have seen

  • 26% fewer new listings under $200,000
  • 5% more new listings between $200,000 and $300,000
  • 5% more new listings between $300,000 and $400,000
  • 12% more new listings between $400,000 and $500,000
  • 21% more new listings between $500,000 and $1 million
  • 5% more new listings between $1 million and $1.5 million
  • 36% more new listings over $1.5 million

So perversely, but not unexpectedly, we are getting the largest percentage increases at the high end of the market where more supply is not really needed. Below $200,000, where supply is already extremely thin, the new listing flow has dropped even further from last year's rate.

January 19 - In January 2017 a new record high MLS sales price was set of $12,750,000, beating the old record which was established as long ago as 2000. To close the 2017 year, this record was broken again with the sale of 7100 N Mummy Mountain Road. This sold for $15,650,000 on December 14 according to the Affidavit of Value. This big jump of almost $3 million makes it by far the most valuable single-family residential closing that has been recorded through ARMLS. The buyer (a CEO and Chairman of a chip technology company) paid cash.

Congratulations to Joan Levinson of Realty ONE Group who acted as listing and selling agent.

I should point out that the property was never really marketed on the MLS - the listing was created 1 day prior to close of escrow. This seems to be a growing trend these days. Retrospective listings are one of the reasons the pending count is so weak compared to the sales rate. It also means we cannot enjoy browsing MLS photos of the 14,200 home built in 2011.

It is also an example of how measuring something sometimes causes the something that is being measured to change its nature. This is a characteristic that the housing market shares with quantum mechanics. If the last point seems too weird to you, please put it down to the flu. .

However, if it is in the ARMLS database and confirmed by a deed then it definitely goes into our numbers, and $1,102 per sq. ft. is a pretty impressive number.

January 18 - Brain not 100% functional, but it does not take much brain power to see interesting messages in the regular table of Cromford® Market Index numbers. These are for the single-family markets in the 17 largest cities by dollar volume.

13 of the 17 cities show movements in favor of sellers and several of these movements are massive.

  1. Tempe up 26%
  2. Chandler up 21%
  3. Glendale up 17%
  4. Gilbert up 12%
  5. Phoenix up 10%
  6. Queen Creek up 10%

Of the 4 cities that moved in favor of buyers two (Fountain Hills and Paradise Valley) moved only a very small amount, and the remaining two (Maricopa and Cave Creek) by moderate amounts.

This table suggests we are likely to see strong price rises during the next 5 months. However transaction volume will probably be limited by the scarcity of homes for sale.

January 17 - Mike is down with the flu. Observations are suspended until his brain is working properly again. Sorry!

January 12 - Let us take a closer look at the West Valley single-family market to see what trends are showing up there.

The first thing we notice is that active listings (excluding UCB and CCBS) are down 14% compared to this time last year. That`s a drop from 3,864 to 3,323. However all of that decline (and then some) was driven by homes priced under $250,000 which plummeted 33% from 1,754 to 1,169. The number of active homes over $250,000 increased slightly from 2,105 to 2,150.

Quarterly sales volume (4Q) increased by 3% over Q4 2016. Again this obscures a huge difference between the price ranges. Due to the weak supply, sales of homes under $250,000 dropped 9% to 3,067 while sales of homes over $250,000 rose 26% to 2,158.

The imbalance between supply and demand under $250,000 led to appreciation averaging 8.3% during the fourth quarter of 2017. Over $250,000, appreciation was a more modest 2.3%

Based on the average $/SF for the fourth quarter the strongest areas for appreciation were:

  1. Wittmann 85361
  2. Glendale 85301
  3. Glendale 85303
  4. Surprise 85387
  5. Sun City 85351
  6. El Mirage 85331
  7. Youngtown 85363

The weakest price trends were in:

  1. Goodyear 85395
  2. Laveen 85339
  3. Sun City West 85375
  4. Litchfield Park 85340
  5. Buckeye 85396
  6. Glendale 85310
  7. Sun City 85373

Generally the Northwest outperformed the Southwest during 4Q 2017.

January 11 - We usually publish a table every week showing the Cromford® Market Index for the single-family markets in the largest 17 cities. However, rarely does it show as much drama as the one we publish today:

The larger cities tend to move more slowly than the smaller ones, but this is no longer the case. We have 6 cities with monthly changes of 10% of more. All of these are changes in favor of sellers and all of them are cities of considerable size.

  • Chandler up 20% to 218.7 - an extreme seller`s market
  • Tempe up 20%
  • Glendale up 19%
  • Gilbert up 12%
  • Phoenix up 10%
  • Avondale up 10%

Just under these we also have:

  • Queen Creek up 9%
  • Buckeye up 8%
  • Mesa up 8%
  • Surprise up 7%

For several of these cities this is the largest monthly move we have seen for many years.

Big changes are afoot in the market and we can expect the level of craziness to increase in all the above cities as buyers at the low and mid-range price points compete frantically over the tiny number of listings available to them.

Some places are being left out of the frenzy, at least for now. Examples include Cave Creek, Fountain Hills, Maricopa and Paradise Valley. However every city in the big 17 has a CMI over 120 so there is nowhere where the buyer has the upper hand.

January 10 - The preliminary data from deeds recorded by the Maricopa County Recorder in December shows the following:

  • total sales count for single-family and condo/townhouse properties was 8,817. This was up 1.5% from December 2017, a rather modest increase.
  • new homes came in at only 1,399 which was down almost 9% from December 2016. An unusual occurrence since most prior months gave us significant annual growth.
  • re-sales came in at 7,418, a 3.7% increase - better than we saw from the ARMLS numbers, suggesting that non-MLS activity is picking up.
  • the re-sale median monthly sales price rose 7.8% over the past 12 months
  • the new home median rose only 1.3%, although there has been a substantial fall in the average new home size to explain this small rise.
  • the overall median was up 5.1%

A few surprises to the downside there. However all the really influential numbers are related to supply. Because this is very low and dropping, any reduction in demand will probably go unnoticed.

We expect sales growth to stall over the next few months because of this lack of supply. Sales are declining in the southeast already and this is likely to spread to the central and western areas over time.

January 9 - What this market badly needs is a flood of new listings below $500,000. Is it going to get one? The answer looks like a no so far. With just over a week in 2018 gone the flow of new listings onto ARMLS is very similar to last year. This means it is barely adequate to meet normal demand and certainly not enough to make any impression on the supply shortage at lower end of the market.

It is is tricky to measure and compare new listing rates properly because of the unbalanced weekly pattern. Thursday and Friday are the big days for new listings, accounting for 44% of all the volume. Tuesday and Wednesday are next with 29%. Saturday, Sunday and Monday are quiet with just 27% across all 3 days. Consequently basing your calculation on calendar months is useless since it all depends on whether they have 4 or 5 Fridays in them.

Instead you must use either lunar months (28 day intervals) or other multiples of 7 to get counts you can accurately compare with similar periods of time.

For the past 28 days we have seen 5,965 new listings across all types, areas & prices. This is actually down 2.4% from last year when we saw 6,114, but up 4.9% from two years ago when we saw 5,688.

No sign of a flood. Just normality, which nowhere near enough to make a difference for exhausted buyers.

January 8 - The luxury re-sale market has enjoyed little to no appreciation over the past 3 years, but there are a few signs that this might be coming to an end at last. The average price per sq. ft. for listings under contract has been shooting up over the past few weeks and the luxury market has participated in that trend.

For all property types across Greater Phoenix:

  • The $/SF for homes under contract over $500,000 has risen from $236 in mid-August to $263 in early January
  • The $/SF for homes under contract between $800,000 and $2 million has risen from $276 in October to $288 in early January

New highs are being set that have not been seen since 2014 or early 2015.

January 5 - At the Cromford® Report we try to spot trends before they become obvious and at the moment we are looking at signs that transaction volume is declining, mainly due to lack of supply and certainly not due to lack of buyer interest. It is very hard to do this by looking at monthly sales numbers because months vary so much and the unit sales count is naturally volatile. However the annual sales count is something that can measured daily (by dropping the oldest day and adding the newest) and this is a very stable and accurate measurement.

Looking at the annual sales counts for single-family detached homes through ARMLS we see declining volumes in the following areas:

  • Anthem - peaked Feb through Jul 2017 and in decline for last 5 months
  • Avondale - peaked Jun 2017 and in decline for the last 6 months
  • Casa Grande - similar to Avondale
  • Chandler - peaked in Mar 2017 and in decline for the last 9 months
  • Eloy - similar to Chandler
  • Florence - peaked Jul 2017 and in decline for 5 months
  • Gilbert - peaked in Jan 2017 and in decline for the last 11 months
  • Laveen - similar to Avondale
  • Tolleson - similar to Avondale

These are the only significant examples so far. The other cities are either stable or growing. Those with better supply like Buckeye are growing fastest.

Gilbert was the earliest city to enter a declining volume pattern. Alongside Chandler, this area of the valley is suffering unusually low numbers of active listings. Mesa has yet to join the trend, though its growth has stalled over the past 5 months. The same can be said of Tempe.

It is possible that we see an unusually strong influx of supply during the first quarter. It is too early to judge at the moment. But unless we get this surge in new listings, we anticipate lower transaction volumes for the Southeast Valley in 2018 than in 2017. Parts of the Southwest Valley also look vulnerable to this effect (Avondale / Tolleson / Laveen) though not Goodyear or Buckeye.

So far Phoenix and the Northeast Valley look likely to grow transaction volume in 2018 over 2017, though nothing like as quickly as between 2016 and 2017.

January 4 - The significant reduction in supply that took place throughout December is reflected in the latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities.

Extreme shifts in favor of sellers took place in Glendale, Chandler, Tempe and Gilbert over the past month. Only Maricopa, Paradise Valley and Fountain Hills were excluded from the favorable trend for sellers.

The 3 largest cities in the Southeast Valley continued to lose supply and consolidated their position at the top of this table. Glendale overtook Surprise as the main challenger but Avondale made a strong move upwards too.

Phoenix is making a more significant move in favor of sellers than it has for many months.

Even the weakening cities are still over 120, so there is little comfort to be seen for buyers.

January 3 - Today would be a good time to look at how the various price ranges performed from an appreciation point of view, comparing sales during 2017 with those during 2016.

The charts here are useful for this purpose. We recommend focusing on the one measuring the annual average $/SF. The monthly $/SF tends to be very volatile for the higher price ranges due to the low sample size.

We can divide the market into the following sectors:

  1. Homes listed below $100,000. This market is now tiny, although it was huge between 2009 and 2011. Prices here went backwards by 0.4% between 2016 and 2017. These homes tend to need a lot of work.
  2. Homes listed between $100,000 and $175,0000. These saw the strongest appreciation rates of all, between 5% and 8%. Supply is fast disappearing.
  3. Homes listed between $175,000 and $400,000. Here we see appreciation between 3% and 5%, roughly double the general inflation rate.
  4. Homes listed between $400,000 and $600,000. These saw appreciation around 2%, about the same level as the general rate of inflation.
  5. Homes listed between $600,000 and $1,500,000. Here we see appreciation around 1%, roughly half the general inflation rate.
  6. Homes listed between $1,500,000 and $3,000,000. These depreciated by 3% to 4% over the last 12 months.
  7. Homes listed over $3,000,000. Here we see depreciation of around 1%.

Two things need to be borne in mind when considering these numbers:

  • appreciation measured by price segment understates the true appreciation rate because some homes migrate from one segment to another.
  • these numbers are based on ARMLS data so do not fully reflect the pricing of new homes, especially for the higher price segments. They are indicative of re-sale home appreciation.
  • individual homes may have behaved quite differently from their peers. These are numbers for the segments as a whole.
  • the vast majority of homes now fall into segments 3 and 4.

January 2 - At the end of every month we see a large number of listings closed At the end of December we also see the biggest number of expiring listings all year. Since we already had a low number of active listings we are now starting 2018 with even fewer homes for sales. A few top-priced areas are still well-supplied but the vast majority of areas are seriously short of homes for sale. We have been commenting on a short supply for many years but in 2018 the situation for buyers is more difficult than it has been since 2012. This makes life easier for sellers but not necessarily for agents. The supply shortage is causing transaction rates to fall in an increasing number of locations. Fewer transactions is not a trend that agents like to see, especially as we have 6.3% more agents than we did 12 months ago. In other words, we anticipate fewer transactions per agent.

What happens when supply is this low relative to demand? Prices have to rise at an increasing rate to balance the market, so reducing demand, in theory at least. The increasing prices compensate agents somewhat for the lower transaction rate by providing higher average commission per sale.

Here are the ZIP codes where total single-family supply (all active listings including those in UCB and CCBS status) has dropped the most over the past 12 months:

  1. Stanfield 85172 - down 67% [Pinal]
  2. Youngtown 85363 - down 48%
  3. Phoenix 85017 - down 46%
  4. Gilbert 85234 - down 46%
  5. Apache Junction 85119 -down 43% [Pinal]
  6. Casa Grande 85122 - down 41% [Pinal]
  7. Chandler 85286 - down 40%
  8. Glendale 85307 - down 39%
  9. Phoenix 85033 - down 39%
  10. Superior 85173 -down 37% [Pinal]

With 4 out of the 10 top ZIP codes, Pinal County is experiencing severe falls in supply. 115 out of 147 ZIP codes that we cover are down from last year.

The ZIP codes with the largest increases are:

  1. Phoenix 85004 - up 75%
  2. Phoenix 85051 - up 42%
  3. Wittmann 85361 - up 28%
  4. Phoenix 85054 - up 25%
  5. Black Canyon City - up 17%
  6. Phoenix 85034 - up 17%
  7. Phoenix 85024 - up 17%
  8. Phoenix 85053 - up 15%
  9. Maricopa 85138 - up 14%
  10. Fountain Hills 86268 - up 13%

Supply always increases sharply in January. We will be watching closely to see if it increases enough to make any significant change to the unusual imbalance that starts 2018.

December 2017

December 29 - Supply, or rather the lack of it, is the big issue in the Greater Phoenix market below $1 million. It was already low 12 months ago, but in some areas it has dropped dramatically since then. Here is a table comparing the days of inventory under $1 million (excluding UCB and CCBS listings) in December 2017 with December 2016:

CityDays of Inventory Dec 2017Days of Inventory Dec 2016Notes on Change
Anthem
58
71
 
Apache Junction
87
113
 
Arizona City
92
127
 
Avondale
45
42
very low supply but higher than last year
Buckeye
72
86
 
Carefree
172
320
 
Casa Grande
74
115
 
Cave Creek
97
112
 
Chandler
36
47
extremely low supply
Coolidge
47
89
very low supply
El Mirage
26
32
extremely low supply
Eloy
138
164
 
Florence
90
130
 
Fountain Hills
138
120
one of the few areas where inventory has risen
Gilbert
36
48
extremely low supply
Glendale
45
56
very low supply
Gold Canyon
104
221
huge collapse in supply since 2016
Goodyear
68
68
 
Laveen
46
54
very low supply
Litchfield Park
75
75
 
Maricopa
73
70
 
Mesa
44
57
very low supply
New River
121
163
 
Paradise Valley
109
127
 
Peoria
55
67
 
Phoenix
57
64
 
Queen Creek
50
63
 
Rio Verde
275
305
 
Scottsdale
80
106
 
Sun City
48
56
very low supply
Sun City West
47
71
very low supply
Sun Lakes
55
87
 
Surprise
55
83
 
Tempe
41
53
very low supply
Tolleson
47
44
low supply but higher than last year
Waddell
52
60
 
Wickenburg
241
263
 
Wittmann
127
98
one of the few areas where inventory has risen
Youngtown
32
75
extremely low supply

I would say anything below 50 is unusually low and below 40 is extremely low. Chandler and Gilbert are struggling with a supply crisis. Tempe and Mesa are not far behind them. Transaction volumes are dropping due to a lack of homes to buy.

For the Southeast Valley, we are no longer in territory where the market is guaranteed to be well-behaved. Unless we see a major increase in supply, prices may have to rise rapidly to get the imbalance between supply and demand back to within normal limits.

For the Northwest Valley, things are approaching the extremes of the Southeast but are not there yet.

For the Northeast and Southwest Valley, times are good for sellers under $1 million, but have not reached the unusual levels of supply shortage that we are seeing elsewhere.

Phoenix has dropped from 64 to 57 days over the past year and may very well drop below 50 during 2018.

For buyers who cannot stand the pressure, outer locations like Wickenburg, Rio Verde, Carefree, Eloy, New River, Fountain Hills and Wittmann offer the best chance of having your offer taken seriously.

2018 is likely to be a very interesting year to watch the market. Supply cannot keep dropping without limit.

December 28 - It does not normally get too exciting in the housing market around Christmas, but the latest table of Cromford® Market Index numbers shows us a market that is quickly changing to become even more extreme. Several cities have seen supply dropping unusually fast in December.

14 out of 17 cities saw the balance move in favor of sellers and buyers are in real trouble in many areas. Yes we will see more listings arrive in January but not enough to compensate for the huge supply deficit that has built up, especially in the southeast and northwest areas.

Glendale, Tempe and Chandler are the big movers over the past month with Chandler exceeding the 200 mark for the first time since 2013. Just behind these we have Gilbert, Mesa, Surprise, Avondale, Phoenix, Peoria and Cave Creek all advancing by 7% or more.

Buckeye improved for sellers by 3% meaning we now have no large cities with a CMI below 120.

The excitement is not confined to the large cities. We have El Mirage now over 300 and Anthem and Apache Junction over 200. At 123.8, Sun City is the lowest CMI among the secondary cities.

There really is no place a regular buyer can go to find a balanced market anymore.

December 27 - The latest S&P/Case-Shiller® Home Price Index® data was published yesterday and covers sales closed between August and October 2017.

The month to month change for the 20 cities that Case-Shiller identifies separately was:

  1. San Francisco - up 1.16%
  2. Las Vegas - up 0.99%
  3. Tampa - up 0.59%
  4. Charlotte - up 0.48%
  5. New York - up 0.38%
  6. Dallas - up 0.36%
  7. Phoenix - up 0.28%
  8. Detroit - up 0.21%
  9. Los Angeles - up 0.21%
  10. Denver - up 0.10%
  11. Washington - up 0.06%
  12. San Diego - up 0.01%
  13. Miami - down 0.07%
  14. Minneapolis - down 0.07%
  15. Seattle - down 0.07%
  16. Atlanta - down 0.13%
  17. Cleveland - down 0.18%
  18. Boston - down 0.22%
  19. Portland - down 0.30%
  20. Chicago - down 0.55%

We note that 7 of the 20 lost ground between September and October, but this is a common seasonal pattern. Last year, 7 cities also lost ground, but not the same ones as in 2017. Looking stronger than last year at this time are:

  • Los Angeles
  • San Francisco
  • Denver
  • Washington
  • Chicago
  • Detroit
  • Charlotte
  • Las Vegas
  • New York

In 7th place, Phoenix was slightly ahead of the national gain of 0.16% for the month, but last year it managed a healthier 0.36%. Pricing was not very impressive for Phoenix between August and October, but November was exceptionally strong. We should see that strength start to show up in the Case-Shiller numbers published at the end of January.

The year over year table looks like this:

  1. Seattle - up 12.7%
  2. Las Vegas - up 10.2%
  3. San Diego - up 8.1%
  4. San Francisco - up 7.7%
  5. Denver - up 7.2%
  6. Detroit - up 7.1%
  7. Dallas - up 7.1%
  8. Portland - up 7.1%
  9. Boston - up 6.9%
  10. Tampa - up 6.9%
  11. Los Angeles - up 6.5%
  12. Charlotte - up 6.4%
  13. Phoenix - up 6.0%
  14. New York - up 5.9%
  15. Minneapolis - up 5.4%
  16. Atlanta - up 5.0%
  17. Cleveland - up 4.7%
  18. Miami - up 4.4%
  19. Chicago - up 4.1%
  20. Washington - up 3.1%

The national figure was 6.2% so Phoenix was very close to this national average for the year Oct 2016 - Oct 2017.

December 26 - In the Cromford® Public section of the site we include a fascinating chart that allows us to look at all closed transactions and compare pricing between the different transaction types, such as

  • how new home price per sq ft compares with re-sales
  • how MLS transactions compare with non-MLS normal sales
  • how investor flip pricing compares with normal sales

When we look at the whole Greater Phoenix market and the annual average $/SF in November we see that the hierarchy is much as you would expect:

  1. New homes $159.11
  2. Normal MLS sales $151.94
  3. Investor flips $133.68
  4. Normal non-MLS sales $129.00
  5. Short sales $121.76
  6. Bank sales $117.33
  7. Pre-foreclosures $114.23
  8. GSE REO sales $109.37
  9. Trustee sales $102.33
  10. HUD sales $97.46

Agents will be delighted to see that sales through the MLS sell for a much higher average $/SF than sales outside the MLS. However this is primarily because we are looking at the the whole market and MLS sales tend to include far more high-end homes than the other categories. New homes also sell for a much higher price per sq. ft. at the extreme upper price points.

If we restrict our chart to the mid-range from $250,000 to $500,000 we get a completely transformed picture:

  1. Investor flips $152.71
  2. Normal MLS sales $149.57
  3. Normal non-MLS sales $145.81
  4. New homes $145.35
  5. HUD sales $138.65 (very small sample)
  6. GSE REO sales $132.34
  7. Short sales $127.03
  8. Pre-foreclosures $126.79
  9. Bank sales $122.07
  10. Trustee sales $121.81

Normal MLS sales still out-perform normal sales that did not go through the MLS, but the difference is less than 3%.

What may be surprising to many is that the investor flips are selling for the highest price per sq. ft. and that this has been largely true since 2014 for this crucial mid-range segment. Those professional fix and flippers really seem to have got their act together. Remember that that they rarely enter the market over $1 million so are at a disadvantage if we look at the chart for the whole market.

It may also be surprising to find that new homes sell for a lower average price per sq. ft. than normal re-sales and that this has been true since at least 2012. This can partly be explained by the fact that the majority of new homes are further out than re-sales and homes that are further from the center of the valley tend to sell for lower prices on average. The gap between new home $/SF and normal non-MLS homes has narrowed over the past 18 months within the $250,000 to $500,000 price range.

December 22 - We are almost at the end of the year and year-to-date sales through ARMLS are up sharply for all price ranges over $200,000:

Price RangeSales YTD% Change
Under $200K 30,001 down 12%
$200K - $250K 18,706 up 17%
$250K - $300K 13,209 up 16%
$300K - $500K 20,725 up 21%
$500K - $800K 5,467 up 23%
$800K - $1M 1,090 up 21%
$1M - $2M 1,166 up 21%
Over $2M 354 up 23%

Under $200K the market is constrained by the short supply, but it still managed to be the most significant price range for unit sales

December 21 - The Cromford® Market Index table for the single-family markets in the 17 largest cities:

There are only 5 of the 17 cities showing any deterioration and only one of these (Paradise Valley) made a significant move over the past month.

The remaining 12 cities are improving for sellers, which means things are getting even tougher for buyers. Several cities made major moves, mainly caused by supply dropping still further below normal:

  1. Glendale
  2. Cave Creek
  3. Tempe
  4. Chandler
  5. Peoria
  6. Surprise

The 3 largest Southeast Valley cities are still holding the top 3 spots but Surprise and Glendale are making an effort to catch up.

December 20 - I have just been studying the deeds recorded for single-family homes in Paradise Valley over the past 3 months and there are some interesting changes going on.

  1. New home sales volume has risen dramatically - 11 closings versus 4 last year
  2. The average $/SF for these 11 new homes was more than 50% higher than the average $/SF for the 89 resales over the same period.
  3. The $/SF for new homes keeps rising while that for re-sales is slowly declining.
  4. 3 of the new homes had very small lot sizes for Paradise Valley - around 13,000 sq. ft.

The premium for new homes in Paradise Valley over re-sale pricing is now the highest I have ever seen.

December 19 - It would be great if the number of new listings was on an increasing trend to give some relief to exasperated buyers. However this is not what we are seeing. The third quarter is nearly over and we have had 1% fewer new listings added to ARMLS than in the same period in 2016.

This is a change for the worse (for buyers). During the third quarter we saw 2% more listings than in 2016. During the second quarter there was a slight increase of just over 1% and in the first quarter an increase of only 0.6%. So for the first 9 months of 2017 it looked as though we were seeing a small trend in favor of additional listings. The fourth quarter has reversed that trend and it is making the supply shortage even more pronounced. All this is good news for sellers, but not those at the top of the market.

The other unfortunate effect is that we are getting extremely few listings at the low-end of the market and too many at the top-end of the market. The luxury market is very susceptible to fashion changes and the switch in demand away from Tuscan style towards Contemporary styles has left many sellers with homes that are considered "in need of modernization" by luxury buyers even though they are not very old and in good working order. This means the very high-end new home market, which can deliver the latest fashion, is much more healthy than the high-end re-sale market. The gap in pricing per square foot between a new luxury home and a re-sale luxury home is as wide as we have ever seen. At the same time the gap in pricing between the low-end and the high-end re-sale home is closing, because low-end homes are appreciating quickly while high-end re-sale homes are either barely appreciating or even depreciating a little. This could be regarded as an ongoing correction because during the crash from 2006 through 2011 low-end home lost value much more dramatically than high-end homes creating the biggest differential we have ever seen. At the moment the bounce back for the low-end still has a long way to run.

December 18 - Our friend Jim Belfiore specializes in new home data analysis, especially during the construction phase and first closing. If you ever need information on the new home market then Jim is a great source as he collects information that is simply not available elsewhere by visiting the individual sales offices for each developer's subdivision. In January each year he publishes a document that summarizes the Greater Phoenix new home market and we assist by providing an annual summary of the re-sale market for comparison. This is for single-family homes purchased through a normal transaction (no short sales, REOs, etc.).

The segmentation for this analysis uses Jim`s customized definition of 60 market areas. The top performing areas for annual appreciation between Dec 2016 and Dec 2017 were:

  1. Sky Harbor South (85040) 12.8%
  2. El Mirage (85335) 12.5%
  3. Southeast Glendale (85301) 11.6%
  4. Downtown Phoenix (85003, 85004, 85007) 10.6%
  5. Coolidge / Florence (85128, 85132, 85191) 10.5%
  6. North Surprise (85387) 10.3%
  7. Casa Grande (85122, 85193, 85194) 9.5%
  8. West Phoenix (85043) 9.4%
  9. Apache Junction (85119, 85120) 9.4%
  10. I-10 and I-17 (85009, 85015, 85017, 85019, 85031, 85033, 85035) 9.1%

We note that Pinal County makes a very strong showing in this top ten list, given its small share of the overall market.

The worst performing areas for appreciation were:

  1. North Scottsdale (85255, 85259, 85262, 85266) -0.1%
  2. New River (85087) 0.8%
  3. Fountain Hills (85268) 1.0%
  4. South Tempe (85284) 1.7%
  5. Gold Canyon (85118) 2.1%
  6. Paradise Valley (85253) 2.4%
  7. North Buckeye (85396) 2.5%
  8. Ahwatukee (85044, 85045, 85048) 2.5%
  9. Cave Creek / Carefree (85331, 85377) 3.0%
  10. NE Phoenix (85050, 85054) 3.1%

This table is dominated by the Northeast Valley and the South Tempe and Ahwatukee area.

The above numbers reflect the re-sale market, not the new home market since 90% of new home sales do not go through the ARMLS database.

December 16 - It is easy to get complacent about the low inventory and assume that this is somehow the "new normal". The long term decline in active listings just keeps going and we have now reached the point where days of inventory is the lowest we have seen for week 50 since 2004 (at the height of the bubble). The inventory figure for all areas & types including UCB and CCBS listings is just 82. Normal is between 120 and 150. If we extract the UCB and CCBS listings the number drops to 69. Even this low number understates the situation because it includes out of area listings and luxury homes, which remain in good supply.

To try to get a handle on what life is like in the regular market, let us focus on homes priced at under $500,000 in Greater Phoenix. The inventory for this segment is 52 days. If we use $250,000 as the price limit we have just under 40 days of inventory. These are not normal readings and we start to wonder how low can these numbers go.

We encourage you to use the Days of Inventory Tableau chart and the weekly Flash chart to examine how out-of-line the current situation is.

December 15 - Once again we are looking at the Cromford® Market Index for the single-family markets in the 17 largest cities:

We see 4 exceptions, but 13 of the cities are improving for sellers with a reduction in supply as the common cause.

Although the 3 at the top are all in the Southeast Valley, the Northwest Valley has had a good month with Glendale, Surprise and Peoria all improving by 8% or more.

The situation for buyers is more difficult than it was at this point last year. Only in the luxury market sector are there sufficient homes for sale to satisfy demand.

December 14 - While prices continue to rise for the bulk of the market, things are rather different for luxury homes, especially re-sales (as opposed to new builds).

At price levels over $2 million, the small number of sales makes measurement tricky, so we tend to focus on long term averages. The 12-month average sales price per square foot for homes over $2 million looks like this.

During the period April 2016 to April 2017, pricing for the high-end seemed to making some progress after a slow slide that started in June 2015. However pricing has been weakening again since June 2017 and despite strong sales volumes the average for November 2017 was lower than the figure for August 2014.

The picture looks particularly troubling for the "big 3" ZIP codes - 85253, 85255 and 85262 which tend to dominate sales over $2 million. The chart for them looks like this:

Prices remained flat to slightly higher between August 2014 and April 2017 but the last 5 months look suspiciously like capitulation.

December 13 - Here are the top 20 ZIP codes in Maricopa County for purchases by in-state buyers. In other words they attract the least interest from out-of-state buyers. To show that this is not necessarily a disadvantage many of these ZIP codes have seen higher than average appreciation over the last few years.

The percentage number given in the table is the percentage of purchases by out-of-state buyers.

  1. Apache Junction 85120 - 4%
  2. Phoenix 85034 - 4%
  3. Phoenix 85009 - 5%
  4. Phoenix 85033 - 5%
  5. Phoenix 85019 - 5%
  6. Phoenix 85031 - 6%
  7. Gila Bend 85337 - 6%
  8. Phoenix 85017 - 6%
  9. Phoenix 85027 - 6%
  10. Youngtown 85363 - 6%
  11. Phoenix 85043 - 6%
  12. Mesa 85204 - 7%
  13. Phoenix 85051 - 7%
  14. Phoenix 85035 - 7%
  15. Mesa 85202 - 7%
  16. Glendale 85303 - 8%
  17. Phoenix 85006 - 8%
  18. Glendale 85306 - 8%
  19. Mesa 85213 - 8%
  20. Phoenix 85029 - 8%

This table includes many of the fastest appreciating parts of the valley and most of them are at the more affordable end of the market. One exception is Mesa 85213 which is one the more expensive and desirable ZIP codes in Mesa, yet seems to be little known to people from out-of-state. Part of the Citrus Sub-Area, 85213 includes many million dollar homes on large lots, but is often overlooked by luxury buyers because it is not as well known as Scottsdale, Paradise Valley or Fountain Hills.

December 12 - So far in 2017 16% of the recorded home sales in Maricopa County have been to out of state buyers and 84% to buyers with a mailing address inside Arizona.

The top 20 ZIP codes for purchases by out of state buyers are as follows:

  1. Aguila 85320 - 50%
  2. Scottsdale 85262 - 48%
  3. Carefree 85377 - 45%
  4. Scottsdale 85266 - 38%
  5. Rio Verde 85263 - 37%
  6. Arlington 85322 - 36%
  7. Surprise 85374 - 35%
  8. Morristown 85342 - 33%
  9. Sun City West 85345 - 32%
  10. Scottsdale 85255 - 31%
  11. Surprise 85387 - 31%
  12. Buckeye 85396 - 31%
  13. Phoenix 85054 - 30%
  14. Wickenburg 85390 - 30%
  15. Fountain Hills 85268 - 29%
  16. Goodyear 85395 - 29%
  17. Fort McDowell - 29%
  18. Sun Lakes 85248 - 27%
  19. Mesa 85215 - 25%
  20. Scottsdale 85251 - 25%

This list is dominated by locations that are on the outer edges of the conurbation. Several of the locations that are top of this list have seen weak pricing compared with the rest of the valley. One of the reasons for this is that migration into Arizona is weaker than it was during the 2000-2007 era. In 2004 we saw 30,564 purchases by out of state buyers. 2017 year to date is 16,443 with only December to go.

The total sales count is lower and the percentage of sales going to out of state buyers has dropped from 20% to 16%.

The flip side of this is that in-state demand has increased from 80% to 84%. Areas that appeal most to in-state buyers have seen stronger appreciation. We shall look at this list tomorrow.

December 11 - After peaking on July 28 at 8.6% the appreciation rate for all areas & types went into a declining trend until November 9 when it bottomed out at 3.6%. It then changed course and over the last 5 weeks has risen sharply to reach between 7% and 7.5%. You can see this sudden change in the chart here. Such a rapid change in direction is quite unusual.

The turn-around corresponded with a change in trend for cancellations too. These had been slowly rising during the summer and fall, but are now on a declining trend again, which can be seen here.

 

December 8 - The preliminary numbers for Maricopa County recordings are in for November 2017.

Total sales of single-family and condo units rose 5.7% over November 2016 to 8,720. Re-sales climbed 6.4% while new homes grew only 1.6%. This is is surprising as for the last couple of years growth in new home sales has been much stronger than re-sales. Both November 2016 and November 2017 had the same number of working days, so we do not have to make any adjustments.

The overall median sales price was $255,000, up 6.3% from $240,000 a year ago. For new homes the median was $328,419, up 2.7% from $319,739. Re-sale median increased 8.0% to $243,000. This under-performance by new homes is easily explained since they do not really compete in the lowest end of the market. Much of the appreciation we see today is concentrated in the price ranges between $100,000 and $200,000. Only in very far-flung areas can you buy a new home in that price range. Hence new homes are not seeing as much appreciation as re-sales.

December 7 - The Cromford® Market Index table for the single-family markets in the 17 largest cities continues to show an improving market for sellers (and a worsening one for buyers).

Only 4 cities show a deteriorating situation for sellers, with Paradise Valley and Avondale in particular continuing their recent trend.

The other 13 cities show at least some improvement, with top gainers being Surprise, Cave Creek, Glendale, Tempe & Peoria.

There is a significant gap after the the top 3 Southeastern cities, but Surprise is making a concerted effort to join them.

December 6 - We tend to think of Paradise Valley as an area where inventory is always high relative to sales rates. There were 9.9 months of inventory as of November 15, for example. However, it is all about the money. If you look exclusively at single-family homes under $1 million in Paradise Valley, there were only 1.9 months of inventory, lower than the Greater Phoenix average. There were 11 active (excluding UCB and CCBS) and the annual sales rate is 70.

For homes between $1 million and $2 million, the number is closer to what you might expect, 7 months of inventory (based on 103 active and an annual sales rate of 177).

For homes between $2 million and #3 million it stretches to 14.9 months (based on 87 active and an annual sales rate of 70).

For homes between $3 million and $5 million it edges upward again to 17.1 months (based on 64 active and an annual sales rate of 45).

Where it really gets eye-popping is for homes over $5 million. There are 114 months of inventory here - almost 10 years! This is based on having 38 active listings (excluding UCB and CCBS) and only 4 sales in the last year.

December 5 - In October there were 926 multi-family units permitted, bringing the 12-month total to 9,746. The 2017 year to date count is 7,475, slightly ahead of 2016's October YTD of 7,374. Last year, November and December were huge months for multi-family permits with 1,144 and 1,127 respectively.

The multi-family boom shows no sign of easing up but it is spreading further afield. Initially building was confined to a corridor just a few miles wide, either side of Scottsdale Road and Rural Road. It was ironic that Rural Road was the center of high density urban development. Now we have Phoenix, Mesa, Glendale, Goodyear, Chandler and Peoria all involved heavily while Scottsdale appears to have slowed down, possibly saturated by the large supply of expensive rental apartments built bet wen 2012 and 2016. Tempe remains very active and we now seeing large number of permits from other parts of Arizona, including Flagstaff and Prescott Valley. Tucson is conspicuous by its low level of multi-family permits.

December 2 - The short and medium term outlook for the Greater Phoenix housing market is currently good. However in the past I have mentioned the exposure we have to falls in fertility rates and the consequent impact on long term demand. The latest data is not looking good at all. If you only care about the next 5 years or so, then you need not read on. But if you care about 2030 and beyond, you should be concerned.

Arizona's fertility rate is falling at the fastest rate ever seen and is dropping at the 4th fastest rate among the states of the USA. Wyoming has the fastest decline, followed by New Mexico. Utah is next, but Utah is starting from a position of having the highest fertility rate in the USA. I am confident readers can guess the reason for that. But even LDS mothers are having fewer children. With the current rate of decline the next generation of native Arizonans will be smaller than the present one and they will need fewer houses. We will be entirely dependent on inward migration to keep the housing demand healthy. But fertility rates are below replacement levels across the developed world, almost without exception. We are likely to see migration rates easing up due to low population growth overall. Mobility is on a clear downward trend across the country too.

Between 1973 and 2007 the USA experienced rising fertility rates, but the last 10 years have undone that and 2018 looks almost certain to set a new low record below 1.75 live births per female.. Remember that 2.05 is the replacement rate (implying no natural in-place population growth).

Most people are not taking this threat seriously at all, because it is insidious and hardly ever makes the news. But in the long term fertility decline can have a very negative effect on the economy. Fewer people usually means a smaller economy, especially if the fertility rate is dropping at an annual rate of almost 6%. This is what has happened in Arizona between 2015 and 2017 and the signs are that it is still accelerating. The impact will probably be felt in 2030-2040 when the small number of current infants come of age requiring fewer resources.

If I am still around in 2030, don't say I didn't warn you. If I am not around, I won't care anyway.

December 1 - The Cromford® Market Index values for the single-family markets in the 17 largest cities appear in the table below:

This is showing the improvement we expected with only 7 cities showing deterioration over the last month compared with 12 last week. 10 cities are improving for sellers, double the number last week.

Paradise Valley and Avondale are the only 2 cities showing major moves backwards while Surprise and Tempe are showing the greatest improvement.

November 2017

November 30 - The S&P / Case-Shiller® Home Price Index® report that was released on Tuesday covers sales between July and September. The month to month movement in the HPI was as follows:

  1. Las Vegas 0.97%
  2. New York 0.89%
  3. Tampa 0.88%
  4. Cleveland 0.68%
  5. Phoenix 0.59%
  6. Miami 0.59%
  7. San Francisco 0.51%
  8. San Diego 0.46%
  9. Los Angeles 0.42%
  10. Boston 0.42%
  11. Dallas 0.39%
  12. Charlotte 0.28%
  13. Denver 0.24%
  14. Portland 0.17%
  15. Atlanta 0.16%
  16. Chicago 0.05%
  17. Minneapolis 0.01%
  18. Detroit -0.13%
  19. Washington -0.21%
  20. Seattle 0.28%

Phoenix was well ahead of the national average of 0.35% and now appears in the top 5 of the 20 major cities reported by Case-Shiller.

The longer term trends, represented by the annual change in the index, was as follows:

  1. Seattle 12.9%
  2. Las Vegas 9.0%
  3. San Diego 8.2%
  4. Portland 7.3%
  5. Tampa 7.2%
  6. Boston 7.2%
  7. Dallas 7.2%
  8. Denver 7.2%
  9. San Francisco 7.0%
  10. Detroit 6.9%
  11. Charlotte 6.2%
  12. Los Angeles 6.2%
  13. Phoenix 6.1%
  14. Cleveland 5.4%
  15. Minneapolis 5.4%
  16. Atlanta 5.4%
  17. New York 5.2%
  18. Miami 5.0%
  19. Chicago 3.9%
  20. Washington 3.1%

In this table we are only 13th out of 20 and roughly in line with the national average.

Las Vegas stands out as being at number 1 and 2 in these tables while Seattle jumps out for being top of the long term but bottom of the short term table.

November 29 - Yesterday we looked at Opendoor over the past 12 months and today we will do the same for OfferPad.

  • first purchase was in November 2015
  • first sale was in January 2016
  • there were 891 purchases during the last 12 months (Nov 2016 - Oct 2017)
  • annual average purchase price was $213,192
  • annual median purchase price was $198,900
  • there were 621 sales during the last 12 month
  • annual average sales price was $232,590
  • annual median sales price was $215,000
  • median gross margin was $24,900 for homes sold in the last 12 months
  • average gross margin was $28,576
  • average time from purchase to sale = 111 days

It is immediately striking that although OfferPad took almost a week longer to turnaround their purchases into closed sales, they have been achieving much higher gross margins than Opendoor. In fact more than twice as much. This could be because they are doing more extensive refurbishment and upgrade, or it could be because they are just negotiating better prices on one or both ends of the flip.

OfferPad`s top line revenue for a typical home is looking like $18,000 in fees and $25,000 in gross margin , making $43,000 in all, some 36% higher than Opendoor.

November 28 - There is considerable interest in the so-called iBuyers of homes. Opendoor and OfferPad are the main operators in Greater Phoenix. With the data gathered from public records we provide Tableau charts about Opendoor and OfferPad purchases and sales within the Cromford Public section of our web-site.

Here is a summary of what we know about Opendoor`s Greater Phoenix operations so far.

  • first purchase was in August 2014
  • first sale was in November 2014
  • there were 1,602 purchases during the last 12 months (Nov 2016 - Oct 2017)
  • annual average purchase price was $213,636
  • annual median purchase price was $204,550
  • there were 1,512 sales during the last 12 month
  • annual average sales price was $223,119
  • annual median sales price was $214,000
  • median gross margin was $13,000 for homes sold in the last 12 months
  • average gross margin was $11,779
  • average time from purchase to sale = 105 days

Typically an iBuyer will charge the seller 9% of the agreed purchase price. This percentage can vary however, based on the iBuyer`s business objectives. The fee is not disclosed in public records since the price stated on the affidavit of value is the gross figure prior to the fees. The seller will receive the gross figure less the fees and less any other close of escrow costs.

Thus the iBuyer typically receives 9% of the purchase price plus the gross margin on sale as top line revenue. From this they will have to cover refurbishment costs, selling costs and two sets of closing costs, including the commission for the buyer`s agent, if there there is one.

For a typical home this looks like $31,500 in top line revenue, consisting of $18,500 in fees and $13,000 in gross margin.

Opendoor's operation grew quickly in 2015 and 2016 but the acceleration has slowed down in 2017 as they face more competition from OfferPad. They are also operating very much at the low end of the market, which is rapidly contracting in size due to diminishing supply. Annual purchases grew by 15% between October 2016 and October 2017.

During the last 12 months, 1,512 sales represents 1.1% of the market in Maricopa and Pinal Counties. The total transaction count over that time was 133,476. Of course you could argue that Opendoor was involved in 2 transactions for every home they sold, the first as buyer and the second as seller. However every one of the 133,476 transactions we monitored had both a buyer and a seller, so there were 266,952 transactions sides of which Opendoor represented 1.2%.

Annual sales were running at $337 million at the beginning of November. Opendoor has never paid more than $550,000 for a home. Because of this focus on the low end, Opendoor has a smaller share of the dollar value, just over 0.87%.

November 27 - Although we saw on Friday that the average location within Greater Phoenix had increased the contract ratio by 10%, there are some areas where the market is cooler than last year. For buyers the lower competition will be welcome in the following locations:

  1. Avondale - down from 97.9 to 57.3
  2. Morristown - down from 27.3 to 17.6
  3. Waddell - down from 52.7 to 38.6
  4. Wickenburg - down from 20.7 to 16.3
  5. Tolleson - down from 77.8 to 62.9
  6. Goodyear - down from 62.2 to 51.3
  7. Fountain Hills - down from 29.1 to 25.2
  8. Anthem - down from 52.5 to 46.6
  9. Laveen - down from 84.6 to 80.6
  10. El Mirage - down from 177.5 to 170.0

El Mirage makes this list by dropping 4% but still remains the hottest location in the whole valley. At 170 its contract ratio is very high with 68 listings under contract and only 40 active.

November 24 - We like to use the Contract Ratio when determining how hot or cold the market is within a certain segment. Comparing Thanksgiving 2017 with Thanksgiving 2016, the following locations have show the biggest increase in temperature:

  1. Carefree - from 11.4 to 28.7
  2. Arizona City - from 23.2 to 45.9
  3. Litchfield Park - from 31.6 to 59.3
  4. New River - from 24.4 to 42.6
  5. Gold Canyon - from 17.5 to 30.1
  6. Sun Lakes - from 40.6 to 67.3
  7. Surprise - from 43.1 to 67.0
  8. Tonopah - from 31.9 to 48.6
  9. Wittmann - from 29.4 to 43.3
  10. Tempe - from 51.4 to 68.9

Many of these locations have been cold or cool for some time but are showing signs of warming up. Carefree, for example has 29 homes under contract compared with only 16 last year, while active listings without a contract are down from 140 to 101. Although it is low by most locations standards, 28.7 is a high reading for Carefree.

The numbers above include all dwelling types and price ranges.

The contract ratio for Greater Phoenix as a whole has increased 10% from 49.2 to 54.1.

November 23 - Another of our regular looks at the Cromford® Market Index for single-family markets in the 17 largest cities shows us this:

Only a handful of big moves here, but they are backwards with

  • Paradise Valley down 15%
  • Avondale down 10%
  • Fountain Hills down 7%

The outlook is for an improvement in this table over the next few weeks (at least for sellers) with falling supply and a small uptick in demand.

The dominance of the Southeast Valley is striking with all of the top 3 places and 4 out of the top 6.

November 22 - Looking at sales year to date compared with this time last year, we see an overall increase of 6.4%. This is down from 9.0% at the mid-point of the year and sales during the second half of 2017 are are up only 3.1% compared to this time last year.

It is also noticeable that single-family detached homes are behind the curve. They are up 5.8% year to date while attached homes are up 10.0% and mobile homes are up 8.1%.

Geographically there has been the highest growth in the tiny part of Yavapai County that falls within the ARMLS Greater Phoenix area - up 15.7%. Pinal County comes next with an 11.2% increase while Maricopa County lags at 5.9%.

The greatest growth in price ranges is for homes over $2 million - these are up 27.3%. Next comes $500,000 to $1 million where sales are up 22.1%. Between $1 million and $2 million sales are up 18.6% and the dominant range between $200,000 and $500,000 is up 18.0%. The big loser is the price range below $200,000 where sales are down 11.5%. Sales below $200,000 still account for 33% of all sales but this is down from 40% in 2016. The lack of volume growth below $200,000 is driving median sales prices higher at a faster rate than average price per square foot.

November 21 - We are looking at the active listing counts compared with the same point in 2016 and excluding UCB listings we are down 11.7%. UCB listings are down also but only by 4.1%. Attached homes are down slightly more (12.1%) than single-family detached homes (down 11.8%). Mobile home listings are only down by 8.4%.

In Maricopa County active listings excluding UCB are down by 10.8% while Pinal has dropped much harder - down 18.4%.

Most of the missing listings are below $200,000 where the count has dropped 31.6% since last year. We also see fewer listings between $500,000 and $1 million (down 8.9%) and between $200,000 and $500,000 (down 6.8%). However supply is up over $1 million. Between $1 million and $2 million we have 8.2% more active listings while over $2 million the increase is a more modest 3.8%.

November 20 - The daily Cromford® Market Index chart shows us that the index has halted its recent swoon and is little changed over the past week. Demand has started to show a little growth over the past 2 weeks and the usual increase in supply that we see between September and November has proven to be nothing special in 2017. This means we will probably see a recovery in the index during December when supply always falls hard.

The conclusion is that most sellers remain in a strong position and there is little relief on the horizon for buyers. Only in the higher echelons over $1.5 million do sellers hold a weak hand. This due to the prolonged over-supply of expensive homes, something that Phoenix has in common with many other parts of the USA.
Phoenix real estate market statistics by the ryan whyte real estate team

November 17 - Each month we publish the ranking table showing 41 cities in Maricopa and Pinal County ordered by average sales price per square foot.

There are still some cities that are appreciating at rates over 10%:

  1. Coolidge
  2. Wickenburg
  3. El Mirage
  4. Arizona City
  5. Eloy

Only one of these (El Mirage) is wholly within Maricopa County. Wickenburg is split between Maricopa and Yavapai while the remaining 3 are in Pinal County. Although it is at the bottom of the table, Coolidge has been catching up with the other 40 for quite some time.

There are 2 cities with negative appreciation over the past year.

  1. Tonopah
  2. Carefree

Carefree has also suffered the loss of its traditional second place to Scottsdale.

November 16 - Today we take another look at the Cromford Market Index for the single-family markets in the largest cities:

The bad news for sellers is that there are 12 cities where conditions deteriorated from a seller's perspective. The good news is that all 17 cities are still in a seller's market and both the top and bottom entries moved upwards.

Buckeye is the only city that improved significantly while Avondale, Fountain Hills, Paradise Valley, Peoria and Surprise all deteriorated by 5% or more over the past month.

November 15 - Over the last 3 years the average home in Maricopa County has turned over at an annual rate of 1 in 14. This means only 1 out of every 14 homes has been sold during the prior 12 months. In other words it takes 14 years for the average home to come up for sale. This excludes new homes sales which cannot be said to "turn over". This is quite a bit less than homes turned over ten or fifteen years ago and this lower mobility is a phenomenon that has occurred across the whole of the USA and in many other countries too.

The areas with the lowest annual turnover are as follows:

  1. Gila Bend 85337 - 1 in 35.8 homes per year
  2. Phoenix 85034 - 1 in 23.3
  3. Aguila 85320 - 1 in 21.7
  4. Fort McDowell 85264 - 1 in 19.0
  5. Tempe 85284 - 1 in 18.0
  6. Tempe 85283 - 1 in 17.3
  7. Mesa 85210 - 1 in 17.2
  8. Phoenix 85035 - 1 in 17.2
  9. Chandler 85226 - 1 in 17.0
  10. Surprise 85387 - 1 in 16.8

Now what real estate agents usually want to know is where the highest turnover rates are because high turnover implies plenty of business for agents.

Here are the top spots in Maricopa County:

  1. Surprise 85388 - 1 in 11.1
  2. Gilbert 85297 - 1 in 11.5
  3. Sun City 85351 - 1 in 11.6
  4. Sun City West 85375 - 1 in 11.6
  5. Anthem 85086 - 1 in 11.7
  6. Surprise 85379 - 1 in 11.7
  7. Phoenix 85006 - 1 in 11.7
  8. Sun City 85373 - 1 in 11.8
  9. Phoenix 85007 - 1 in 12.2
  10. Phoenix 85018 - 1 in 12.3

November 14 - The market in the Northeast Valley is seeing very different conditions from those we examined yesterday in the Southeast Valley. Active listings jumped 9% during October giving buyers plenty of new homes to consider but supply is not arriving in the price ranges that most need it. Relative to demand we are short of homes under $500,000 but have plenty of homes over $1 million and a surplus over $2 million. This means our balanced market breaks down into a seller’s market under $500,000 and a buyer’s market over $2 million, with balance only applying somewhere in between those extremes. Comparing the average price per square foot over the past 3 months with the same period in 2016, we find strong appreciation of 6% or more in several less expensive areas such as 85257, 85254 and 85331. However, the price movement was negative for the big ZIP codes 85255 and 85262 which were down 7% and 4% respectively. The ample supply of high-end homes means transaction rates are well up from last year, but sellers are finding their pricing power is very limited.

November 13 - In the last year, supply has fallen further in the Southeast Valley than any other part of Greater Phoenix. Although October is usually when we see an increase, days of inventory have dropped from 65 to 64 which is 21% lower than last November. The low supply is starting to slow sales. There were only 2 more closed listings during October 2017 than during October 2016 and given that we had 2 more working days in October 2017 the effective sales rate per day is 10% lower than last year. The annual sales rate is 4% higher than this time last year but has been in decline since June. If we exclude active listings with an accepted offer, months of supply has dropped from 2.1 to 1.7 over the last 12 months. For homes under $250,000 supply has dropped from 1.1 to 0.8 months. Buyers under $250,000 are certainly having a hard time. Even buyers over $500,000 have less choice than normal with less than 5 months of supply compared with over 7 months this time last year.

The top ZIP codes for appreciation, comparing quarterly $/SF for August through October with the same 3 months in 2016, are as follows:

  1. Mesa 85206 - 12.2%
  2. Mesa 85203 - 10.2%
  3. Mesa 85212 - 10.2%
  4. Mesa 85204 - 9.8%
  5. Chandler 85224 - 9.7%
  6. Tempe 85281 - 9.5%
  7. Queen Creek 85142 - 8.8%
  8. Sun Lakes 85248 - 8.8%
  9. Mesa 85208 - 8.3%
  10. Mesa 85202 - 7.9%

November 10 - The average sales price per square foot for all areas & types just hit a new high point of $152.01 today. This is the first time we have exceeded $152 since March 2008 almost 10 years ago, although we came pretty close on June 21. The third quarter dip is now well behind us and pricing has regained the sort of momentum we expected for the fourth quarter. Closed sales are no longer running well ahead of last year, but are still slightly higher than this time last year. Year to date we are up almost 8%. New supply over the last month is down 1% compared with the same period in 2016, so a slight weakening in sales momentum seems to be counter-balanced by a slight weakening in new supply. The market is healthy for sellers but the lack of volume growth is slightly concerning for agents, given that we have 6% more agents active than this time last year. Dollar volume is up 15% for annual sales but only 3% up for the most recent monthly period. To preserve or increase revenues per agent we need the dollar volume growth to exceed the growth in agent numbers. That goal was easily exceeded in the first half of this year but is looking less certain for the second half.


November 9 - Let us have another look at the Cromford® Market Index for the single-family markets in our 17 largest cities.

All 17 are in the seller's market zone over 110, but only one out the 17 (Buckeye) saw any significant improvement in market conditions for sellers over the past month. Three other cities improved but by less than 1% (Chandler, Cave Creek and Tempe).

We see significant deterioration for sellers in Fountain Hills, Avondale, Surprise and Peoria.

Generally the Southeast Valley is doing better than the rest of the Greater Phoenix area because supply is more limited. We have never seen Chandler, Mesa and Gilbert hold the top 3 spots like they do today. However, even Mesa and Gilbert have weakened since last month.

November 8 - The last 3 months make an interesting comparison with the same period last year for the high end market. The good news for sellers is that sales increased 37% for single-family homes over $2 million, from 46 to 63. This was a much higher percentage increase than for luxury homes as a whole. These were up 15%.

The bad news, unsurprisingly, is that many prices had to be cut to achieve these sales. The average price per square foot during August to October 2016 was $471.37, but during the same period in 2017 the average was $398.03, a drop of almost 16%. Now this does not mean the average value of a high-end home dropped that much, because sample sizes of 46 and 63 are not large enough to eliminate variations due to changing mix, but the trend is still clear. The high end of the market remains under pressure from over supply and those who are in a hurry to sell are having to drop prices. This effect is most noticeable in the far Northeast in ZIP codes like 85262, 85255 and 85268.

Between $500,000 and $1,500,000 the situation is better for sellers as the inventory of homes for sale is more limited relative to demand. Between $500,000 and $1,000,000 we see average $/SF is up 1.2% from this time last year while between $1,000,000 and $2,000,000 a rise of 0.5% can be reported.

November 7 - Most ZIP codes are still quite some way below the peak pricing that we saw during the housing bubble of 2004-2007. Just a few are edging above that mark however.

The most realistic way to measure this is to use the annual average price per square foot. Any measure shorter than a year will have occasional spikes that make a comparison difficult for an area as small as a ZIP code. The median sales price could also be used but this is an easier benchmark to breach. Here are the ZIP codes where single-family homes that have made the real breakthrough:

  1. Eloy 85131
  2. Scottsdale 85257
  3. Scottsdale 85251

South Scottsdale and Old Town Scottsdale are in great shape, but things get a lot less rosy when we venture into the far north. Scottsdale 85262 is only at 70% of the peak while 85266 and Carefree are at 72%.

November 6 - The Mortgage Interest Deduction is not as important as many in the housing industry believe. It only comes into play for taxpayers who itemize their deductions and for many people the standard deduction is already larger than the total of their itemized deductions. With the proposed tax changes under review in 2017, the standard deduction will increase while many other deductions will be reduced. This will mean the Mortgage Interest Deduction will become irrelevant except to a very small percentage of home owners in Arizona. Only filers with incomes well over $200,000 are likely to find it worthwhile to itemize their deductions. Needless to say, this is a lot higher than the typical income level to be found across Greater Phoenix.

The limit on the size of the mortgage for which mortgage interest can be deducted is proposed to fall from $1,000,000 to $500,000 and property tax deductions will be limited to $10,000. In California these limits may look rather low, but in Arizona there are few people who will be affected. This because our property taxes are much lower than California and our average mortgage is much smaller too.

The net effect of the proposed tax changes will be to lessen the tax advantages of home ownership versus home rental. This could divert some demand away from homes for sale towards homes for rent. Neither type of home is easy to find in affordable form in the Phoenix area right now, though expensive homes are easy to find for both rent and purchase. It also means the tax proposals will be unpopular with real estate agents, who much prefer people to buy rather than rent. This is confirmed by the strong opposition to the tax reforms voiced by the National Association of REALTORS®

Another thing that agents will dislike is the new incentive created for high end homeowners not to sell their home. Existing mortgages will have their interest deductibility preserved but any new mortgage will be under the new rules. The national mobility is rather low at the moment so this tax change will probably reduce mobility further, especially at the high end. On the other hand, people involved in re-modelling and renovating will be pleased about the changes, as owners decide to stay with their existing mortgage and update their home instead. Perhaps this effect will reduce the over-supply of high end homes coming onto the market.

From a builder’s perspective, they too prefer incentives to buy rather than rent, so most are in opposition to the tax proposals. However it will be high end builders like Toll Brothers and those with a greater exposure to expensive markets on the coast who will be most negatively affected. The Arizona market will feel very minor effects in comparison and the low and mid-range demand for new homes is likely to remain intact..

Those involved in rentals will love the changes because rental demand will get a boost. Doubling the standard deduction will give most filers the tax benefit of owning a home without the bother of having to actually purchase one. The likely increase to their take-home pay will probably make it easier for tenants to pay their rent on time and agree to the rent increases that landlords love to impose. The tax changes are therefore friendly to landlords and real estate investors.

November 4 - In contrast to yesterday's observation, here are the 20 ZIP codes with the highest average days on market. Plenty of patience is required from sellers in these areas:

  1. Crown King 86343 - 389 days
  2. Aguila 85320 - 357 days
  3. Carefree 85377 - 213 days
  4. Scottsdale 85262 - 201 days
  5. Congress 85332 - 201 days
  6. Stanfield 85172 - 190 days
  7. Kirkland 86332 - 186 days
  8. Wickenburg 85390 - 180 days
  9. Rio Verde 85263 - 178 days
  10. Paradise Valley 85253 - 163 days
  11. Fort McDowell 85264 - 161 days
  12. Casa Grande 85194 - 145 days
  13. Superior 85173 - 142 days
  14. Scottsdale 85266 - 141 days
  15. Morristown 85342 - 138 days
  16. Phoenix 85004 - 136 days
  17. Phoenix 85003 - 134 days
  18. Scottsdale 85255 - 130 days
  19. Gold Canyon 85118 - 128 days
  20. Eloy 85131 - 121 days

November 3 - Here are the top 20 ZIP codes based on the lowest average days on market for closed listings. Homes here sell faster than anywhere else in Greater Phoenix:

  1. El Mirage 85335 - 37 days
  2. Mesa 85210 - 42 days
  3. Peoria 85345 - 42 days
  4. Mesa 85202 - 43 days
  5. Phoenix 85027 - 44 days
  6. Mesa 85204 - 44 days
  7. Glendale 85307 - 44 days
  8. Phoenix 85037 - 44 days
  9. Phoenix 85031 - 45 days
  10. Chandler 85224 - 45 days
  11. Mesa 85201 - 45 days
  12. Phoenix 85040 - 45 days
  13. Youngtown 85363 - 46 days
  14. Phoenix 85043 - 46 days
  15. Phoenix 85051 - 47 days
  16. Chandler 85225 - 47 days
  17. Glendale 85306 - 48 days
  18. Glendale 85302 - 48 days
  19. Gilbert 85296 - 49 days
  20. Tempe 85282 - 49 days

The measurement was taken from November 2016 through October 2017 for all dwelling types.

November 2 - Our weekly look at the Cromford® Market Index for the single-family markets in the 17 largest cities gives us a table like this:

All 17 cities are in the seller's market zone over 110. However the situation deteriorated for sellers over the last month in 12 of the 17 cities, particularly in Fountain Hills, Surprise, Avondale and Peoria.

Once again Paradise Valley and Buckeye were the only 2 cities to improve for sellers by more than 1%. Queen Creek, Tempe and Chandler managed small improvements which shows relative strength at this time of year.

October 2017

October 31 - The S&P / Case-Shiller® Home Price Index® is reported today and cover sales between June and August 2017. The chart is available here.

The changes since last month`s report are as follows:

  1. Las Vegas 0.99%
  2. New York 0.85%
  3. San Diego 0.85%
  4. Phoenix - 0.77%
  5. Charlotte 0.74%
  6. Cleveland 0.66%
  7. Detroit 0.61%
  8. Chicago 0.38%
  9. Boston 0.35%
  10. Tampa 0.35%
  11. Los Angeles 0.34%
  12. Denver 0.32%
  13. Dallas 0.29%
  14. Minneapolis 0.28%
  15. Atlanta 0.24%
  16. Seattle 0.18%
  17. Miami 0.15%
  18. Portland 0.14%
  19. Washington 0.13%
  20. San Francisco -0.11%

These numbers look very different from last month with the former high-flyers of Seattle, Portland, Denver and San Francisco in the bottom half of the table.

Phoenix has moved up from 14 to 4 in this table. The national average was 0.54% and the majority of the big cities did worse than the national average. Only the top 7 cities above did better.

When we look at the 12 month change in the Index we see the following:

  1. Seattle 13.2%
  2. Las Vegas 8.6%
  3. San Diego 7.8%
  4. Denver 7.2%
  5. Portland 7.2%
  6. Detroit 7.2%
  7. Dallas 7.1%
  8. Boston 6.9%
  9. Tampa 6.8%
  10. Charlotte 6.8%
  11. San Francisco 6.1%
  12. Los Angeles 6.1%
  13. Phoenix 5.8%
  14. Minneapolis 5.6%
  15. Atlanta 5.4%
  16. Miami 4.9%
  17. Cleveland 4.4%
  18. New York 4.4%
  19. Chicago 3.7%
  20. Washington 3.4%

The national average is 6.1% and Phoenix is a little below that. Unless this month's index is an anomaly, the fact that the short term movement for Phoenix is more impressive than the long term movement is a positive signal for us.

October 30 - Multi-family building permits remain buoyant with a total of 911 units across Maricopa and Pinal counties in September. The total for the 12 month period ending September 2017 is 9,071. The year to date counts by city look like this:

  1. Phoenix - 2,707
  2. Mesa - 716
  3. Chandler - 670
  4. Tempe - 636
  5. Glendale - 471
  6. Peoria - 456
  7. Goodyear - 336
  8. Scottsdale - 314
  9. Surprise - 135
  10. Unincorporated Pinal County - 70
  11. Paradise Valley - 23
  12. Fountain Hills - 6
  13. Guadalupe - 5
  14. Apache Junction - 4

We note that multi-family counts exceed single-family counts in Phoenix, Tempe, Glendale and Chandler. We also see the first permits in Guadalupe for many 

October 27 - The Census Bureau has published single family permit data for September 2017. Across Maricopa and Pinal counties we see 1,625 permits, the lowest monthly total since February. However it is up 11% from 1,467 in September 2016. As a result, the 12 month total has risen to 20,023 the first time we have seen over 20,000 permits since February 2008.

Looking at the year to date counts, the ranking by city or place is as follows:

  1. Phoenix - 2,120
  2. Mesa - 1,930
  3. Buckeye - 1,642
  4. Unincorporated Pinal County - 1,599
  5. Peoria - 1,452
  6. Gilbert - 1,260
  7. Queen Creek - 889
  8. Maricopa - 842
  9. Goodyear - 836
  10. Unincorporated Maricopa County - 628
  11. Surprise - 575
  12. Scottsdale - 546
  13. Chandler - 408
  14. Avondale - 198
  15. Florence - 156
  16. Wickenburg - 128
  17. Glendale - 127
  18. Casa Grande - 93
  19. Eloy - 88
  20. Litchfield Park - 63
  21. Fountain Hills - 57
  22. Tempe - 41
  23. Apache Junction - 35
  24. Carefree - 24
  25. Cave Creek - 23
  26. Guadalupe - 9
  27. El Mirage - 8
  28. Tolleson - 4
  29. Coolidge - 2

The top 2 are not a surprise, but look how Buckeye is outbuilding Chandler, Scottsdale and Surprise combined.

Most of the activity in Unincorporated Pinal County is in the San Tan Valley area. When combined with the nearby incorporated towns of Queen Creek and Florence we have a total of 2,644.

October 26 - Our regular table showing the Cromford® Market Index for the single-family markets in the largest 17 cities is shown below:

The usual increase in supply that we see during the first part of the fourth quarter is bring down many of the indexes and we have 12 cities deteriorating for sellers. However 5 cities are bucking that trend, with Paradise Valley and Buckeye drawing attention.

Avondale has conceded its place at the top once more with Chandler taking first place for the first time and former top-spot holder Mesa close behind. The Southeast Valley is doing particularly well in the CMI stakes at the moment. This not due to demand which is actually close to normal, but due to supply which is not only very low but has deteriorated much faster than the rest of the Phoenix area over the last 12 months. In contrast supply has been pouring in for Fountain Hills where the CMI has dropped 16% in the last month. Surprise and Peoria are other cities that dropped 5% or more in the last month.

October 25 - According to the Freddie Mac survey, interest rates dropped in September. The average rate on a 30 year fixed home loan was 3.81%, the lowest since November 2016. Fluctuations in mortgage rates have been pretty small over the past 12 months. The only excitement comes from comparing actual rates with the wild forecast produced by most economists in the last quarter of 2016. We note that economist's forecasts for mortgage interest rates have been wildly wrong (too high) for several years in a row now. I like to quote the Canadian-born American economist (also diplomat, editor and public official) John Kenneth Galbraith, who is responsible for some of the best comments on many subjects:

  • The only function of economic forecasting is to make astrology look respectable
  • Economics is extremely useful as a form of employment for economists
  • Under capitalism, man exploits man; under communism it's just the opposite
  • In the choice between changing one's mind and proving there's no need to do so, most people get busy on the proof

October 24 - We are seeing the usual increase in active listing counts that occurs during October and November, but this is disguising a slightly weak flow of new listings. For the first 3 weeks of October we have seen 1% fewer listings added than in October 2016. Looking at the change in active supply compared with this time last year we are seeing the opposite of what we need. More listings at the top end, fewer in the mid range and dramatically fewer at the bottom end.

Price RangeActive Listings% Change
Under $200K 3,082 -27%
$200K-$250K 2,582 -5%
$250K-$300K 2,182 -3%
$300K-$500K 5,045 -5%
$500K-$800K 2,3828 -2%
$800K-$1M 690 -1%
$1M-$2M 1,059 +6%
Over $2M 613 +8%

 

October 23 - The final price band we are looking at for active listing counts is $1,500,000 and up:

Here we see an unrelenting upward trend will higher highs and higher lows. Despite a significant increase in sales volumes, life is difficult for someone selling a home over $1.5M because there are simply too many for buyers to chose from. One slightly good piece of news for sellers to observe is that the increase between 2016 and 2017 is less than the increase between 2015 and 2016. Apart from that, sellers must keep their fingers crossed that the high point next spring fails to exceed the high point of spring 2017.

October 20 - Another look at the active listing count but this time those homes listed between $500,000 and $1,500,000:

Here we see a strong seasonal pattern with a peak in May and a trough in September. We also see an general upward trend in the number of listings between 2013 and 2016. However 2017 has seen a turnaround with a smaller peak in May and a lower trough in September. Supply is tightening in this price range and given the large percentage increase in closed sales, the balance of power has swung in favor of sellers.

October 19 - Our weekly look at the Cromford® Market Index for the single-family market in the largest 17 cities suggests that the market is weakening a little:

We have slightly more cities (9) deteriorating than improving (8). However most of the deteriorations are of very small magnitude except for Fountain Hills and Cave Creek.

Paradise Valley has moved higher up the table than we have seen it for a long time and showed the biggest improvement over the last month. Buckeye came next, followed by Avondale and Tempe.

October 18 - Another active listings chart extract but this time for homes between $200,000 and $500,000:

Here we see that supply was a huge problem in mid 2013 but grew rapidly during 2014. Since then it has been surprisingly stable. However the sales rate has increased substantially over the past 2 years. A flat supply feels more and more inadequate in the face of a much larger sales volume. However at least the supply has not fallen back as sales increased.

We see that supply usually increases quickly during the first quarter and also during the fourth quarter with the annual low point usually occurring in September.

October 17 - Below is an image taken from the weekly active listings chart:

A price range filter has been selected to eliminate all listings over $200,000. UCB and CCBS listings are excluded from the counts.

Here we can see the huge reduction in supply that has occurred over the past 4 years. The seasonal pattern clearly shows up, but each year is much lower than the year before. It is starting to look as though there will not be much of a market below $200,000 before too long.

October 16 - As a follow up to our observation about appreciation rates on October 13, we are taking a look at the trends for the cities.

Cities showing a declining trend in appreciation rate:

  • Arizona City peaked at 17.9% in May but has retreated to 12.0% now.
  • Avondale peaked at 10.7% in July but has retreated to 9.2% now
  • Buckeye peaked at 9.9% in February but has retreated to 7.4% now
  • Fountain Hills was at 3.3% in January but has fallen to 0.7% now
  • Laveen has dropped from 10.4% in January to 7.4% now
  • Maricopa has declined steadily all year from 11.6% in January to 6.4% now
  • Phoenix has dropped from 7.4% in January to 5.2% now
  • Sun City West has dropped from 9.2% in January to 6.0% now
  • Tempe has dropped from 6.2% in January to 4.8% now
  • Tolleson has dropped from 11.2% in January to 7.3% now

Cities on an improving appreciation trend:

  • Anthem, relatively slow, has started to catch up, increasing from 1.6% in January to 3.9% now
  • Apache Junction has increased from 5.7% in January to 8.9% now
  • Casa Grande has increased from 6.1% in January to 9.7% now
  • Gold Canyon was at -0.7% in January and has increased dramatically to 7.1% now
  • Litchfield Park was at a low of 5.5% in May and has improved to 8.8% now
  • Mesa was at 5.8% in January and has advanced to 7.3% now
  • Paradise Valley has improved from -1.4% in January to 4.6% now
  • Peoria has increased from 5.2% in January to 7.1% now
  • Queen Creek has increased steadily from 7.0% in January to 8.2% now
  • Scottsdale has seen modest improvement from 2.7% in January to 3.6% now
  • Sun Lakes has increased from 3.7% to 5.9% now
  • Surprise has increased slowly but steadily from 6.7% in January to 7.7% now

Cities with little change in appreciation rates:

  • Cave Creek was at 4.6% in January and is at 5.2% now
  • Chandler was at 6.2% in January and is at 5.6% now
  • El Mirage was at 13.8% in January and is at 12.8% now
  • Gilbert was at 5.3% in January and is at 5.6% now
  • Glendale was at 6.9% in January and is at 7.0% now
  • Goodyear was at 6.3% in January and is at 6.9% now
  • Sun City was at 10.1% in January and is at 9.7% now

This is a pretty mixed picture with fortunes changing in many different directions. All the appreciation rates are now positive (two were negative in January) which is a good sign. However the slowdown in our largest city of Phoenix (about 25% of the total market) means the overall trend is very slightly lower at the moment.

October 13 - Changes in the annual appreciation rate (measured using the annual average $/SF) give us a good indication of whether the market has been heating up or cooling down. This is using closed sales prices so it is a trailing indicator rather than a leading indicator. By using the annual average we get a fairly non-volatile reading. The trends tend to stay in place for quite some time. By looking at the weekly chart for annual appreciation we can detect when those trends change direction.

Here is what we have seen so far:

  1. Appreciation was below 2% and weakening in early 2002, but the trend turned around in the second quarter and reached 4% by the end of the year.
  2. The appreciation continued to increase slowly during 2003 reaching 5.6% by the end of the year.
  3. Appreciation started to go crazy as the market heated up during 2004 thanks to the widespread availability of easy credit. It exceeded 12% in December 2004.
  4. The bubble was in full expansion mode during 2005 with appreciation exceeding 36% at the end of 2005.
  5. Appreciation peaked at 37.2% in March 2006 and then collapsed down to 11% by the end of the year, as the bubble burst.
  6. The bubble continued to deflate reaching -5% in December 2007.
  7. The foreclosure wave took depreciation to new depths reaching -28% in December 2008.
  8. The appreciation rate hit a historic low in the summer of 2009 at -36.5% but then started rising again.
  9. During 2010, the appreciation rate climbed by to slightly positive at 0.6% but this trend ran out of steam during the fourth quarter of 2010.
  10. 2011 saw appreciation slide back down to -9% by 3Q but signs of new life emerged at the end of the year.
  11. In 2012 appreciation charged from -9% all the way up to 20%
  12. Appreciation peaked at 25% during the spring of 2013 and started to drift slowly down again.
  13. 2014 saw appreciation drop from over 20% to less than 9%.
  14. In 2015 the downward trend stopped in September at 4.1% and started rising slowly again, reaching 4.4% by the end of the year.
  15. During 2016 the appreciation rate improved to 5.4% by the end of the year, though all of that improvement occurred during the first 3 months of the year.
  16. In 2017 appreciation hit a maximum of 6.5% in September and has drifted slightly lower since then, currently at 6.3%

The second and third quarters of 2017 gave us a fairly strong positive direction but so far the fourth quarter has seen a change of trend to a slight downward drift. Since this is a trailing indicator it suggests the market has cooled a little since the spring. By examining the appreciation chart by city we can see where the cooling trend has occurred, and where it has not.

We should emphasize that when the rate of appreciation falls, prices are still rising, they are just not rising with quite so much speed. Only when the rate of appreciation goes negative are prices actually falling compared with the previous year. At the current 6.3% we are a long way above that point.

October 12 - The Cromford® Market Index for the single-family markets in the 17 largest cities by dollar volume is shown in the table below:

Chandler Real Estate Agents Bill Ryan Team

Although we are very much in a seller`s market the changes over the last month are mixed. We have 9 cities showing improvement for sellers and 8 showing deterioration.

Buckeye is one of the improving areas and is now comfortably over 110 in the seller`s market zone. Gilbert is catching up with Mesa and Chandler while Avondale has consolidated its place at the top of the table. Paradise Valley continues to improve.

The cities doing significantly less well are Fountain Hills and Cave Creek. The others losing ground are only down 4% or less.

October 11 - Let us take a look at how the single-family luxury market fared during the third quarter. We will count homes that were listed for $500,000 or more and closings through ARMLS only. Our comparison period will be the third quarter of 2016.

Supply:

Looking at active listings excluding those in AWC or CCBS status as of October 1, the total number declined by 4% from 4,096 to 3,946. The decline was 6% in the price range from $500,000 to $1 million, from 2,667 to 2,508. The price range from $1 million to $2 million increased slightly from 916 to 920 while the price range over $2 million increased 1% from 513 to 518.

Demand:

Third quarter closings were up a very strong 22% from 1,500 to 1,835. The increase was greatest over $2 million where closings rose 33% from 48 to 64. The range between $1 million and $2 million was next with an increase of 24% from 211 to 262. Between $500,000 and $1 million closings increased 22% from 1,241 to 1,509.

Supply versus Demand:

  • The price range from $500,000 to $1 million went from 6.5 to 5.0 months of inventory based on the quarterly sales rate
  • The price range from $1 million to $2 million went from 13.0 to 10.5 months of inventory
  • The price range over $2 million went from 32.1 to 24.3 months of inventory

Pricing:

  • Despite a significant improvement in the inventory position, the price range between $500,000 and $1 million only managed a 0.7% increase in average $/SF from $192.47 to $193.89
  • The price range from $1 million to $2 million fared worse, with the average $/SF dropping 1.2% from $280.84 to $277.39
  • The price range over $2 million saw a 14.3% decline in average $/SF from $455.43 to $390.34

The overall pricing for single-family homes over $500,000 declined 0.6% from $224.12 to $222.67

In summary, it was a great quarter for sales volume, but for pricing it was not good at all. Having said that, some ZIP codes did much better than others.

Average $/SF was at least 10% higher in 85018, 85020, 85234, 85250, 85254, 85298, 85377 and 85383 when compared with 3Q 2016. However several of these are ZIP codes with only a small number of luxury sales. The large ZIP codes did not do well, with 85255 down 4% and 85262 down 6%.

October 10 - We now have the preliminary September recording data for Maricopa County and can report the following data.

  • The overall monthly median sales price was $251,000, unchanged from August but up 3.3% from September 2016.
  • The new home median sales price was $331,188, up 3.1% from September 2016
  • The re-sale median sales price was $239,900, up 4.3% from September 2016
  • The total sales count was 8,933, up 1.5% from September 2016 (which benefited from an extra working day)
  • The new home sales count was 1,388, up 9.4% from September 2016
  • The re-sale home sales count was 7,545, up 0.2% from September 2016

New homes continue to out-perform re-sales in volume, but not in pricing.

Note that the median sales price for new homes and re-sales are not comparable since the average new home is much larger than the average re-sale home.

October 9 - On October 6 we published a comprehensive analysis by ZIP code of the annual change in annual average price per sq. ft. for single family homes in the Greater Phoenix area.

Today we are doing the same for condos & townhomes. There are far fewer ZIP codes that qualify based on our minimum 2,000 homes, but we need to apply this minimum to ensure the results are meaningful. Below this level the sample size is just too small to give us results we can truly rely on.

RankCityZIPCondos & TownhomesAppreciation RateCurrent Annual Average $/SF
1Phoenix 85014 3,527 24.2% $159.08
2Phoenix 85008 2,528 23.3% $135.92
3Phoenix 85015 3,300 20.8% $90.39
4Mesa 85201 3,597 19.4% $122.20
5Phoenix 85016 5,743 17.8% $225.91
6Glendale 85301 3,182 14.6% $73.07
7Mesa 85206 2,751 13.3% $128.18
8Mesa 85210 3.170 13.2% $118.33
9Mesa 85202 4,171 13.1% $114.97
10Tempe 85282 3,298 13.0% $138.57
11Scottsdale 85257 2,764 12.6% $141.94
13Sun City 85351 8,135 12.5% $91.96
14Chandler 85225 3,221 12.4% $135.83
15Phoenix 85032 4,246 11.6% $131.63
17Scottsdale 85251 12,063 11.5% $227.26
19Phoenix 85018 3,869 10.2% $179.82
20Phoenix 85022 3,290 10.2% $125.93
21Phoenix 85020 5,740 9.3% $147.00
22Fountain Hills 85268 4,579 8.7% $172.50
23Phoenix 85013 2,026 8.0% $158.45
24Scottsdale 85254 2,632 7.7% $247.83
25Tempe 85283 2,807 7.6% $141.50
26Mesa 85209 3,125 7.2% $141.02
27Scottsdale 85260 6,634 7.1% $191.05
28Phoenix 85044 2,402 7.0% $149.90
29Tempe 85281 5,350 6.0% $183.20
30Scottsdale 85250 6,125 5.5% $186.66
31Sun City West 85375 2,780 5.1% $108.82
32Chandler 85224 2,539 4.3% $149.09
33Scottsdale 85258 7,532 3.2% $210.38
34Scottsdale 85255 3,805 -1.0% $215.40

In general, condos and townhomes have appreciated faster than single-family homes over the past 12 months. Central areas of Phoenix and Mesa have seen the biggest rises. Least favorable was 85255 which saw a small decline. Pricing in 85301 remains far below average but is catching up.

October 6 - At the ZIP Code level, the monthly average price per square foot is not terribly useful. Most ZIP codes are too small to have sales rates that give us enough samples to get a realistic price per sq. ft. over just one month. The average ZIP code in Maricopa County has 9,718 single family homes, condos or townhomes. There are a few ZIP codes that are much larger than average. Examples would be 85255 with 19,121, 85308 with 21,286, 85383 with 20,389, 85351 with 20,626, 85375 with 18,650, 85225 with 19,538 and 85032 with 20,399. Others are tiny, such as 85004 with only 1,288 homes and 85034 with only 851.

The answer is to take averages over a longer time frame, such as a year. However with the tiny ZIP codes, even this yields too small a sample to be very useful. So ignoring ZIP codes with fewer than 2,000 single-family homes, here is the ranking of ZIP codes by the annual change in annual average $/SF for single-family homes:

RankCityZIPSingle Family HomesAppreciation RateCurrent Annual Average $/SF
1Phoenix 85009 8,208 18.9% $111.17
2Coolidge 85128 3,827 17.9% $70.76
3Wickenburg 85390 2,599 15.7% $148.29
4Phoenix 85040 6,245 13.8% $110.24
5Mesa 85201 6,552 13.3% $135.97
6Phoenix 85035 8,808 12.8% $108.34
7El Mirage 85335 9,439 12.8% $109.14
8Eloy 85131 2,690 12.3% $110.20
9Phoenix 85051 9.653 12.0% $113.86
10Phoenix 85041 15,428 12.0% $107.98
11Sun City 85351 12,491 11.6% $112.22
12Arizona City 85123 3,668 11.6% $80.57
13Phoenix 85031 5,816 11.5% $98.15
14Phoenix 85033 11,130 11.5% $107.48
15Florence 85132 6,339 10.9% $91.80
16Avondale 85323 10,139 10.6% $106.73
17Scottsdale 85250 3,382 10.5% $233.43
18Peoria 85345 14,734 10.3% $124.06
19Phoenix 85027 9,294 10.2% $143.57
20Buckeye 85326 16,945 10.0% $101.89
21Glendale 85301 7,165 9.9% $103.20
22Surprise 85387 5,029 9.8% $142.39
23Phoenix 85017 5,650 9.6% $103.97
24Mesa 85204 12,100 9.4% $136.55
25Casa Grande 85194 2,223 9.2% $123.24
26Phoenix 85006 5,090 9.1% $186.71
27Phoenix 85019 5,594 9.1% $104.72
28Phoenix 85043 7,764 9.1% $106.50
29Casa Grande 85122 13,044 9.0% $85.60
30Phoenix 85029 10,124 9.0% $123.98
31San Tan Valley 85143 13,701 9.0% $97.01
32Phoenix 85015 5,441 8.9% $145.03
33Phoenix 85037 12,226 8.8% $105.92
34Mesa 85213 8,393 8.8% $139.62
35San Tan Valley 85140 11,268 8.8% $110.30
36Phoenix 85053 7,809 8.7% $123.71
37Scottsdale 85257 7,239 8.7% $195.65
38Litchfield Park 85340 9.148 8.6% $126.68
39Surprise 85378 2,340 8.6% $121.47
40Glendale 85302 8,914 8.6% $116.71
41Apache Junction 85120 5,362 8.6% $123.72
42Apache Junction 85119 4,775 8.4% $134.96
43Chandler 85225 16,317 8.4% $149.17
44Surprise 85379 14,467 8.4% $109.85
45Goodyear 85338 16,631 8.3% $120.05
46Mesa 85215 5,084 8.2% $151.78
47Phoenix 85008 6,940 8.2% $159.85
48Maricopa 85139 4,643 8.0% $85.37
49Mesa 85212 10,852 8.0% $127.53
50Queen Creek 85142 19,969 8.0% $125.12
51Peoria 85381 7,207 7.9% $133.19
52Laveen 85339 12,399 7.9% $105.96
53Gilbert 85298 12,788 7.9% $153.37
54Avondale 85392 10.730 7.7% $113.85
55Mesa 85203 7,848 7.7% $132.59
56Tolleson 85353 9,723 7.5% $101.38
57Sun City 85373 7,089 7.5% $116.05
58Glendale 85310 7,043 7.4% $146.79
59Mesa 85208 8,324 7.3% $128.45
60Tempe 85281 5,557 7.3% $177.17
61Mesa 85209 11,109 7.1% $134.51
62Mesa 85202 6,943 7.1% $141.29
63Gold Canyon 85118 6,242 7.1% $157.81
64Glendale 85306 6,625 7.0% $132.27
65Surprise 85388 9,173 6.9% $107.70
66Mesa 85206 9,245 6.9% $132.82
67Peoria 85383 19,973 6.8% $144.87
68Mesa 85210 5,739 6.7% $135.75
69Tempe 85282 10,209 6.6% $153.45
70Scottsdale 85254 14,623 6.6% $202.84
71Phoenix 85007 3,011 6.6% $186.08
72Glendale 85303 7,895 6.6% $114.37
73Maricopa 85138 13,991 6.4% $89.16
74Waddell 85355 3,719 6.3% $115.21
75Phoenix 85028 7,165 6.2% $186.19
76Chandler / Sun Lakes 85248 13,608 6.2% $158.84
77Glendale 85308 20,170 6.2% $143.35
78Scottsdale 85251 5,574 6.1% $268.13
79Scottsdale 85266 5,711 6.0% $235.50
80Sun City West 85375 15,870 5.9% $131.65
81Gilbert 85234 14,569 5.9% $145.37
82Gilbert 85233 11,342 5.8% $146.81
83Phoenix 85023 7,976 5.8% $141.72
84Phoenix 85021 6,522 5.8% $173.86
85Phoenix 85032 16,153 5.8% $161.21
86Phoenix 85083 6,342 5.7% $138.78
87Phoenix 85024 7,124 5.7% $156.53
88Chandler 85226 11,108 5.6% $162.68
89Phoenix 85018 9,303 5.6% $289.95
90Surprise 85374 16,627 5.5% $134.55
91Glendale 85304 8,368 5.4% $122.31
92Gilbert 85296 14,257 5.3% $141.03
93Scottsdale 85260 9,118 5.2% $214.18
94Phoenix 85022 10,371 5.1% $153.27
95Mesa 85205 11,598 5.1% $136.25
96Chandler 85249 15,940 5.1% $147.06
97Chandler 85224 11,505 4.9% $153.62
98Scottsdale 85259 7,522 4.8% $225.40
99Cave Creek 85331 11,715 4.8% $186.90
100Anthem / Phoenix 85086 14,279 4.8% $145.72
101Phoenix 85016 6,858 4.8% $219.65
102Mesa 85207 14,399 4.8% $159.31
103Phoenix 85020 7,269 4.7% $185.68
104Glendale 85305 2,984 4.7% $118.52
105Phoenix 85042 10,513 4.7% $127.59
106Gilbert 85295 12,829 4.5% $135.48
107Paradise Valley 85253 6,668 4.3% $353.90
108Phoenix 85045 2,771 4.2% $149.32
109Phoenix 85014 4,105 4.2% $194.48
110Chandler 85286 12,352 4.1% $151.16
111Peoria 85382 12,874 4.0% $136.17
112Phoenix 85050 8,812 4.0% $178.57
113Goodyear 85395 11,204 3.9% $135.94
114Scottsdale 85258 6,395 3.9% $239.34
115Tempe 85283 9,312 3.5% $153.70
116Buckeye 85396 8,547 3.5% $121.86
117Phoenix 85013 4,221 3.0% $191.97
118Tempe 85284 6,009 2.9% $173.43
119Gilbert 85297 9,881 2.8% $138.21
120Phoenix 85085 6,417 2.2% $142.01
121Phoenix 85048 10,509 2.1% $159.32
122Phoenix 85044 10,796 1.2% $162.14
123Fountain Hills 85268 8,446 1.2% $201.21
124New River 85087 2,867 0.8% $139.12
125Scottsdale 85255 15,316 -0.1% $281.13
126Scottsdale 85262 6,964 -2.1% $264.33

These are meaningful numbers and tell us a number of stories.

Generally the more glamorous and sought after ZIP codes are doing the least well for appreciation. The prime examples would be 85255 and 85262 which are the only 2 ZIP codes that show depreciation over the past year.

The inverse is also generally true. It is hard to imagine 2 less glamorous ZIP codes than than 85009 and 85128 yet they are doing extremely well from an investment point of view.

There are notable exceptions to this pattern. One expensive ZIP code has experienced strong appreciation over the past 12 months, and that is 85250. There also some cheaper locations that have seen relatively weak appreciation, including 85087, 85297, 85396 and 85395.

Ahwatukee (85044, 85045, 85048) and Fountain Hills are obvious examples of areas that are appreciating slower than people might expect. In contrast, Wickenburg, Arizona City and Florence are appreciating much faster than people might have expected.

For the data in chart form by ZIP code see here.

October 5 - The Cromford Market Index table for the single-family markets in the 17 largest cities by dollar volume is shown below:

Here we see 9 cities improving for sellers and 8 deteriorating. A little more balanced than we have seen for some time.

The largest improvement by far is in Avondale which has consolidated its place at the top of the table one more.

Other cities showing good improvements for sellers are Gilbert, Paradise valley, Maricopa and Buckeye.

Fountain Hills, Cave Creek and Mesa are seeing the biggest pull backs.

This is still very much a seller's market with Buckeye now only hair's breadth away from exceeding the 110 mark.

October 4 - The overall supply has been very weak for a long time now, though the high-end remains well supplied with plenty of homes for sale. Some areas have changed quite a bit over the past year while other have remained stable. We can see the biggest changes by studying the Cromford® Supply Index for the individual cities. Ranking from lowest to highest supply we currently have:

  1. Arizona City - 39.5
  2. Tolleson - 42.6
  3. Avondale - 44.9
  4. El Mirage - 45.1
  5. Anthem - 47.3
  6. Sun City West - 48.8
  7. Apache Junction - 51.3
  8. Chandler - 53.6
  9. Sun Lakes - 54.4
  10. Mesa - 56.2
  11. Sun City - 57.0
  12. Glendale - 57.1
  13. Gilbert - 57.2
  14. Surprise - 58.6
  15. Phoenix - 65.5
  16. Gold Canyon - 65.5
  17. Laveen - 65.8
  18. Casa Grande - 67.4
  19. Queen Creek - 69.3
  20. Litchfield Park - 70.9
  21. Fountain Hills - 72.3
  22. Peoria - 73.9
  23. Maricopa - 74.2
  24. Goodyear - 75.1
  25. Scottsdale - 75.2
  26. Cave Creek 77.7
  27. Tempe - 80.9
  28. Paradise Valley - 84.3
  29. Buckeye - 104.0

Remember that 100 represents normal and only one city (Buckeye) has a supply that is higher than normal (for Buckeye).

The changes over the past year have been:

  1. Chandler - down 29%
  2. Sun Lakes - down 28%
  3. Casa Grande - down 26%
  4. Anthem - down 25%
  5. Arizona City - down 24%
  6. Gilbert - down 22%
  7. Apache Junction - down 17%
  8. Sun City West - down 17%
  9. Mesa - down 16%
  10. Cave Creek - down 14%
  11. Laveen - down 13%
  12. Queen Creek - down 12%
  13. Tempe - down 12%
  14. Tolleson - down 11%
  15. Litchfield Park - down 7%
  16. Surprise - down 7%
  17. Scottsdale - down 6%
  18. Avondale - down 5%
  19. Glendale - down 4%
  20. Paradise Valley - down 4%
  21. Gold Canyon - down 2%
  22. Peoria - down 2%
  23. Maricopa - down 2%
  24. Phoenix - unchanged
  25. Buckeye - up 1%
  26. Goodyear - up 6%
  27. Fountain Hills - up 7%
  28. Sun City - up 11%
  29. El Mirage - up 33%

For buyers the supply situation has deteriorated the most in the Southeast Valley and Pinal County, while parts of the Southwest Valley (Goodyear and Buckeye) have eased, along with the Sun City and El Mirage area, although supply remains very tight compared with normal.

October 2 - The percentage of trustee auctions being won by a third-party reached 68.9% in September. This is the highest level since the bubble era in October 2005.

The remaining 31.1% of auctions failed to catch a bid and reverted to the beneficiary (i.e. lender). There were 60 of these. There were only 14 in October 2005 because in the bubble era, investors were even more active than now, picking off pre-foreclosures before they even got to the auction.

October 1 - The multi-family permits issued in August for Maricopa and Pinal Counties amounted to 1,240, the highest total since September 2016. This robust total after several weak months brings the 12 month total up to 9,722, much higher than the Blue Chip Forecast for 2017 which was only 7,153 in the second quarter of this year. It seems that multi-family permits refuse to conform to expectations of a decline.

The City of Phoenix is now way out in front in multi-family permits year-to-date:

  1. Phoenix - 2386
  2. Mesa - 716
  3. Chandler - 664
  4. Glendale - 471
  5. Tempe - 413
  6. Peoria - 408
  7. Goodyear - 336
  8. Surprise - 135
  9. Unincorporated Pinal County - 66
  10. Paradise Valley - 20
  11. Scottsdale - 13
  12. Fountain Hills - 6
  13. Apache Junction - 4

Please note that the census definition of multi-family includes residential buildings from duplexes upwards.

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