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September 15 - Mid Month Pricing Update and Forecast

Mid Month Pricing Update and Forecast

Each month about this time we look back at the previous month, analyze how pricing has behaved and report on how well our forecasting techniques performed. We also give a forecast for how pricing will move over the next month.

For the monthly period ending September 15, we are currently recording a sales $/SF of $161.41 averaged for all areas and types across the ARMLS database. This is down 0.4% or 65 cents from the $162.06 we now measure for August 15. Our forecast range midpoint was $160.97, with a 90% confidence range of $157.75 to $164.19. The actual result was a little higher than the mid-point, but well within our 90% confidence range. We had expected a decline but we actually saw prices decline a little less than expected.

On September 15 the pending listings for all areas & types shows an average list $/SF of $166.07, up 0.4% from the reading for August 15. Among those pending listings we have 96.9% normal, 1.4% in REOs and 1.7% in short sales and pre-foreclosures. This mix is little changed from last month, with a small decrease in short sales and pre-foreclosures and a small increase in bank-owned homes.

Our mid-point forecast for the average monthly sales $/SF on October 15 is $162.13, which is 0.4% above the September 15 reading. We have a 90% confidence that it will fall within ± 2% of this mid point, i.e. in the range $158.89 to $165.37.

So we are expecting the third quarter $/SF slump to end with a small rebound during September and early October. This will end the run of 3 months in a row of declining average $/SF.

Market Summary for the Beginning of September

Starting with the basic ARMLS numbers for September 1, 2018 and comparing them with September 1, 2017 for all areas & types:

  • Active Listings (excluding UCB): 16,222 versus 17,486 last year - down 7.2% - but up 3.4% from 15,686 last month
  • Active Listings (including UCB): 19,831 versus 21,355 last year - down 7.1% - but up 2.1% compared with 19,415 last month
  • Pending Listings: 5,262 versus 6,002 last year - down 12.3% - and down 6.9% from 5,655 last month
  • Under Contract Listings (including Pending, CCBS & UCB): 8,871 versus 9,871 last year - down 10.1% - and down 5.5% from 9,384 last month
  • Monthly Sales: 8,230 versus 8,252 last year - down 0.3% - and down 3.7% from 8,548 last month
  • Monthly Average Sales Price per Sq. Ft.: $161.10 versus $149.47 last year - up 7.8% - and up 0.2% from $160.76 last month
  • Monthly Median Sales Price: $262,000 versus $245,000 last year - up 6.5% - but down 1.1% from $265,000 last month

The supply of active listings without a contract rose 3.4% during the month of August, while total active listings increased by 2.1%. These are bigger increases than we saw in August 2017 so there has been a slight improvement in supply even though it remains very low by normal standards.

The count of under contract listings continues to weaken relative to the last 3 years and indicates a gradual reduction in demand. Demand at the low-end of the market cannot be satisfied as the number of available homes below $250,000 is far too low. With supply moving up a little and demand down a little, it is not a surprise to see the Cromford® Market Index lower than last month. It still remains at a significantly elevated level relative to normal, however, and so we are in a strong seller's market.

August 2018 and August 2017 both had the maximum 23 working days so the sales counts are comparable without adjustment. The 2018 sales count is just a shade lower than 2017 which again hints at a tiny downward trend in demand.

New listing counts were slightly lower than last year, so the market is actually a bit smaller in unit counts, both from a supply and a demand perspective. This might be a problem for the 3% additional agents working the territory, except that prices rose around 8% so dollar volume is still looking very strong and growing faster than agent numbers. In fact 2018 is likely to outperform every previous year in ARMLS dollar volume, even 2005, the peak of the bubble. The main cause of this is that a far higher percentage of sales are going through the MLS compared with 2005 which saw over 40% of home sales completed outside the MLS.

Initial counts (based on affidavits) for iBuyers suggest a market share of 65% for Opendoor, 25% for OfferPad and 10% for Zillow.

Pricing is behaving normally for a seller's market with 3Q average and median prices lower than 2Q. We still expect 4Q to hit the high point for the year as any weakness in demand is compensated for by long-term shortages in supply.

August 15 - Mid Month Pricing Update and Forecast

Mid Month Pricing Update and Forecast

Each month about this time we look back at the previous month, analyze how pricing has behaved and report on how well our forecasting techniques performed. We also give a forecast for how pricing will move over the next month.

For the monthly period ending August 15, we are currently recording a sales $/SF of $161.94 averaged for all areas and types across the ARMLS database. This is down 0.2% or 29 cents from the $162.23 we now measure for July 15. Our forecast range midpoint was $162.48, with a 90% confidence range of $159.23 to $165.73. The actual result was a little lower than the mid-point, but well within our 90% confidence range. We had expected a very slight bounce but we actually saw the usual 3Q decline continue a little further.

On August 15 the pending listings for all areas & types shows an average list $/SF of $165.44, down 0.6% from the reading for July 15. Among those pending listings we have 96.9% normal, 1.2% in REOs and 1.9% in short sales and pre-foreclosures. This mix is little changed from last month, with a small decrease in short sales and pre-foreclosures and another small decrease in bank-owned homes.

Our mid-point forecast for the average monthly sales $/SF on September 15 is $160.97, which is 0.6% below the August 15 reading. We have a 90% confidence that it will fall within ± 2% of this mid point, i.e. in the range $157.75 to $164.19.

So we are expecting the third quarter $/SF slump to continue during August and September. This will give us 3 months in a row of declining average $/SF.

It does not change the overall upward trend, which is likely to restart by October.

Market Summary for the Beginning of August

Starting with the basic ARMLS numbers for August 1, 2018 and comparing them with August 1, 2017 for all areas & types:

  • Active Listings (excluding UCB): 15,686 versus 17,412 last year - down 9.9% - and down 2.6% from 16,101 last month
  • Active Listings (including UCB): 19,415 versus 21,484 last year - down 9.6% - and down 5.1% compared with 20,464 last month
  • Pending Listings: 5,655 versus 6,085 last year - down 7.1% - and down 7.2% from 6,092 last month
  • Under Contract Listings (including Pending, CCBS & UCB): 9,384 versus 10,157 last year - down 7.6% - and down 10.2% from 10,455 last month
  • Monthly Sales: 8,533 versus 8,024 last year - up 6.3% - but down 7.5% from 9,229 last month
  • Monthly Average Sales Price per Sq. Ft.: $160.69 versus $148.75 last year - up 8.0% - but down 1.7% from $163.54 last month
  • Monthly Median Sales Price: $265,000 versus $242,000 last year - up 9.5% - but down 1.1% from $268,000 last month

The supply of active listings without a contract dropped 2.6% during the month of July, while total active listings fell by 5.1%. The fall in supply was greatest at the top end of the market, and homes with active listings over $600,000 fell by 9.5%.

The sales count for July 2018 looks very strong, up 6.3% from last year, but this is mostly due to July 2018 having 21 working days, a 5% advantage over July 2017. After adjusting for this, we still see a 1.3% advantage for July 2018, an improvement over the flat result from a similar analysis last month. Above $300,000, sales were 27% higher than a year ago reflecting much stronger activity at the mid and high end of the market. Only the very top, over $3 million, had a weak month in July. Below $300,000, sales were down 5%, largely due to insufficient supply of homes under $200,000.

The strong sales number halted the decline in the annual sales rate and took it slightly higher again.

Pricing was noticeably weaker in July, but followers of the Cromford Report, know to expect this in July every year. It does not reflect any weakness in price pressure, and is merely a seasonal effect.

Progress Residential continue to add to their rental portfolio by buying 46 homes in Maricopa County while Cerberus eased up and only acquired 9.

iBuyers purchased a total of 384 homes in Maricopa County during July 2018, down only slightly from their June total of 392. Closed sales were identical for both June and July at 311. For Maricopa County, Opendoor had a 72% share of iBuyer purchases while OfferPad had 20% and Signpost (Zillow) 8%. Signpost has now sold 5 of the 47 homes they have purchased. Signpost has yet to enter the Pinal County iBuyer market where OfferPad is the largest player.

The balance between supply and demand still favors sellers almost everywhere. However there was a major swing in favor of sellers in the Northeast Valley during July. The rest of the valley saw a mild movement in favor of buyers, mainly thanks to a slight easing of demand, but this was nowhere near enough to wipe out the sellers' big advantage, one they have enjoyed since 2014. It will take a strong increase in supply to rebalance the market and in July new listing counts were slightly weaker than expected, so there is no sign as yet of any serious change in favor of buyers.

Market Summary for the Beginning of July

Starting with the basic ARMLS numbers for July 1, 2018 and comparing them with July 1, 2017 for all areas & types:

  • Active Listings (excluding UCB): 16,101 versus 18,087 last year - down 11.0% - but up 0.5% from 16,018 last month
  • Active Listings (including UCB): 20,464 versus 22,301 last year - down 8.2% - and down 1.7% compared with 20,809 last month
  • Pending Listings: 6,092 versus 6,486 last year - down 6.1% - and down 7.8% from 6,608 last month
  • Under Contract Listings (including Pending, CCBS & UCB): 10,455 versus 10,700 last year - down 2.3% - and down 8.3% from 11,399 last month
  • Monthly Sales: 9,171 versus 9,608 last year - down 4.5% - and down 9.1% from 10,093 last month
  • Monthly Average Sales Price per Sq. Ft.: $163.59 versus $151.67 last year - up 7.9% - but down 0.5% from $164.35 last month
  • Monthly Median Sales Price: $267,329 versus $245,000 last year - up 9.1% - and up 1.7% from $262,900 last month

The supply of active listings without a contract rose slightly during the month of June, even though total active listings dropped 1.7%. June was a slightly weaker month for new listings, down just over 1% compared to last year. We normally see total supply drop between June and July, but it is a surprise to see active listings without a contract move a little higher. A very slim ray of sunshine for buyers, perhaps.

The sales count for June looks weak, down significantly from May and the first month to show a year-on-year decline for 2 years. Before we start to wring our hands, we need to check how many working days there were in June 2017 and 2018. There were 22 in 2017 and 21 in 2018, giving June 2018 a 4.5% disadvantage. This is exactly the same percentage as the shortfall in sales compared with June 2017. We conclude that the underlying sales rate is very similar to last year. This is nothing to be too concerned about but it is evidence that the sales rate peaked in May and may no longer be rising. To confirm this we look at the annual sales rate which stands at 96,965. A month ago, we saw 97,402, so we are seeing confirming evidence that sales are no longer growing. However there is also little sign of a significant decline in sales so far, as the huge declines at the bottom and are sufficiently balance by increases in the mid-range and top end.

The number of listings under contract at the beginning of July is lower than last year - down 3% - but this is nothing new, as it was down 6% last month. In conjunction with the lower monthly sales count and the weaker annual sales rate, this confirms that demand is getting slightly weaker. A combination of poor supply, higher pricing and rising interest rates makes this unsurprising. Demand is strong at the upper end but unit volumes are too small above $500,000 to have much impact on the overall market direction. The decline in demand is small and because of the weak supply, difficult to detect in the real world as it is still so much higher than supply.

Just as median sales prices dropped unusually low during the housing crash, they are now rising artificially quickly. This is predominantly caused by the lack of supply of homes at the low end, not by the increase in home prices. We caution you not to use the median sales price as a guide to how fast the market is appreciating. The average price per sq. ft. is a much better measuring tool at times like these.

Purchases by institutional investors are now led by Progress Residential with Cerberus easing up. Both are buying roughly 1 new single-family home a day to convert to a rental. This is a much lower purchase rate than we saw from Cerberus between November 2017 and March 2018

ibuyers continue to grow their penetration of the market. During June 2018 in Maricopa County, we counted 456 iBuyer purchases and 354 iBuyer sales. Market share for purchases went 73% to Opendoor, 23% to OfferPad and 4% to Zillow (trading as Signpost Homes). To capture these properties, buying prices are getter even closer to market price so the open question is not whether many sellers like to sell their homes this way, but whether these iBuyers can survive long-term on the small gross margins between the buying and selling price, plus the fees charged to the sellers. In Pinal County, we have not completed the June totals yet, but OfferPad is the bigger player, with 60% of purchased, 40% going to Opendoor and Zillow not making an appearance yet.

June 15 - Mid Month Pricing Update and Forecast

Mid Month Pricing Update and Forecast

Each month about this time we look back at the previous month, analyze how pricing has behaved and report on how well our forecasting techniques performed. We also give a forecast for how pricing will move over the next 30 days.

For the monthly period ending June 15, we are currently recording a sales $/SF of $164.10 averaged for all areas and types across the ARMLS database. This is up 1.0% or $1.64 cents from the $162.44 we now measure for May 15. Our forecast range midpoint was $163.59, with a 90% confidence range of $160.32 to $166.86. The actual result was slightly higher than the mid-point, and well within our 90% confidence range. As expected, we saw a substantial increase after the mild correction the month before.

On June 15 the pending listings for all areas & types shows an average list $/SF of $165.74, down 0.5% from the reading for May 15. Among those pending listings we have 96.7% normal, 1.0% in REOs and 2.3% in short sales and pre-foreclosures. This mix is little changed from last month, with a small increase in short sales and pre-foreclosures and a small reduction in bank-owned homes.

Our mid-point forecast for the average monthly sales $/SF on July 15 is $163.80, which is 0.2% below the June 15 reading. We have a 90% confidence that it will fall within ± 2% of this mid point, i.e. in the range $160.52 to $167.08.

We are now faced with the third quarter which is almost always a weak period for average price per sq. ft. A forecast decline of 0.2% between now and July 15 would be less than average and has no real significance over the longer term.

June 3 - Market Summary for the Beginning of June

Market Summary for the Beginning of June

Starting with the basic ARMLS numbers for June 1, 2018 and comparing them with June 1, 2017 for all areas & types:

  • Active Listings (excluding UCB): 16,018 versus 18,476 last year - down 13.3% - and down 1.9% from 16,329 last month
  • Active Listings (including UCB): 20,809 versus 23,281 last year - down 10.6% - and down 2.9% compared with 21,440 last month
  • Pending Listings: 6,608 versus 7,324 last year - down 9.8% - and down 10.6% from 7,393 last month
  • Under Contract Listings (including Pending, CCBS & UCB): 11,399 versus 12,129 last year - down 6.0% - and down 8.8% from 12,504 last month
  • Monthly Sales: 10,081 versus 9,858 last year - up 2.3% - and up 9.8% from 9,178 last month
  • Monthly Average Sales Price per Sq. Ft.: $164.03 versus $150.51 last year - up 9.0% - and up 0.7% from $162.81 last month
  • Monthly Median Sales Price: $262,900 versus $240,000 last year - up 9.5% - and up 3.9% from $253,000 last month

We can see that the supply of active listings without a contract dropped again during the month of May but the deficit compared with 2017 narrowed slightly to 13.3%. May was a weaker month for new listings, down about 1% compared to last year. This was a contrast to April which had seen a stronger rate than 2017. We normally see total supply drop between May and June and we still expect this downward trend to continue until September.

The sales count for May was very strong, topping 10,000 for the first time since 2011. However the number of listings under contract at the beginning of June is much lower than last year - down 6%. Even with this possible sign of wavering demand, supply is so weak that sellers still have a huge advantage in negotiations. This situation inevitably leads to price increases and the annual rate of change has reached 9% for average $/SF and 9.5% for median sales price. This growth is about 4 times the inflation rate and with interest rates rising, homes are obviously getting less affordable. At some point this trend will impact demand, which is why we are keeping a close watch on the annual sales rate and the number of listings under contract. However we are not at all in the sort of situation we faced in 2005 and we refer you to our latest video for a discussion of what is different this time.

 

The rise in interest rates does not just tend to lower demand, in the current circumstances it can lower supply too. Home owners with an existing mortgage will be less inclined to move if their next mortgage is going to be at a much higher rate than their existing one. This is more likely to be the case with every passing month. As a result we do not see prices as likely to fall because of interest rate rises, but we do anticipate limited growth in sales volumes. This has obvious implications for agents and brokers especially as the number of agents continues to grow at just under 5% a year.

It is important to compare sales numbers year over year, but we should also point out that the presence of iBuyers means that there are more transactions than there would be without them. In situations where a seller accepts an iBuyer offer, the home is resold again in a matter of months, so we see 2 transactions instead of 1. The first sale is not shown within the MLS numbers but the second almost always is. Both sales appear in the counts when we look at recorded deeds. With iBuyers representing 4% of the re-sale market, counts of recorded sales are about 2% higher than they otherwise would be.

We started referring to the chronic low inventory over 5 years ago and it is now at the lowest level we have seen during those 5 years. Fluctuations in demand are unlikely to have much impact on the market until we see an increasing trend in listing counts. This was the first sign of a slowdown in April 2005 and will be the first sign of a slowdown if and when we get one in the future. It came suddenly and unexpectedly in April 2005 and it may do the same at any time. However, nobody paid any attention in 2005 and I am assuming we are all older and wiser now. Any unusual activity in the listing counts will show up in the daily Tableau charts which we create and study each and every day. These are:

New Listings by Day

 

Active Listing Counts Daily

We recommend that you become familiar with these charts so you can spot any new trends very quickly.

May 15 - Mid Month Pricing Update and Forecast

Mid Month Pricing Update and Forecast

Each month about this time we look back at the previous month, analyze how pricing has behaved and report on how well our forecasting techniques performed. We also give a forecast for how pricing will move over the next 30 days.

For the monthly period ending May 15, we are currently recording a sales $/SF of $162.32 averaged for all areas and types across the ARMLS database. This is down 0.4% or 66 cents from the $162.98 we now measure for April 15. Our forecast range midpoint was $161.80, with a 90% confidence range of $158.56 to $165.04. The actual result was slightly higher than the mid-point, and well within our 90% confidence range. As expected, we saw a slight fall back after the very strong rise over the prior month.

On May 15 the pending listings for all areas & types shows an average list $/SF of $166.54, up 0.8% from the reading for April 15. Among those pending listings we have 96.8% normal, 1.1% in REOs and 2.1% in short sales and pre-foreclosures. This mix is little changed from last month, with a small reduction in distressed and bank-owned homes.

Our mid-point forecast for the average monthly sales $/SF on June 15 is $163.59, which is 0.8% above the May 15 reading. We have a 90% confidence that it will fall within ± 2% of this mid point, i.e. in the range $160.32 to $166.86.

After a short-term consolidation over the last month we anticipate prices moving ahead once again between May and June.

Market Summary for the Beginning of May

Market Summary for the Beginning of May

Starting with the basic ARMLS numbers for May 1, 2018 and comparing them with May 1, 2017 for all areas & types:

  • Active Listings (excluding UCB): 16,329 versus 19,228 last year - down 15.1% - and down 3.8% from 16,972 last month
  • Active Listings (including UCB): 21,440 versus 24,472 last year - down 12.4% - and down 1.7% compared with 21,800 last month
  • Pending Listings: 7,393 versus 7,552 last year - down 2.1% - but up 3.7% from 7,128 last month
  • Under Contract Listings (including Pending, CCBS & UCB): 12,504 versus 12,796 last year - down 2.3% - but up 4.3% from 11,985 last month
  • Monthly Sales: 9,157 versus 8,827 last year - up 3.7% - but down 5.1% from 9,649 last month
  • Monthly Average Sales Price per Sq. Ft.: $162.44 versus $151.88 last year - up 7.0% - and up 0.6% from $161.46 last month
  • Monthly Median Sales Price: $253,000 versus $232,500 last year - up 8.8% - but down 0.4% from $253,995 last month

The supply of active listings without a contract got worse compared to last year, 15.1% down compared to 14.3% lower last month. We normally see supply drop between April and May and expect this trend to continue until September. Buyers can expect fewer homes to choose from, but at least there will also be a fall in the number of buyers looking at them. Buying activity tends to drop as the temperatures rise. Pending listings are still lower than last year but the gap has reduced from 5.9% to 2.1% over the last month. The number of listings under contract is also down compared to last year, but up 4.3% from last month suggesting a strong sales month in May.

Prices continued to rise during April but quite a bit slower than in March. The average price for homes under contract suggests another modest rise by the end of May.

The situation below $500,000 remains largely unchanged, still a tough place to be a buyer and little sign of any relief. The next price range up, between $500,000 and $1,000,000 has started to go a similar way, with falling inventory and price rises beginning to gain momentum. Demand is very strong over $1,000,000 but relatively plentiful inventory has been stopping prices from rising quickly until recently.

Typical of the $500,000 to $1,000,000 sector is McDowell Mountain Ranch in Scottsdale, which we will use as an example of the improving situation for sellers in this price range. With average prices around $600,000, the annual sales rate has jumped 25% since April 2017. Pricing has increased only modestly for a couple of years but has risen sharply in the last 2 months. The annual average $/SF is now up 8% from this time last year, having grown only 4% when we measured 2 months ago.

Despite a slight dampening effect of demand from the higher interest rates, there is still more than enough demand for homes to overwhelm the inadequate supply in the general market. For the highest price ranges, where excessive supply had been a problem since 2015, demand has increased to the point where the supply is now looking quite normal and prices can make some progress again.

For sellers, the situation continues to look very good while any bargaining power that buyers possessed is gradually drifting away from them.

April 15 - Mid Month Pricing Update and Forecast

Mid Month Pricing Update and Forecast

Each month about this time we look back at the previous month, analyze how pricing has behaved and report on how well our forecasting techniques performed. We also give a forecast for how pricing will move over the next 30 days.

For the monthly period ending April 15, we are currently recording a sales $/SF of $162.61 averaged for all areas and types across the ARMLS database. This is up 1.7% or $2.74 from the $159.87 we now measure for March 15. Our forecast range midpoint was $162.26, with a 90% confidence range of $159.01 to $165.51. The actual result was slightly higher than the mid-point, and well within our 90% confidence range. As expected, we saw a very strong rise over the past month.

On April 15 the pending listings for all areas & types shows an average list $/SF of $165.25, down 0.5% from the reading for March 15. Among those pending listings we have 96.6% normal, 1.2% in REOs and 2.2% in short sales and pre-foreclosures. This mix is little changed from last month. REO activity is well below normal at the moment compared to historic rates. Short sale activity remains slightly elevated caused by negative equity as a prolonged after-effect of the housing crash.

Our mid-point forecast for the average monthly sales $/SF on May 15 is $161.80, which is 0.5% below the April 15 reading. We have a 90% confidence that it will fall within ± 2% of this mid point, i.e. in the range $158.56 to $165.04.

After a strong rise over the last month we anticipate prices dropping back slightly between April and May.

Market Summary for the Beginning of April

Market Summary for the Beginning of April

Starting with the basic ARMLS numbers for April 1, 2018 and comparing them with April 1, 2017 for all areas & types:

  • Active Listings (excluding UCB): 16,972 versus 19,810 last year - down 14.3% - and up 0.3% from 16,924 last month
  • Active Listings (including UCB): 21,800 versus 24,794 last year - down 12.0% - but up 1.7% compared with 21,474 last month
  • Pending Listings: 7,128 versus 7,572 last year - down 5.9% - and down 0.4% from 7,158 last month
  • Under Contract Listings (including Pending, CCBS & UCB): 11,985 versus 12,556 last year - down 4.5% - but up 2.4% from 11,708 last month
  • Monthly Sales: 9,566 versus 9,354 last year - up 2.3% - and up 35.3% from 7,071 last month
  • Monthly Average Sales Price per Sq. Ft.: $161.08 versus $148.31 last year - up 8.6% - and up 1.5% from $158.71 last month
  • Monthly Median Sales Price: $253,995 versus $232,500 last year - up 9.2% - and up 1.2% from $251,000 last month

Total active listings (including UCB and CCBS) saw a small increase of 1.7% during March, but when we remove the UCB and CCBS listings that already have a contract, we see only a 0.3% rise. At least this is better for buyers than the 1.7% decline we saw in February, but it is not enough to make a difference.

There were 22 working days in March, 16% more than February and 4% fewer than the 23 days we enjoyed in March 2017. In that context the sales counts for March 2018 look very positive. Surprisingly positive given the shortage of supply that is restricting volumes in many segments. Volume at the higher price points remains much higher than in 2017 and supply is plentiful there, so this is compensating for lower transaction counts at the entry level.

For pricing, there is only good news for sellers and bad news for buyers. The monthly average price per sq. ft. increased almost 9% over March 2017 and the median sales price rose by more than 9%. With pending listings priced at 0.7% higher per sq. ft. than last month, this upward trend looks likely to continue for at least another month.

Those seeking for any sign of market weakness should probably focus on the pending and under contract numbers. The are both down from this time last year. However we see many closed listings that were never pending or UCB, being added to the MLS after the transaction closed, purely to register the sale for agent productivity statistics. This trend has been increasing for several years now and tends to make pending and under contract numbers look low relative to sales counts. We would need to see bigger drops in these numbers before we could attribute any market weakness as a cause. Indeed, keeping transactions off the MLS can justifiably be considered a sign of abnormal market strength.

The Cromford Market Index has advanced from 159.0 to 160.8 over the last month. This tells us we are in a strong seller's market with little change. What change there has been has been in the seller's favor.

March 15 - Mid Month Pricing Update and Forecast

Mid Month Pricing Update and Forecast

Each month about this time we look back at the previous month, analyze how pricing has behaved and report on how well our forecasting techniques performed. We also give a forecast for how pricing will move over the next 30 days.

For the monthly period ending March 15, we are currently recording a sales $/SF of $159.67 averaged for all areas and types across the ARMLS database. This is up 0.3% or $0.55 from the $159.12 we now measure for February 15. Our forecast range midpoint was $160.74, with a 90% confidence range of $157.53 to $163.95. The actual result was well below the mid-point, but still within our 90% confidence range. The highest point reached over the last month was $160.24 on March 11. Overall, pricing has been weaker than we anticipated.

On March 15 the pending listings for all areas & types shows an average list $/SF of $166.06, up 1.5% from the reading for February 15. Among those pending listings we have 96.6% normal, 1.1% in REOs and 2.3% in short sales and pre-foreclosures. This mix includes fewer distressed properties than last month. REO activity is well below normal at the moment compared to historic rates. Short sale activity remains slightly elevated caused by negative equity as a prolonged after-effect of the housing crash.

Our mid-point forecast for the average monthly sales $/SF on March 15 is $162.26, which is 1.7% above the March 15 reading. We have a 90% confidence that it will fall within ± 2% of this mid point, i.e. in the range $159.01 to $165.51.

We are therefore predicting a much stronger rise over the next month than the one we just experienced between February and March.

March 3 - Market Summary for the Beginning of March

Market Summary for the Beginning of March

Starting with the basic ARMLS numbers for March 1, 2018 and comparing them with March 1, 2017 for all areas & types:

  • Active Listings (excluding UCB): 16,924 versus 19,648 last year - down 13.9% - and down 1.7% from 17,211 last month
  • Active Listings (including UCB): 21,474 versus 24,269 last year - down 11.5% - but up 1.2% compared with 21,209 last month
  • Pending Listings: 7,158 versus 7,194 last year - down 0.5% - but up 18.5% from 6,041 last month
  • Under Contract Listings (including Pending, CCBS & UCB): 11,708 versus 11,815 last year - down 0.9% - but up 16.6% from 10,039 last month
  • Monthly Sales: 7,017 versus 6,520 last year - up 7.6% - and up 14.4% from 6,212 last month
  • Monthly Average Sales Price per Sq. Ft.: $158.72 versus $147.63 last year - up 7.5% - but down 1.3% from $160.76 last month
  • Monthly Median Sales Price: $251,000 versus $230,000 last year - up 9.1% - and up 2.4% $245,000 last month

Total active listings (including UCB and CCBS) managed to grow 1.2% during February, but when we remove the UCB and CCBS listings that already have a contract, we see a 1.7% decline in available supply. Not positive news for buyers who have faced dwindling supply for many years now. The situation is far worse for those looking for affordable homes. The available supply of single-family homes under $200,000 has collapsed by 48% over the past 12 months, and it was very weak to begin with. Things are a little easier between $200,000 and $300,000 but even here supply has dropped over 16% and competition from other buyers is intense. Activity has grown sharply in the price range from $300,000 to $600,000 yet supply is down 10% compared to March 1, 2017. For the lower ranks of the luxury market, between $600,000 and $1 million, available supply has fallen 7% and at the top, over $2 million, active listings have drifted lower by 2%. This leaves the mid-range luxury market, between $1 million and $2 million, as the only price range where supply is higher than this time last year. The increase is just 2%, from 1,185 to 1,214.

There are a few market segments where supply remains adequate, but for the most part Greater Phoenix remains woefully under supplied in both homes to rent and homes to purchase.

Under contract listing counts are slightly lower than last year but the difference is very small. February was a very good month for closed sales with a 7.5% increase over February 2017. This is a clean comparison because both months had 19 working days. We are still seeing sales rates rise without a corresponding increase in under-contract counts, partly because of listings that are added retrospectively after they have closed.

The monthly median sales price suddenly shot up 2.4% during February having been stuck around $245,000 for several months. In contrast the monthly average price per sq. ft. declined 1.3% after a very strong run. The last few months have been one of the best examples of how these measures do not follow each other very closely.

The average price per sq. ft. for pending listings has moved significantly higher over the past 4 weeks, so we expect the usual upward price trend to take hold this spring. So far there is no sign that higher interest rates are keeping buyers away, but we will report immediately if we see any numbers that suggest this.

February 15 - Mid Month Pricing Update and Forecast

Mid Month Pricing Update and Forecast

Each month about this time we look back at the previous month, analyze how pricing has behaved and report on how well our forecasting techniques performed. We also give a forecast for how pricing will move over the next 30 days.

For the monthly period ending February 15, we are currently recording a sales $/SF of $159.13 averaged for all areas and types across the ARMLS database. This is up 1.0% or $1.53 from the $157.60 we now measure for January 15. Our forecast range midpoint was $159.14, with a 90% confidence range of $155.95 to $162.31. The actual result was just 1 cent below the mid-point, which means the forecast we gave last month was our most accurate ever.

On February 15 the pending listings for all areas & types shows an average list $/SF of $163.65, up 1.4% from the reading for January 15. Among those pending listings we have 96.4% normal, 1.5% in REOs and 2.1% in short sales and pre-foreclosures. This mix includes fewer distressed properties than last month. REO activity remains low at the moment compared to historic rates, and short sale activity declined sharply although it remains slightly elevated as an after-effect of the housing crash.

Our mid-point forecast for the average monthly sales $/SF on March 15 is $160.74, which is 1.3% above the February 15 reading. We have a 90% confidence that it will fall within ± 2% of this mid point, i.e. in the range $157.53 to $163.95.

We are therefore predicting a similar rise over the next 28 days to the one we just experienced between January and February. So far in 2018, with a month and a half of new listings to go on, we have seen a 1.5% decline in new supply over the same period in 2017. Obviously this not going to rebalance the market in favor of buyers. Prices will continue to trend higher until we see either far more supply or much lower demand.

February 3 - Market Summary for the Beginning of February

Market Summary for the Beginning of February

Starting with the basic ARMLS numbers for February 1, 2018 and comparing them with February 1, 2017 for all areas & types:

  • Active Listings (excluding UCB): 17,211 versus 19,863 last year - down 13.4% - but up 3.1% from 16,697 last month
  • Active Listings (including UCB): 21,209 versus 23,632 last year - down 10.3% - but up 8.2% compared with 19,606 last month
  • Pending Listings: 6,041 versus 6,095 last year - down 0.9% - but up 29.2% from 4,674 last month
  • Under Contract Listings (including Pending, CCBS & UCB): 10,039 versus 9,864 last year - up 1.8% - and up 32.4% from 7,583 last month
  • Monthly Sales: 6,165 versus 6,097 last year - up 1.1% - but down 14.4% from 7,204 last month
  • Monthly Average Sales Price per Sq. Ft.: $160.66 versus $146.73 last year - up 9.5% - and up 2.6% from $156.61 last month
  • Monthly Median Sales Price: $245,000 versus $225,000 last year - up 8.9% - but unchanged from $245,000 last month

Although we have 3.1% more active listings than last month, this is not an impressive increase for January and we are still down 13.4% compared to a year ago. the drop in supply was most severe for home below $200,000. However all price ranges up to $1 million have fewer homes for sale than last year.

The swing away from using Pending status toward UCB continued with Under Contract listings rising 32.4% during the month to reach almost 2% higher than last year. Pending listing numbers were less robust.

The sales count managed a small 1% increase over last year, hampered by the lack of supply. There is no doubt that if more affordable homes were available the sales count would be much higher.

The average price per sq. ft. for closed sales rose a surprising 2.6% from December. January is usually a weak month for pricing, so this is an unusually strong performance. The median sales price was unchanged. The strong $/SF number was due to higher average pricing as well as smaller average sq. ft numbers. It all counts, however, and appreciation using $/SF is almost into double figures. We need to be clear that appreciation does not apply equally to all price points. The strongest appreciation is occurring where supply is tightest - at the low end.

The Southeast Valley is in a different situation from most of of the Greater Phoenix area. This is because supply has dropped much further in this geographic area and annual sales counts are falling as a result. Sellers love having so much competition between their buyers but agents wish there were more listings. Lower sales counts are not welcome in an area trying to support a higher number of agents, as the average number of transactions per agent is falling.

January 15 - Mid Month Pricing Update and Forecast

Mid Month Pricing Update and Forecast

Each month about this time we look back at the previous month, analyze how pricing has behaved and report on how well our forecasting techniques performed. We also give a forecast for how pricing will move over the next 30 days.

For the monthly period ending January 15, we are currently recording a sales $/SF of $157.68 averaged for all areas and types across the ARMLS database. This is up 1.1% or $1.65 from the $156.03 we now measure for December 15. Our forecast range midpoint was $155.13, with a 90% confidence range of $152.03 to $158.23. The actual result was a lot stronger than the mid-point but still within the confidence range. It is very common for January's reading to be lower than December's, so the fact that it is not in 2018 is an indication of the current strength of most sellers' negotiating position.

On January 15 the pending listings for all areas & types shows an average list $/SF of $161.40, up 1.2% from the reading for December 15. Among those pending listings we have 95.1% normal, 1.8% in REOs and 3.2% in short sales and pre-foreclosures. This mix is almost the same as last month. REO activity remains low at the moment compared to historic rates, though short sale activity remains slightly elevated as an after-effect of the housing crash.

Our mid-point forecast for the average monthly sales $/SF on February 15 is $159.14, which is 0.9% above the January 15 reading. We have a 90% confidence that it will fall within ± 2% of this mid point, i.e. in the range $155.95 to $162.31.

We are therefore predicting a similar rise over the next 31 days to the one we just experienced between December and January. So far in 2018, with 14 days of new listings to go on, we have seen a 1.3% decline in new supply over the same period in 2017. Obviously this not going to rebalance the market in favor of buyers.

January 3 - Market Summary for the Beginning of 2018

Market Summary for the Beginning of 2018

Starting with the basic ARMLS numbers for January 1, 2018 and comparing them with January 1, 2017 for all areas & types:

  • Active Listings (excluding UCB): 16,697 versus 19,397 last year - down 13.9% - and down 9.4% from 18,422 last month
  • Active Listings (including UCB): 19,606 versus 22,313 last year - down 12.1% - and down 11.0% compared with 22,019 last month
  • Pending Listings: 4,728 versus 4,885 last year - down 4.3% - and down 16.2% from 5,579 last month
  • Under Contract Listings (including Pending, CCBS & UCB): 7,583 versus 7,801 last year - down 2.8% - and down 17.4% from 9,176 last month
  • Monthly Sales: 7,187 versus 7,133 last year - up 0.8% - but down 0.4% from 7,216 last month
  • Monthly Average Sales Price per Sq. Ft.: $156.44 versus $144.68 last year - up 8.1% - and up 1.0% from $154.91 last month
  • Monthly Median Sales Price: $245,000 versus $225,000 last year - up 8.9% - and up 0.04% from $244,900 last month

Starting the year with 14% fewer homes for sale than last year is more bad news for buyers. Even with a fresh batch of listings arriving over the next few months, they will have only about 65% of what we would consider normal to choose from. Bidding wars will continue to be the norm for the lower half of the market and are likely to get even more intense.

Demand is nothing special. December's sales were barely able to record an increase over December 2016 and listings under contract are down almost 3% compared with last year. To be fair, supply is so low below $200,000 that the usual number of sales below this figure is impossible to achieve. If there were more supply then sales would increase. However the trend is strongly in the opposite direction, so I would not hold my breath.

The annual sales rate stood at 95,883 on January 1, up from 89,885 a year earlier. However, it had reached 96,339 on December 2 and is now struggling to make any advance. Any growth in this number is probably dependent on more supply coming from somewhere.

The current imbalance between very low supply and normal demand generates substantial upward pressure on pricing. The average $/SF is up over 8% from a year ago and the monthly median sales price is up almost 9%. These are strong appreciation numbers given that inflation remains tame, but last year had a smaller imbalance than we have now. The Cromford® Market Index stood at 155.4 on January 1, 2018 up from 144.5 12 months ago. Both supply and demand are lower now than they were this time last year, but supply has dropped much further than demand. So unless there is a major shift in direction, it makes sense to expect prices to rise faster in 2018 than they did in 2017. In theory this should lead to further cuts in demand.

There is another factor at play in 2018. Mortgage rates have been on a distinct upward path for the last 4 months, especially the 15 year and ARM rates which have moved up faster than the 30 year rate. I anticipate that homeowners will increasingly prefer the terms of the loan they already have to the terms they could get on a new loan. This is likely to reduce both supply and demand but be beneficial to companies that specialize in modernization and refurbishing properties.

All the comments above apply exclusively to the market below $1 million which accounts for 98% of units sold. However the 2% of the market over $1 million benefits from having 12% of the active listings - six times it's fair share. Consequently buyers have a much easier time if they are planning to spend $1 million or more and sellers are rarely in control of the negotiations. This is why you see some spectacular price cuts in the high-end market and a sales pricing trend that is flat to slightly lower. We should emphasize that this applies to the re-sale market and not the new home market, where pricing has a trajectory all of its own.

December saw a significant change from the rest of 2017 - supply dropped faster than expected and it is fairly unusual for December sales to come in lower than November, especially as December had one more working day than November. Unless this was a fluke (unlikely) then 2018 is going to be a interesting year. While owners and sellers can celebrate the rising prices, many players in the market should be concerned that a downturn in transaction volumes is becoming a distinct possibility. Fewer homes to buy could mean fewer homes sold and therefore impact the volumes at lenders, title companies as well as brokers. Competition for business is likely to intensify.

December 15 - Mid Month Pricing Update and Forecast

Mid Month Pricing Update and Forecast

Each month about this time we look back at the previous month, analyze how pricing has behaved and report on how well our forecasting techniques performed. We also give a forecast for how pricing will move over the next 30 days.

For the monthly period ending December 15, we are currently recording a sales $/SF of $156.20 averaged for all areas and types across the ARMLS database. This is up a massive $3.83 or 2.5% from the $152.37 we now measure for November 15. Our forecast range midpoint was $157.31, with a 90% confidence range of $154.16 to $160.46. The actual result was a little weaker than the mid-point but well within the confidence range. Last month's forecast was the most optimistic we have published for many years, so we are pleased that the model turned out to be correct about a huge jump in just a single month.

On December 15 the pending listings for all areas & types shows an average list $/SF of $159.45, down 0.7% from the reading for November 15. Among those pending listings we have 95.1% normal, 1.8% in REOs and 3.1% in short sales and pre-foreclosures. This mix contains more distressed listings than last month. REO activity remains low at the moment compared to historic rates, though short sale activity remains slightly elevated as an after-effect of the housing crash.

Our mid-point forecast for the average monthly sales $/SF on January 15 is $155.13, which is 0.7% below the December 15 reading. We have a 90% confidence that it will fall within ± 2% of this mid point, i.e. in the range $152.03 to $158.23.

We are therefore predicting a small correction after the massive increase between November and December. This is in line with the pattern that occurs in most years. We often see a very strong December reading followed by a weaker January. In most years February bounces back again so there is no need to look at our January forecast as a negative signal. While demand indicators are doing nothing special, supply continues to get even tighter so there is no let up in the overall upward trend in pricing on the horizon. For prices to change direction we would need some sign of an increase in supply.

Market Summary for the Beginning of December

Starting with the basic ARMLS numbers for December 1, 2017 and comparing them with December 1, 2016 for all areas & types:

  • Active Listings (excluding UCB): 18,422 versus 20,928 last year - down 12.0% - and down 1.2% from 18,646 last month
  • Active Listings (including UCB): 22,019 versus 24,514 last year - down 10.2% - and down 1.7% compared with 22,403 last month
  • Pending Listings: 5,579 versus 5,782 last year - down 3.5% - and down 1.2% from 5,646 last month
  • Under Contract Listings (including Pending, CCBS & UCB): 9,176 versus 9,368 last year - down 2.0% - and down 2.4% from 9,403 last month
  • Monthly Sales: 7,180 versus 6,875 last year - up 4.4% - but down 3.2% from 7,421 last month
  • Monthly Average Sales Price per Sq. Ft.: $154.62 versus $144.60 last year - up 6.9% - and up 2.7% from $150.53 last month
  • Monthly Median Sales Price: $244,900 versus $225,000 last year - up 8.8% - but down 0.04% from $245,000 last month

The supply of active listings is still substantially lower than last year, although almost all the drop is for homes under $200,000. We usually get a decent increase during the fall but in 2017 this increase was pretty paltry. Buyers got very little relief except at the upper end of the market, where relief was not required.

There were 19 working days in November 2017, the same as in 2016, so the 4.4% increase in sales is a valid and fair comparison. This is an improvement on October, although the percentage increase in sales is less than the percentage increase in the number of real estate agents since last year (6.3%). Luckily the increase in average prices makes up for that difference and then some.

The average price per square foot jumped a hefty 2.7% in just one month, between October 1 and November 1, putting appreciation back above the rate we saw last year. However those who watch only the median sales price will be disappointed at the lack of movement over the same period.

All in all, November was a positive month for sellers and has turned around the weakening demand trend that prevailed for the prior 3 months. This bodes well for a strong finish to the year in December.

Supply is still high above $1.5 million but demand continues to look better at this end of the market so well-priced homes should not have to wait excessively long to find a buyer

Market Summary for the Beginning of November

Starting with the basic ARMLS numbers for November 1, 2017 and comparing them with November 1, 2016 for all areas & types:

  • Active Listings (excluding UCB): 18,646 versus 21,028 last year - down 11.3% - but up 2.7% from 18,161 last month
  • Active Listings (including UCB): 22,403 versus 24,862 last year - down 9.9% - but up 2.8% compared with 21,783 last month
  • Pending Listings: 5,646 versus 6,050 last year - down 6.5% - and down 6.9% from 6,065 last month
  • Under Contract Listings (including Pending, CCBS & UCB): 9,403 versus 9,884 last year - down 4.9% - but up 0.2% from 9,388 last month
  • Monthly Sales: 7,379 versus 7,078 last year - up 4.3% - but down 1.8% from 7,515 last month
  • Monthly Average Sales Price per Sq. Ft.: $150.35 versus $144.39 last year - up 4.1% - and up 0.6% from $149.45 last month
  • Monthly Median Sales Price: $245,000 versus $229,000 last year - up 7.0% - and up 1.7% from $241,000 last month

The supply of active listings has increased less than 3% over the past month, a smaller percentage than in 2016. New listings have been arriving at a slightly lower rate during October 2017 than in October 2017. We still have too few homes for sale at the low and mid range and too many for sale at the top end. Consequently prices have been rising quickly at the bottom end, rising moderately for the mid-range and falling moderately at the high end. You can see this clearly in the annual appreciation chart by price range.

Supply has fallen since 2016 across much of the Southeast Valley and is lower than normal in much of Pinal County. The effects in the rest of the Phoenix area are more muted.

The total sales count for October 2017 was fairly weak. Although it was up 4.3% compared with 2016, October this year had 10% more working days (22) than October last year (20 days). So the rate per working day declined by 5% making October the weakest month so far in 2017 for year over year daily sales volumes. With supply so tight it is often difficult to detect a fall in demand but sales, pending and AWC counts all indicate a slight weakening of demand.

As we suggested last month, pricing resumed its upward trajectory in October, especially for the median sales price. The average price per sq. ft. improved too, but was up only 4.3% compared with October 2016. This is a healthy increase but less than we have been seeing in year over year measurements for prior months.

The proposed changes to US taxation that are currently being discussed are widely seen as negative for the housing industry, both new and re-sale. This is because they will reduce the financial advantage of owning a home compared with renting. More details on this effect will be forthcoming in one of our daily observations.

October 15 - Mid-Month Pricing Update and Forecast

Mid Month Pricing Update and Forecast

Each month about this time we look back at the previous month, analyze how pricing has behaved and report on how well our forecasting techniques performed. We also give a forecast for how pricing will move over the next 30 days.

For the monthly period ending October 15, we are currently recording a sales $/SF of $150.21 averaged for all areas and types across the ARMLS database. This is up $1.10 or 0.7% from the $149.11 we now measure for September 15. Our forecast range midpoint was $148.18, with a 90% confidence range of $145.22 to $151.14. The actual result was much stronger than our predicted mid-point, and we said last month that this would not surprise us. However it remained within our 90% confidence interval. Almost all of the increase happened in the last 7 days since the reading was at $149.20 as recently as October 8.

On October 15 the pending listings for all areas & types shows an average list $/SF of $155.74, up 1.7% from the reading for September 15. Among those pending listings we have 95.0% normal, 1.6% in REOs and 3.4% in short sales and pre-foreclosures. This mix is little changed from August, except that we have a slightly lower ratio of REOs to short-dales and pre-foreclosures. REO activity is very low at the moment compared to historic rates.

Our mid-point forecast for the average monthly sales $/SF on November 15 is $152.17, which is 1.7% above the October 15 reading. We have a 90% confidence that it will fall within ± 2% of this mid point, i.e. in the range $149.71 to $155.83.

So we are forecasting the same percentage increase over the next 31 days that we have seen in the average price of pending listings over the past 30 days. This means the third quarter slump is well and truly over and we expect the usual surge in $/SF for the fourth quarter. Having said that, the actual number of pending listings is lower than usual. Only 2001, 2007 and 2014 saw lower pending listing readings as of October 15, so it appears that the current pricing level is putting a slight damper on demand, at least as far as pending counts is concerned. Sales counts are still looking healthy although the annual sales rate is no longer increasing as it had been. a few months ago. This means the market is not expanding as fast as as it was in the first half of 2017.

October 3 - Market Summary for the Beginning of October

Market Summary for the Beginning of October

Starting with the basic ARMLS numbers for October 1, 2017 and comparing them with October 1, 2016 for all areas & types:

  • Active Listings (excluding UCB): 18,161 versus 20,153 last year - down 9.9% - but up 3.9% from 17,486 last month
  • Active Listings (including UCB): 21,783 versus 24,101 last year - down 9.6% - but up 2.0% compared with 21,355 last month
  • Pending Listings: 5,766 versus 6,065 last year - down 4.9% - and down 3.9% from 6,002 last month
  • Under Contract Listings (including Pending, CCBS & UCB): 9,388 versus 10,013 last year - down 6.2% - and down 4.9% from 9,871 last month
  • Monthly Sales: 7,470 versus 7,415 last year - up 0.7% - but down 9.5% from 8,258 last month
  • Monthly Average Sales Price per Sq. Ft.: $149.28 versus $142.00 last year - up 5.1% - but down 0.2% from $149.61 last month
  • Monthly Median Sales Price: $241,000 versus $230,000 last year - up 4.8% - and down 1.6% from $244,900 last month

Supply remains lower than last year, and the gap opened up slightly compared with last month. We do have more supply than last month, but not as much more as we would normally expect at the time of year. Last month we were seeing more new listings but this trend quickly petered out and so far in 2017 we are up only 1.15% for new listings over this time in 2016. Overall, the supply remains chronically weak and there is little sign of any improvement.

Demand has been slightly weakening for several months now and at first sight it looks slightly weaker again at the start of October, although when supply is poor, it can be very hard to detect weakening demand out there in the market because there is enough demand to soak up all the supply and then some. The monthly sales rate is up only 0.7% compared with September 2016. This is the smallest annual increase since July 2016. However September 2016 had 21 working days, one more than September 2017. This is a 4.8% disadvantage for 2017, meaning that the calendar month comparison is very misleading. The real difference between the sales rate now and last year is more like 5.5% when a like for like comparison is made. This is actually an improvement on the year over year comparison we made last month.

Pending listing counts and under contract counts are weaker than last year as well as last month. For quite some time we have been seeing weak counts although sales counts have stayed high. This is partly because more listings are being added to ARMLS and closed the same day. These listings count as closed sales but were never active, pending or UCB. In effect, agents are documenting pocket listings after the fact in order that their sales statistics are seen in the best light. These were really off-MLS sales.

Pricing went backwards during September, continuing the 3Q trend until the very end of the month which is unusual. We normally see pricing trends turn positive during September rather than October. The average $/SF for pending listings has gone up 1.1% over the past 30 days so we are pretty confident that October will see more positive results for pricing.

Price trends remain weakest for the high end of the market and despite much stronger sales numbers than last year, the top end remains over-supplied. This is not unique to Central Arizona as we see similar weakness in luxury pricing across most of the USA. The low-end and mid-range still have price momentum and given the deterioration in supply, especially in the Southeast Valley, we expect that to continue for some time.

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