Cromford Report

 

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Daily Observations from The Cromford Report

 

January 2019

January 17 - The single-family markets in the 17 largest cities generate the following Cromford® Market Index information:

This does not look quite as encouraging as last week with 5 of the 17 cities showing deterioration for sellers and 12 showing improvement.

The big positive moves are in the West Valley (Avondale and Peoria) while the big negative move is in the Northeast Valley (Cave Creek).

Paradise Valley has seen conditions deteriorate quickly, having looked strong as recently as early January.

The average move over the past month was +2.0%, but this is down from +2.6% last week.

Another reference point is the high number of cities (20 out of 29) where the CMI went down over the past week:

  • Anthem
  • Apache Junction
  • Arizona City
  • Buckeye
  • Cave Creek
  • Gilbert
  • Gold Canyon
  • Goodyear
  • Laveen
  • Litchfield Park
  • Mesa
  • Paradise Valley
  • Phoenix
  • Queen Creek
  • Scottsdale
  • Sun City
  • Sun City West
  • Sun Lakes
  • Surprise
  • Tempe

Gold Canyon is the only city which has dropped below 100.

Over the past week, we have seen the demand index rise in the following:

  • Avondale
  • Buckeye
  • Casa Grande
  • El Mirage
  • Fountain Hills
  • Glendale
  • Maricopa
  • Peoria
  • Tolleson

This is rather a short list (8 out of 29 cities). Although almost all areas remain a seller's market thanks to the chronic low supply, demand is staying stubbornly weak in the majority of locations. Where we go from here is not exactly clear.

January 16 - After 2 full weeks it is fair to compare closed sales counts with the same 2 weeks last year.

Across Greater Phoenix for all dwelling types we have seen 1,980 closings, down 14% from 2018.

By price range the changes are:

  • Under $250K - down 25.2% from 1,186 to 887
  • Between $250K and $500K - down 3.9% from 893 to 858
  • Between $500K and $1M - up 7.9% from 178 to 192
  • Over $1M - down 18.9% from 53 to 43

The range between $500K and $1M has been relatively strong.

The range over $3M was particularly weak with closings dropping from 7 to 3.

January 15 - New listing counts are a little lower than last year with 4,383 added and activated in the first 2 weeks. The same period in 2018 gave us a count of 4,627, so we are looking at a drop of 5.3%. However, the use of the relatively new "Delayed" status means more listings are being added without being activated. If we examine the total number of residential listings created (whether activated or not) we find 4,684 in 2019 and 4,657 in 2018, a small increase of 0.6%.

Active listing counts are rising faster than last year because although there are a lower number of new listings activated, fewer listings are going into Pending or UCB status.

During the first 2 weeks of 2018 we saw active listing counts (excluding UCB and CCBS) climb from 16,697 to 17,667, a rise of 5.8%.

In 2019 we saw an increase from 17,339 to 18,581, a rise of 7.2%.

Unless demand starts to increase, which is certainly possible given that interest rates have eased, we expect to see active listing counts peak later in the spring than they did in 2018.

January 14 - Well 2019 is off to a rather flat start so far with most numbers well below those of January 2018.

The monthly sales rate is at 6,102 which is down 10% from the 6,816 we saw last year. Most of those sales occurred in December since the year to date count is only 1,835, down 20% from the same point last year.

Listings under contract are at 7,115, up 12.9% from 6,301 at the start of the year. The equivalent numbers in 2018 were 8,356, up 10.8% from 7,543. Although the fact that the counts are down substantially, the growth rate is a little higher, a positive signal.

Mortgage rates have dipped recently so we may see more demand arrive soon. In most years we don't really get buyers returning in large numbers until the Super Bowl is over.

In 2019 so far, new listings have been arriving at a similar rate to 2018. With the lower demand they are turning into listings with contracts more slowly, so active listing counts are rising faster than last year. However, active listing counts remain low by historic standards and unless they rise very much higher we have little chance of significant downward pressure on closed prices. List prices are more fragile as sellers adjust to the slower demand. Average price per sq. ft. for most segments remains strong, particularly when we look at pending listings.

The listing success rate stands at 74.3%, still well above the long term average, but down from 76.8% at this time last year.

Although the market is cooler and smaller than last year, it is not in any significant trouble. The CMI is drifting slightly lower, something that happens in January for most years.

January 10 - The regular Cromford Market Index table for the single-family markets in the largest 17 cities is below:

14 out of 17 cities have seen conditions change in favor of sellers over the past month and only 3 have moved the other way. Only one (Cave Creek) has moved in favor of buyers in a big way (CMI down 11%)

The West Valley is stronger with Avondale up 16% and Peoria up 13%.

Demand remains weak, but the important thing to remember is that supply is even weaker, so the balance still favors sellers, even though volumes are on a downward trend.

Prices remain on a clear upward trend.

January 9 - A few agents have contacted us to suggest that their revenue and side counts are too low in the Agent Performance Table for 2018. So far, every case has shown the table to be correct because the agents were including transactions in their totals that are intentionally not included in the table.

The most common reasons why a transaction is not included in the table are:

  • it was a land transaction not a residential sale
  • it was a new home sale that did not get a listing on ARMLS
  • it was outside of the ARMLS territory (out of area)
  • the agent was a co-listing agent or co-selling agent, not the listing agent or selling agent

We are very willing to correct any errors in the table if you find any, but please make sure you have excluded the inappropriate transactions from your comparison.

January 8 - We have just got a chance to study the affidavits that were filed in Maricopa County during December and they paint a much rosier picture of the housing market than we get from examining the ARMLS data. Why is this?

  • new home sales are holding up far better than re-sales
  • new home prices are gaining strength which is not reflected in MLS data since most new home sales are not in the MLS database

December's new home sales (single-family and condo / townhouse) totalled 1,544 which is up 10% from December 2017, while re-sales totalled 6,624, down 11% from a year earlier.

The median sales price of a new home in December was $349,990, up 6.6% from a year earlier

The median sales price of a re-sale home in December was $256,000, up 5.6% from December 2017.

This data suggests buyers are increasingly being attracted to new homes rather than the limited choice available for re-sale. They took 19% of the market in December 2018 while only managing 16% in December 2017.

January 7 - I have started to see a few writers claim that Phoenix is becoming a buyer's market. I think this is a huge stretch. It is possible that we have forgotten what a buyer's market really feels like. We have seen a noticeable downturn in demand but that alone does not constitute a buyer's market.

In a buyer's market, supply is higher than demand and currently we still have very low supply and little sign of a significant increase on the horizon. The weaker demand is still more than enough to match the current level of supply. Consequently sales prices still upwards momentum, although this has eased a little since last spring.

I also hear talk of lower prices, but this talk is not referring to closed sales prices. It refers to the fact that many sellers are adjusting their expectations and bringing list prices more in line with market conditions. This is not resulting in closed prices going lower than last year, as we would expect in a true buyer's market. In fact the average price per sq. ft. for listings under contract continues to hit new highs.

We have become used to a hot, growing market that strongly favors sellers and now that it is cooler, contracting in volume and moderately favoring sellers, we have a tendency to over-react and make more of the change than it really deserves. We have to stay calm and realistic and be guided by the numbers. These numbers look like a cooling off, not a downturn. We experienced a similar, though more severe, cooling off in 2013-2014, but the last significant downturn took place between late 2005 and 2009 and was followed by a 2 stage recovery from 2009 through 2013. There was also a mini-downturn in 2010-2011 which interrupted the recovery but had little lasting significance in hindsight.

There has been no decrease in loan approval rates and buyers have little to stop them apart from their own desires and perceptions. Many appear to think the current state of the market will mean lower prices for them if they wait to buy later. In this, they are very likely mistaken, but it will take time for them to realize this. Population growth in Central Arizona is still increasing faster than the number of homes. Despite a less friendly tax code since 2017, owning a home still makes better financial sense than renting unless you expect to own the home for less than 3 years. None of the conditions for closed prices to fall are currently in effect.

It seems more likely that demand will come back up, rather than more supply will appear out of nowhere. It is certainly possible that new facts come into play (e.g. interest rates) which could change the picture, but most measurements that impact the housing market are in normal to good ranges. Affordability has dropped below the ideal range but compared with neighboring California, we are amazingly affordable. 2019 is very unlike the situation in 2005, when almost every number was highly unusual and flashing danger signals, even though most of the population chose to ignore them.

As in most things, the numbers are more reliable that emotions. We will continue to report the natural numbers without adding any artificial ingredients.

January 5 - We have updated the Agent Production Table for 2018 to include all data in ARMLS as of January 4. You can find it here.

Based on dollar volume (not sides) the top 25 agents during 2018 were as follows:

Rank Name 2018 Dollars 2017 Dollars
1 Beth Rider $180M $159M
2 Jeff Sibbach $172M $152M
3 Andrew Bloom $123M $72M
4 Jason Mitchell $111M $114M
5 Walt Danley $110M $84M
6 Carol Royse $88M $64M
7 Robert Joffe $87M $103M
8 JoAnn Callaway $77M $75M
9 Lisa Lucky $76M $71M
10 Ashley Pickens $75M $43M
11 Joan Levinson $72M $73M
12 Carin Nguyen $71M $60M
13 Chris Karas $70M $75M
14 Jennifer Wehner $69M $64M
15 James Wexler $69M $42M
16 John Gluch $67M $72M
17 Deborah Beardsley $66M $20M
18 Kenny Klaus $66M $96M
19 Scott Grigg $62M $26M
20 Bobby Lieb $62M $51M
21 Russell Shaw $59M $72M
22 Mike Domer $57M $33M
23 Don Matheson $54M $44M
24 Jason Penrose $54M $58M
25 Bruno Arapovic $52M $24M

This table excludes:

  • agents working for home builders
  • agents working for iBuyers

If you wish to include these, the Tableau chart has filters that allow this. There may be some home builder agents that are not yet identified as such. If you spot any, please let me know.

Dan Noma handles Zillow iBuyer transactions but also acts as a non-iBuyer agent. However the volume of Zillow transactions is now so large that we have decided to include him as an iBuyer rather than a regular agent.

If you feel any of these numbers are incorrect, please let me know. Many of the top agents in this list lead large teams. In most cases all team members funnel their transactions through the team leader's MLS ID. For team that do not do this, ARMLS does not provide team member information, so I can only include other team members if you let me know exactly who was on your team during which time period. I can then aggregate the transactions under the team leader, if you so desire. Otherwise the transactions will appear under the individual team members because that is what appears on the MLS listing data.

January 3 - Below is the regular table showing the Cromford® Market Index for the single-family markets in the 17 largest cities.

Despite the lower demand we have been experiencing the market index has improved in the majority of cities over the past month. Only 5 of the 17 are showing deterioration for sellers and only 1 of these is experiencing strong deterioration (Cave Creek).

Avondale, Paradise Valley, Peoria and Tempe are showing the largest monthly improvements, mainly thanks to lower inventory.

The average monthly change in the CMI is +2.6%, an improvement from +1.9% last week.

January 2 - We started 2019 with remarkably few listings in escrow. Across all areas & types in the ARMLS database we counted 17,339 active listings, 2,561 UCB or CCBS and 3,740 pending. This gives us a contract ratio of 36.34. Now January 1 is always a low point for listings under contract (pending + UCB + CCBS), but at 6,301, 2019 is down 17% from 7,583 last year and the lowest we have seen since since 2008 when we had an unbelievably weak 3,632 during the collapse of the bubble.

There is no doubt at all that this number will grow over the next few months, bit the real question is by how much. Sellers would like to see more buyers back in the game. Buyers seems suspicious that something bad is happening to the market, but the only bad thing is the fact that so many of them are holding back. If they stopped holding back, we would be back in a hot market once more. It is an unusual situation with both supply and demand far below normal. The big question is whether they are holding back by choice (fear) or because they cannot do anything at current prices (lack of affordability). Fear can be easily overcome, given time, but prices are not likely to move lower in the current circumstances. We would need a glut of homes to hit the market and there is no sign of that coming from anywhere. Employment remains strong and typical homeowners have plenty of equity. There are very few weak hands among the sellers, even though some investors may choose to take profits at this point..

If we look at the single-family sector by price range, we find the following change in the contract ratios:

Price Range Contract Ratio Jan 2018 Contract Ratio Jan 2019 Change
$150K to $175K 88.3 68.1 -23%
$175K to $200K 91.1 63.5 -30%
$200K to $225K 75.5 55.6 -26%
$225K to $250K 67.4 52.2 -23%
$250K to $275K 62.6 45.5 -27%
$275K to $300K 60.9 45.5 -25%
$300K to $350K 52.8 39.4 -25%
$350K to $400K 40.3 35.8 -11%
$400K to $500K 37.1 32.0 -14%
$500K to $600K 34.1 25.2 -26%
$600K to $800K 28.6 25.5 -11%
$800K to $1M 21.6 17.6 -19%
$1M to $1.5M 14.1 14.8 +5%
$1.5M to $2M 12.0 9.4 -22%
$2M to $3M 7.4 12.9 +74%
Over $3M 8.6 5.6 -35%

Two price ranges are stronger than last year - $1M to $5M and $2M to $3M

The biggest percentage fall is for homes over $3M, which is not surprising given the antics of the stock market over the past 3 months. The price range up to $350K have all fallen by 23% to 30% which is a significant cooling off across a broad range of prices. The cooling effect is much less noticeable between $350K and $1M although for some reason $500K to $600K has dropped 26%.

December 2018

 

December 29 - Most of the market indicators are looking pretty healthy at the moment:

  • the Cromford® Market Index is now looking stable and for all areas & types stands comfortably over 130
  • the days of inventory count at 78 is just a tad higher than it was at this time last year (77)
  • average days on market are low (66), lower than last year (69) and have risen only moderately in the past few months
  • active listing counts are low by historic standards and now stand just above last year
  • listing success rate stands at 870.8% (very high), slightly down from this time last year

The primary measure that is looking rather poor is the under contract count, as can be seen in the image taken from the weekly chart below:

 

At 6,458, listings under contract are down 20% from 8,043 last year and at the lowest point since 2008. 2007 was also much lower the the current total,

We shall be watching closely to see what sort of ramp up we get during the first 3 months of 2019.

December 28 - We normally publish the building permit data at this point but the Census Bureau is closed due to the government shutdown so unfortunately we will not have any more permit data until the shutdown is over.

December 27 - The Cromford® Market Index numbers for the single-family markets in the 17 largest cities:

Things continue to get better for sellers, a trend which started back on November 30, although you would not think so based on some of the gloomy commentaries in the media.

The average change in the CMI values is +1.9% which compares favorably with +0.3% last week.

We see 12 cities showing improvements for sellers and only 5 showing deterioration over the past month. All 17 cities are seller's markets (over 110).

Paradise Valley and Avondale are leading the recovery, up 12% and 11% respectively. This shows it is not confined to a specific price range, as Paradise Valley is our most expensive city while Avondale is among the least expensive.

Cave Creek has the least favorable market index trend of the 17 (down 9%). This is because demand has been declining while supply remains flat. Among the cities that experienced a decline during the past month, Fountain Hills, Queen Creek, Surprise and Glendale have shown a rise over the past week. This is another positive signal as we enter the new year.

The table above is a far more positive picture for sellers than we were expecting to see based on the situation in mid November. Although demand is certainly weaker than last year, supply remains far below normal and insufficient to meet even the subdued demand. Consequently sellers remain firmly in control of the market and prices will continue to rise while this situation continues.

December 26 - The S&P/Case-Shiller® Home Price Index® numbers have been released for the latest sales period (August through October) and the 20 focus cities fared as follows on a month to month basis:

  1. Phoenix +0.70%
  2. New York +0.41%
  3. Las Vegas +0.33%
  4. Charlotte +0.30%
  5. Tampa +0.27%
  6. Atlanta +0.16%
  7. Miami +0.14%
  8. Boston +0.13%
  9. Los Angeles +0.11%
  10. Washington +0.02%
  11. Dallas +0.01%
  12. Detroit -0.02%
  13. San Diego -0.12%
  14. Minneapolis -0.13%
  15. Denver -0.28%
  16. Chicago -0.35%
  17. Cleveland -0.52%
  18. Portland -0.55%
  19. San Francisco -0.71%
  20. Seattle -1.05%

Once again Phoenix is at the top of the table having opened up a gap ahead of number 2 New York.

We see almost half of the focus cities with negative changes, but this is partly due to seasonality and the national average was +0.10%. Phoenix was seven times the national average and is over-performing again. As a result, it even made a mention in the Case-Shiller press release. Seattle took another large hit for a single month while San Francisco and Portland are slowing after very strong gains over the past 4 years.

For the year over year numbers we see:

  1. Las Vegas +12.8%
  2. San Francisco +7.9%
  3. Phoenix +7.7%
  4. Seattle +7.3%
  5. Denver +6.9%
  6. Tampa +6.4%
  7. Detroit +6.0%
  8. Atlanta +6.0%
  9. Minneapolis +5.9%
  10. Los Angeles +5.5%
  11. Boston +5.4%
  12. Charlotte +5.0%
  13. Portland +4.9%
  14. Cleveland +4.8%
  15. Miami +4.8%
  16. Dallas +3.9%
  17. San Diego +3.8%
  18. Chicago +3.3%
  19. New York +3.1%
  20. Washington +2.9%

The national average was +5.5% so Phoenix was well ahead of that, and it moved up to 3rd place from 5th place last month. None of the focus cities is showing a negative move year over year.

December 24 - After 3 full weeks of December we can once again make some comparisons with the same period in 2017. For December 1 to December 21

  • we have seen 4,590 new listings added, 6.0% fewer than the 4,881 we saw in 2017
  • there have been 4,668 closed listings, 5.1% fewer than the 4,919 we saw in 2017
  • we have seen 4,735 accepted offers, 8.4% fewer than the 5172 we saw in 2017

The situation with new listings is almost the same as last week, down 6% showing that sellers have little enthusiasm for today's market

Closed listings are down 5% although they were slightly above 2017 last week, so we immediately see that the third week has had a sharp drop in closing activity. Indeed, we had 16% fewer closings during the third week of December. After the first 2 weeks were roughly level, this drop is quite a major change. However it was impossible for closings to stay high indefinitely while accepted contracts continued to fall.

Accepted contracts fell further during the third week leaving us down 8.4% after 3 weeks compared with down 7% after 2 weeks. The third week of December was down 11% compared with the same week in 2017.

We hesitate to read too much into a single week of data, but it is clear that demand is not recovering. In fact it is weakening further as buyers step up their strike action. December 15 to 21 was the worst week of 2018 so far for year over year comparisons of demand. We still see low levels of supply, but demand is now so weak that active listing counts are not falling away quickly as they usually do during the second half of December. They are just drifting slightly lower.

It looks like December will probably be a low volume month in all respects: low demand, even lower supply and a low number of closings.

December 22 - We are still seeing fewer accepted contracts than in December 2017. This means active listings stay active longer so average days on market increases. It also means the count of listings under contract is much lower than last year. How much lower? Let us take a look at various segments:

Market Segment Under Contract Dec 21, 2017 Under Contract Dec 21, 2018 Change
All Areas & Types 8,558 7,229 down 15.5%
Greater Phoenix, All Types 8,365 7,072 down 15.5%
Greater Phoenix - Single-Family Detached 6,846 5,801 down 15.3%
Greater Phoenix - Condo / Townhouse 1,317 1,090 down 17.2%
Greater Phoenix - Mobile / Manufactured 202 181 down 10.4%
Greater Phoenix - Under $250K 4,078 2,922 down 28.3%
Greater Phoenix - $250K to $350K 2,087 1,972 down 5.5%
Greater Phoenix - $350K to $500K 1,191 1,200 up 0.8%
Greater Phoenix - $500K to $1M 774 761 down 1.7%
Greater Phoenix - Over $1M 235 217 down 7.7%
Northeast Valley 1,079 867 down 19.6%
Central & North Valley 1,870 1,532 down 18.1%
Southeast Valley 2,326 1,891 down 18.7%
Pinal County 842 755 down 10.3%
Paradise Valley 61 65 up 6.6%
Scottsdale 85254 98 57 down 41.8%
Peoria 85383 121 163 up 34.7%
Queen Creek 85142 167 177 up 6.0%
Sun City 85351 130 100 down 23.1%

Although the decline in listings under contract is quite noticeable, it is not at all consistent. The most significant decline is for homes below $250K. In this price segment there is a dearth of attractive homes to tempt buyers. It also seems that buyers with less than $250,000 to spend are very discouraged by higher interest rates.

There are plenty of examples of ZIP codes with higher listings under contract than last year. Among them are 85172, 85307, 85355, 85194, 85281, 85324, 85305, 85140, 85387 and 85383, all with increases of over 30%. I am struggling to find a common thread that binds those.

There are even more examples of ZIP codes with a huge fall in listings under contract, including 85040, 85332, 85131, 85233, 85284, 85043, 85087, 85377, 85303, 85044, 85304, 85210, 85254, 85045, 85018, 85048, 85119, 85248, 85249, 85379, 85262, 85206, 85390, all having more than a 33% reduction. Again there is no obvious pattern, though the area of Ahwatukee, South Tempe and South Chandler is prominently represented.

This looks to me like a buyer's strike, but one without a lot of conviction. Sellers would probably be best advised to wait it out until more buyers arrive in late January and early February. Unless sellers have a strong need to sell quickly there is no obvious reason for drastic action. The laws of supply and demand are still working in sellers' favor and a little patience will probably prove wise.

December 21 - Here is a list of the cities where the CMI is higher than it was last week:

  • Anthem
  • Arizona City
  • Avondale
  • Casa Grande
  • Chandler
  • El Mirage
  • Gilbert
  • Litchfield Park
  • Maricopa
  • Mesa
  • Paradise Valley
  • Peoria
  • Phoenix
  • Queen Creek
  • Scottsdale
  • Sun City West
  • Sun Lakes
  • Tempe

The exceptions are:

  • Apache Junction
  • Buckeye
  • Cave Creek
  • Fountain Hills
  • Glendale
  • Gold Canyon
  • Goodyear
  • Laveen
  • Sun City
  • Surprise
  • Tolleson

I think we can agree that the cities gaining advantage for sellers are more significant than the ones going the other way. These numbers are for single-family homes only.

In the overall market for all areas & types the CMI has not yet completed its downward cycle. It stands at 132.0 and was 132.3 last week. This is a very modest decline however and there is no sign of enough momentum to force it below 130.

Both the demand index and the supply index are falling, telling us that the market is getting less active. The monthly sales rate is down 9.9% while the number of listings under contract is down 14.9% from this time last year. Sales momentum has evaporated faster than prices have increased, which means dollar volume is moving lower. This is bad news for agents, lenders and title companies, but because supply remains weaker than demand, sellers should not be fooled into thinking that buyers now have an advantage.

Sales may take longer and time on market may increase, but we do not have the right conditions for prices to decline. Based on the CMI staying above 130 we anticipate upward pressure on pricing to continue. The only city with a CMI below 110 is Casa Grande at 101 and even here it rose from 100.5 last week.

December 20 - A Christmas present for sellers in the Cromford® Market Index table this week. The following is for the single-family markets in the 17 largest cities.

A much greener table than those we have published for the past 2 months, we have 11 cities showing improvements for sellers and only 6 still deteriorating. The recent downturn is now complete as the overall average change in the CMI in this table is +0.2% instead of the -1.5% we reported last week.

Paradise Valley and Maricopa are the strongest upward movers, while Glendale, Queen Creek and Surprise are the primary downward trending cities.

Remember that the CMI tells us about the balance between buyers and sellers. It does not tell us about the size of the market. Both supply and demand are weak at the moment so the market is contracting. That means fewer transactions and less business to go round. However those worried about falling prices can take some comfort. The numbers in the table above support significant upward pricing pressure. This means homes will probably get even more unaffordable and sales volumes are likely to fall further. Listings are receiving remarkably few acceptable offers in the middle of December, but we are also seeing very low numbers of new listings.

Normally when demand goes weak we see a build up of supply, but in this cycle, we are not seeing this effect..

December 17 - We now have 2 complete weeks of December data in hand so it is fair to compare with the same 2 weeks in past Decembers:

  • we have seen 3,268 new listings across Greater Phoenix, 6% lower than the 3,478 we saw in 2017 and the second lowest total after 2014
  • there have been 2,949 closed listings across Greater Phoenix, slightly above the 2,937 we saw in 2017
  • there have been 3,340 accepted offers on listings across Greater Phoenix, down 7% from the 3,607 we saw in 2017

At 6% the drop in new listings is not as severe as for the first week of December which was down 11%. However it indicates we still see subdued flows of new supply in December, well below the average over the past 18 years.

Closings are running at a good pace, but new contracts are now down 7% having been down 4% after the first week. Buyer enthusiasm is low partly because of higher cost of ownership but also because there is a shortage of attractive inventory for them to choose from.

The combination of low contracts and normal closings means that the number of listings in escrow is unusually low and declining further. This means there is excess capacity at title companies and we will enter January with an extremely low number of homes under contract.

December 16 - Demand is lower today than it was this time last year, but the decline is modest compared with the downturns of 2006-8, 2010 and 2013-14.

One way of measuring demand downturns is to look at the contract ratio. This indicator has the advantage of being applicable to small sectors of the market but it is subject to seasonality. We can avoid the seasonality effects by comparing the same dates in different years. Let us take a look at December 2018 versus December 2017 to see how much the contract ratio has changed.

On December 15, 2018 the contract ratio for all areas & types across the ARMLS database stands at 40.9. This is a 19% decline from 50.8 on December 15, 2017 - a noticeable downturn but not a dramatic one.

On December 15, 2013 the contract ratio was 35.6 and had suffered a 54% decline since December 15, 2012 when it was 78.0. We can see that the downturn that started in mid-2013 created more than twice the annual decline that we are seeing in mid-December 2018. This was a dramatic fall, but it was not enough to stop prices from rising. It did cause them to rise at a much lower rate however.

On December 15, 2010 the contract ratio was 43.2 having been 52.2 a year earlier. This was a 17% decline and gives us a similar percentage decline to the one we experiencing today. In 2010 the fall in demand was due to the expiry of large government incentives to encourage home purchases. This occurred during a period when delinquency rates for home loans were very high and negative equity was widespread. New supply was pouring onto the market, much of it distressed in the form or short sales or lender owned homes. As a consequence the price rises experienced between 2009 and 2010 were given up again in 2011 to reach a second low point.

In 2018, home loan delinquencies are at an extremely low level and home equity is at a high level. Consequently the fall in demand is merely causing sales rates to drop and allowing buyers a little more negotiation power than a year ago. This is likely to lead to a slower appreciation rate but is very unlikely to lead to home values falling.

Before buyers get too excited about their improving circumstances, we should point out that this is because there are slightly fewer of them about. The supply is still very low by long term standards. In fact the total number of active listings on ARMLS as of December 15, 2018 is the lowest we have recorded for any December 15 since 2004, which was close to the height of the bubble. Indeed it is the second lowest total for December 15 since our records began.

December 15 - Today we are taking a deeper look into the annual sales rate and how it has changed over the past 12 months.

If we compare the annual period ending December 12 2018 with that ending December 12, 2017, we see a small increase of 0.3% over all areas and types. However single-family detached sales are down 0.2% while mobile home sales are up 7.6% and condo sales are up 2.0%. Condo sales includes the following ARMLS dwelling types:

  • Townhouse
  • Apartment Style / Flat
  • Loft Style
  • Gemini / Twin Home
  • Patio Home

Mobile home sales include:

  • Mfg / Mobile Housing
  • Modular / Pre-Fab

Sales in Greater Phoenix are up by 0.2% while out-of-area sales are up 3.5%.

Comparing the broad areas around Phoenix we find

  • the central valley is up 1.0% (all types)
  • the northeast is up 2.6%
  • the southeast is down 1.4%
  • the west is flat
  • Pinal County is up 2.4%

This demonstrates the better performance of the higher end of the market (which dominates the northeast), relatively unconstrained by supply problems. Pinal County is growing faster than Maricopa County.

December 14 - Among the 12 cities that are too small to be included in the weekly survey, the following have seem their Cromford® Market Index rise over the last week:

  • Anthem
  • Arizona City
  • El Mirage
  • Litchfield Park
  • Tolleson

7 of the 12 cities are still showing some deterioration for sellers. The overall picture is of a market stabilizing after a mild downturn. This does not bear much similarity to what we read in the press of a major retreat or even slump in the housing market. But then if the headlines did not grab your attention you would not read the adverts alongside..

The reality in Greater Phoenix is that we have shifted from a strong seller's market with high volumes to a moderate seller's market with slightly lower volumes. In due course this is likely to adjust appreciation rates from the 8%-10% level to more like 6%-8%. If the CMI drops below 120 I would change our prediction to 4%-6% but at the moment there is little sign of a fall much below 130. At a CMI of 100 we would expect appreciation Of course things could change at any point but it would need a new factor coming into play.

The housing market has seen 3 factors put a slight dent in demand:

  1. Mortgage interest rates are at a much higher level than in 2017, though still far below long term averages
  2. The cost of home ownership has risen faster than rents
  3. The tax law changes since 2018 have removed many of the tax benefits of owner-occupied housing relative to renting

We definitely do not have anything approaching a crash or a slump, which would require a large increase in supply. Supply remains weak because many existing homeowners are more reluctant to move. Doing so would require them to give up their existing cheap loan and take out a new more expensive one. They are tending to stay put, which is good news for the likes of Home Depot and home remodelling and redecorating companies.

Other parts of the country are reporting weaker markets at the upper levels, but in Greater Phoenix, the luxury market is looking strong. Supply of higher end homes is down from last year and demand is holding up rather well. Of course the luxury market in Arizona is priced like the mid-range market in many parts of California. Population flows are favoring Arizona too, so it looks as though Phoenix will have one of the leading housing markets over the coming year, even though it is likely to be somewhat less active than 2018.

December 13 - The Cromford® Market Index for the single-family markets in the 17 largest cities is shown below:

With 10 cities showing deterioration for sellers over the last month and 7 showing improvement, this is better for sellers than last week and a huge improvement from mid November when every city was deteriorating. The average change in the CMI is only -1.5%, up from -3.6% last week.

Glendale was the last city to enter the downturn but it looks like being the last to leave too. Queen Creek's market is also weak while Avondale and Surprise make up the remaining big downward movers over the past month. When we look at changes over the past week we can see the following cities improved for sellers:

  • Avondale
  • Buckeye
  • Chandler
  • Gilbert
  • Goodyear
  • Maricopa
  • Paradise Valley
  • Peoria
  • Scottsdale
  • Tempe

This list is as long as last week at 10, but there has been some change in the members with Cave Creek and Mesa dropping out while Peoria and Gilbert have joined.

Though we still have a little deterioration overall, the movement is now very slight. The overall Cromford® Market Index for all areas & types has declined from 132.8 to 132.3 which means we are still very much in a seller's market and 2019 will start with sellers still dominant. The last time buyer's had a slight advantage (CMI below 100) was July 1, 2014. The last time they had a clear advantage (CMI below 90) was November 11, 2010.

 

December 12 - Closings in November were sharply down from a year earlier. Many people believe the primary reason for this is the steep increase in mortgage rates that took place between September and October. According to Freddie Mac, the average rate on a 30-year fixed loan rose from 4.63% to 4.83%. We had seen an even steeper rise between January and February from 4.03% to 4.33% which did not seem to have much effect on buyer enthusiasm here in Greater Phoenix. However this earlier increase was spread over many weeks whereas the rise between September and October took place during 1 week between October 4 and October 11. The sudden sharp increase seemed to take the wind out of the sails of many buyers. It makes sense, from a timing perspective, for this to negatively affect contracts in October and closings in November.

Rates peaked at 4.94% between November 8 and November 15 and have since been on a downward trajectory. The poor performance of the stock market has driven investors into treasury bonds, raising their prices and hence lowering yields. These yields have a major influence on mortgage rates and so we are now down to 4.75% for a 30-year fixed loan as of December 6. The trend is now downward until the stock market starts booming again and money comes back out of its safe havens.

It now looks as though closings are strengthening in December and this may be because buyers are anxious to lock down their lower rates before they start to rise again.

December 11 - Trying to determine how many buyers in Maricopa County come from California is slightly complicated. We need to exclude many banks and companies like Opendoor who are headquartered in CA.

If we look only at the people who buy as individuals or couples, then we see significant growth over the last year. The annual purchase rate for people with Californian addresses is up 23% to 4,391. It is also up 43% from 2 years ago.

A similar (and slightly more pronounced) situation exists in Pinal County, where purchases by Californian couples or individuals are up 30% from last year and up 47% from 2 years ago. The absolute numbers are smaller however with the annual rate at 655. This is in line with the relative sizes of the Maricopa and Pinal markets.

We conclude there is a lot of truth in the rumor than more people are moving sideways from California to Central Arizona. In doing so they can often get 2 to 3 times as much home for the same money or release equity while same-sizing. Their property taxes will also be significantly lower.

The favorite locations for 2018's Californian buyers to originate are as follows:

  1. San Diego
  2. San Jose
  3. Los Angeles
  4. San Francisco
  5. Irvine
  6. Huntingdon Beach
  7. Corona
  8. Riverside
  9. Fremont
  10. Sacramento
  11. Anaheim
  12. Long Beach
  13. Temecula
  14. Mission Viejo
  15. Rancho Cucamonga
  16. Chula Vista
  17. Carlsbad
  18. Oceanside
  19. Murietta
  20. Simi Valley

The potential inter-state movement here from California is vast and the current numbers represent only a trickle, given the total size of the Californian population.

December 10 - Now we have complete data for the first week of December we can compare the numbers for those 7 days with the same period last year. We want to know about new listings, contract activity and closed sales. Here are the numbers:

  • new listings - there were 1,649 new listings added to ARMLS across Greater Phoenix, which is 11% lower than the 1,857 we saw in 2017
  • accepted offers - there were 1,726 accepted offers within ARMLS across Greater Phoenix, which is 4% lower than the 1,807 we saw in 2017
  • closed sales - there were 1,353 closed listings across Greater Phoenix, barely changed from 1,357 in 2017

The conclusion for this particular period is that new supply was unusually weak while demand was a bit stronger than anticipated and not much below this time last year.

This is more evidence that the market is stabilizing and no longer in much of a downtrend.

December 7 - Based on affidavits filed at the Maricopa County Recorder's office in November, home sales were 6% lower in November 2018 than November 2017. However, condo and townhouse sales were up 2% while single-family detached sales were down 7%. We also note that more of the condo / townhouse sales were for owner-occupation rather than rental - 18.7% were intended to be used as rental properties in November 2018 compared with 19.4% in 2017.

The same source shows us that new home sales increased 2% year over year while re-sales declined 7%.

December 6 - Below is the table showing the Cromford® Market Index for the single-family markets in the 17 largest cities:

Now we are really starting to see some significant improvement for sellers. Most obviously 5 of the 17 cities have seen a movement in favor of sellers over the past month. The moves are relatively small, with only Paradise Valley making a significant move of 6%. We also still have 12 cities that have deteriorated, but that is distinctly better than the 16 we had last week.

The downturn still has some distance to run, but it seems to be rapidly running out of steam.

Looking at the changes over the last week, we see the following cities have a higher CMI than last Thursday:

  • Avondale
  • Chandler
  • Mesa
  • Cave Creek
  • Maricopa
  • Scottsdale
  • Paradise Valley
  • Goodyear
  • Tempe
  • Buckeye

So more than half of the cities have a higher CMI than 7 days ago. Gray clouds are all around, but that tiny silver lining we referred to on November 15 now looks very shiny and thick. We should be seeing some sunshine quite soon.

The average decline in CMI is 3.6%, down from 5.9% last week and 8.0% the week before.

The remaining problem areas are concentrated in Queen Creek, Glendale and Surprise.

All 17 cities are still over 110 and therefore seller's markets.

ecember 4 - Monthly sales totals have tended to look more robust in public records than they have in ARMLS data over the past few months. This is because volumes of new home sales and normal non-MLS sales have held up better than normal MLS sales. The strength of non-MLS sales is largely because iBuyer purchases are now some 4% to 5% of the market and about 90% of them do not involve an MLS listing until after they have been purchased by the iBuyer. It is also true that iBuyer transactions tend to create higher sales overall. What would have been a single sale prior to iBuyers entering the market becomes 2 sales - one from seller to the iBuyer and one from iBuyer to the eventual purchaser.

We now have preliminary counts for Maricopa County affidavits in November and after adjusting for the number of working days in each month we see the following year-over-year changes in sales volume for single-family homes, condos and townhomes:

  • Nov 2018 - down 5.9%
  • Oct 2018 - down 2.7%
  • Sep 2018 - up 1.5%
  • Aug 2018 - up 1.4%
  • Jul 2018 - up 5.2%
  • Jun 2018 - up 3.0%
  • May 2018 - up 3.5%
  • Apr 2018 - up 2.2%
  • Mar 2018 - up 9.0%
  • Feb 2018 - up 10.8%
  • Jan 2018 - up 0.4%

The November % change is the most negative since September 2014 (down 6.8%). However the year-over-year sales declines that we saw in 2013 and 2014 were far more severe. The worst case was December 2013 when it dropped 15.5% from December 2012.

In summary, the November affidavit counts confirm a significant downturn in demand but also imply the downturn is not as severe as we experienced in 2013 and 2014.

The affidavit counts exclude transactions that are exempt from filing an affidavit. These include HUD sales and trustee sales. They also include some REO sales filed by a few out-of-state title companies who erroneously think REO sales are exempt. They are clearly wrong, but for some reason the Arizona authorities have not sought to correct the title company misinterpretation of Arizona statutes. Servicelink, Quality Escrow and NexTitle are the primary offenders.

December 3 - The daily Cromford® Market Index chart looks like this:

looks like this:

The rate of decline reached maximum during late October and subsided during November. We are now seeing a moderate rate of decline which looks as though it might not drop much below 130.

November 2018

 

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

At first sight this looks pretty bad for sellers, with 16 out of 17 cities moving in favor of buyers over the past month. However there are in fact several pieces of good news for sellers buried in the details.

First of all the average decline is down to 5.9% from 8% last week.

Secondly, every city is still above 110 and therefore inside the seller's market zone.

Thirdly, we have several cities that saw their CMI rise over the past week. These are:

  • Buckeye - up from 111.4 to 112.4
  • Cave Creek - up from 142.0 to 142.6
  • Chandler - up from 159.8 to 160..7
  • Goodyear - up from 120.4 to 121.2
  • Maricopa - up from 124.4 to 127.1
  • Mesa - up from 156.4 to 157.0
  • Paradise Valley - up from 121.8 to 122.5
  • Peoria - up from 119.7 to 120.4

That is almost half of the 17 cities that have staged a turnaround, albeit by very small amounts. We can see that supply is dropping again and demand is stabilizing. The present downturn looks like it is shaping up to be both relatively minor compared to 2013 and relatively short-lived too.

Among the smaller cities outside the top 17, we are also seeing improvements for sellers over the last week in the following:

  • Anthem
  • Arizona City
  • Casa Grande
  • El Mirage
  • Litchfield Park
  • Sun City

At the moment I see only a small chance of the current trajectory taking us into a balanced market, and a buyer's market is not a likely outcome at all. This means that in the short term prices will continue to have upward momentum, although somewhat less than they had before September. Any buyers who think by opting out today they will be able to come back and find lower prices next year are very likely to be disappointed. It would take a massive change in the market for this to happen and there is absolutely no evidence of such a change in today's numbers.

November 29 - In the Cromford® Public section of this web-site we provide a chart which compares the annual average price per square foot over time for each transaction type. The current figures look like this:

  1. New homes $168.16
  2. Normal MLS sales $164.16
  3. Investor Flip sales $143.21
  4. Normal non-MLS sales $137.86
  5. Short sales $131.15
  6. Bank owned sales $124.41
  7. Pre-foreclosures $124.34
  8. GSE REO sales $115.54
  9. Trustee sales $111.21
  10. HUD sales $101.76

The annual change for these values are as follows:

  1. Pre-foreclosures 10.36%
  2. Trustee sales 10.21%
  3. Normal MLS sales 9.18%
  4. Bank owned sales 8.86%
  5. Normal non-MLS sales 8.72%
  6. Investor flip sales 8.70%
  7. Short sales 7.76%
  8. GSE REO sales 7.64%
  9. New home sales 6.32%
  10. HUD sales 4.42%

Although new homes are the most expensive transactions on a price per sq. ft. basis, the average $/SF is growing slowest apart from HUD sales (of which there are now very few). This is partly because many developers are aiming at lower price points where demand is strongest and competition from the supply of existing homes is very weak.

November 28 - It happens every year. As soon as Thanksgiving is over, the number of active listings starts to drop. For example, in the city of Phoenix, single-family listings without a contract are down from the peak of 3,263 reached on November 18 to 3,157 on November 27, a level we last saw on October 31. This is slightly higher than the 3,058 we measured on October 27 last year, but the drop in contract activity is being matched by a drop in new listing activity.

Both buyers and sellers are fewer in number than they were in November 2017. This increases competition among agents.

November 27 - The S&P/Case-Shiller® Home Price Index® numbers have been released for the latest sales period (July through September) and the 20 focus cities fared as follows on a month to month basis:

  1. Phoenix +0.75%
  2. Las Vegas +0.64%
  3. Tampa +0.58%
  4. Cleveland +0.29%
  5. New York +0.23%
  6. Atlanta +0.22%
  7. Charlotte +0.20%
  8. Miami +0.20%
  9. Detroit +0.11%
  10. San Francisco +0.02%
  11. Boston -0.01%
  12. Dallas -0.01%
  13. Chicago -0.06%
  14. Portland -0.06%
  15. Minneapolis -0.07%
  16. Denver -0.13%
  17. Los Angeles -0.16%
  18. Washington -0.23%
  19. San Diego -0.35%
  20. Seattle -1.34%

Suddenly Phoenix has jumped from the number 5 spot to top of the table

We see half of the focus cities with negative changes, but the national average was +0.08%. Phoenix was almost ten times the national average and is definitely an over-performer again. Seattle took another large hit for a single month while Las Vegas is no longer out in front in a league of its own.

For the year over year numbers we see:

  1. Las Vegas +13.5%
  2. San Francisco +9.9%
  3. Seattle +8.4%
  4. Denver +7.3%
  5. Phoenix +7.2%
  6. Tampa +6.7%
  7. Detroit +6.3%
  8. Minneapolis +6.0%
  9. Atlanta +5.7%
  10. Los Angeles +5.5%
  11. Cleveland +5.2%
  12. Portland +5.2%
  13. Charlotte +5.2%
  14. Boston +5.0%
  15. Miami +4.6%
  16. Dallas +4.3%
  17. San Diego +4.0%
  18. Chicago +3.0%
  19. Washington +2.9%
  20. New York +2.6%

The national average was +5.5% so Phoenix was well ahead of that, and it moved back to 5th place from 6th place last month. None of the focus cities is showing a negative move year over year.

November 26 - Comparing the annual non-distressed single-family sales in Greater Phoenix between November 1, 2017 and October 31, 2018 with the previous year we find that the annual sales rate increase was 2.0% and the annual average $/SF rose by 7.3%.

The top performing areas for appreciation were as follows:

  1. Florence & Coolidge (85128 & 851320 - up 15.6%
  2. Sky Harbor South (85040) - up 13.9%
  3. Far West Phoenix (85037) - up 12.1%
  4. I-10 and I-17 (85009, 85015, 85017, 85019, 85031, 85033, 85035) - up 11.8%
  5. Maricopa (85138 & 85139) - up 10.7%
  6. Southwest Phoenix (85043) - up 10.3%
  7. Tolleson (85353) - up 10.2%
  8. Sky Harbor North (85006, 85008, 85014, 85034) - up 10.1%
  9. El Mirage (85335) - up 10.0%
  10. South Buckeye (85326) - up 9.8%

The bottom performing areas for appreciation were as follows:

  1. Gold Canyon (85118) - up 3.1%
  2. South Tempe (85284) - up 3.5%
  3. North Goodyear (85395) - up 3.8%
  4. Downtown Phoenix (85003, 85004, 85007) - up 4.1%
  5. Northeast Phoenix (85050, 85054) - up 4.1%
  6. North Surprise (85387) - up 4.5%
  7. North Phoenix (85083, 85085, 85310) - up 5.0%
  8. North Scottsdale (85255, 85259, 85262, 85266) - up 5.1%
  9. South Scottsdale (85250, 85251, 85257) - up 5.3%
  10. Anthem (85086) - up 5.4%

November 24 - For the first time in many years, the monthly dollar volume today is lower than it was this time last year. This confirms the market slowdown and indicates that the drop in monthly sales volume is now having a greater impact than the annual rise in average sales price.

The last time this crossover occurred was in December 2013. On that occasion dollar volume remained lower than the prior year for 9 months but re-crossed in September 2014 and has remained above the prior year from then until today.

If history is any guide, the dollar volume is likely to remain lower for the rest of 2018 and part of 2019. However it is unlikely to remain lower for the whole of 2019. In fact we can gauge the severity of the current downturn by how long it takes to cross back over the prior year's dollar volume. We are unable to make any specific prediction for this date, but we can see that the current downturn has so far proven to be less dramatic than the one that occurred in 2013.

November 23 - Looking at the third week of November and comparing with the same period in 2017 we see the following:

  • New listings total 1,764, down 13.0% from 2017 and the lowest number we have ever recorded since 2000 for the third week of November.
  • Closed listings total 1,832, down 12.3% from 2017
  • Accepted offers total 1,875, down 9.5% from 2017

The figures above are for all dwelling types across Greater Phoenix.

Clearly the market is far less active than it was this time last year, but it is not just buyers who are down. The steepest fall was in the number of new listings, showing that sellers are also losing enthusiasm. If this trend continues we will probably find we have too much capacity in the support functions for residential real estate transactions. It appears that many potential move-up buyers are deciding to stick with the mortgage they already have. This reduces the number of sellers as well as the number of buyers but it is good news for the businesses that support home improvement.

The changes are not uniform across all price ranges:

  • Closed listings were down 25.7% for homes under $250,000
  • Closed listings were down 4.6% for homes between $250,000 and $300,000
  • Closed listings were up 17.9% for homes between $300,000 and $400,000
  • Closed listings were down 7.6% for homes between $400,000 and $800,000
  • Closed listings were up 14.5% for homes between $800,000 and $1.5 million
  • Closed listings were down 14.3% for homes over $1.5 million

November 22 - Once again we take a look at the Cromford Market Index numbers for the single-family markets in the largest 17 cities:

The market is starting to show signs of pulling out of its dive. The above table looks pretty negative for sellers but it has a few more positive elements than last week.

First we have 1 city - Paradise Valley - that showed a small improvement from last month. Second, we have an average change of -8.1%, better than the -9.2% we saw last week.

We still have every city in the seller's market zone above 110. In fact Buckeye, the closest we have to a balanced market, moved up from 110.8 last week. Fountain Hills is also higher than last week

Avondale, Queen Creek, Chandler, Tempe & Scottsdale are down by 10% or more since last month, but we still see no signs of any of these 17 cities breaching the 110 mark. Until they do, the long-term average sales price per sq. ft. is very unlikely to fall below current levels. In fact we would not expect this to become a real possibility until CMI values have dipped well below 100.

November 21 - To read the news you would that the housing market was having a really hard time. A phrase like "the worst slowdown in years" (Bloomberg) sound ominous, but we need to remember that the housing market had been growing at an accelerating pace between 2015 and 2018 and a slowdown is inevitable at some point when prices rise for many years.

Talking specifically about Greater Phoenix

  • We are having a slowdown
  • It has been expected for at least a year
  • It is quite a modest slowdown, the least dramatic in the last 20 years
  • It is still the worst slowdown in years, because it is the only slowdown since 2013/2014.
  • The 2013/2014 slowdown was much more severe that the current slowdown
  • Sales prices did not decline during the 2013/2014 slowdown, they merely stabilized for a while before resuming an upward trajectory
  • So far there is no sign that sales prices will decline due to the current slowdown
  • There are more cuts in list prices than we have seen for a good while, but these are not likely to lead to cuts in the average sales price per sq. ft. which is based on closed contract prices
  • There is no sign yet of sales prices even moderating, although that would be likely if the drop in demand continues for a long period
  • It would take a large increase in supply to start putting downward pressure on pricing, and the supply of new listings is currently getting weaker, not stronger.

To give you some idea of how benign the current slowdown is let us have a look at the average price per sq. ft. for listings under contract:

This is for all types of dwellings within Greater Phoenix.

The chart is a leading indicator of future sales pricing and shows a strong rise in prices for homes in escrow over the past 2 months.

If buyers are going on strike, waiting for prices to come down or interest rates to drop (or both), then they are likely to be disappointed. It is more likely that prices will rise (and who knows what interest rates will do?).

November 16 - During the second full week of November we made the following observations compared with the same period in 2017:

  • New listings: 2,039 in 2018 versus 2,095 in 2017, a decline of 3.3%
    • new listings under $250K fell 19% from 1,001 to 809
    • new listings between $250K and $500K rose 16% from 794 to 924
    • new listings over $500K rose 2% from 300 to 306
  • Closed listings: 1,272 in 2018 versus 1,392 in 2017,a decline of 8.6%
    • closed listings under $250K fell 20% from 720 to 574
    • closed listings between $250K and $500K rose 4.4 % from 542 to 566
    • closed listings over $500K rose 1.5% from 130 to 132
  • Accepted offers: 1,828 in 2018 versus 2,083 in 2017, a decline of 12%
    • accepted offers on listings under $250K fell 24% from 1,080 to 821
    • accepted offer on listings between $250K and $500K rose 4% from 802 to 831
    • accepted offers on listings over $500K fell 12% from 201 to 176

All the above numbers are for all property types across Greater Phoenix.

The conclusions we can make are as follows:

  1. The market is contracting with new listings, closed listings and accepted offers all down from last year
  2. Accepted offers showed the largest decline, showing that weaker demand is the primary change compared to last year.
  3. Although sales and offers have fallen in the segment below £250K, so has the supply of new listings. All have declined by a similar amount, around 20%. The market remains favorable for sellers, though much smaller than last year.
  4. New supply between $250K and $500K is arriving 4 times as fast as listings are going under offer or closing, leading to an increase in choice for buyers and weakening sellers' negotiation power.
  5. The market over $500K, which remained stronger than 2017 during October is starting to show signs of demand weakness with the 12% drop in accepted offers. New listings and closings were in balance.

November 15 - Looking at the Cromford® Market Index table for the single-family markets in the 17 largest cities we see another big downward change over the past month:

Now we have 100% of the cities showing a decline as even Glendale has surrendered. Glendale does have the lowest monthly fall at -3%. The average change is -9.2%, just 0.1% higher than last week, the tiniest of silver linings.

There are more silver linings if we look very closely.

The first positive is that every city is still over 110 and so is officially classified as a seller's market despite the big decline in buyer interest. Buckeye has stabilized in the last week and only fell 0.1 over the last 7 days. Other cities that have stabilized over the last week are Peoria and Goodyear, while Paradise Valley has managed a very slight increase over the past 2 weeks. So we would then have all 5 cities at the bottom of the table refusing to drop further. Those higher up the table are still rushing to join them in the 110 to 130 zone. It looks like Tempe, Maricopa & Fountain Hills are preparing to join the stabilized group soon, now they have dropped below 130.

Top of the table Avondale declined by the largest percentage (-16%).

The overall impression is that cities are unlikely to fall much below 110 on the current trends. This is much cooler than the market in the first half of 2018, but it certainly is not a market crash, just a return to a healthy more-balanced situation. Many potential buyers are taking a break, but it would not be surprising if they came back again once they have got used to the current interest rate environment. They are probably hoping that closed sales prices will fall, which is unlikely given the continued shortage of homes for sale. It is likely that asking prices will have to get more attractive however, which will cause sales price increases to moderate.

We clearly have a rapidly cooling market but there is absolutely no sign of serious cause for alarm in the data we are studying. Sellers will need a little more patience and flexibility on their terms and asking prices. Buyers may feel less outnumbered by other competing buyers and as a result can do their house-hunting in a less frenetic and stressful way.

Both of these seem like good news to me.

November 14 - The Home Opportunity Index (HOI) is published by the National Association of Home Builders in conjunction with Wells Fargo Bank. It calculates the percentage of homes listed for sale that could be afforded by a family earning the median income.

The chart below shows the HOI for the USA in green and for Phoenix in blue.

In the third quarter of 2018 homes were the least affordable they had been since 2008 and the HOI is no longer inside the normal range of 60-75. This helps to explain why we are seeing a weakening trend in demand.

We also see that Phoenix no longer has a significant affordability advantage over the USA as a whole, something we have had for most of the past 30 years. Houses in Phoenix are cheaper than average, but incomes are also lower than average.

November 13 - Today we make another comparison between 2013 and 2018, this time looking at listings under contract.

We can see that 2013 had much higher numbers of listings under contract, but this was primarily caused by the large number of short sales in escrow.

We can also see that although 2018 has seen a sharp fall-off in listings under contract between April and November, the decline in 2013 was steeper. Again, this shows that the cooling of the market in 2018 is not as severe as in 2013.

We note that the cooling of the market in 2013 did not cause prices to stop rising. We can deduce that the cooling in 2018 is unlikely to stop prices from rising. However it may stop them from rising quite so fast.

November 12 - Although we have entered a market down-cycle, it is much less severe than the last down-cycle which commenced in 3Q 2014. To illustrate this let us take a look at a series of charts that compare 2018 with 2013.

Here we can see that active listings have risen in 2018 from the end of July, but they have not yet exceeded the level of early April. The count for November 10 (week 45) was 22,112 (all areas and types). Our current down-cycle features a relatively small build-up of inventory.

In 2013, active listings started rising in late May and surged between July and November by roughly 7,000 listings. The count for week 45 was 26,900. This illustrates how much more severe the market slowdown was in 2013 compared with 2018. We also have far fewer active listings in 2018 than we did in late 2013.

November 9 - We like to study weeks much better than months. Weeks are more consistent in length and therefore comparing (say) week 45 of 2018 with week 45 of earlier years usually gives us an accurate understanding of how the current market compares with the past. Even if there was a holiday during a week, reducing its working-day count from 5 to 4 or even 3, the corresponding week almost always has the same working-day count. Months have the annoying habit of being inconsistent in length. Even a month like November which always has 30 days, has a variable number of working days, between 17 and 20, so comparing November 2018 with earlier Novembers is fraught with problems. Most analysts ignore this problem and compare months anyway, sometimes leading to spurious conclusions.

Anyway, we would now like to look at the week at the start of November, one which has just completed. Comparing with the same week last year we find:

  • new listings are down from 2,353 to 2,178, a drop of 7%
  • closed listings are down from 1,245 to 1,133, a drop of 9%
  • accepted offers are down from to 2,281 to 1,904, a drop of 17%

The market is clearly less busy than last year at this time. New supply is coming onto the market more slowly while existing listings are closing at an even slower rate. The biggest decline is in contract signings. This latter change is the one with the most significance and implies that higher interest rates and higher prices are finally cooling the market down, as economic theory tells us they should.

Buyers are much less active than they were last year, so despite the fact that we have more demand than supply, sellers will not be in as strong a position as they were this time last year. A corollary is that the remaining buyers are going to enjoy better negotiating power and are more likely to win concessions from sellers. This is reflected in the charts which show seller paid closing costs and price changes.

Everything is orderly and the market is operating as we would expect. This is not unusual greed or fear at work (as we would see in a bubble), just the normal operation of a cyclical market. The only slightly surprising thing is how long it took for the higher interest rates and higher prices to have an impact. In 2017 we were expecting to see this effect become clearly observable by mid-2018, but the signs were only very small at this point. Now the effects are very clear and this makes for a different market sentiment.

November 8 - Once again we are showing the table of Cromford® Market Index values for the single-family markets in the 17 largest cities:

If you thought last week's average 8.4% decline was impressive, then you will be even more impressed with the 9.3% fall we have this week.

Glendale managed a very small increase but the other 16 cities saw declines, most of them over 10%.

The common story is that listings are going under contract slower than usual which makes active listings start to build up. We are NOT seeing an increase in the number of new listings arriving.

Despite the declines, all the cities (even Buckeye) are still in the seller's market zone over 110. Remember that 100 represents normality. We expect Buckeye will drop below 110 by next week, but the overall market is still much stronger than it was for all of 2014, all of 2015 and most of 2016. We are approaching a more balanced market at some speed, but given the continued weak supply, we are very unlikely to overshoot. We would need a large increase in supply to create a buyer's market. It is not at all obvious where this extra supply would come from. The situation is very different from 2005 when tens of thousands of empty homes had been purchased by speculators with ill-advised and reckless loans. Anyone who thinks the current situation is a bubble bursting is very much mistaken. It is merely the normal process of an over-heated market cooling down, something we expect to see several times a decade. True bubbles in housing tend to occur once or twice a century.

November 6 - There was a significant decline in the number of MLS listings going under contract in October. The total of accepted offers was 8,133 which was down 2% from September (a much shorter month with 17% fewer working days) and it was down 8% from October 2017.

However the decline was not universal across all price ranges. Almost all the decline occurred in the price range up to $225,000. This saw just 2,630 accepted contracts, down 28% from 3,651. Between $225,000 and $350,000 accepted contracts rose 5% to 3,226 while between $350,000 and $800,000 they grew 10% to 2,003. Between $800,000 and $2 million there was a slight decline of 1% to 240 while over $2 million we saw a 31% increase to 34.

Seeing the huge drop-off in contracts under $225,000 we expect to see a strong upward trend in average price per sq. ft. over the coming months, since the mix of homes closing will be skewed towards the higher end.

November 5 - Looking at the affidavit counts for October in Maricopa County, we see 9,042 for single-family and condo residences, up 1.7% from October 2017. New homes sales were up 5.9% while re-sales were up only 1.0%. These sales counts do show some modest annual growth, unlike the ARMLS closings which were down year-over-year. The reason the public recordings show more growth are:

  • 90% of new home sales do not get recorded in the ARMLS database and these are still showing a healthier trend than re-sales.
  • 90% of iBuyer purchases do not get recorded in the ARMLS database and these are well up from 2017 levels.
  • October's fall in MLS sales was more severe in Pinal County (-8%) than in Maricopa County (-1%)

November 2 - This is the first month since September 2016 where months of supply (3.1) is higher than 12 months earlier. This transpired for two reasons. First, the monthly sales rate for October was unusually weak compared with the previous 24 months, especially considering it had 23 working days. Second, the active listing count rose sharply during October due to the low rate at which listings went under contract.

Although it is valid to conclude that the market is cooling, 3.1 months is still lower than average and the market is merely heading towards normality. We would consider 4 to 5 months normal for a balanced market in early November. For example November 2014's reading was 4.7 months and the market was reasonably balanced between buyers and sellers at that point.

November 1 - The cooling of the market is accelerating according to the weekly table of Cromford® Market Index values for the single-family markets in the 17 largest cities:

Here we have 16 cities deteriorating for sellers and only 1 (Glendale) improving over the past month.

All 17 cities remain in the seller's market and so those hoping for prices to fall have nothing to celebrate yet. We would need CMI values to fall below 90 for that to occur and even the lowest ranked (Buckeye) is above the balanced zone of 90 to 110.

The average change over the past month is -8.4%, the largest decline we have seen since 2013. This means we are experiencing a profound change in market conditions. The decline is not as rapid or severe as 2013, but sellers need to note that their bargaining power is on the wane. Buyers are less numerous and have lowered enthusiasm.

It is unusual to see many cities with double digit percentage declines with Paradise Valley, Buckeye, Gilbert, Mesa, Avondale, Goodyear, Chandler and Maricopa all holding that dubious honor. Among the secondary cities, Casa Grande is the weakest with a CMI of 110.8, just outside of the balanced zone.

At some point we expect this plummeting behavior to slow and bottom out. We are not seeing this yet, but it is quite likely that we see some slowing of the trend during November. Watch this section of the web sites for the earliest news of this.

October 2018

October 31 - The Greater Phoenix area is relatively unaffected by international buyers, with the single exception of Canadians. Unlike Californio or Washington State, we get little attention from the Chinese. The good news is that we are therefore seeing little to no effect from the significant downturn in Chinese buying of American real estate. This downturn is probably a consequence of the imposition of tariff barriers to trade. Chinese holders of significant commercial real estate assets have been selling many of them in 2018 to release liquid funds to repatriate. Most of these assets are on the east and west coasts.

The bad news is that Arizona is no longer attracting much Canadian interest either. The annual purchase rate across Maricopa and Pinal counties is standing at an unimpressive 768 homes for the 12 months starting October 2017. At least this is up from the low point of 564 attained in December 2016, but it is a far cry from the 4,351 we saw in February 2012.

Canadians are selling almost twice as many homes as they are buying. 1,524 is the current annual sales rate, though this has declined from a peak of 2,824 in August 2016.

So the vast majority of the housing demand across Phoenix is now coming from domestic sources. The table below shows how much annual housing demand comes from each state or territory:

  1. Arizona 92,012
  2. California 4,380
  3. Washington 1,867
  4. Illinois 1,250
  5. Colorado 1,245
  6. Minnesota 777
  7. Oregon 658
  8. Texas 654
  9. Wisconsin 505
  10. Utah 387
  11. Michigan 377
  12. Nevada 373
  13. New York 355
  14. Florida 318
  15. Iowa 302
  16. Ohio 291
  17. North Dakota 262
  18. Pennsylvania 252
  19. New Mexico 252
  20. Idaho 232
  21. Nebraska 230
  22. Missouri 224
  23. Montana 221
  24. Indiana 189
  25. Virginia 188
  26. New Jersey 162
  27. South Dakota 161
  28. Kansas 151
  29. Alaska 147
  30. Georgia 138
  31. North Carolina 131
  32. Massachusetts 126
  33. Wyoming 114
  34. Hawaii 107
  35. Maryland 106
  36. Tennessee 92
  37. Oklahoma 87
  38. South Carolina 79
  39. Connecticut 78
  40. Arkansas 39
  41. Kentucky 38
  42. Alabama 38
  43. Louisiana 33
  44. New Hampshire 31
  45. Maine 25
  46. Delaware 23
  47. Armed Forces in Europe (AE)
  48. Rhode Island 19
  49. Mississippi 18
  50. Vermont 17
  51. West Virginia 16
  52. Armed Forces in the Pacific (AP)
  53. Washington DC 11
  54. Guam 8
  55. Puerto Rico 5

The numbers indicate the annual sales rate for homes intended as first or second residences (not investment properties) and exclude purchases by the out-of-state iBuyers (Opendoor and Zillow).

Alberta and British Columbia used to rank quite high in this table, but AB is now equivalent to North Dakota and BC to Kansas.

October 30 - The S&P/ Case-Shiller® Home Price Index® numbers have been released for the latest sales period (June through August) are the 20 focus cities fared as follows on a month to month basis:

  1. Las Vegas +1.15%
  2. Tampa +0.54%
  3. Detroit +0.52%
  4. Cleveland +0.52%
  5. Phoenix +0.40%
  6. Minneapolis +0.32%
  7. Atlanta +0.30%
  8. Charlotte +0.22%
  9. Chicago +0.20%
  10. Miami +0.13%
  11. Los Angeles +0.13%
  12. Boston +0.06%
  13. Denver -0.02%
  14. Washington -0.03%
  15. New York -0.03%
  16. Dallas -0.04%
  17. Portland -0.10%
  18. San Francisco -0.29%
  19. San Diego -0.46%
  20. Seattle -1.58%

We are starting to see a larger number of cities with negative changes - 8 this month, although the national average was +0.22%. Phoenix was almost double the national average and is starting to look like an over-performer again, although it slipped from 3rd to 5th place in the table above since last month. Seattle took an unusually large hit for a single month while Las Vegas is out in front in a league of its own.

For the year over year numbers we see:

  1. Las Vegas +13.9%
  2. San Francisco +10.6%
  3. Seattle +9.6%
  4. Denver +7.7%
  5. Tampa +7.0%
  6. Phoenix +7.0%
  7. Los Angeles +6.2%
  8. Minneapolis +6.0%
  9. Detroit +6.0%
  10. Atlanta +5.8%
  11. Cleveland +5.6%
  12. Boston +5.5%
  13. Portland +5.4%
  14. Charlotte +5.2%
  15. Miami +5.0%
  16. San Diego +4.8%
  17. Dallas +4.7%
  18. Chicago +2.9%
  19. New York - 2.8%
  20. Washington +2.8%

The national average was +5.8% so Phoenix was well ahead of that, though it slipped from 5th place last month to 6th place today.

October 29 - The Cromford® Market Index for all areas and types is really diving at the moment as can be seen in the chart below:

This is partly because of more supply, but then we get more supply at this point every year. It almost always peaks around Thanksgiving and then plunges again during December. Supply is not what we need to worry about at this stage.

The primary reason for the plummeting CMI is the weakness of demand. Closed listings had been running well ahead of 2017 for most of the year but started to falter a couple of months ago. Monthly closings were 1.2% ahead of 2017 as recently as October 2. Today they are 7.3% below 2017. Pending listings are 13.5% below 2017 levels and UCB listings are down 9%.

We can argue about what is causing the drop in demand, but we can no longer argue about its existence.

October 26 - Below is a table showing the Cromford® Market Index for the single-family markets in the 17 largest cities:

Although all cities are still in the seller's market zone over 110, this is the most negative picture we have seen for a very long time.

16 of the 17 cities have deteriorated for sellers over the past month and only 1 (Glendale) has improved. Paradise Valley and Buckeye have fallen the most, representing both the top and bottom end of the price spectrum. The Southeast Valley mid-range strongholds of Chandler, Gilbert and Mesa are all down 7 to 9% while the Northeast Valley's Scottsdale and Fountain Hills are down 8%. The big West valley cities including Peoria and Surprise are holding up reasonably well in comparison. Phoenix continues to drift lower as it has for many months now.

The market is cooling fast with weakened demand being the primary culprit. Supply remains low and still inadequate to meet demand, so sales prices continue to rise. However the fall in seller negotiation power is leading to a flattening trend in asking prices across many price ranges.

We anticipate falling sales volumes, which is bad news for agents, brokers and title companies, though the downwards trend is not as steep as we saw in 2013 and 2014. Lenders will probably also see lower volumes though the rising interest rates create opportunities to increase spreads.

The rest of the USA has been reporting weaker demand for several months now. It seems that Greater Phoenix is joining the rest of the country. However we must emphasize that the current figures represent a return to normality rather than a dire situation. Loan delinquency is very low and most home owners have substantial equity, so there are almost none of the dangerous conditions that prevailed in 2006 and 2007.

October 25 - The Census Bureau has released the single-family housing permit counts for September and they are a little lower than we have been used to seeing. A total of 1,511 permits for Maricopa and Pinal counties is down 7% from 1,625 in September 2017. This means the 12 month rolling average is slightly down from 22,388 last month to 22,274 this month.

The third quarter total is still up over last year, increasing from 5,423 to 5,912.

It appears that an additional degree of caution has overtaken the home builders, though supply still remains far below demand.

October 24 - Time to check on how sales have been doing for the first 3 weeks of October:

Segment Closed Listings 2018 Closed Listings 2017 Change
All areas & types 4,372 4,639 down 6%
Greater Phoenix - all types 4,214 4,504 down 6%
Greater Phoenix - Single-Family Detached 3,479 3,711 down 6%
Greater Phoenix - Condo/Townhouse 641 691 down 7%
Greater Phoenix - Mobile Homes 94 102 down 8%
Greater Phoenix - Below $200K 884 1,413 down 37%
Greater Phoenix - Between $200K and $300K 1,694 1,611 up 5%
Greater Phoenix - Between $300K and $400K 805 749 up 7%
Greater Phoenix - Between $400K and $1M 732 667 up 10%
Greater Phoenix - $1M and over 99 64 up 55%

Overall, the unit counts are down everywhere and for all dwelling types. However the steepest drop is at the bottom end, mainly because of lack of supply. The mid range is up over last year but the increase is far less than during the first half of 2018.

For the luxury market over $1M sales have seen a very healthy increase.

These changes in the sales mix (in favor of the top end) will make the average sales price, median sales price and average $/SF all look very strong, and much stronger than the underlying change in home values. Remember this when interpreting the price charts during the fourth quarter.

October 23 - What we are witnessing in the Greater Phoenix housing market right now is nothing like a crash or a bubble deflating. However there are many clear signs that the market is softening after 3 years of growing strength. So far we have not seen enough to make any dent in the upward progress of average sales price per sq. ft. In fact this measure looks very strong in October as the market from $500K up to $3M is holding on to more momentum than the mid-range from $250K up to $500K. We should not expect to see negative changes in sales price $/SF any time soon because it is very much a trailing indicator. There are many other places to look for a change in the market and we will cover one of them today - the listing success rate.

Since exceeding 85% in mid-April the listing success rate has been gently moving lower and on October 22 we measure it below 78%.

This is still well above the long-term average but is the lowest we have seen for a long time. This means 22 out of 100 listings are failing to find a buyer instead of 15 out of 100 six months ago. Inverting the measure, the listing failure rate has increased by about 50% from below 15% to more than 22%. It sounds worse when we put it that way, but whatever way you look at it, sellers are not feeling as secure and confident as they did just a few months ago.

October 22 - In an effort to understand more clearly how the market has changed since last year we segmented the Greater Phoenix market by price range and compared the contract ratios:

Price Range Contract Ratio Today Contract Ratio Last Year Change
Under $100K 51.0 46.8 up 9%
$100K to £125K 87.4 90.6 down 4%
$125K to $150K 83.9 91.8 down 9%
$150K to $175K 92.1 95.9 down 4%
$175K to $200K 93.2 85.5 up 9%
$200K to $225K 78.6 81.2 down 3%
$225K to $250K 68.8 73.0 down 6%
$250K to $275K 57.0 67.5 down 16%
$275K to $300K 52.1 62.6 down 17%
$300K to $350K 47.7 53.8 down 11%
$350K to $400K 42.7 45.1 down 5%
$400K to $500K 39.0 38.3 up 2%
$500K to $600K 35.5 32.0 up 11%
$600K to $800K 30.3 26.8 up 13%
$800K to $1M 23.0 20.5 up 12%
$1M to $1.5M 19.7 18.8 up 5%
$1.5M to $2M 13.3 11.4 up 16%
$2M to $3M 15.0 10.8 up 39%
Over $3M 4.9 7.0 down 30%

The weakest trend is for homes priced between $250K and $350K (and also for homes over $3M, though this segment has very few sales and is therefore very volatile). Between $250K and $350K we are seeing more available supply and fewer homes going under contract. It is this lower mid-range sector which is exhibiting the most significant weakening. As this is a very high volume part of the market it affects the overall market numbers. It is also a very popular price range for new homes, which for the most part are excluded from our numbers since 90% of them are not listed on the MLS.

The strongest trend is for homes priced between $500K and $3M. Here supply has fallen 5% compared with last year while 7% more homes are going under contract. However it is not as much improved as it was during the first half of 2018.

October 20 - The Cromford® Market Index for all areas and types stands at 149.1 today. This is significant because it is lower than at the same point in both 2016 and 2017. As recently as one month ago it stood above both these years at 158.2.

The market appears to be hitting an air-pocket with falling demand and rising supply. There are a number of possible causes and probably a combination of them is driving this change in market direction:

  • mortgage interest rates have now risen enough to dampen buyer enthusiasm
  • mortgage interest rates have now risen enough to cause sellers to defer move-ups or downsizing
  • we are starting to see the end of the wave of boomerang buyers
  • home prices have risen enough to seriously affect affordability
  • interest from foreign buyers is at an extreme low (which means mostly Canada in Arizona)
  • recent tax changes have removed incentives for home ownership over rental
  • home purchase has become more expensive relative to home rental

Black Knight Financial Services estimates that the monthly mortgage payment required to buy the average home in the USA has increased 16% since January. Wages are up an average of 3% and rents are up an average of 8% across Greater Phoenix in the last year. Official government measures of inflation might be relatively low, but inflation in the cost of shelter is very high. Eventually demand is susceptible to costs rising beyond a tipping point. While rents are rising fast they are rising less fast than mortgage payments.

The CMI is a leading indicator. The most widely followed trailing indicator is sales price. This is still rising and is likely to continue to do so for several months at least.

October 18 - The market is in a cooling trend as evidenced by the Cromford® Market Index for the single-family markets in the 17 largest cities:

Here we see 13 of the cities deteriorating for sellers and of the the cities improving, only 1 (Glendale) improved by a significant percentage over the past month.

Among the declining cities, Paradise Valley, Buckeye are down by double digits. Scottsdale, Fountain Hills, Mesa and Chandler are all down 7% to 8%.

We are not getting a flood of new listings (quite the opposite in fact), but active listing counts are rising because contract activity is weakening. The Cromford Demand Index and Contract Ratio measures tell us that buyers have lost enthusiasm. However under $200,000 we still see multiple offers in most situations thanks to to the continued lack of listings within that price range.

October 17 - The contract ratio is an excellent guide to how hot or cold a market is, and we are seeing the following readings compared to October 17 last year:

Market Segment Contract Ratio 2017 Contract Ratio 2018 Change
All Areas & Types 53.0 50.0 down 6%
Greater Phoenix - Single-Family Detached 55.9 51.7 down 8%
Greater Phoenix - Townhouse 70.1 66.5 down 5%
Greater Phoenix - Apartment Style 48.9 45.0 down 8%
Greater Phoenix - Twin / Duplex 68.2 89.6 up 31%
Greater Phoenix - Patio Home 53.3 58.1 up 9%
Greater Phoenix - Mobile Home 34.1 41.5 up 22%
Single-Family - Phoenix 59.3 52.0 down 12%
Single-Family - Mesa 79.4 66.5 down 16%
Single-Family - Scottsdale 30.1 28.7 down 5%
Single-Family - Chandler 78.2 68.6 down 12%
Single-Family - Glendale 64.8 67.7 up 4%
Single-Family - Gilbert 75.9 73.8 down 3%
Single-Family - Surprise 61.0 59.8 down 2%
Single-Family - Peoria 53.7 49.2 down 8%
Single-Family - Queen Creek (including San Tan Valley) 73.6 61.4 down 17%
Single-Family - Avondale 73.0 68.8 down 6%
Single-Family - Tempe 51.0 49.6 down 3%
Single-Family - Goodyear 46.9 45.2 down 4%
Single-Family - Maricopa 65.5 57.4 down 12%
Single-Family - Buckeye 62.4 59.6 down 5%
Single-Family - Cave Creek 35.5 34.0 down 4%
Single-Family - Fountain Hills 25.2 23.2 down 8%
Single-Family - Paradise Valley 20.4 14.7 down 28%
Single-Family - Casa Grande 66.5 41.6 down 37%
Single-Family - Sun City 62.5 69.0 up 10%
Single-Family - El Mirage 162.5 98.1 down 40%
Single-Family - Apache Junction 61.3 63.3 up 3%
Single-Family - Anthem 58.8 37.6 down 36%
Single-Family - Laveen 75.4 93.2 up 24%
Single-Family - Sun City West 78.8 79.6 up 1%
Single-Family - Litchfield Park 42.9 38.7 down 10%
Single-Family - Tolleson 72.7 86.8 up 19%
Single-Family - Arizona City 35.8 72.5 up 103%
Single-Family - Sun Lakes 64.0 62.9 down 2%
Single-Family - Gold Canyon 29.0 28.5 down 2%
Single-Family - Florence 55.3 71.0 up 28%

The majority of segments are cooler than last year, with dramatic declines in Anthem, El Mirage, Casa Grande and Paradise Valley. This is a situation that has developed over just the last 6 weeks.

However mobile homes are hotter than last year, as are patio homes and twin/duplex homes and a handful of cities - Florence, Glendale, Arizona City, Sun City, Sun City West, Tolleson, Laveen and Apache Junction.

October 15 - The second week of October has continued the new trends started in the first week, an important signal for the market. New listings are well below last year but active listing counts have grown relatively fast. This means listings are going under contract more slowly. Closed listings are less numerous than last year too.

These all add up to a smaller market with lower activity, but not necessarily lower pricing. Demand is weaening but supply is also weak and needs to grow a lot if it is to match even a weaker demand level.

The Cromford® Market Index is still over 150 so we have a strong seller's market. However it is falling very fast with supply increasing and demand falling. If this trend continues for a couple of months we could be well on the way back to a balanced market. Change is in the air, but it is still too soon to be certain how this will develop. It is clear that this is an important time to be watching the market carefully.

Here are a few key numbers from the first 2 weeks of October:

Measure for first 2 weeks of October 2017 2018 Change
New Listings - Greater Phoenix 4,916 4,226 down 14%
Active Listings Change - Greater Phoenix 827 871 up 5%
Closed Listings 2,845 2,646 down 7%
Pending Listings at end of period 5,786 4,973 down 14%
UCB & CCBS Listings at end of period 3,773 3,559 down 6%

 

All of these changes are negative for sellers, as evidenced by the short term Cromford® Market Index chart.

October 11 - The Cromford® Market Index table for the single-family markets in the 17 largest cities is shown below:

We see 7 cities showing an improvement for sellers and 10 deteriorating. This does not sound too bad until we calculate that the average change is -2.8%, considerably worse than last week's -1.9%.

Buckeye, Fountain Hills and Paradise Valley have seen the largest declines while Tempe was the only city to see a double digit percentage improvement.

Despite the shortage of new listings, active listings are growing because fewer homes are going under contract. Over the last month there has been a decline in the enthusiasm of both buyers and sellers.

October 10 - We are examining the first week of October in more detail to study how new listing counts dropped unexpectedly. We counted 2,017 new listings in Greater Phoenix during the first full week which is down dramatically from the same week in 2017. The overall decline is 23% year over year and this is the lowest number of new listings we have ever seen for the first week of October. The previous record low was 2,343 in 2014.

  • Homes priced up to $250K dropped from 1,147 to 764, a decline of 33%
  • Homes priced between $250K and $500K dropped from 1,003 to 929, a decline of 7%
  • Homes priced over $500K dropped from 454 to 324, a decline of 29%

So the mid-range had the smallest decline while the top and bottom saw large falls in new listing counts.

If we chop more finely, we do see a handful price ranges with a growth in new listings:

  • Up to $25K increased from 5 to 6
  • $25K to $50K increased from 7 to 8
  • $250K to $300K increased from 319 to 351
  • $800K to $1M increased from 43 to 45
  • Over $3M increased from 16 to 22

Segmenting by dwelling type we see:

  • Single-family listings fell by 20%
  • Condo listings fell by 33%
  • Mobile home listings fell by 29%

Mortgage rates tend to increase when the economy is strong. According to realtor.com the average 30 year fixed loan in Arizona is now at 5.01%, up from 4.83% just 7 days ago. People usually worry about higher rates discouraging buyers and while that is a reasonable concern, I am also of the opinion that higher rates discourage sellers, because in most cases they are going to move somewhere else and pay a higher rate too. If they have the option to stay put, they may choose to do so when rates are increasing.

For whatever reason, sellers are surprisingly rare this month. Even if we change the measurement week to Oct 3 to Oct 9, the picture does not change - new listings down 25% from 2,520 in 2017 to 1,885 in 2018. This latter total is once again the lowest we have ever recorded for those dates.

We live in interesting times.

October 9 - Filing the latest version of the long term interest chart on Cromford Public, it struck me that mortgage rates have been climbing very slowly but somewhat relentlessly. Freddie Mac reported an average of 4.63% during September for the 30 year fixed. This is the highest we have seen since May 2011, more than 7 years ago. Of course in 2011 this seemed like a very low rate because we had experienced rates over 6% almost continuously between 1970 and 2008, with occasional short periods in the mid 5s.

Now we have a lot of homeowners with loans bearing rates of 3.5% to 4.25% taken out over the past 7 years. To move to a new home, they will need to pay off that cheap loan and take out another at closer to 5%. This effect is likely to be a drag on the supply of re-sale homes for a long time to come. It is likely to be good news for remodelling companies as many home owners decide to preserve their cheap financing by staying in place and spending their upgrade money on improving and modernizing their existing home instead.

October 8 - After the first full week of October it is striking that the month is off to an unusually slow start.

New listings are 14% lower than they were during the same period in 2017. It is a very long time since we saw a drop-off like that..

Closed sales are also down, with 1,338 closed during the first week of October 2018, down over 10% from the 1,494 we had in 2017. The annual sales rate has taken a step lower as a result.

It is not exactly clear what is causing this, but both supply and demand are weaker than expected. One week does not make a trend, but this is so different from what we have seen so far this year that I feel I should point it out. If the rest of the month continues in this vein then it would represent a significant change of sentiment.

We will watch carefully and report whether the second week is similar to the first or gives us a snap-back to normal.

October 5 - Until September we had seen extremely strong sales numbers for the Northeast Valley's luxury single-family homes (over $500,000). Here are the comparisons with the year before:

Month Sales Year Earlier Change
December 2017 374 292 +28%
January 2018 354 265 +34%
February 2018 336 268 +25%
March 2018 549 454 +21%
April 2018 504 426 +18%
May 2018 590 504 +17%
June 2018 534 504 +8%
July 2019 438 352 +24%
August 2018 447 348 +28%
September 2018 314 338 -7%

The wheels seem to have come off the cart last month. Could we have seen this coming. Yes!

The under contract count on September 1 was down 2% from the year before, suggesting that year over year growth would stall. Now September 2018 had only 19 working days and thus a 5% disadvantage compared with September 2017. Adding that 5% to the 2% drop in under contract listings we get -7%, exactly the drop in sales during September. It does not always work this cleanly. What do we expect for October? Well the under contract count is almost identical to 2017 as of October 1, so we would anticipate roughly the same unit sales, adjusted for the number of working days. October 2018 has 23 working days compared with October 2017's 22, so this will add 5% to our estimate. We should therefore expect a resumption of sales growth this month, but only 5%, unimpressive in the context of the last 10 months.

The lack of sales is concentrated at the bottom end between $500,000 and $600,000, where unit counts fell 32% from a year earlier. This is probably connected to the shortage of supply since active listing counts are down 21% in this price range.

October 4 - The table below shows the Cromford® Market Index for the single-family markets in the 17 largest cities

We have 6 cities showing an improvement for sellers, 2 more than last week, with Glendale and Goodyear joining the other 4. However 11 cities showed deterioration for sellers and the average monthly change was 1.9%, slightly higher than the 1.8% we recorded last week. The trend remains down with rising supply and falling demand.

Tempe was the standout city for improving selling conditions while Fountain Hills, Paradise Valley and Buckeye showed significant weakness.

October 3 - Although Zillow has ramped up its purchases as an iBuyer, it has sold relatively few homes so far. The total number of homes purchased by the end of September was 157 while the total number of sales was 33, leaving 124 in inventory.

When we compare with Opendoor's start-up in 2015 and 2015, we see a similar pattern. By July 2015 they had 132 homes in inventory, having purchased 169 and sold 37. The main difference was that it took Opendoor 12 months to reach this stage and Zillow has taken less than half this time. The first mover has to prove the concept and break rocks. Followers benefit from that ground-breaking.

OfferPad has a somewhat different trajectory. They have tended to keep a lower inventory and sell their homes more quickly. By the time they had purchased 154 homes (in July 2016, they had sold 64 and only had 90 left in inventory.

Lifetime statistics as of the end of September are:

  Opendoor OfferPad Zillow
Purchases 5,945 2,175 157
Sales 5,063 1,893 33
Inventory 882 282 124

October 2 - Based on affidavit filings, the 3 main iBuyers operating in Greater Phoenix purchased 358 homes across Maricopa and Pinal counties in September. This is down from 446 purchases in August, but up from 278 in September last year.

Opendoor only purchased 188, making it their quietest month for purchases since September last year when they bought 161.

OfferPad purchased 105, in line with recent months but down from 117 in September 2017.

Zillow purchased 65, their largest total since starting in May. They seem to be stealing some market share from the other 2, possibly because they are buying at slightly higher prices. Certainly they are making less gross margin when they sell. The median gross margin for Zillow was 5% in July but only 3% in August. We have not yet been able to calculate the September number. Their 3% gross margin is immediately eaten up by commission paid to the buyer's broker, so they are living off the seller fees, to which we do not have access. This iBuyer business clearly involves a large amount of capital tied up and seriously low margins. Some may question why Zillow wishes to engage in the market, but it does seem to be growing in popularity with sellers. iBuyer transactions now represent roughly 1 in 20 home sales (excluding new homes and foreclosures).

Gross margins for Opendoor were around 6% in August and for OfferPad around 8%. Both of these are down from 8% and 11% respectively in August 2017. The additional competition seems to be causing gross margins to tighten.

September was a low activity month with only 19 working days thanks to a weekend at both ends. All the sales counts will be lower than normal for this reason.

October 1 - Nate Randleman used our Tableau chart showing average $/SF over the long term to calculate how prices had appreciated over the past 18 years. For Maricopa County the average was $97.63 in September 2000 and it was $166.51 in September 2018. The difference between these 2 numbers represents a long term average appreciation rate of only 3%.

Nate believes most clients (and probably many agents) would expect the number to be much higher since we have experienced very positive appreciation since 2011. They sometimes forget how much we went backwards between 2000 and 2011. We have spent much of the time since 2011 recovering from the crash of 2007-2008.

Overall, a long term appreciation rate of 3% is far from excessive and supports the theory that we are not significantly over-valued at today's prices.

What Nate did not know is that this Long Term Appreciation rate appears in all of our snapshots, so he could have saved himself some calculating. Here are the numbers extracted from a few of our snapshots (there are well over a hundred on the site). It may be that many of these will surprise you.

Market Segment Sub-set Long Term Appreciation (Jan 2001 - Sep 2018)
All Area & Types in ARMLS   2.9%
Single-Family Detached Anthem 2.5%
  Apache Junction 3.1%
  Arizona City 2.4%
  Avondale 2.8%
  Buckeye 3.1%
  Carefree 2.1%
  Casa Grande 1.9%
  Cave Creek 3.0%
  Chandler 3.5%
  Coolidge 3.2%
  El Mirage 3.3%
  Eloy 5.9%
  Florence 2.6%
  Fountain Hills 3.1%
  Gilbert 3.3%
  Glendale 3.4%
  Gold Canyon 2.4%
  Goodyear 2.4%
  Laveen 0.8%
  Litchfield Park 2.1%
  Maricopa 1.6%
  Mesa 3.6%
  New River 2.3%
  Paradise Valley 2.5%
  Peoria 3.5%
  Phoenix 3.6%
  Queen Creek 1.5%
  Rio Verde 2.3%
  Scottsdale 3.4%
  Sun City 3.4%
  Sun City West 3.1%
  Sun Lakes 3.3%
  Surprise 2.6%
  Tempe 3.7%
  Tolleson 2.5%
  Tonopah 1.7%
  Waddell 1.6%
  Wickenburg 2.4%
  Wittmann 4.3%
  Youngtown 3.4%

 

September 2018

September 28 - The Cromford® Market Index for the single-family markets in the 17 largest cities is shown in the table below:

Sellers may be dismayed to see 13 of the 17 cities showing the balance of power shifting away from them. However they can console themselves with the fact the the average shift is only -1.8% which is down from the -2.2% we saw last week. This is partly because 2 of the 4 improving cities (Tempe and Cave Creek) improved by large percentages.

Among the decliners, Buckeye (-10%) and Fountain Hills (-18%) are the most prominent, but Surprise(-7%) and Mesa (-7%) declined significantly too.

Scottsdale has changed course after a strong run in the last 3 months.

September 27 - The Census Bureau has just released the single-family building permit counts for August. The total for Maricopa and Pinal counties was 2,263, up 16% from 1,954 in August 2017. The count for the 12 months Sep 2017 to Aug 31 is 22.388 which is up 12.7% from 19,865 last year. Maricopa and Pinal account for 74% of Arizona's single-family permits.

Year-to-date in 2018 we have 16,154 permits which is up 13.6% from 2017.

The increases all exceed the increase in the overall sales rate, which implies:

  1. The market share for new homes should increase over the next year
  2. Supply should gradually improve if developers build as quickly as the permits indicate

For the past 12 months the breakdown by city is as follows:

  1. Phoenix 15.7%
  2. Unincorporated Pinal County 11.0%
  3. Buckeye 10.1%
  4. Mesa 7.9%
  5. Gilbert 6.8%
  6. Maricopa 6.1%
  7. Peoria 6.1%
  8. Unincorporated Maricopa County 6.0%
  9. Goodyear 5.9%
  10. Surprise 5.8%
  11. Queen Creek 5.2%
  12. Scottsdale 3.0%
  13. Chandler 2.4%
  14. Avondale 1.2%
  15. Florence 1.1%
  16. Glendale 0.9%
  17. Tempe 0.7%
  18. Wickenburg 0.7%
  19. Casa Grande 0.7%
  20. Eloy 0.6%
  21. Fountain Hills 0.4%
  22. Paradise Valley 0.4%
  23. Apache Junction 0.4%
  24. Litchfield Park 0.3%
  25. Cave Creek 0.2%
  26. Carefree 0.1%
  27. Coolidge 0.1%
  28. everywhere else 0.1%

September 26 - The S&P / Case-Shiller® Home Price Index® report was published yesterday covering sales during May, June and July 2018. The month to month change in indexes were as follows:

  1. Las Vegas +1.39%
  2. Cleveland +1.35%
  3. Phoenix +0.74%
  4. San Francisco +0.64%
  5. Tampa +0.61%
  6. Atlanta +0.54%
  7. Portland +0.47%
  8. Miami +0.44%
  9. Detroit +0.41%
  10. Minneapolis +0.39%
  11. Chicago +0.33%
  12. Denver +0.33%
  13. Dallas +.18%
  14. Washington +0.16%
  15. Charlotte +0.15%
  16. Los Angeles +0.13%
  17. Boston +0.14%
  18. New York +0.09%
  19. San Diego +0.01%
  20. Seattle -0.01%

Moving up from 7th to 3rd place, Phoenix is retaining more price momentum compared with the rest of the country, although it is not alone - Las Vegas and Cleveland are doing even better. The national average was +0.45%

It is quite a while since we saw a negative change in Seattle, albeit a very tiny one.

The year-over-year table looks like this:

  1. Las Vegas +13.7%
  2. Seattle +12.1%
  3. San Francisco +10.8%
  4. Denver +8.0%
  5. Phoenix +7.5%
  6. Tampa +6.8%
  7. Los Angeles +6.4%
  8. San Diego +6.2%
  9. Detroit +6.2%
  10. Boston +6.0%
  11. Minneapolis +6.0%
  12. Atlanta +5.8%
  13. Cleveland +5.7%
  14. Portland +5.6%
  15. Charlotte +5.6%
  16. Miami +5.0%
  17. Dallas +5.0%
  18. New York +3.4%
  19. Chicago +3.0%
  20. Washington +2.7%

Phoenix moves up to 5th place from 6th last month and is now well above the national average of 6.0%.

I have to admit it makes me nervous when Las Vegas is number one in both these tables.

September 25 - Consistent with the slight decline in the Cromford® Market Index we are seeing a slight decline in the listing success rate over the past 6 months. At the end of March the success rate for all areas & types was very high at 85%. Now it is merely high at 81%. This might seem like a very small drop but it does mean a 27% increase in the number of listings that failed to sell (from 15% to 19%). This is also consistent with the higher pace of price cuts that we have seen recently.

 

All in all, the market remains strong for sellers but not as strong as it has been and with a slow cooling trend.

September 24 - Long-time subscribers will have become familiar with the third-quarter slump in prices that happens every year in Greater Phoenix. It is not so much that home values go down; more that the sales mix moves away from more expensive properties and the price pressure from the second quarter eases away.

Despite the seller's market that prevails over the whole valley, the third quarter slump was in full force in 2018. However, it has now run its course and we can see the pressure building for another upward price trend in the fourth quarter. Take a look at the Tableau chart for Under Contract $/SF and you can see a sharp upward turn over the past few weeks. This happened at the same time in 2017 and was followed by 9 months of powerful upward movement. Unless there is a significant change in market conditions we are likely to see something similar over the next 9 months. Such a significant change would involve either a large increase in new listings or a major fall in the sales rate, neither of which are looking likely at the moment.

September 21 - One possible explanation for the low under contract counts we see these days is that lenders are taking less time to approve loan applications than they used to. This would shorten the time to close and result in fewer listings under contract for the same number of closed sales.

You would think that it would be fairly easy to check this hypothesis. It ought to be possible to measure close times by calculating the difference between the Contract Date and Close Date for each listing that closed on ARMLS. Unfortunately there are 85,044 closed listings where this calculation has a negative result, implying that the listing agent believes the purchase contract was signed AFTER the close of escrow. There are another 105,873 closed listings where the Close Date and Contract Date are exactly the same. This leads me conclude that the Contract Date data in ARMLS is of low quality and cannot be trusted. The Close Date is also of fairly poor quality, but we have the advantage of being able to cross check that date with the date the sale was recorded and therefore apply corrections to this field. At least that gets rid of the thousands of listings which are supposed to have closed on a Saturday, Sunday or public holiday (impossible since the county recorder does not work on those days).

Making the best of a bad job, we can examine the listings where the Close Date is at least 14 days later than the Contract Date. Closing times shorter than this are unlikely to have involved a third party lender. This test applies to 79% of the closed listings so it is a pretty decent sample. Using these records we find the following:

  • average closing time in 2014 was 39.9 days
  • average closing time in 2015 was 40.7 days
  • average closing time in 2016 was 42.4 days
  • average closing time in 2017 was 39.3 days
  • average closing time in 2018 was 37.6 days

This gives us evidence of a 4.5% reduction is closing time between 2017 and 2018, following a more substantial reduction of 7.3% between 2016 and 2017.

Mind you, 2018's closing times are not exceptional. We were seeing closing times of 33 to 36 days throughout the years 2001 to 2008. It seems the easier it is to get a loan approved (as in 2004 to 2006) the quicker the close occurs. That make intuitive sense. The record low was 33.8 days in 2005. 2005 was really the year of the bubble bursting, even though people tend to focus on the collapse of Lehman Brothers in 2008, a long time after its collapse became inevitable.

We know that TRID (TILA-RESPA Integrated Disclosure) lengthened closing times in the fourth quarter of 2015 and then times started improving once everyone got used to the new procedures. Let us check the quarterly numbers:

  • 2014 Q1 - 39.9
  • 2014 Q2 - 40.0
  • 2014 Q3 - 40.1
  • 2014 Q4 - 39.4
  • 2015 Q1 - 39.4
  • 2015 Q2 - 40.8
  • 2015 Q3 - 40.2
  • 2015 Q4 - 42.7
  • 2016 Q1 - 42.8
  • 2016 Q2 - 42.6
  • 2016 Q3 - 42.9
  • 2016 Q4 - 41.3
  • 2017 Q1 - 39.9
  • 2017 Q2 - 39.9
  • 2017 Q3 - 39.4
  • 2017 Q4 - 37.8
  • 2018 Q1 - 37.7
  • 2018 Q2 - 37.9
  • 2018 Q3 - 37.0

These numbers are at least consistent with the TRID story although I remain a little concerned about the quality of the data source even in the listings with reasonable sounding Contract Dates.

My conclusion is that there has been a reduction in close times over the past 2 years, but that we are now back to normal after the disruption due to TRID. The biggest drop took place in 4Q 2017. This goes some way towards explaining the reductions in listings under contract that we have reported, but it does not explain the drop completely. The under contract counts still look somewhat lower than we would expect. I believe we are seeing a slight weakening trend in demand at the low and mid-range, compensated by stronger demand at the high-end.

September 20 - The Cromford® Market Index table for the single-family markets in the 17 largest cities is shown below:

Here we see an average decline of 2.2% over the past month with 5 cities improving for sellers and 12 deteriorating.

Cave Creek and Tempe have shown the strongest improvement while Fountain Hills is in full scale retreat.

We cannot remember seeing Paradise Valley so high up this chart ever before. The luxury market has improved significantly over the past year with lower supply and much stronger sales numbers.

The recent weakness in the West Valley is reflected in this table with every city deteriorating for sellers

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.

 

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