Cromford Report

 

To View Monthly Observations from The Cromford Report, Click HERE

 

Daily Observations from The Cromford Report

September 2018

September 19 - The number of listings under contract is surprisingly low considering all the other readings on the market. We are some 9% below the count for this time last year and that was some 6% below 2016. The last time we saw a year-over-year increase for listings under contract was at the end of April.

While this situation persists it would be a mistake to think we are in a market with strong demand.

We are in a seller's market but that is not the same thing - the seller's current advantage is created by weak supply, not strong demand.

September 18 - It appears that Californians are back in force buying up Arizona homes, comprising 7.2% of all buyers in Maricopa County during August. However we need to remember that Opendoor counts as a Californian buyer and they represent about 33% of all sales to Californians at the moment. So we need to subtract their purchases before we can make a year over year comparison.

Having taken this extra step, we see that Californian buyers took a 5.1% market share during August, excluding Opendoor. In August 2017 the equivalent percentage was 4.2%. Thus there is a growing trend, but it is not quite as big as we might have assumed. California is almost always the largest source of out-of-state buyers and that is true more than ever in 2018.

Washington buyers have increased their share from 1.4% to 1.7% over the past year, but this includes Zillow, based in Washington. Subtracting their purchases brings us back to 1.6% which is still something, but again not quite as substantial as initial analysis suggests. Washington is in second place to California.

We don't have to make an allowance for OfferPad since they are based right here in Gilbert, Arizona.

Colorado is another strong state for our buyers but they have not increased their share (1.2%) since last year. Illinois has edged up from 0.9% to 1.0%.

All other US states increased from 7.2% to 7.7%. None of these individual states has as much impact as California, Washington, Colorado or Illinois, which are the biggest long term sources of out-of-state buyers.

Foreign buyers have become very scarce. Even Canadians who were buying as much as 6% in 2011 and rivalling California for impact on our market. Canadian buyers are down below 0.4% at the moment. This is not a new phenomenon. They were below 0.4% in August 2016 and August 2017 too.

September 17 - Reports from other parts of the country suggest the following trends:

  1. A significant reduction in demand from Chinese buyers.
  2. Continued strong demand for entry-level homes
  3. Declining demand for discretionary move-up and luxury homes

These trends do not appear to match what we are seeing in the Greater Phoenix area.

For one thing, we have never had much demand from Chinese buyers so even if their demand disappeared completely we would hardly notice. The Phoenix metropolitan area is the 12th largest in the USA, but it does not register in the conscious mind of the typical Chinese person. Before you think that is strange, let me ask you what you know about the 12th largest metropolitan area in China. The first question is what is it called? - Shenzhen being the correct answer. With a metro population of well over 23 million it is roughly 6 times the size of the Greater Phoenix area. I imagine few Arizona residents have ever thought much about it, never mind considered buying a home there. The same applies in reverse.

We are seeing much stronger growth in demand for luxury home this year than in 2017. Below we compare sales during the first 2 weeks of September:

  • Total sales (all types) - 2,864 in 2018, 2,556 in 2017 - up 12%
  • Under $250K - 1,310 in 2018, 1,357 in 2017 - down 3%
  • $250K to $400K - 1,033 in 2018, 814 in 2017 - up 27%
  • $400K to $800K - 427 in 2018, 317 in 2017 - up 34%
  • $800K and up - 94 in 2018, 68 in 2017 - up 38%

No evidence there of declining demand for move-up and luxury homes. Entry level sales are down a little but that could be due to the limited availability of homes to buy at that price level.

I would therefore caution you not to assume that anything going on in the wider housing market applies to Greater Phoenix.

September 14 - We are still examining the changes that took place in the single-family market between August 1 and September 1, but this time we will segment the market by price rather than location.

The first thing that strikes us is that supply increased for homes at or under $400,000, but decreased for homes over $400,000. It is a very long time since we have said anything like that, so something different seems to be going on.

  • active listings at or under $400,000 without a contract grew 9% from 6,610 to 7,187
  • active listings over $400,000 without a contract fell 0.3% from 5,304 to 5,288

The big drop in supply was for homes between $1.5M and $2M which fell by 11%. This has been a heavily over-supplied sector in the recent past.

  • monthly sale for homes at or under $400,000 fell 7% from 5,391 to 5,038
  • monthly sales for homes over $400,000 grew 2% from 1,505 to 1,536

This analysis confirms our observations on September 12. The low to mid-range market is seeing rising supply and falling sales while the higher mid-range and luxury market is doing the opposite. This is the reason why the West Valley, with a large share of the most affordable homes, was the weakest areas during August.

About 78% of single-family sales in Greater Phoenix are priced at or below $400,000, so if this market loses steam, it will not be fully compensated by strength at the higher end.

One month does not make a trend, but we should keep our eyes on the low-to-mid-range market over the next few months.

September 13 - Below we show the Cromford® Market Index for the single-family markets in the 17 largest cities:

Here we a gradually deteriorating market from a seller's perspective. The average change of the last month is only -2.3%, but the decline is widespread with 12 of the 17 cities showing some deterioration and only 5 improving for sellers.

Cave Creek is the stand-out with a gain of 9% while Glendale and Fountain Hills saw the largest declines.

Despite this, every city is still a seller's market and well above the balanced zone of 90-110.

September 12 - We saw yesterday that the largest changes for the single-family market between August 1 and September 1 took place in the West Valley. Today we will look at the individual ZIP codes within the West Valley.

Area Active Listings (excl. UCB/CCBS) Aug Active Listing (excl. UCB/CCBS) Sep Change Sales Jul Sales Aug Change Months of Supply Aug Months of Supply Sep Change
Glendale 85301 46 46 none 34 29 down 15% 1.6 2.1 up 30%
Glendale 83302 52 48 down 8% 34 40 up 18% 2.0 1.8 down 9%
Glendale 85303 37 35 down 5% 43 32 down 26% 1.1 1.7 up 57%
Glendale 85304 46 59 up 28% 42 37 down 12% 1.5 1.9 up 32%
Glendale 85305 26 25 down 4% 16 14 down 12% 2.1 2.5 up 18%
Glendale 85306 34 42 up 24% 38 26 down 26% 1.1 1.7 up 55%
Glendale 85307 24 21 down 12% 8 5 down 37% 3.4 5.0 up 48%
Glendale 85308 180 168 down 7% 110 98 down 11% 2.1 2.3 up 6%
Glendale 85310 74 77 up 4% 46 37 down 20% 1.9 2.8 up 14%
Avondale 85323 60 61 up 2% 64 45 down 30% 1.3 2.0 up 58%
Buckeye 85326 192 197 up 3% 173 145 down 16% 1.5 1.8 up 17%
El Mirage 85335 44 44 none 63 37 down 41% 0.9 1.6 up 70%
Goodyear 85338 223 241 up 8% 109 116 up 6% 2.4 2.4 down 1%
Laveen 85339 97 122 up 26% 78 77 down 1% 1.6 2.0 up 12%
Litchfield Park 85340 124 137 up 11% 62 55 down 12% 2.4 2.9 up 19%
Peoria 85345 76 82 up 8% 67 72 up 8% 1.5 1.5 none
Sun City 85351 47 66 up 40% 69 59 down 15% 1.1 1.4 up 31%
Tolleson 85353 79 69 down 13% 70 64 down 9% 1.4 1.3 down 1%
Tonopah 85354 8 7 down 12% 5 1 down 80% 1.6 8.0 up 400%
Waddell 85355 62 63 up 2% 24 32 up 33% 3.3 2.4 down 28%
Wittmann 85361 25 29 up 16% 13 9 down 31% 2.6 3.8 up 44%
Youngtown 85363 6 10 up 67% 13 11 down 15% 0.7 1.6 up 136%
Sun City 85373 68 61 down 10% 45 36 down 20% 1.9 2.2 up 18%
Surprise 85374 85 94 up 11% 86 86 none 1.4 1.5 up 10%
Sun City West 85375 83 97 up 17% 91 83 down 9% 1.4 1.6 up 16%
Surprise 85378 20 39 up 95% 16 8 down 50% 1.6 5.6 up 246%
Surprise 85379 168 192 up 14% 124 106 down 15% 1.7 2.2 up 29%
Peoria 85381 59 56 down 5% 39 25 down 36% 1.8 3.2 up 76%
Peoria 85382 92 110 up 20% 55 69 up 26% 2.2 2.0 down 11%
Peoria 85383 418 440 up 5% 172 139 down 19% 2.7 3.6 up 30%
Surprise 85387 90 100 up 11% 30 28 down 7% 1.5 1.9 up 14%
Surprise 85388 103 120 up 17% 72 76 up 6% 1.8 1.9 up 6%
Avondale 85392 79 80 up 1% 67 55 down 18% 1.5 1.9 up 28%
Goodyear 85395 131 148 up 13% 61 53 down 13% 2.6 3.3 up 26%
Buckeye 85396 167 170 up 2% 76 81 up 7% 2.5 2.4 down 3%

We see only 6 ZIP codes with lower months of supply than a month earlier. There is a general trend in favor of buyers when we see active listings up 7% in a month with 11% fewer sales despite the maximum number of working days (23). August is not expected to be a strong month, but the cooling is surprisingly strong in locations such as:

  • Glendale 85303, 85306 and 85307
  • Avondale 85323
  • El Mirage 85355
  • Tonopah 85354
  • Wittmann 85361
  • Youngtown 85363
  • Surprise 85378
  • Peoria 85381

We have become used to reporting strong markets at the low end and weaker ones at the top over the last 6 years. However there are distinct signs of a change going on. The top end is strengthening while the low to medium price ranges are cooling, albeit from a very strong situation. Supply is still weak (though improving) in the West Valley, so the market has a long way to go before it gets back to balance. However there are some signs of consolation for West Valley buyers in the above table.

If the entry-level market were very strong we would expect the West Valley to be the top performing area. Between August 1 and September 1, the opposite was the case.

September 11 - Here is how the major areas changed between August 1 and September 1

Area Active Listings (excl. UCB/CCBS) Aug Active Listing (excl. UCB/CCBS) Sep Change Sales Jul Sales Aug Change Months of Supply Aug Months of Supply Sep Change
Central Valley 2,810 2,892 up 2.9% 1,461 1,509 up 3.3% 2.4 2.3 down 1.0%
Northeast Valley 2,166 2,183 up 0.8% 632 612 down 3.2% 4.0 4.1 up 2.1%
Southeast Valley 2,578 2,696 up 4.6% 2,027 1,892 down 6.7% 1.7 1.9 up 9.6
West Valley 3,125 3,356 up 7.4% 2,119 1,888 down 10.9% 1.8 2.2 up 19.5

The numbers are for single-family detached homes only.

We see that the deterioration in the market for sellers was concentrated in the West Valley - adding more listings without contracts than any of the other 3 are and showing a bigger drop in monthly sales rate too.

The Central Valley saw an increase in sales with a higher percentage than the increase in supply. It was therefore the area with the best trends for seller. The Northeast valley saw very little increase in supply, but there was a 3.2% drop in the sale rate. It was therefore the second best region from a seller's perspective.

The Southeast valley started and ended with the tightest supply, but it did see a 4.6% increase in active listings coupled to a 6.7% drop in sales. These trends went in the buyer's favor but not as much as in the West Valley.

September 10 - If you feel like the luxury market has improved a lot during the past year you are not mistaken. Excessive supply between 2015 and 2017 was a drag on the market keeping prices weak and inhibiting sellers during negotiations. The supply has been trending lower over the past year but the biggest change has been a surge in demand.

For the annual period that ended on August 31, we saw $8.4 billion spent on homes over $500,000 in Greater Phoenix. This is a huge 24.7% increase over the prior 12 months and almost entirely due to a 24.2% increase in the number of homes sold. The average price of these homes only rose by 0.4%.

The largest percentage increases in high-end dollar volume are to be seen in:

  1. Phoenix 85006 - up 384% (12 sales over $500K)
  2. Scottsdale 85257 - up 157% (40 sales)
  3. Rio Verde - up 163% (76 sales)
  4. Phoenix 85022 - up 142% (48 sales)
  5. Buckeye 85396 - up 132% (31 sales)
  6. Waddell 85355 - up 129% (22 sales)
  7. Surprise 85387 - up 121% (26 sales)
  8. Phoenix 85003 - up 105% (64 sales)
  9. Phoenix 85042 - up 95% (31 sales)
  10. Chandler 85224 - up 94% (23 sales)
  11. New River 85087 - up 91% (18 sales)
  12. Phoenix 85032 - up 85% (29 sales)
  13. San Tan Valley 85140 - up 85% (22 sales)
  14. Surprise 85379 - up 77% (14 sales)
  15. Phoenix 85008 - up 66% (13 sales)
  16. Mesa 85213 - up 65% (82 sales)

We excluded locations with fewer than 10 sales in the last 12 months from this table.

Few of these are generally regarded as top luxury home locations. The fact is that a rising price wave is pushing homes into the over-$500K bracket all over the place. We have more ZIP codes joining the over-half-million club, with homes selling for more than $500,000 in the following relatively inexpensive locations

  • Phoenix 85009
  • Casa Grande 85122
  • Coolidge 85128
  • Maricopa 85138
  • Maricopa 85139
  • Casa Grande 85194
  • Mesa 85208
  • Glendale 85301
  • Glendale 85307
  • Peoria 85382
  • Avondale 85392

We also see strong rises in dollar volume in most of the traditional luxury areas:

  1. Fountain Hills 85268 - up 40%
  2. Scottsdale 85262 - up 24%
  3. Scottsdale 85255 - up 23%
  4. Paradise Valley - up 23%
  5. Phoenix 85018 - up 20%

There were a few exceptions, with Carefree 85377 down 1% and Scottsdale 85259 down 7%.

September 7 - Our regular examination of the Cromford® Market Index for the single-family markets in the 17 largest cities is shown below:

We see an average decline of 3% in the CMI, telling us that the market is not quite as favorable for sellers as it was a month ago. 6 cities have improved for sellers but 11 have deteriorated.

Glendale, Goodyear, Queen Creek, Maricopa, Mesa and Fountain Hills saw the largest declines while Cave Creek was the only city showing strong improvement.

Despite the general trend, every city is still a seller's market and it would take many months of this trend before buyers start to flex their negotiation power.

September 6 - We often get asked what percentage of the market has been captured by the iBuyers (Opendoor, OfferPad and Zillow). The answer is not too hard to calculate but it does depend on what you define as "the market". The simplest calculation is to take all sales of single-family or condo/townhouses within Maricopa and Pinal County. However this includes new home sales which are not part of the market where iBuyers operate. Trustee sales, bank owned sales, GSE REO sales and HUD sales should probably be excluded from the market too, even though it is possible for an iBuyer to acquire a home through these channels.

Here is a table showing market share over the past 24 months, using the 2 different definitions of "the market":

Month OfferPad Purchases Opendoor Purchases Zillow Purchases Total iBuyer Purchases % All Sales % Sub market
Aug 2016 23 147   170 1.65% 2.00%
Sep 2016 39 139   178 1.82% 2.26%
Oct 2016 38 155   193 2.10% 2.54%
Nov 2016 45 191   236 2.59% 3.24%
Dec 2016 37 112   149 1.54% 1.98%
Jan 2017 34 60   94 1.17% 1.41%
Feb 2017 63 65   128 1.50% 1.84%
Mar 2017 57 60   117 0.97% 1.17%
Apr 2017 60 82   142 1.28% 1.53%
May 2017 58 131   189 1.51% 1.78%
Jun 2017 98 182   280 2.25% 2.67%
Jul 2017 84 160   244 2.39% 2.86%
Aug 2017 119 149   268 2.44% 2.96%
Sep 2017 117 161   278 2.79% 3.45%
Oct 2017 120 209   329 3.35% 4.09%
Nov 2017 99 236   335 3.46% 4.28%
Dec 2017 84 217   301 3.09% 3.88%
Jan 2018 67 229   296 3.52% 4.26%
Feb 2018 76 245   321 3.45% 4.14%
Mar 2018 78 265   343 2.73% 3.27%
Apr 2018 81 274   355 3.00% 3.52%
May 2018 125 282 3 410 3.15% 3.75%
Jun 2018 115 298 16 429 3.51% 4.18%
Jul 2018 98 294 31 423 3.77% 4.53%
Aug 2018 109 280 44 433 3.86% 4.63%

The August 2018 numbers are based on preliminary unverified data.

In rough terms, the iBuyers are now handling almost 1 in 20 of the available sellers in the Greater Phoenix market.

September 5 - Now let us take a look at average price per sq. ft. for new homes year-to-date:

  1. The New Home Company - $701
  2. Optima - $701
  3. Green Street - $296
  4. Statesman - $260
  5. Toll Brothers - $242
  6. Porchlight - $236
  7. Cachet - $232
  8. Highland - $232
  9. Robson - $208
  10. David Weekley - $205
  11. Shea - $200
  12. K Hovnanian - $194
  13. Blandford - $191
  14. VIP - $186
  15. Farnsworth - $184
  16. Taylor Morrison - $168
  17. Maracay - $168
  18. Mattamy - $161
  19. Towne - $157
  20. Bellago - $157
  21. Lennar - $156
  22. Woodside - $154
  23. Fulton - $152
  24. Richmond American - $148
  25. Pulte - $147
  26. William Ryan - $145
  27. Cresleigh - $145
  28. Ashton Woods - $139
  29. Elliott - $139
  30. Gehan - $138
  31. Meritage - $138
  32. William Lyon - $134
  33. KB - $132
  34. Beazer - $132
  35. Providence - $132
  36. Garrett Walker - $131
  37. Courtland - $130
  38. LGI - $124
  39. Pinnacle West - $121
  40. D R Horton - $120

It must be emphasized that land cost is an important part of the price of a new home. D R Horton achieves the lowest cost by focusing most of its development where land prices are lowest. Of the 1,332 closed sales year-to-date, 63% of them were in Buckeye, Maricopa or San Tan Valley.

September 4 - Here are the median sales prices for new homes in Maricopa and Pinal counties, sold between January and July 2018.

Developer Median Sales Price
The New Home Company $2,298,999
Toll Brothers $814,028
Optima $689,491
Porchlight $644,606
David Weekley $606,749
VIP $566,346
Green Street $552,164
Maracay $458,906
Cachet $434,499
Blandford $426,932
Mattamy $419,997
Highland $411,949
Shea $400,183
Robson $396,463
Taylor Morrison $391,055
Woodside $378,000
K Hovnanian $365,000
Cresleigh $362,066
William Ryan $356,934
Statesman $350,000
Gehan $340,765
Ashton Woods $340,698
Fulton $336,681
Farnsworth $330,031
Pulte $326,698
Lennar $316,190
William Lyon $310,093
Richmond American $309,715
Elliott $296,794
Meritage $288,008
Towne $284,353
Bellago $283,347
Beazer $281,480
KB $270,771
Pinnacle West $263,595
Courtland $263,129
Garrett Walker $259,923
Providence $230,495
D R Horton $220,000
LGI $212,900

There are many other entities but volumes for these were too small to calculate a reasonable median sales price.

Once again we can see how D R Horton and LGI are very targeted at the entry level homes where there is such a shortage of re-sale supply.

September 3 - Following up our post of August 31, here the top 25 developers in Maricopa and Pinal counties by YTD sales revenue recorded by the end of July:

  1. Lennar - $405M
  2. Taylor Morrison - $337M
  3. D R Horton - $306M
  4. Pulte - $251M
  5. Meritage - $203M
  6. Shea - $193M
  7. Mattamy - $164M
  8. Toll Brothers - $148M
  9. Fulton - $133M
  10. KB - $129M
  11. Ashton Woods - $122M
  12. Optima - $117M
  13. Robson - $109M
  14. Richmond American - $109M
  15. K Hovnanian - $104M
  16. Maracay - $103M
  17. William Lyon - $83M
  18. Blandford - $77M
  19. Beazer - $68M
  20. Woodside - $63M
  21. Garrett Walker - $60M
  22. LGI - $48M
  23. David Weekley - $47M
  24. Courtland - $40M
  25. Gehan - $40M

We note that Toll Brothers moves up from 19 by units to 8th by revenue due to their exclusive focus on higher-end homes.

In contrast D R Horton and KB drop down compared the unit table due to heavy focus on entry-level housing.

August 2018

August 31 - After 7 months of recordings between Jan 1 and July 31, here is the top 25 ranking by closed units for local developers:

  1. D R Horton - 1,332 closed homes
  2. Lennar - 1,137
  3. Taylor Morrison - 801
  4. Pulte - 715
  5. Meritage - 620
  6. KB - 469
  7. Shea - 420
  8. Mattamy - 397
  9. Fulton - 380
  10. Ashton Woods - 328
  11. Richmond American - 292
  12. William Lyon - 263
  13. K Hovnanian - 262
  14. Robson - 255
  15. Beazer - 237
  16. Garrett Walker - 228
  17. Maracay - 219
  18. LGI - 217
  19. Toll Brothers -170
  20. Woodside - 161
  21. Blandford - 159
  22. Courtland - 142
  23. Optima - 140
  24. Gehan - 114
  25. Pinnacle West - 96

The numbers are for Maricopa and Pinal counties only.

August 30 - Another look at the Cromford® Market Index table for the largest 17 cities (single-family only):

Here we see 11 cities deteriorating for sellers and 6 improving. The overall average is a decline of 2%. This week Cave Creek is the top advancing city with +7%. Glendale is going backwards fastest with -10%. Phoenix continues to drop slowly down the table.

Some of the smaller cities are looking more positive with some outstanding values for the CMI:

  • Arizona City - 385.7
  • El Mirage - 300.9
  • Sun Lakes - 259.1
  • Gold Canyon - 236.7
  • Tolleson - 216.2
  • Apache Junction - 204.2

If you want a high CMI these days its good to be in Pinal County or an inexpensive spot in the West Valley.

August 29 - The S&P / Case-Shiller® Home Price Index® number are now out for the sales during April through June. Comparing with last month, here is how the 20 featured metropolitan areas fared:

  1. Las Vegas +1.39%
  2. Detroit +1.04%
  3. Minneapolis +1.04%
  4. Cleveland +0.99%
  5. Boston +0.85%
  6. Chicago +0.77%
  7. Phoenix +0.74%
  8. Seattle 0.73%
  9. Portland +0.70%
  10. Miami +0.66%
  11. Atlanta +0.65%
  12. San Diego +0.60%
  13. Tampa +0.60%
  14. Denver +0.60%
  15. Charlotte +0.55%
  16. Washington +0.55%
  17. Los Angeles +0.53%
  18. San Francisco +0.47%
  19. Dallas +0.39%
  20. New York -0.07%

Phoenix slipped very slightly from 6th place last month to 7th this month and came in just below the national average of +0.77%.

On a year over year basis the ranking table looks like this:

  1. Las Vegas +13.0%
  2. Seattle +12.8%
  3. San Francisco +10.7%
  4. Denver +8.3%
  5. Los Angeles +7.4%
  6. Phoenix +7.2%
  7. Boston +7.1%
  8. San Diego +6.9%
  9. Tampa +6.9%
  10. Minneapolis +6.5%
  11. Detroit +6.4%
  12. Portland +5.8%
  13. Charlotte +5.7%
  14. Atlanta +5.7%
  15. Dallas +5.2%
  16. Miami +5.2%
  17. Cleveland +5.1%
  18. New York +3.8%
  19. Chicago +3.3%
  20. Washington +2.9%

Phoenix ranked 6th in this table, up from 7th last month and well above the national average of +6.2%.

August 28 - For the largest 17 cities you can see 2 years of comparative appreciation rates using the chart here.

We see that appreciation rates have tended to converge over the past 2 years, currently ranging from a low of 4.4% for Scottsdale to a high of 10.9% for Maricopa. Two years ago the range was much wider from a low of -4.8% for Paradise Valley to a high of 11.0% for Maricopa. Maricopa has not been on top for the whole period. Avondale was in the lead between April 2017 and May 2018.

The current ranking is:

  1. Maricopa 10.9%
  2. Avondale 8.2%
  3. Queen Creek 8.1%
  4. Mesa 8.0%
  5. Buckeye 7.9%
  6. Surprise 7.9%
  7. Glendale 7.7%
  8. Cave Creek 7.6%
  9. Phoenix 7.5%
  10. Paradise Valley 7.1%
  11. Gilbert 7.0%
  12. Chandler 6.8%
  13. Peoria 6.7%
  14. Tempe 6.5%
  15. Fountain Hills 5.5%
  16. Goodyear 4.7%
  17. Scottsdale 4.4%

All these numbers are for single-family detached homes only.

August 27 - The supply of active listings in 2018 (excluding those under contract) has followed a different trend depending on the dwelling type:

  • single-family - has fallen from a peak 13,498 on January 21 to 12,392 on August 24, a drop of 8.2%
  • condo / townhouse - has fallen from a peak of 2,561 on January 21 to 1,936 on August 24, a drop of 24.4%
  • mobile / manufactured - has fallen from a peak of 684 on January 13 to 431 on August 24, a drop of 37.0%

So single-family homes have retained a much higher percentage of their supply than condos or mobile homes.

The supply has also behaved differently by county:

  • Maricopa County - has fallen from a peak of 14,783 on January 20 to 13,254 on August 24, a drop of 10.3%
  • Pinal County - has fallen from a peak of 1,917 on February 10 to 1,429 on August 24, a drop of 25.5%

So Pinal County has seen far more of its supply disappear than Maricopa County has.

These effects are all due to average price points.

  • Pinal County is on average cheaper than Maricopa County
  • condo / townhouse properties are on average cheaper than single family homes
  • mobile / manufactured homes are on average cheaper than condo / townhouse properties

Although condo / townhouse properties are cheaper on average than single-family homes, this is purely because they are much smaller on average. The average price per sq. ft. for condo / townhouse properties is currently around $170, noticeably higher than the average price of single-family properties at around $160.

Whatever way you look at the market, inexpensive homes have become much harder to find over the last 7 months.

August 24 - The Cromford® Market Index for the single-family markets in the 17 largest cities:

Another table that suggests the market is slowly and slightly cooling down. The average change over the last month is -2% and we see 11 cities deteriorating for sellers with 6 improving. The general trend is an uptick in supply despite low numbers of new listings, coupled with continued weakness in homes going under contract compared with normal.

The Northeast Valley, represented by Paradise Valley (+9%), Scottsdale (+7%) and Cave Creek (+6%), is having the best of things, but Avondale, Buckeye and Chandler all managed a 3% gain.

The strongest declines are seen in Tempe (-10%), Glendale (-8%), Fountain Hills (-8%) and Gilbert (-7%).

Avondale has consolidated its position at the head of the table. Peoria and Tempe are a little way adrift at the bottom, but even these 2 cities remain in a seller's market over 110.

August 23 - The Census Bureau reported a total of 5,937 multi-family permits across Maricopa & Pinal counties for July 2018 year-to-date. This is the highest YTD number for July since 2007.

Phoenix and Tempe completely dominate the YTD numbers in 2018 with 2,118 and 2,021 respectively. Formerly very active, Scottsdale has faded into a distant third place with 505, while Chandler (387), Gilbert (205), Peoria (183) and Mesa (155) are the principal also-rans.

August 22 - The single-family permits for Maricopa & Pinal counties during July totalled 2,138 which is a 16% increase over July 2017. The annual run rate has increased to 22,079 which is the highest we have seen since February 2008. However it is still a lot lower than between 1997 and 2007 when it was consistently over 28,000 and usually over 33,000.

Many developers are trying harder to meet the demand for more affordable homes, which is probably why Unincorporated Pinal County is the number one source of permits this July with 300. The vast majority of these are located in the loosely defined area we know as San Tan Valley. The inexpensive areas of Buckeye and Maricopa also appear among the top 6 locations with 211 and 204 permits respectively. The top 6 are rounded out by Phoenix (250), Mesa (222) and Queen Creek (167).

Overall, the numbers suggest a mood of optimism among the developers, though moderated by caution based on their unhappy experience of 2007-2009.

August 21 - In the first 3 weeks of August we have seen fewer new listings appear than during the same 3 weeks last year. We currently count 6,147 which is 3.4% less than the 6,361 for last year. This gap seems to be widening because we saw a 1.4% drop after 2 weeks and a 0.3% increase after the first week.

The gap is visible for all dwelling types but is largest for mobile homes. We have seen only 111 versus 133 new mobile home listings which is a drop of over 16%.

The gap is also larger for Pinal County at 4.8% versus Maricopa County (3.2%).

August 20 - In most years the active listing count (excluding UCB and CCBS listings) hits a low point in August and then starts to rise until Thanksgiving. In 2018 we hit the low point slightly early in July and have already been drifting upwards for 4 weeks now. This might be considered a negative sign for sellers, but the change is so slight I would not want to make too big a deal out of it.

There are some areas that have seen a dramatic rise, often from abnormally low levels. Florence is probably the best example. At the end of June we had just 100 active listings without a contract, but since then the count has shot up 38%. The trend does not affect mobile homes, but single-family listings have jumped from 71 to 111, an increase of 56% in just 8 weeks. A similar but smaller event has occurred in Casa Grande and Coolidge. The only areas outside of Pinal County with a jump like this (albeit more moderate) are Litchfield Park and Surprise.

August 17 - We have examined the new listings for Greater Phoenix that arrived in the first 2 weeks of August. Overall we saw 4,079, down from 4,208 in the same period last year. The interesting stuff comes when we look at individual price ranges:

Price Range New Listings 2017 New Listing 2018 Change Sales Rate Change in Annual Sales Rate
Up to $150K 408 275 down 33% 8,697 down 20%
$150K to $200K 789 542 down 31% 17,257 down 13%
$200K to $250K 871 843 down 3% 20,496 up 6%
$250K to $300K 638 706 up 11% 15,044 up 10%
$300K to $400K 688 803 up 17% 16,376 up 12%
$400K to $500K 334 379 up 13% 7,639 up 14%
$500K to $1M 371 441 up 19% 7,711 up 14%
Over $1M 109 90 down 17% 1,882 up 19%

We see that the market under $200K is contracting fast with both new listings and sales falling. However the new listing arrival rate is falling faster than the sales rate.

From £200K to $250K we have sales up and new listings down, a market improving for sellers. From $250K to $1M the supply is growing at a similar rate to sales, with a couple of ranges getting a larger increase in supply than sales ($300K to $400K and $500K to $1M).

Over $1M the situation is vastly improved for sellers because supply has fallen while sales rate up by the largest percentage of any price range.

August 16 - Once again we show the Cromford® Market Index table for the single-family markets in the 17 largest cities:

Only 5 cities improved for sellers over the past month, 3 of them in the Northeast Valley. Once again Paradise Valley and Scottsdale were the biggest gainers.

Avondale has regained its place at the head of the table despite losing 1%. The Southeast Valley has lost the dominance it held in the early part of the year, with Tempe (down 14%) and Gilbert (down 8%) the biggest decliners. Only Mesa remains above 200 although it went backwards by 2%. Chandler managed a 1% advance.

All 17 cities remain seller's markets, but 12 out of the 17 weakened for sellers.

August 15 - The total number of active listings (including those in UCB or CCBS status) is 19,736 today for all areas & types across the ARMLS database. This is just slightly above June 15, 2011 when we saw 19,696. We have to go all the way back to October 2005 to find another 15th date (19,715) with lower active listings.

Active listing counts have been on a declining trend since April 2014 when we hit a short term peak of 30, 506. We would consider somewhere between 30,000 and 35,000 to be sufficient for a balanced market. The all-time record high for a 15th date is 58,195 in November 2007.

Even if we are hearing about signs of a fall in demand, mainly at a national level and in regions outside Arizona, supply is so low at the moment, demand would have to drop a lot more for us to reach a balanced (and smaller) market.

August 14 - Inspired by a question from Tracy Royce, we have created a new Tableau chart in Cromford® Public which allows you to examine the intended use stated on the Affidavits of Value by buyers in Maricopa and Pinal counties.

For the second quarter of 2018, the following breakdown is observed for Greater Phoenix as a whole:

  1. Owner Occupier (Primary Residence) - 74.0%
  2. Investor - 10.9%
  3. Second Home - 10.7%
  4. iBuyer - 3.2%
  5. Unknown - 1.2% (mostly trustee sales)

Since iBuyers are acting as intermediaries and create one extra transactions than we would have seen without them, we concluded that the overall sales count is 3.2% higher than it would have been normally. Their share in 2Q 2017 was 1.7%, in 2Q 2016 was 1.3% and in 2Q 2015 was 0.2%.

We can see that iBuyers are not involved with home sales over $500,000 nor with the new home market. Excluding those sales from the total, they currently have a 4% market share, up from 2.1% a year ago.

If we focus on the 55+ communities (both legally restricted and targeted by marketing), then we see a very different picture:

  1. Owner Occupier - 64.0%
  2. Second Home - 28.0%
  3. Investor - 6.3%
  4. Unknown - 1.0%
  5. iBuyer - 0.7%

Since the iBuyer buying process is fairly passive, we conclude that the owners of 55+ properties are far less attracted to the iBuyer web sites than the average seller. We also see that investors show far less interest in 55+ homes than average. However 55+ properties are very popular as second homes.

Investors are far more active purchasing condos (16.6%) than single-family homes (9.8%)

iBuyers have tended to prefer the opposite with a 2.5% share in condo purchases and a 3.3% share in single-family purchases.

Top cities for the percentage of purchases by iBuyers in 2Q 2018 were:

  1. Waddell - 10.6%
  2. Tolleson - 9.5%
  3. Anthem - 9.1%
  4. Laveen - 8.0%
  5. San Tan Valley - 6.1%
  6. Glendale - 5.2%
  7. Avondale - 4.9%
  8. Surprise - 4.9%
  9. Arizona City - 4.8%
  10. Buckeye - 4.8%

August 13 - Sometimes it can be revealing to examine a market by breaking it into just a few large geographic areas. Below is a table of some key statistics for single-family homes comparing August 2018 with August 2017.

Area Annual Change in Annual Sales Rate Annual Change in Active Listings (excluding UCB/CCBS) Annual Change in Days of Inventory
Central & North Valley +2.4% -1.5% -5.3%
Northeast Valley +6.3% -16.3% -19.7%
Pinal County +4.2% -16.5% -19.8%
Southeast Valley -0.1% -16.3% -16.3%
West Valley +2.3% -9.4% -12.3%

For sellers, every area has seen an improvement, but the Central & North Valley has seen by far the lowest percentage reduction in days of inventory. This is primarily due to a very small drop (-1.5%) in active listings compared to the rest of the valley.

The Northeast Valley and Pinal County have both seen a big improvement for sellers with an almost 20% drop in days of inventory. Both had a large 16% decline in active listings without a contract while they both saw strong increases in annual sales, with the Northeast the strongest of all.

The Southeast Valley saw a similar fall in active listings to Pinal County and the Northeast, but the annual sales rate has not managed any growth. It therefore lags behind the other two areas in positive movement for sellers.

The West Valley managed a similar increase in the annual sales rate to the Central Valley but saw a more significant drop in active listings.

Ranking the areas by improvement for seller's prospects we have:

  1. Pinal County
  2. Northeast Valley
  3. Southeast Valley
  4. West Valley
  5. Central & North Valley

It is surprising how different the areas are to one another and also how much the Northeast Valley has improved for sellers over the past 12 months.

August 10 - We have an unusually low number of listings under contract at the moment. Looking at the weekly chart for all areas & types we can see that in the last 10 years only 2008 and 2014 had lower counts at this point of the year. This is particularly unusual given that sales volume remains strong.

Certain cities have a significant shortfall of single-family contracts compared with last year:

  1. Fountain Hills - down 41%
  2. El Mirage - down 26%
  3. Avondale - down 24%
  4. Litchfield Park - down 21%
  5. Surprise - down 19%
  6. Sun City - down 18%
  7. Tempe - down 17%
  8. Glendale - down 16%
  9. Chandler - down 15%
  10. Casa Grande - down 15%

Fountain Hills had a large number of listings under contract in April, as many as 109, its highest count since 2012, but has slumped to just 41 as of this week.

Since the sales rates are holding up, you could argue that listings are closing more quickly or are being entered into ARMLS only after closing. This is certainly true of some listings, but since a drop in listings under contract is usually the first sign of a fall in demand, we are watching this situation closely. We suggest that you do too. As yet we are drawing no conclusions but we are wondering if the sales rate will follow suit over the next few months.

August 9 - The table below shows the Cromford® Market Index values for the single-family markets in the 17 largest cities by dollar sales volume.

We again see a big divergence between the Northeast Valley and the rest of the market.

The Northeast Valley continues to improve for sellers with a 26% increase in the CMI for Paradise Valley over the last month and a 10% rise for Scottsdale. Cave Creek has also gained a healthy 5% but Fountain Hills has started to fade after a very strong run over the past 3 months.

The rest of the market is looking a little bit tired. All cities are still seller's markets, but every city outside the Northeast (except Buckeye and Goodyear) showed at least a slight move in favor of buyers over the last month. Much of the change is due to weaker numbers of listings under contract. Tempe has also gained supply faster than normally expected for the season. Tempe, Gilbert and Avondale were the biggest losers. The change was modest for Mesa, Chandler, Surprise, Glendale, Phoenix and Queen Creek.

Supply remains very low, but has started to show early rises between $200,000 and $400,000.

It is unusual that Mesa should be top of the table while its close neighbor Tempe has hit the bottom. We are living in interesting times.

August 8 - Zillow has now purchased 62 homes and sold 10. All are in Maricopa County and none in Pinal.

The average purchase price of the 10 homes that have been sold was $309,700, which is just 0.4% below their average Zestimate of $311,036. The average sale price was $319,080, 2.3% higher than Zestimate. This means the average gross margin was 2.9%.

It took an average of 15 days to list the homes purchased, a further 23 days to get a contract and 20 days to close. These are lower numbers than the existing iBuyers (Opendoor and OfferPad), but remember we are only measuring the homes that sold, which by definition are the ones that sold quickly. There are plenty of homes that will take longer but are not closed yet.

Indeed, the first home purchased by Zillow is still active and has had no offers after 71 days and numerous Open House events. It has had 2 price reductions and is now on offer for $415,000 (having been purchased for $410,000). Zillow is offering an additional $2,500 commission to the buyer's broker on top of the 3% already offered.

There are now 10 listings in UCB status (the other iBuyers always use Pending status). There are 24 Active with no contracts and 18 not listed yet.

Zillow has announced a huge reduction in its targets for home sales in 2018. Forecast revenue is now down from $255 million to $40 million. They stated to investors that home closings are taking longer than anticipated.

August 7 - Between 2014 and 2016 we saw a strong upward trend in the supply of luxury homes, particularly in the Northeast Valley. That trend came to a halt in 2017 and we are now seeing a downward move. On August 1, 2018 we counted 2,365 single-family active listings (including UCB and CCBS) across the Northeast Valley and priced over $500,000. This is the lowest start-of-month count since September 2015 and is down 11% from a month ago and 8% lower than this time last year. The downward trend has gained momentum in the last 8 weeks.

Luxury buyers may have become used to having plenty of supply to choose from, and certainly supply is abundant compared with the market below $500,000. However supply is dropping faster than for several years and as a consequence sellers are gaining significant negotiation advantage. This is reflected in the rise in the Cromford® Market Index numbers for Scottsdale, Paradise Valley and Fountain Hills.

We normally see an increase in active listings from September through November but this is unlikely to change the narrative. Buyers of luxury homes have had their best times (the spring of 2016 was the peak) and their search is likely to become trickier over the next few months.

August 6 - The daily chart showing Average Annual Appreciation based on Monthly Average $/SF has been unusually stable for the last 6 months. The appreciation rate (by this measure) has stayed very close to 8% with only slight dips to 7% and occasional surges towards 10%.

If home prices are rising by 8% a year, then they are getting much less affordable. Average incomes are rising by something like a quarter of this rate. Rents are also rising at a steep rate (see charts below). The cost of shelter is rising as a percentage of income.

The effect is to make existing home owners feel more wealthy since their equity is growing fast. However, the incentive for people to move up and the enthusiasm of first-time buyers is in gradual decline. We have a low Cromford® Supply Index because remarkably few people wish to sell their house. We also have a declining Cromford® Demand Index because fewer people are trying to buy. At the moment demand remains much higher than supply across most sectors, so it feels like we have strong demand. Do not be fooled. The CSI stands at 59.1, the lowest level since 2015, but the CDI is at 96.5, the lowest level since March 2015. This is a key reason why we do not have bubble conditions (in which demand rises artificially due to speculation).

August 2 - The table showing the Cromford® Market Index values for the single-family markets in the largest 17 cities appears below.

 

There is a surprising amount of movement here. First we should point out that every one of the 17 cities is a seller's market. However only 7 of the 17 saw improvement for sellers over the past month and 10 saw deterioration.

 

Once again the biggest moves upward came from the Northeast with Paradise Valley up a staggering 32% and Scottsdale up 11%.

The biggest decliners were Tempe down 17% and Avondale down 12%.

Mesa remains on top for the second week, even though it took a 1% hit over the month.

 

Sign up for email updates