Current Phoenix Metropolitan Real Estate

Market Updates

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 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 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 Opendoor Purchases OfferPad 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.

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 this chart). 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.

July 31 - The last Tuesday of the month is always the date for publication of the Case-Shiller® Home Price Index®. The numbers released today include sales that closed between March and May 2018. Looking at the month to month change in the index we get the following raking table:

  1. Seattle +2.23%
  2. Cleveland +1.35%
  3. Chicago +1.28%
  4. Las Vegas +1.27%
  5. Portland +1.24%
  6. Phoenix +1.08%
  7. San Francisco +1.08%
  8. Minneapolis +1.07%
  9. Atlanta + 1.00%
  10. Denver +0.85%
  11. Miami +0.79%
  12. Boston +0.78%
  13. Charlotte +0.76%
  14. Detroit +0.76%
  15. San Diego +0.65%
  16. Washington +0.63%
  17. Dallas +0.63%
  18. Tampa +0.49%
  19. Los Angeles +0.48%
  20. New York -0.04%

Phoenix has moved up from 15th to 6th over the last month, a rapid change which now has us well over the national average of 1.06%. It is also unusual to see Cleveland and Chicago among the top 3 in this table, while Los Angeles and San Diego are much lower than usual.

For the year over year changes, the table looks like this:

  1. Seattle +13.6%
  2. Las Vegas +12.6%
  3. San Francisco +10.9%
  4. Denver +8.5%
  5. Los Angeles +7.6%
  6. San Diego +7.3%
  7. Phoenix +7.3%
  8. Detroit +7.1%
  9. Boston +7.0%
  10. Tampa +6.5%
  11. Minneapolis +6.4%
  12. Charlotte +6.0%
  13. Portland +5.9%
  14. Atlanta +5.6%
  15. Dallas +5.6%
  16. Cleveland +5.0%
  17. Miami +5.0%
  18. New York +4.2%
  19. Chicago +3.3%
  20. Washington +3.1%

Phoenix has moved up from 10th to 7th place over the last month. The national average was 6.4%

July 30 - The month of June was the busiest for new single-family home permits since June 2007, 11 years ago. The Census Bureau reported a total of 2,307 for Maricopa and Pinal counties combined, and 3,056 for the State of Arizona as a whole. Those interested in the details by city or county can obtain charts going back to 1996 from the Cromford® Public section of the web site.

The latest number represents an increase of 28% from a year ago. Clearly developers are planning to build at a faster rate and the 12 month rolling average has reached 21,785, the highest since February 2008.

The top 10 locations for 2018 year to date are:

  1. Phoenix - 1,942
  2. Unincorporated Pinal County -1,272
  3. Buckeye - 1,104
  4. Mesa - 835
  5. Gilbert - 830
  6. Goodyear - 778
  7. Surprise - 761
  8. Maricopa - 741
  9. Peoria - 722
  10. Queen Creek - 630

July 27 - Below is an image extracted from a Tableau chart on our Cromford® Public pages.

The Transaction Type filter has been used to select only new home sales. We can see an obvious upward trend from 2011 to 2015 reversing and heading downward between August 2015 and June 2018. Clearly developers are attempting to head off affordability problems by building smaller homes. This goes some way to address the chronic shortage of affordable re-sale homes. The annual average has dropped a total of 8.3% since peaking in 2015 and there is no sign of it halting at the moment. However, the average new home is still roughly 20% larger than the average re-sale, which is currently 1,919 sq. ft.

July 26 - Although the numbers for the overall market have not moved much over the last month, there are some significant winners and losers when we look at the Cromford® Market Index for the single-family markets in the 17 largest cities:

The Northeast Valley provides the big winners over the last month: Paradise Valley (+32%), Fountain Hills (+11%) and Scottsdale (+10%). Cave Creek did not follow that trend and lies in 16th place.

The West Valley's Goodyear was the best of the rest with a gain of 9%. However Avondale dropped by 15% and fell from 1st place to 3rd. Peoria gained 1% but still ended up in the bottom position of the table.

In the Southeast Valley, Mesa moved into the top spot by holding steady, while Tempe (-15%), Chandler (-7%) and Gilbert (-5%) showed weaker conditions.

Overall we have 9 cities deteriorating for sellers, while 8 improved. This is the first time we have seen the negatives outnumber the positive for several months. Phoenix continues to drift slowly lower, representing about 25% of the market.

If it were not for booming sales in the luxury market we would probably be seeing a market that is cooling slightly. However every city in the list is still firmly in the seller's market zone over 110.

It seems that rising prices and climbing interest rates have coupled with low supply to dampen some of our buyers' enthusiasm at the low end of the market.

July 25 - Scottsdale has been one of the larger markets showing a strong decline in active listings without a contract. At 1,500 the count is the lowest we have seen for Scottsdale single-family homes since September 12, 2013. This time last year we saw over 1,800. The trend is still downwards, but we normally see an upswing during the third quarter. I wonder how low it will go in 2018 before this takes effect..

July 24 - Back from vacation to find little has changed in the Greater Phoenix housing market. However the Days of Inventory measure (365 x active listings / annual sales rate) has declined to its lowest level since October 2005. Hovering between 75 and 76 days (for all areas & types), we are now a shade lower than the minimum level of 2012. We are unlikely to approach the freakish readings of early 2005 which registered as low as 30 and should have been a warning of a bubble about to pop. However we can conclude that the market is now even more favorable to sellers than it was in the frenzied market of 2012.

July 14 - Mike Orr is on vacation for 10 days. Normal observation service will be resumed on July 24.

July 13 - We are seeing some exceptionally low numbers among active listing counts in the Northeast. Carefree has just 44 active single-family listings without a contract, which is easily the lowest we have ever recorded. The long term average is 99.

Rio Verde has just 34, again the lowest we have ever recorded. The long term average is 92.

July 12 - Our usual weekly look at the Cromford® Market Index for the 17 largest cities and their single-family markets:

11 cities are showing favorable moves for sellers over the past month while 6 are showing moves that favor buyers.

The biggest improvement is for Paradise Valley (up 23%), yet it remains at the bottom of the table.

The biggest decline is for Avondale, yet it remains at the top of the table (just).

Significant improvements are experienced by Goodyear, Scottsdale and Fountain Hills.

Tempe and Chandler are the other significant moves backwards.

July 11 - The Gross Rent Multiple (GRM) measures how many year's rent would be equivalent to the purchase price of a property. The lower the number the better the return on investment a landlord gets. Unless maintenance and taxes are unusually high, it is easier to make a property cash flow if the GRM is low. A typical number for the Phoenix area would be about 14. For tenants you could argue that a high number means they are getting more for their rent dollar than a property with a low GRM.

There are some areas with particularly low average GRMs, but these are often small and remote locations where homes are relative cheap and rents relatively high. If you can find a tenant you are in luck, but the remote location means that demand for rental homes may be much lower than in a more central area. Examples would include:

  • Aguila 85120 - GRM = 8.8
  • Valley Farms 85193 - GRM = 7.7
  • Coolidge 85128 - GRM = 10.8

However 2 areas of Phoenix stand out as having low GRMs:

  • Phoenix 85009 - GRM = 10.9
  • Phoenix 85034 - GRM = 10.8

This explains why landlords tend to have a much stronger appetite for homes in less desirable areas than ordinary home buyers.

The places that have the best reputations as being desirable tend to have high GRMs. They are more difficult for landlords to cash flow but you could argue they may make up for this with stronger appreciation. I am not sure I would agree with that argument. Certainly the majority of landlords avoid these locations. However the high purchase price of such homes tend to make renting them a more attractive option if you are only going to stay for a handful of years or less. Example of high GRMs include:

  • Phoenix 85018 - GRM = 19.5
  • Gold Canyon 85118 - GRM = 17.6
  • Paradise valley 85253 - GRM = 21.1
  • Scottsdale 85255 - GRM = 18.9
  • Scottsdale 85262 - GRM = 22.6
  • Rio Verde 85263 - GRM = 18.3
  • Scottsdale 85266 - GRM = 19.8
  • Fountain Hills 85268 - GRM = 17.8
  • Carefree 85377 - GRM = 20.1

The average GRMs shown above are based on the 2017 full year numbers.

July 10 - Based on Affidavits of Value filed in Maricopa and Pinal counties we can summarize the activities of iBuyers during June:

June 2018 Opendoor OfferPad Signpost (Zillow)
Number of homes purchased - Maricopa 283 86 16
Number of homes purchased - Pinal 16 29 0
Number of homes purchased in total 299 115 16
Percentage share of iBuyer purchases 70% 27% 4%
Number of homes sold - Maricopa 236 85 0
Number of homes sold - Pinal 18 27 0
Number of homes sold 254 112 0
Percentage share of iBuyer sales 69% 31% 0%

The situation a year ago was like this:

June 2017 Opendoor OfferPad
Number of homes purchased - Maricopa 165 80
Number of homes purchased - Pinal 17 18
Number of homes purchased in total 182 98
Percentage share of iBuyer purchases 65% 35%
Number of homes sold - Maricopa 88 37
Number of homes sold - Pinal 9 13
Number of homes sold 97 50
Percentage share of iBuyer sales 66% 34%

Opendoor has grown 98% over the year and increased its market share slightly.

OfferPad has grown 53% and lost some market share, but has become the largest iBuyer in Pinal county.

Signport has achieved a 4% market share for purchases in just over 1 month but has yet to record a sale.

There were 9,883 sales in June 2017 excluding new homes and homes over $500,000. iBuyers had a 2.2% share of this market in June 2017.

In June 2018 there were 9,205 sales with the same exclusions, making the iBuyer share 4.3%

We can conclude that the iBuyer market share has almost doubled from 2.2% to 4.3% in 12 months.

July 9 - Looking at the single-family market under $250,000 we of course see a lack of supply. Comparing areas with last year:

Area Active Listings excluding UCB & CCBS Now Last Year Change
Northeast Valley 175 239 -27%
Phoenix & North Valley 983 1,260 -22%
Pinal County 581 796 -27%
Southeast Valley 545 836 -35%
West Valley 1,085 1,653 -34%
Greater Phoenix 3,369 4,784 -30%

We see that the Southeast Valley has experienced the largest percentage decline in supply, but the West Valley is close behind. Phoenix and the North Valley has experienced the smallest percentage decline but this is still a hefty 22%.

By comparing with the annual sales rate we get the days of inventory as follows:

Area Days of Inventory Listings Now Last Year Change
Northeast Valley 35 42 -17%
Phoenix & North Valley 31 37 -16%
Pinal County 37 49 -24%
Southeast Valley 22 26 -15%
West Valley 26 35 -28%
Greater Phoenix 28 35 -20%

We see that the West Valley has experienced the largest percentage decline in days of inventory with Pinal County in second place. The Southeast Valley has experienced the smallest percentage decline, but it was already in the worst shape for supply last year and now has just over 3 weeks available.

July 6 - We have added a tab to the Tableau Chart showing List Price versus Sales Price. The new tab shows how the median percentage of list price has changed over time.

The measure gets higher as the market gets more favorable to sellers. in July 2018 we are seeing 99.24% versus 98.93% last year. We usually see a peak around July and then a fall back reaching an annual low point in January. The series of higher highs and higher lows shows the market is still getting hotter rather than cooler.

We also note that the median is somewhat higher than the average because the lower end of the market invariably achieves a higher percentage of list than the mid-range or high-end. The median is less affected by high-end sales than the average.

July 5 - Today we take another look at the Cromford® Market Index for the single-family markets in the largest 17 cities:

We see 10 cities with improving conditions for sellers and 7 cities deteriorating. The major decliners were Avondale (-11%) which has seen lower sales and increasing supply but still remains at the top of the table, and Chandler (-6%), falling slightly behind its Southeast Valley rivals Mesa and Gilbert.

Moving strongly in a positive direction for sellers were Paradise Valley, which has seen a downward trend in supply, Goodyear and Scottsdale.

With the bottom 7 cities all rising, all 17 cities are comfortably inside the seller's market zone.

July 4 - Rental prices have increased sharply over the past 3 months, up from 89 cents per sq. ft. per month in March to 96 cents per sq. ft. per month in June. These are still very low by the standards of cities like San Francisco or New York, but for Phoenix they represent a big increase. Between 2006 and 2014 they remained flat around 70 cents for the entire period.

This calculation is based on leases closed through ARMLS, which represent a relatively small subset of the market. Yet it is large enough to be a representative sample and an 8% rise in just 3 months is a little alarming. The cost of homes to rent is increasing faster than the cost of homes to buy.

It gives us some insight into the motives of Progress Residential and Cerberus paying market price to turn single-family homes into rentals.

July 3 - The monthly median sales price is a popular measurement that often gets a lot of attention in the news media. Real estate data often contains a certain amount of garbage data so when you receive a list of sales prices there will be a few that look like $0, $100 or $100,000,000. If you use average sales price these pieces of garbage really mess up the answer. To avoid this problem, you have to do a lot of work to detect the garbage and supply the correct data. This is the approach we take. However if you use median sales price instead of average sales price, the garbage has almost no effect on the median, so you can be lazy and just ignore the garbage. As you can imagine, this lazy person's approach is very popular.

Real estate analysis is the only discipline that I know that pays a lot of attention to medians. Almost everyone else regards them as a mathematical construct of little interest. You never hear Wall Street referring to median share prices. The only exception would be population demographics, where median age is often a useful measurement. The Census is another area in which a certain percentage of data is garbage.

There are times when median sales prices can become misleading, and now is one of them. They work great when the mix of homes being sold remains constant. However, we have a very low number of low-end homes available and a plentiful supply of high end homes. This means the mix is highly skewed in favor of expensive homes, compared with normal. This makes the median sales price shift upwards to a much greater extent than if the mix had stayed constant. We therefore get an over-optimistic impression of how much prices are increasing. This makes for good headlines but will lead to plenty of disappointment when sellers find out their home has not really increased in value as much as the median.

We saw a similar but opposite effect during the housing crash when the market was dominated by bank-owned homes and the median sales price collapsed much faster than other price measurements.

Let us look at the change between May and June 2018

Measurement (all areas & types) May 2018 Jun 2018 Change Observation
Median Sales Price $262,900 $267,329 +1.69% a large jump in median price
Average Sales Price $332,239 $332,743 +0.15% a tiny increase in average price
Average Price per Square Foot $164.35 $163.59 -0.46% a fall in average price per sq. ft
Average Square Foot 2,022 2,034 +0.59% a significant rise in average home size

 

The median price jumped almost 1.7% in a single month, about 10 times faster than inflation. It implies falsely that prices are accelerating higher.

The sales mix caused the average home size to rise almost 0.6%. 2, 022 to 2,034 sq. ft. is an unusually large change month to month and 2,034 is one of the highest readings we have ever seen.

Average price rose by a small 0.15%, less than the increase in average home size.

The average price per sq. ft. fell almost 0.5%. Price per sq. ft. was weaker in June than May.

Note that the change in the median sales price gives us a very unrealistic picture of what is happening in the market. We recommend using the average price per sq. ft. which is much more laborious to calculate but is much less prone to changes in the sales mix. It is quite normal for the average $/SF to decline between May and September. The heat of the summer has this effect almost every year.

July 2 - At this half-way point in the year, it is tempting to assume that not much has changed since January. The overall Cromford® Market Index is bouncing around within a narrow range between 150 and 170 and everything looks pretty stable. However when we look at individual ZIP codes we see some that are reaching new lows in single-family active listing counts while others are moving much higher.

Supply Moving Higher:

  • Phoenix 85006 - 74 active listings excluding UCB & CCBS - the highest count since 2011
  • Phoenix 85008 - 68 active listings excluding UCB & CCBS - the highest in over 2 years
  • Phoenix 85013 - 63 active listings excluding UCB & CCBS - the highest in 15 months
  • Phoenix 85015 - 79 active listings excluding UCB & CCBS - the highest in over 4 years
  • Phoenix 85023 - 74 active listings excluding UCB & CCBS - the highest in 14 months
  • Phoenix 85053 - 52 active listings excluding UCB & CCBS - the highest in 19 months
  • Phoenix 85083 - 115 active listings excluding UCB & CCBS - the highest in over 4 years
  • Phoenix / Anthem 85086 - 291 active listings excluding UCB & CCBS - the highest in 14 months
  • New River 85087 - 88 active listings excluding UCB & CCBS - the highest in over 4 years

The low inventory plaguing most of the valley does not apply in the above areas, so buyers may do well by shopping there.

Supply Reaching New Lows:

  • Phoenix 85045 - 26 active listings excluding UCB and CCBS - second lowest level since 2013
  • Mesa 85206 - 46 active listings excluding UCB and CCBS - the lowest number we have ever recorded for the start of a month
  • Gold Canyon 85118 - 115 active listings excluding UCB and CCBS - the lowest level in 6 years
  • Casa Grande 85122 - 103 active listings excluding UCB and CCBS - the lowest level in 6 years
  • Florence 85132 - 80 active listings excluding UCB and CCBS - the lowest level in 6 years
  • Paradise Valley 85253 - 267 active listings excluding UCB and CCBS - the lowest level in almost 3 years
  • Scottsdale 85255 - 424 active listings excluding UCB and CCBS - the lowest level in almost 3 years
  • Scottsdale 85257 - 46 active listings excluding UCB and CCBS - the lowest level in 3 years
  • Scottsdale 85258 - 82 active listings excluding UCB and CCBS - the lowest level we have ever recorded for the start of a month
  • Scottsdale 85262 - 360 active listings excluding UCB and CCBS - the lowest level in almost 3 years
  • Rio Verde 85263 - 43 active listings excluding UCB and CCBS - the lowest level in almost 3 years
  • Fountain Hills 85268 - 161 active listings excluding UCB and CCBS - the lowest level in almost 5 years
  • Casa Grande 85294 - 36 active listings excluding UCB and CCBS - the lowest level we have seen since the ZIP code was first created in 2007
  • Gilbert 85298 - 137 active listings excluding UCB and CCBS - the lowest level in over 5 years
  • Aguila 85320 - 7 active listings excluding UCB and CCBS - the lowest level in almost 7 years
  • Arlington 85322 - 0 active listings excluding UCB and CCBS - the lowest level in almost 5 years
  • Surprise 85374 - 110 active listings excluding UCB and CCBS - the lowest level in almost 3 years
  • Sun City West 85375 - 87 active listings excluding UCB and CCBS - the lowest level we have ever recorded for the start of a month
  • Carefree 85377 - 53 active listings excluding UCB and CCBS - the lowest level in almost 5 years
  • Surprise 85378 - 15 active listings excluding UCB and CCBS - the lowest level in 14 months
  • Buckeye 85396 - 178 active listings excluding UCB and CCBS - the lowest level in almost 3 years

It is counter-intuitive that the ZIP codes showing growth in supply should be all in the central and north valley. However it is true. Phoenix is better supplied than most of the other large cities.

Many of the ZIP codes hitting low points are in southern Pinal County and the Northeast Valley.

The 4 most expensive ZIP codes (85253, 85255, 85262 and 85377) are all in the list of ZIP codes making new lows in supply. It would appear that wealthy people are spending some of their tax cuts on luxury homes. The strong increase in luxury sales in 2018 has made inroads into what used to to be an excess of supply.

June 29 - Our regular look at the Cromford® Market Index for the single-family markets in the largest 17 cities is below:

Here we see 9 cities improving for sellers over the past month and 8 deteriorating.

The cities at the bottom of the table are improving - Scottsdale, Goodyear and Paradise Valley in particular, with Surprise also up 8%.

Most of the falls were modest with the largest being Avondale at -6% but still top of the league.

All 17 cities are in the seller's market zone over 110.

June 28 - We often get asked to produce statistics for subdivisions. This is usually a case of be careful what you ask for, because in almost all cases, the results are very unsatisfactory. The reason is that good quality statistics require large sample sizes. Particularly if you are trying to measure prices in any way, a small number of sales will result in meaningless statistics. You can certainly do the math, but the results will be worthless.

There are over 28,000 legal subdivisions in Maricopa and Pinal counties so the average number of annual sales per subdivision is less than 4 and the average number of sales per month is zero. 4 is not just a small sample, it is a negligible sample. You would not conduct a political opinion survey by asking 4 people. Useful statistics cannot be obtained for legal subdivisions. The only statistics that have value for them are sales counts and turnover rate, and even those will vary enormously from year to year.

We recommend an annual sales rate of at least 400 homes before attempting to take seriously any price statistics for that segment. This is especially true if you are trying to measure average appreciation. There are a few large Master Planned Communities that get close to or even exceed that number, but they are very few indeed. Even a huge community like McDowell Mountain Ranch (containing dozens of legal subdivisions) averages only 250 sales a year. To compensate for the low sample size, we have to measure over very long periods, Anything less than a quarter is pointless and annual measurements are preferred.

The same problems arise with some ZIP codes. Many people do not realize that ZIP codes vary enormously in the number of homes they contain. Some can have as many as 20,000 (e.g. 85032, 85308, 85383) but some have fewer than 50. If we are looking for at least 400 sales a year and there are fewer than 4,000 homes in the ZIP code, we are unlikely to be happy with the statistics we obtain for that ZIP code. When we look at annual sales by ZIP code there are 39 of the 155 ZIP codes in Maricopa and Pinal that do not make the grade for meaningful appreciation statistics. These include some significant ones like 85355, 85123, 85305, 85128, 85263, 85378 and 85377.

There are ZIP codes that are definitely big enough for analysis. The top 10 by annual sales rate are:

  1. Queen Creek 85142 (3,116 sales per year) - includes areas of San Tan Valley in Pinal as well as the town of Queen Creek
  2. Peoria 85383 (3,071)
  3. Buckeye 85326 (2,443)
  4. Mesa 85212 (2,255)
  5. Maricopa 85138 (2,094)
  6. Buckeye 85396 (2,072)
  7. Goodyear 85338 (2,036)
  8. San Tan Valley 85140 (1,991)
  9. San Tan Valley 85143 (1,950)
  10. Sun City 85351 (1,903)

Note that Phoenix itself is plagued by tiny ZIP codes. 85032, 85041, 85018, 85016, 85020 and 85051 are the big ones, but 85034, 85004, 85012, 85003, 85054, 85045 and 85007 are all too small having under 400 sales a year.

Please remember to consider sample size when interpreting statistics, particularly if you are using a lot of filters in the Tableau charts.

June 27 - The Census Bureau has released the new single-family home permit counts for May and for Maricopa and Pinal counties the total is 2,112. This is the second month running with a total over 2,000 since April's total was 2,185. Prior to this, the last month with a number over 2,000 was way back in August 2007.

The growth in single-family permits between May 2017 and May 2018 was 115 or 5.8%. The growth in single-family new home sales between the same two months was 15.3%, so permit growth is not running away.

In fact we need to put this number into historical context. At no time between 1996 and 2006 did the annual number of permits drop below 29,500. In 2018, 10 years beyond the collapse of the housing market, we are still forecasting a total of less than 24,000 permits. It is really not surprising that we are experiencing a shortage of supply.

June 26 - The latest S&P / Case-Shiller® Home Price Index® report was released today covering sales between February and April. The 20 cities are ranked as follows based on the month-to-month change in their index:

  1. Seattle +2.69%
  2. Boston +1.86%
  3. Minneapolis +1.82%
  4. Las Vegas +1.61%
  5. Detroit +1.41%
  6. Denver +1.19%
  7. Chicago +1.18%
  8. Washington +1.14%
  9. Portland +1.09%
  10. San Francisco +0.99%
  11. San Diego +0.98%
  12. Dallas +0.90%
  13. Los Angeles +0.89%
  14. Cleveland 0.86%
  15. Phoenix +0.84%
  16. Atlanta +0.82%
  17. Charlotte +0.77%
  18. Miami +0.50%
  19. Tampa +0.47%
  20. New York -0.58%

At 0.84% for a single month, Phoenix may seem to be moving fast, but it ranked only 15th out of 20 and fell well below the national average of +1.01%

The year-over-year changes look like this:

  1. Seattle +13.1%
  2. Las Vegas +12.7%
  3. San Francisco +10.9%
  4. Denver 8.6%
  5. Los Angeles +8.3%
  6. San Diego +7.8%
  7. Detroit +7.4%
  8. Tampa +7.2%
  9. Boston +6.9%
  10. Phoenix +6.8%
  11. Minneapolis +6.5%
  12. Charlotte +6.0%
  13. Portland +5.9%
  14. Dallas +5.7%
  15. Atlanta +5.5%
  16. Miami +5.0%
  17. Cleveland +4.9%
  18. New York +4.0%
  19. Washington +3.2%
  20. Chicago +3.0%

In this longer term picture, Phoenix fell right in the middle of the table and just above the national average of +6.4%

June 25 - Zillow has purchased 16 homes in the Greater Phoenix area since they started their iBuyer program. Only 6 are listed on ARMLS while the other 10 are marked as "coming soon" at the Zillow site. There are no closed sales but one homes is under contract accepting backup offers. The other 2 major iBuyers rarely use UCB status.

Their first home purchased May 18 is still active but has had a price cut from $425,000 to $418,500, which is $8,500 more than they paid for it.

In the last month Opendoor has completed 295 purchases and 225 sales while OfferPad has completed 103 purchases and 84 sales.

For their sales, Opendoor averaged a sales price of $247,775 on homes that cost them an average of $235,638, so their gross margin was 4.9%. They also made buyer concessions averaging $1,954 and paid an average of $6,848 in buyer's agent commission. So their gross margin after these selling expenses was 1.3%.

For their sales, OfferPad averaged a sales price of $265,106 on homes that cost them an average of $245,768, so their gross margin was 6.9%. They made buyer concessions averaging $1,850 and paid average buyer's broker commission of $7,623. So their gross margin after these selling expenses was 3.3%.

We are not able to report on the fees charged to home sellers or the refurbishing expenses as these are not revealed to the public.

June 22 - Each week we like to check how new listings compare with the same point in the same month in prior years. This is only possible once a week since you have to compare full weeks. There are far more new listings on Thursdays and Fridays so it is only a fair comparison when the date can be divided by 7. After June 21, 2017 we had 6,749 new listings activated for Greater Phoenix and after June 21, 2018 we had 6,746. This is a negligible difference. We conclude that the overall rate of new supply is almost identical.

Of course the listings in 2018 tend to be higher priced than in 2017.

  • We have had 153 new listings over $1 million versus 167 in the first 3 weeks of June last year (down 8%)
  • We have had 682 new listings between $500,000 and $1 million versus 605 (up 13%)
  • We have had 3,117 new listings between $250,000 and $500,000 versus 2,721 (up 15%)
  • We have had 2,794 new listings under $250,000 versus 3,256 (down 14%)

So we are getting fewer new listings at the top and bottom but more in the mid-range up to $1 million.

There is little change in the mix by dwelling-type

Pinal county is getting fewer new listings than in 2017 (down 7%) while Maricopa is getting very slightly more (up 1%)

June 21 - Once again we take a look at the single-family market in the 17 largest cities, represented by the Cromford® Market Index and how it has changed over the past month.

Cities improving for sellers outnumber those deteriorating by 9 to 7.

The biggest improvements are in Scottsdale, Goodyear and Surprise.

None of the backwards movements exceeded 5%

Paradise Valley moved out of the balanced zone and into a seller's market.

Nothing to scare sellers or give buyers much relief in any of this data.

June 20 - Here are the major and secondary cities ranked by the change in the annual single-family sales rate over the past 12 months.

  1. Buckeye +17.2%
  2. Fountain Hills +16.3%
  3. Litchfield Park +13.2%
  4. El Mirage +10.2%
  5. Paradise Valley +10.0%
  6. Arizona City +8.5%
  7. Queen Creek +8.5%
  8. Apache Junction +7.7%
  9. Maricopa +7.2%
  10. Surprise +6.9%
  11. Peoria +6.3%
  12. Gold Canyon +6.0%
  13. Tempe +5.1%
  14. Scottsdale +4.7%
  15. Phoenix +2.8%
  16. Sun City +2.7%
  17. Cave Creek +2.3%
  18. Mesa +2.2%
  19. Tolleson +1.1%
  20. Sun Lakes +0.7%
  21. Goodyear +0.5%
  22. Sun City West +0.0
  23. Glendale -0.4%
  24. Gilbert -2.0%
  25. Avondale -3.9%
  26. Chandler -4.2%
  27. Anthem -8.7%
  28. Casa Grande -9.8%
  29. Laveen -17.1%

Quite a wide range from -17% to +17%. Note the strong growth in some of the more expensive areas like Paradise Valley and Fountain Hills.

A growing annual sales rate is generally a positive indicator. The opposite is usually true of a declining rate, although in some cases (e.g. Avondale) the underlying cause is a lack of inventory rather than a lack buying interest.

June 19 - My favorite Tableau chart is Days of Inventory. The reason is that it packs a lot of information into just one chart and shows you the history since 2011 as well as current conditions. It is updated weekly and currently shows 57.8 days of inventory for Greater Phoenix as a whole. This excludes active listings with an existing contract (UCB or CCBS) even though they still count as active to ARMLS.

The lower the number the more the market favors sellers over buyers. 57.8 is the lowest we have seen since 2012 but we got down to 42.9 then. However the 2012 number was driven down by investors and their ravenous appetite for bank-owned homes. If we filter out everything except normal transactions then we stand at 58 days, lower than any point in the last 8 years.

If you are expecting the market to weaken then watch this chart. It will have to rise much like it did in the second half of 2013. No-one knows the future for sure, but this chart will quickly indicate if the market is headed for a change.

It is always possible to find sectors of the market that are behaving differently from the rest. For example the city of Mesa stands at just 41 days, but if you restrict the chart to homes over $1 million, there are 517 days of inventory, not far below the long term average of 587. The high-end market in Mesa therefore feels nothing like the frenzied market at the low end. If we confine ourselves to homes in the sector between $175,000 and $250,000, so beloved of iBuyers and landlords, there are only 21 days of inventory, less than a third of the long term average of 68. It therefore indicates why we see strong appreciation at the low end and weak appreciation at the top.

You can conduct similar analyses for most cities round the valley. One exception to the pattern is Anthem and New River, an area which seems to be losing the plot. Here there are 108.5 days of inventory, which is above the long term average of 94 and the annual average of 100. This a distinctly negative signal, but it does seem to be confined to this specific area. It was down at 72 as recently as the start of 2018. This illustrates how the Days of Inventory chart reinforces the message we get from the Cromford® Market Index. Both are leading indicators.

June 18 - Hybrid agency Purplebricks announced that they will be launching into the Phoenix and Las Vegas housing markets this week. Although they are virtually unknown in Phoenix as yet, Purplebricks was founded in 2012 by Northern Irish entrepreneurs Michael and Kenny Bruce. They quickly rose to dominate the UK online estate agency market, where they now have over 5% of the 520,000 or so listings in the country creating strong competition to the traditional agencies. After launching in California in 2017, they have teamed with local broker Marcus Fleming to recruit agents to promote their business model in the Phoenix area.

Purplebricks charges a flat non-refundable fee of $3,600 for listing a home for sale and provides a "Local Real Estate Expert" to act as the seller's agent. Much of the selling process is performed through their web-site. Properties are listed with the local MLS and buyer's agents are paid commission in the normal way. So the cost to the seller is $3,600 plus the commission to the buyer's agent (typically 3%). This not as attractive a deal as they offer in the UK, where there are no buyer's agents and their fixed price is £849 outside London and £1,199 in the London area. At the moment the higher fee is equivalent to $1,600. It therefore remains to be seen if their value proposition will click in Arizona. Some would argue their closest competitor would be Redfin. Redfin charges a 1.5% fee to sellers rather than a flat fee.

The expected benefits for their "Local Real Estate Experts" are that they spend a great deal of corporate money and effort on advertising and tend to generate a lot of seller leads. As of today there are 12 agents shown at the ADRE site who are part of Purplebricks. A large number of these had prior experience with Redfin. We should expect their recruiting efforts to continue. At the moment there is just 1 for-sale listing for Purplebricks on ARMLS, but then they do not launch officially until tomorrow.

June 15 - Below is our regular table showing the Cromford® Market Index for the 17 largest cities and their single-family housing markets;

Here we see 11 cities showing a swing in favor of sellers and 6 improving for buyers.

Scottsdale is benefitting from lower supply and strong demand and is out highest percentage gainer with 12% over the past month. Surprise is just behind with a 10% improvement. The remaining improvements are rather modest except for Tempe and Maricopa at 7%.

Buckeye and Glendale were the biggest movers in favor of buyers, while Phoenix continues to decline.

Not in the table above, Anthem is down to 95.9, its lowest level since 2014 and is showing an advantage to buyers.

June 14 - As I gaze at the ranking table for cities by annual average price per sq. ft., it is very obvious that the best performers for appreciation over the last 12 months have been the remote parts of the central valley.

Here is a different version where the cities are ranked in order by appreciation rate:

We have been pointing out how well Coolidge has been doing for a couple of years now, but anyone can see that 25% is a pretty impressive gain for a single year.

All of the top 6 locations are on the fringes of the valley and among the top 10, only Youngtown could be classed as a more central location.

We see Florence, Maricopa and Rio Verde also looking very promising for appreciation over the next 12 months.

The big cities are way down the table, with Queen Creek at 9% leading the pack and Scottsdale at just under 5% the worst performer among the big 12. We expect better things from Scottsdale over the next 12 months given the recent improvement in its Cromford® Market Index.

We think many investors are missing the opportunities in these smaller and far-flung locations. There are exceptions however. Things are looking difficult at the moment for Anthem and New River while Gold Canyon and Carefree just don't enjoy the publicity of Paradise Valley and Scottsdale and tend to get neglected by out-of-state buyers. Despite their beautiful surroundings these upscale locations tend to appreciate more slowly as a result, even when supply is scarce.

In the West Valley, Youngtown, El Mirage and Sun City have been the top price gainers, while in the Southeast, Apache Junction, Queen Creek and Mesa are top.

In the Northeast, Fountain Hills and Cave Creek are the leaders, both at the edge of the conurbation.

Phoenix itself has been only a modest performer, ranked at 27 out of 42 and returning below average appreciation of 6.7%.

June 13 - The single-family market in the Northeast Valley continues to swing in favor of sellers, especially at the low-end.

For homes below $500,000:

  • active listings (excluding UCB & CCBS) dropped 31% from 542 to 376 between June 1, 2017 and June 1, 2018
  • quarterly sales (Mar-May) dropped 8% from 947 to 867 between 2017 and 2018
  • average $/SF for those sales climbed 5.2% from $194.52 to $204.72
  • months of supply fell from 1.7 to 1.3

Clearly the shortage of homes for sale is causing the sales rate to decline.

For the mid-range between $500,000 and $1 million:

  • active listings (excluding UCB & CCBS) dropped 18% from 1,257 to 1,037 between June 1, 2017 and June 1, 2018
  • quarterly sales (Mar-May) rose 16% from 865 to 1,006 between 2017 and 2018
  • average $/SF for those sales climbed 2.8% from $218.66 to $224.73
  • months of supply fell from 4.4 to 3.1

For the high-end over $1 million:

  • active listings (excluding UCB & CCBS) dropped 8% from 1,348 to 1,238 between June 1, 2017 and June 1, 2018
  • quarterly sales (Mar-May) rose 31% from 318 to 416 between 2017 and 2018
  • average $/SF for those sales climbed 2.0% from $355.44 to $362.60
  • months of supply fell from 12.7 to 8.9

All three price ranges show a shift in favor of sellers in Northeast.

June 12 - The single-family luxury market has grown in volume since last year. Using ARMLS data for the 3 months March, April, May we see:

  • a 26% increase in sales between $500,000 and $1 million
  • a 33% increase in sales between $1 million and $2 million
  • a 41% increase in sales over $2 million

All this activity has caused inventory to fall compared to last year

  • inventory between $500,000 and $1 million has dropped from 4.9 months to 3.5 months
  • Inventory between $1 million and $2 million has dropped from 10.7 months to 7.7 months
  • inventory over $2 million has dropped from 18.8 months to 12.8 months

So far this has not had a big effect on pricing. The average price per sq. ft. is up only 2.3% compared to a year ago for homes over $500,000.

June 11 - The data is preliminary, based on affidavits of value recorded during May, but here are the statistics for iBuyers in Maricopa County during May 2018.

iBuyer Homes Purchased May 2018 Homes Sold May 2018 Homes Purchased May 2017 Homes Sold May 2017
Opendoor 257 235 118 63
OfferPad 99 66 49 33
Zillow (Signpost Homes) 3 0 0 0

In addition, we had 2 institutions actively buying during May - Cerberus and Progress Residential. Both are converting homes into rentals.

So far Zillow has purchased 5 homes (to June 8) at an average of 100.3% of their Zestimate. Only 1 is listed on ARMLS and it currently remains active. The others are listed as "coming soon" on the Zillow site.

For comparison, over the last 3 weeks Opendoor has paid an average of 96.9% of Zestimate while OfferPad has paid 94.5% of Zestimate. Clearly gross margins are getting squeezed with 5 major players trying to buy homes which are already pretty scarce. The competition is also likely to be putting pressure on the size of the fees charged by iBuyers to home sellers.

June 8 - The local press has been headlining that sales prices for homes in Maricopa County have hit an all-time high. This is a very misleading statement that I take strong issue with. Although the median sales price has recovered to 2006 levels, the conclusion that sales prices in general are higher than June 2006 is completely wrong.

There are very few homes that would sell in 2018 for more than they would have sold for in 2006. The vast majority of homes in the valley have not recovered the value they had in 2006 and are still quite a long way from doing so. If home sellers believe they can sell their home for more than it was worth in June 2006, they are going to be bitterly disappointed, unless they live in the heart of Arcadia or a few isolated parts of South or Central Scottsdale. These media stories make life hard for agents trying to set reasonable asking prices when taking new listings.

The first problem is that the stories in the media are comparing the monthly median sales price for May 2018 with that for June 2006. The homes that sold in May 2018 are a very different collection from the homes that sold in June 2006, so this is an apples to oranges comparison. Let us compare the two sets of homes:

  1. June 2006
    • number of affidavits describing the property as a single-family home = 10,715
    • median sales price = $280,000
    • percentage of homes that were new builds = 28%
    • average sales price = $357,067
    • average home size = 1,840
  2. May 2018
    • number of affidavits describing the property as a single-family home = 9,987
    • median sales price = $285,000
    • percentage of homes that were new builds = 14%
    • average sales price = $354,727
    • average home size = 2,007

We can see that the sales mix is very different between June 2006 and May 2018. In June 2006 we had twice as many new homes as in May 2018 and the average homes size in 2018 is over 9% larger than in 2006. The average price per sq. ft. is much lower in 2018 than 2006.

A second problem is that affidavits of value are woefully inaccurate about property types. Hundreds of townhomes and condos are mis-classified as single-family properties every month. Therefore any numbers quoted for single-family homes in May are likely to be wrong until the affidavits have been checked and corrected, which takes several weeks.

In general, median sales prices are often misused and should NEVER be the basis for comparing the values of homes or comparing new home prices with re-sale prices.

A much more reasonable measurement is average price per sq. ft. which, though not perfect, adjusts for the difference in the average home size. In June 2006 the average price per sq. ft. of single-family homes sold in Maricopa County through the MLS was $193.65 while the average for May 2018 was $170.02.

We therefore estimate that the average single-family home in Maricopa County has a 14% rise in price to achieve before it reaches its value in June 2006. Individual homes will obviously vary quite a bit.

While the median sales price has recovered the level of June 2006, the value of the average home has certainly not achieved this. Do not let your clients be misled.

June 7 - Our regular table of Cromford® Market Index numbers for the 17 largest cities and their single-family markets is shown below:

Buyers will be dismayed that the balance of power is moving towards sellers again. 12 of the 17 cities are swinging in favor of sellers with Surprise, Maricopa and Scottsdale the biggest movers in that direction. Fountain Hills and Cave Creek have also improved significantly over the past month.

The areas moving in favor of buyers do include some large cities - Phoenix, Glendale and Peoria, and Buckeye has moved down the highest percentage. Buckeye tends to have much better supply than elsewhere as it is relatively cheap and quick to build new homes there.

We have 4 of the 17 cities over 200, but there are 4 more among the secondary cities:

  • Apache Junction - 225
  • Arizona City - 323
  • El Mirage - 257
  • Tolleson - 207

At only 99.2, Anthem is the only area below 100. This is quite startling give that it was over 200 in January. The market has swung dramatically in favor of buyers in Anthem

June 6 - The preliminary recording data is in for May 2018 in Maricopa County, allowing us to publish the usual median price spreadsheet.

Overall sales of single-family and condo/townhouse homes rose 3.5% over May 2017 while the median sales price rose 8.2%. A large part of the increase in the median sales price occurred in the last month, rising from $260,950 to $270,400. New home sales rose a strong 14.2% while re-sales only managed a 2.1% increase. Pricing was the other way round with re-sales increasing their median by 8.7% while new homes managed a 7.6% rise, more than half of which came between April and May. The median for new homes is $349,945, which is 34.7% higher than the $259,800 for re-sales. However we must remember that new homes are still much larger than re-sales for the price per sq. ft. is much closer.

The summary is that prices are rising fast but sales volumes are rising more slowly now among re-sales. New homes are selling well and pricing for them is picking up momentum.

June 5 - Yesterday we focused on Fountain Hills, a town that has been improving for sellers. Today we will focus on a location that is going the opposite way - Anthem. The market in Anthem has weakened significantly in the last few months, with its Cromford® Market Index dropping from 163 in March to around 100 today.

Other negative movements:

  • total active listings 182 versus 155 last year
  • pending listings 26 versus 61 last year
  • monthly sales 51 versus 66 last year
  • days of inventory 112 versus 89 last year
  • contract ratio 47.5 versus 75.6 last year

It is clear that supply is rising and demand is falling in Anthem, very different from most other parts of the valley.

As a result, the situation in Anthem is getting much more difficult for sellers and much better for buyers.

June 4 - Sometimes a geographic location behaves quite differently from surrounding areas and it is not always easy to discern why. A case in point right now is Fountain Hills, which has seen supply fall and sales rise quite dramatically over the past 3 months

Here is the weekly active listings chart for Fountain Hills showing listings without a contract

In most years, supply increases during the first quarter and then starts to fall. However, in 2018 (the orange line) supply has fallen sharply over the past 3 month and has plummeted from 363 to 242 in just 10 weeks (all property types).

Meanwhile the year-to-date sales chart looks like this:

This chart compares sales year-to-date between 2017 and 2018 and you can see that 2018 has opened up a 17% lead, most of which has happened since March.

The Cromford® Market Index for Fountain Hills has risen from 116.8 on February 20 to 180.4 on June 4.

Sellers in Fountain Hills must be delighted with these developments.

June 3 - Cerberus seems to have just about finished the acquisition phase of their big investment in Greater Phoenix homes. Now they are busy renting them out. You can see many of their rental listings on ARMLS under Bullseye Property Management (Nick Stratton). The ownership is vested in Cerberus but the rentals are marketed under the name First Key Homes. Some homes were purchased as new from builders but the majority were re-sales purchased at full market price from the MLS.

June 1 - The most recent S&P / Case-Shiller® Home Price Index® report was released earlier this week and shows a lot of upward movement in pricing. It is based on sales that closed during the first quarter of 2018 and does not include sales from April or May.

The 20 featured cities are ranked as follows for month-to-month change in their index:

  1. Seattle +2.84%
  2. San Francisco +2.15%
  3. Minneapolis +1.65%
  4. Las Vegas +1.45%
  5. Denver +1.43%
  6. Boston +1.18%
  7. Washington +1.14%
  8. Detroit +1.11%
  9. Chicago +1.10%
  10. Portland +1.01%
  11. San Diego +1.02%
  12. Charlotte +1.01%
  13. Phoenix +0.95%
  14. Los Angeles +0.94%
  15. Atlanta +0.78%
  16. Dallas +0.71%
  17. Miami +0.66%
  18. Tampa +0.61%
  19. Cleveland +0.35%
  20. New York +0.08%

Despite a strong increase of almost 1%, Phoenix is only ranked in 13% place. It did beat the national index which rose 0.84%.

The year-over-year-changes were as follows:

  1. Seattle +13.0%
  2. Las Vegas +12.4%
  3. San Francisco +11.3%
  4. Denver +8.6%
  5. Los Angeles +8.1%
  6. Detroit +7.9%
  7. San Diego +7.7%
  8. Tampa +7.5%
  9. Phoenix +6.8%
  10. Portland 6.7%
  11. Charlotte +6.2%
  12. Atlanta +6.2%
  13. Minneapolis +6.1%
  14. Dallas +5.8%
  15. Boston +5.7%
  16. New York +5.2%
  17. Miami +5.0%
  18. Cleveland +4.6%
  19. Washington +3.0%
  20. Chicago +2.8%

In this table, Phoenix managed to appear in the top half, but its increase was only slightly higher than the national index which rose 6.5%.

So we conclude that although Phoenix is experiencing strong home price appreciation, it is not out of line with the rest of the USA.

May 31 - We look once again at how the Cromford® Market Index has changed for the single-family markets in the 17 largest cities:

Sellers have benefited since last week with 10 cities showing an improving situation for sellers and only 7 showing deterioration.

Many of the improvements are quite large including:

  1. Fountain Hills - up 12% because of higher sales and lower inventory
  2. Maricopa - up 11%
  3. Cave Creek - up 10%
  4. Surprise - up 8%

The deteriorating markets saw lower percentage changes, the highest being -7% for Glendale

One slightly disturbing aspect of this table is the continuing decline of Phoenix, which represents 25% of the market by units. The annual sales rate has started to fall in Phoenix and supply has been more resilient than in many other areas. Average and $/SF prices have shot up over the past several weeks which may be having a slightly dampening effect on latent demand. Sellers need to be wary of getting over-confident in this situation.

May 30 - The second Zillow purchase was recorded today - 22734 N 123rd Dr in Sun City West - a 5 bedroom 2 story detached home built in 2011

They paid $312,000 (excluding any seller fees deducted from this amount) for this home with a Zestimate of $317,114.

It is not currently shown as coming soon or for sale, but the sale to Signpost Homes is shown at the Zillow site.

May 29 - Despite reports of Greater Phoenix's housing market being "over-valued" (e.g. CoreLogic), we expect prices to continue rising while the Cromford® Market Index remains over 110. The CMI compares demand with supply and throughout its existence has always given us at least 3 to 6 months warning of any shift in pricing trends. Despite many fears, the housing market always gives plenty of warning before major changes occur, as long as your are paying attention and do not believe "it's different this time".

In the chart below you can see the CMI collapsed in 2005 long before prices started falling. The CMI exceeded 100 in early 2009 showing that it was safe to enter the market again. The sharp drop in the CMI in late 2013 warned us that appreciation rates would fall, but because it did not drop far below 100 they never became negative.

The CMI is currently well over 150 and would need to see another collapse below 100 before prices have any significant chance of declining.

May 28 - It takes longer to analyze new home sales because the vast majority of them do not appear in the MLS and we have to wait for the recorded deeds to be transcribed from images, entered, verified and corrected. Only then can we tally up the numbers with some accuracy. The new home numbers for April are quite surprising.

  • There were 1,425 new single-family closings, up only 2% from April 2017. Since April 2018 had a 5% advantage in working days (21 over 20), this is an unexpectedly weak number.
  • Single-family dollar volume was down 1% compared to April 2017, largely because the average new home was 6% smaller than in 2017

Although new single-family home numbers were unexpectedly weak, new townhouse / condos were unexpectedly strong.

  • There were 166 new townhouse / condos recorded, up from 132 in April 2017
  • New townhouse / condo dollar volume grew 66%, up from $49 million to $81 millio
  • The average new townhouse / condo price was $485,459, up from $367,921 a year ago

Clearly there is a lot of growth in luxury condos:

Optima Kierland had 29 closings at an average price of $977,688 and an average price per sq. ft. of $741, more than 4 times the overall average price per sq. ft. for the valley. This was by far the biggest contributor to the surge in dollar volume. Most of the buyers were from Arizona, though 3 were from California and 1 each from Alaska, Kansas, Connecticut and Colorado.

Other condo developments selling in volume during April 2018 were

  • Aire on McDowell
  • Cays at Downtown Ocotillo
  • Che Bella Villas
  • Contour
  • Copper Leaf
  • Enclave at Borgata
  • Rhythm
  • Terrace at Green Gables
  • Toscana Vacation Suites (all buyers were out-of state)
  • Villages at Aviano
  • Villages at Country Club
  • Villagio at Happy Valley

May 25 - Once again we publish below the Cromford® Market Index for single-family markets in the 17 largest cities.

This shows 8 cities improving for sellers and 9 deteriorating. However the situation is a little more positive for sellers than last week.

The major improving cities are Cave Creek, Fountain Hills, Maricopa and Avondale. Going in the other direction are Goodyear, Glendale and Tempe. Phoenix is also slightly losing steam with a growing inventory. Things are looking up in Scottsdale and Surprise.

This is still a strong seller's market with 4 cities over 200 and only 1 city lower than 110.

May 24 - Zillow has created the subsidiary Signpost Homes Inc. to operate its home buying and selling business, which was approved by the Arizona Corporation Commission on May 1. Their first acquisition was recorded on May 18 - 6630 S Nash Way in Chandler 85249. This was purchased for $410,000. The affidavit of value states the transaction was all cash and that the buyer intends to use the property as a non-primary or secondary residence. Fidelity was the title company.

The home is listed as "coming soon" on the Zillow site with an "expected on market" date of May 29. The asking price is $425,000. The current Zestimate is $412,568. It had previously been listed on ARMLS since March 16, and this listing expired on April 30.

Zillow's buying price appears to be very close to the Zestimate and it also appears that Zillow will make 2% gross margin if the home sells for the typical 98.7% of list price for Chandler.

May 23 - The US Census Bureau has just released permit counts for the month of April and all 10 of the charts in the Cromford Public section of the web-site have been updated accordingly.

In Maricopa and Pinal counties, we see a total of 2,185 single-family permits. This is the highest monthly total since June 2007 and a 19% increase over April 2017. Clearly the builders are planning to compensate for the shortage of re-sale inventory.

The annual rate for single-family permits has risen to 21,163, up 12% from 18,893 this time last year. the year-to-date total in 2018 is 7,334, up 11% over 2017 but still 35% below 2007, which was a year when the market was in the process of collapsing.

Although permit levels are increasing, the rate of change is insufficient to have a big impact on the overall shortage of homes for sale. It is however swinging the balance of supply between new and re-sale in favor of new.

May 22 - This is the last installment of our series on days of inventory. Today we list the ZIP codes with relatively high days of inventory:

  1. Phoenix 85016 - 149
  2. Superior 85173 - 158
  3. Wickenburg 85390 - 164
  4. Scottsdale 85255 - 173
  5. New River 85087 - 180
  6. Phoenix 85004 - 180
  7. Valley Farms 85191 - 182
  8. Carefree 85377 - 215
  9. Scottsdale 85266 - 225
  10. Morristown 85342 - 239
  11. Rio Verde 85263 - 252
  12. Casa Grande 85193 - 255
  13. Paradise Valley 85253 - 268
  14. Arlington 85322 - 304
  15. Scottsdale 85262 - 315
  16. Stanfield 85172 - 365
  17. Fort McDowell 85264 - 438
  18. Aguila 85320 - 730

Some of these (85172, 85173, 85191, 85193, 85264, 85320, 85342) have fairly small numbers of active listings, but their annual sales rates are extremely low, so sellers must be very patient.

Others are quite large but have far higher inventory levels than the rest of the valley.

Apart from scattered tiny communities in Pinal County, this list mostly comprises places that are in the North, such as Wickenburg, Morristown, North Scottsdale, Carefree, Rio Verde, Fort McDowell. We also see relatively central but expensive locations like Paradise Valley and Phoenix 85016.

If you are tired of sellers who are too big for their boots, go visit Aguila or Fort McDowell. Not many homes to choose from (14 and 6 respectively) but at least the sellers will be pleased to see you. The nearest we have to that situation in the larger and denser locations is Scottsdale 85262. With 485 active listings and a sales rate of only 562 per year, you should find more respect for your offers.

May 21 - Today we are resuming our analysis of days of inventory by ZIP code. We have so far covered 90 ZIP codes with days of inventory at 70 or lower. Now we look at those between 71 and 140.

  1. Phoenix 85045 - 71
  2. Tempe 85281 - 72
  3. Wittmann 85361 - 73
  4. Phoenix 85028 - 73
  5. Phoenix 85048 - 73
  6. Goodyear 85338 - 75
  7. Mesa 85207 - 75
  8. Glendale 85310 - 76
  9. Tempe 85284 - 78
  10. Litchfield Park 85340 - 79
  11. Tonopah 85354 - 81
  12. Waddell 85355 - 82
  13. Phoenix 85014 - 83
  14. Buckeye 85396 - 83
  15. Phoenix 85006 - 87
  16. Phoenix 85007 - 88
  17. Scottsdale 85251 - 88
  18. Scottsdale 85260 - 89
  19. Goodyear 85395 - 90
  20. Phoenix 85013 - 90
  21. Phoenix 85021 - 91
  22. Phoenix 85083 - 92
  23. Anthem 85086 - 96
  24. Phoenix 85085 - 98
  25. Surprise 85387 - 98
  26. Scottsdale 85298 - 100
  27. Apache Junction 85119 - 104
  28. Peoria 85383 - 110
  29. Phoenix 85054 - 115
  30. Fountain Hills 85268 - 117
  31. Casa Grande 85194 - 122
  32. Phoenix 85018 - 124
  33. Gold Canyon 85118 - 130
  34. Scottsdale 85259 - 132
  35. Black Canyon City 85324 - 132
  36. Congress 85332 - 133
  37. Phoenix 85012 - 134
  38. Eloy 85131 - 135
  39. Cave Creek 85331 - 138
  40. Phoenix 85003 - 139

Relative to the rest of the valley we are seeing more inventory available in the North Valley (e.g. Anthem, New River, Black Canyon City, Cave Creek, Phoenix 85085 and 85083).

Some of the central Phoenix ZIP codes are relatively well-off for supply (85003, 85012, 85013 for example)

East Apache Junction (85119) has far more supply than the west (85120).

May 18 - We interrupt our series on inventory numbers to post the latest table showing the Cromford® Market Index for the single-family markets in the 17 largest cities:

Here we see 8 cities showing improvement for sellers while 9 cities show deterioration. The general trend has improved since last week, from a seller's perspective.

There are 4 cities showing a strong improving trend:

  1. Fountain Hills - up 14%
  2. Cave Creek - up 14%
  3. Maricopa - up 11%
  4. Avondale - up 11%

Avondale is the first major city to exceed 250 since the heights of the bubble.

There are 5 cities showing significant deterioration over the month:

  1. Tempe - down 13%
  2. Goodyear - down 11%
  3. Glendale - down 8%
  4. Peoria - down 7%
  5. Chandler - down 6%

Of these 5, Chandler is the only one which has changed direction and improved for seller's over the past week. The 3 largest cities in the Southeast (Mesa, Gilbert, Chandler) are all over 200, reflecting very low supply.

The City of Phoenix has seen supply grow over the past month, unlike most of the surrounding cities. However, Goodyear and Glendale have also seen supply growth, as have Peoria & Gilbert. Among the secondary cities, Anthem, Tolleson and Buckeye are the only ones with more supply than a month earlier. Anthem has experienced a major downtrend in its CMI over the past 5 months. It was measured at 208 in late December and is down to 111.8 this week.

May 17 - Yesterday we listed the 40 ZIP codes with the lowest inventory relative to their annual sales rate. These ranged from 17 to 36 days of inventory (all very low). Today we are looking at the next tier of ZIP codes - those with between 37 and 70 days of inventory. This ranges from very low to much lower than normal.

  1. Phoenix 85051 - 37
  2. Peoria 85382 - 37
  3. Phoenix 85032 - 37
  4. Gilbert 85295 - 37
  5. Phoenix 85053 - 37
  6. Sun City West 85375 - 39
  7. Laveen 85339 - 39
  8. Mesa 85208 - 40
  9. Mesa 85206 - 40
  10. Mesa 85209 - 42
  11. Avondale 85392 - 42
  12. Mesa 85205 - 42
  13. Peoria 85381 - 42
  14. Buckeye 85326 - 43
  15. Glendale 85301 - 43
  16. Chandler 85226 - 44
  17. Phoenix 85042 - 44
  18. Glendale 85304 - 44
  19. Tolleson 85353 - 46
  20. Sun City 85373 - 46
  21. Phoenix 85023 - 48
  22. Surprise 85374 - 49
  23. Chandler 85249 - 49
  24. Mesa 85213 - 51
  25. Scottsdale 85257 - 51
  26. Phoenix 85034 - 52
  27. Arizona City 85123 - 53
  28. Scottsdale 85250 - 54
  29. Phoenix 85022 - 54
  30. Casa Grande 85122 - 55
  31. Gilbert 85298 - 56
  32. Queen Creek 85142 - 57
  33. San Tan Valley 85140 - 57
  34. Mesa 85212 - 58
  35. Glendale 85305 - 59
  36. Surprise 85379 - 60
  37. Surprise 85388 - 61
  38. Mesa 85215 - 61
  39. Coolidge 85128 - 62
  40. Phoenix 85044 - 63
  41. Glendale 85308 - 63
  42. Florence 85132 - 65
  43. Sun Lakes 85248 - 66
  44. Phoenix 85015 - 66
  45. Scottsdale 85254 - 67
  46. Maricopa 85138 - 68
  47. Surprise 85378 - 69
  48. Phoenix 85050 - 70
  49. Phoenix 85008 - 70
  50. Phoenix 85020 - 70

Here we are starting to see more expensive areas included in the table, such as 85250 and 85254.

The overall inventory for Greater Phoenix is 64 days. We consider a normal range to be 120 and 150 days, so inventory for all dwelling types across Greater Phoenix is roughly half of what would be considered normal.

May 16 - While inventory is low for the market as whole, some areas are much worse than others. In general the lowest priced areas have the weakest supply, but there are anomalies and exceptions. We are going to compare ZIP codes by days of inventory - the active listing count (excluding UCB and CCBS) divided by the annual sales rate and multiplied by 365 (the number of days in a year). For this analysis we are including all dwelling types.

Here are the 10 ZIP codes with the lowest days of inventory as of May 16:

  1. Phoenix 85035 - 17
  2. El Mirage 85335 - 18
  3. Mesa 85202 - 21
  4. Phoenix 85033 - 22
  5. Mesa 85203 - 23
  6. Gilbert 85296 - 24
  7. Youngtown 85363 - 24
  8. Phoenix 85037 - 24
  9. Phoenix 85009 - 25
  10. Mesa 85210 - 25

25 is an extremely low reading for days of inventory. All of the above are in West Phoenix, West Mesa or the El Mirage / Youngtown area, with the exception of 85296, which is rather more expensive

The next group of 10 is as follows:

  1. Phoenix 85043 - 25
  2. Mesa 85204 - 26
  3. Glendale 85306 - 26
  4. Gila Bend 85337 - 26
  5. Tempe 85282 - 27
  6. Glendale 85307 - 27
  7. Tempe 85283 - 27 (includes Guadalupe)
  8. Chandler 85224 - 28
  9. Peoria 85345 - 29
  10. Phoenix 85040 - 29

This is still mostly in the inner West Valley and the inner Southeast Valley

The next group of 10 is:

  1. Chandler 85225 - 30
  2. Gilbert 85233 - 30
  3. Glendale 85303 - 30
  4. Mesa 85201 - 31
  5. Glendale 85302 - 31
  6. Phoenix 85031 - 31
  7. Gilbert 85297 - 31
  8. Phoenix 85027 - 32
  9. Chandler 85286 - 32
  10. Phoenix 85019 - 32

This is a slightly more diverse group, but 32 days is still a very low number for days of inventory.

The we come to:

  1. Apache Junction 85120 - 33
  2. Phoenix 85017 - 33
  3. Sun City 85351 - 33
  4. San Tan Valley 85143 - 34
  5. Gilbert 85234 - 34
  6. Phoenix 85041 - 34
  7. Avondale 85323 - 35
  8. Phoenix 85029 - 35
  9. Phoenix 85024 - 36
  10. Maricopa 85139 - 36

A much more diverse group with a couple of more expensive areas (85234 and 85024). Still little chance of buyers finding a property without multiple offers.

May 15 - Zillow is now active as our third iBuyer, though we have yet to see any deeds recorded in their name. This is normal as it would take several weeks before they close on their first purchase.

Meanwhile our existing iBuyers have settled into patterns that have been fairly consistent over the past 6 months. During that period we see the following for Opendoor:

  • The average sales price was $236,438 with an average gross margin of $10,844 (4.6%) across 1,083 sales
  • Average turn round time between acquisition date and sales date was 97 days.
  • The maximum price paid was $490,000.
  • Their market share (excluding new home and distressed sales) was 2.3% for the 6 months and 2.8% for March 2018.

The equivalent for OfferPad:

  • The average sales price was $245,752 with an average gross margin of $21,217 (8.6%) across 656 sales
  • Average turn round time between acquisition date and sales date was 108 days.
  • The maximum price paid was $700,500.
  • Their market share (excluding new home and distressed sales) was 1.4% for the 6 months and 1.3% for March 2018.

So iBuyer sales exceeded 4% market share during March 2018, the last month for which we have verified data.

Using unverified data we counted 309 iBuyer sales during April 2018, down from 390 in March. This suggests they slipped back to slightly under 4% of sales during April. However purchases were higher in April than March and they are off to a slightly faster start for sales in May with 116 closed during the period May 1 to May 11.

Cerberus has slowed down a lot ,making only 26 purchases during the first 11 days of May.

May 14 - The single-family market in the Northeast Valley has strengthened the negotiating power of sellers over the last 12 months. Two trends have worked in sellers' favor. Supply, measured by the number of active listings without a contract, is down 14%, while the sales rate has increased. Monthly sales for April were up 12% while the annual sales rate has climbed 7%. The most interesting things is how these trends varied by price range.

For supply, it is the range below $500,000 that was most affected with months of supply down from 2.1 to just 1.5 and a 31% drop in active listings. The range between $500,000 and $1 million was down 16% in active listings pushing our months of supply lower from 5.7 to 4.1. Over $1 million there was a drop in supply, but only by 5%. There is currently just under a year of supply over $1 million.

For demand, the most impressive sales volume increase occurred above $1 million where the quarterly sales rate has jumped 32%. The range between $500,000 and $1 million rose a healthy 18%. The lower end under $500,000 was constrained by supply and saw a 5% fall in the quarterly sales rate.

So supply has fallen most at the lower end of the market while demand has increased most at the higher end. In the middle, the combination of lower supply and higher demand is welcomed by sellers but makes life tougher for the increased number of buyers.

May 11 - It has been a while since we last looked at what Canadians are up to in the Greater Phoenix housing market. The answer is - not a lot. In April 2018 the annual transaction count for Canadians across Maricopa and Pinal counties hit the lowest level since 2009. They represent only 0.9% of all transaction sides, their lowest percentage since our records for them began in 2009. At their peak in 2011 Canadians represented 2.5% of the market.

The annual purchase count in April 2018 stood at 769 which represents a slight recovery from the low point of 564 in December 2016. However it is still a very low number compared with the peak of buying in December 2011 when we saw 4,340.

Canadians have reduced the rate at which they are selling their Central Arizona homes to 1,640 a year, but that is still more than double their purchase rate. The peak exodus was August 2016 when the annual sales rate hit 2,824.

The number of sales has exceeded the number of purchases every month since February 2015. The net change over that time represents a loss of 4,658 in Canadian owners.

May 10 - The Cromford® Market Index values for the 17 largest cities and their single-family markets show quite a lot of movement in both directions:

We have 7 cities improving for sellers and 10 cities deteriorating. As last week, 16 cities are seller's markets (over 110) while one (Paradise Valley) is in the balanced zone (90 to 110).

Among the improving cities we have the following showing significant change:

  1. Fountain Hills - up 15%
  2. Cave Creek - up 12%
  3. Maricopa - up 11%
  4. Avondale - up 8%

Among the deteriorating cities, here are biggest movers:

  1. Tempe - down 13%
  2. Goodyear - down 11%
  3. Glendale - down 10%
  4. Chandler - down 9%
  5. Peoria - down 7%

Although the market remains heavily skewed in favor of sellers, the overall trend is for this imbalance to fade very slightly.

May 8 - Just as the supply situation is very different at the two ends of the market, the sales counts are behaving very differently too. Sales counts for the luxury market over $500,000 are dramatically higher than last year, unhampered by any supply shortage and fueled by buyer optimism. Sales counts under $250,000 are down compared to last year, largely due to a lack of sufficient supply.

So far in 2018 we have seen 3,398 closed listings over $500,000 across Greater Phoenix (all dwelling types). At the same point in 2017 we had seen only 2,679.

That is an increase of almost 27%. Thanks to the plentiful supply, price rises have been fairly modest in this sector so that the dollar volume is up 29%. Nevertheless that represents a huge increase in overall business volume, more than enough to make up for the increased number of active agents and brokers.

Below $250,000 we see a year-to-date reduction is sales of 11% and a reduction in dollar volume of 7%.

In the middle ground between $250,000 and $500,000, year-to-date sales are up 23% and dollar volume is also up 23%.

The increased sales volume is even more extreme for homes over $1,000,000, where unit counts are up 32% and dollar volume up 33%.

Despite the huge increase in luxury sales, supply remains fairly plentiful over $500,000 and very strong over $1,000,000. However the number of active listings no longer seems too large relative to the sales activity and the counts are starting to come down from the peaks of 2016. Sellers over $500,000 are starting to exercise a little more negotiating power, especially if they hold a modern home or one that has been recently upgraded.

May 7 - Initial results from examining the recorded deeds in Maricopa County show that April was not as strong for sales as February or March, relative to last year. Total unit sales for single-family and condo/townhouse properties came to 10,712. However April 2018 had 21 working days, one more than April 2017. This means that the apparent 7.4% growth in sales over last year, really represents a 2.2% increase in sales per working day. This compares with 10.8% in February and 9.0% in March.

The new home total of 1,295 was up 3.9% over April 2017, but after adjusting for the number of working days, this becomes a 1.0% decline. Given that both February and March showed more than 14% increases after adjusting for the number of working days, it appears that demand has weakened a bit, probably caused by the jump in interest rates.

The number of listings under contract has also weakened a little over the past month. The Cromford® Demand Index is now less than 100 in the majority of cities, the exceptions being Buckeye, Cave Creek, Fountain Hills, Litchfield Park, Maricopa, Mesa, Paradise Valley, Peoria, Queen Creek and Scottsdale. The chronic lack of supply tends to mask any weakness in demand. However the following cities are showing unusually low Cromford® Demand Index levels:

  • Anthem 75.0
  • El Mirage 80.9
  • Sun City 81.6
  • Sun Lakes 78.6

The market is still heavily favoring sellers because of the weak supply, but we need to keep a watchful eye out for possible weakness in demand. One place where demand is not at all weak is the luxury market, which is seeing a large increase in sales volumes over 2017, something we will examine in detail in a future observation.

May 4 - Looking at the changes in the Cromford® Market Index among the 17 largest cities and their single-family markets, we see:

We see 11 of the 17 cities showing deterioration for sellers with just 6 showing improvement.

16 of the 17 are currently in a seller's market with Paradise Valley the only exception, lying in the balanced zone between 90 and 110.

Among the gainers, Fountain Hills, Maricopa, Buckeye and Cave Creek are the four leaders.

Among the losers, Tempe, Glendale, Chandler and Goodyear fell the largest percentage over the past month.

The movement overall is not huge, but the trend over the past month is for the extremely strong market to lose just a little of that strength.

May 3 - Yesterday we looked at where supply was most plentiful relative to the number of homes that exist within in a ZIP code. Today we look at the opposite; the ZIP codes with the least number of homes for sale:

For single-family homes:

  1. Gila Bend 85337 - 0.0%
  2. Palo Verde 85343 - 0.0%
  3. Phoenix 85035 - 0.2%
  4. Mesa 85210 - 0.2%
  5. Phoenix 85033 - 0.3%
  6. Mesa 85203 - 0.3%
  7. Mesa 85204 - 0.3%
  8. Phoenix 85053 - 0.3%
  9. Phoenix 85037 - 0.3%
  10. Phoenix 85019 - 0.3%
  11. Phoenix 85031 - 0.3%
  12. Phoenix 85027 - 0.3%
  13. Glendale 85302 - 0.3%
  14. Mesa 85202 - 0.3%
  15. Phoenix 85009 - 0.3%
  16. El Mirage 85335 - 0.3%
  17. Phoenix 85040 - 0.3%
  18. Glendale 85306 - 0.3%
  19. Chandler 85224 - 0.3%
  20. Phoenix 85017 - 0.4%

For townhomes & condos:

  1. Peoria 85381 - 0.0%
  2. Mesa 85213 - 0.0%
  3. Phoenix 85009 - 0.0%
  4. Phoenix 85043 - 0.0%
  5. Phoenix 85041 - 0.0%
  6. Glendale 85307 - 0.0%
  7. Tolleson 85353 - 0.0%
  8. Laveen 85339 - 0.0%
  9. Buckeye 85326 - 0.0%
  10. Phoenix 85083 - 0.0%
  11. Phoenix 85023 - 0.1%
  12. Glendale 85306 - 0.2%
  13. Mesa 85204 - 0.2%
  14. Peoria 85383 - 0.2%
  15. Peoria 85345 0.2%
  16. Mesa 85202 - 0.2%
  17. Gilbert 85234 - 0.3%
  18. Glendale 85302 - 0.3%
  19. Mesa 85203 - 0.3%
  20. Phoenix 85022 - 0.3%

These tend to be affordable locations reasonably close to the center of the valley. Gila Bend has no active listings. Palo Verde has no active listings, but then there are only 33 homes in the entire ZIP code.

Phoenix 85035 (part of Maryvale) has the lowest percentage of active listings of all types - just 1 in 452 homes are for sale.

Way out in the far West Valley, Aguila 85320 has 1 in 12 homes for sale. Still some negotiation power for buyers who are prepared to live that close to California.

Among the more well known areas, Scottsdale 85262 has the most plentiful supply - 1 in 16 homes there are for sale.

May 2 - In Maricopa County 1.0% of single-family homes and 1.1% of townhomes / condos are currently listed for sale on ARMLS without an existing contract. We normally expect to see an average of around 1.6%.

Some areas have far more of their single-family homes for sale, for example:

  1. Aguila 85320 - 8.3%
  2. Fort McDowell 85264 - 8.0%
  3. Scottsdale 85262 - 6.6%
  4. Paradise Valley 85253 - 5.1%
  5. Rio Verde 85263 - 4.8%
  6. Carefree 85377 - 4.4%
  7. Scottsdale 85255 - 3.5%
  8. Morristown 85342 - 3.2%
  9. New River 85087 - 2.9%
  10. Arlington 85322 - 2.8%
  11. Phoenix 85108 - 2.7%
  12. Scottsdale 85259 - 2.6%
  13. Fountain Hills 85268 - 2.5%
  14. Phoenix 85016 - 2.3%
  15. Cave Creek 85331 - 2.2%
  16. Phoenix 85085 - 2.2%
  17. Wickenburg 85090 - 2.2%
  18. Buckeye 85396 - 2.1%
  19. Peoria 85383 - 2.1%
  20. Anthem 85086 - 1.8%

If you are a buyer who is tired of having so few homes to choose from, then these ZIP codes would give you some relief. They do include many very expensive locations however. None are perfect for the first-time home buyer on a limited budget.

If you are looking for a condo or townhouse then these are the ZIP codes with the highest percentage of homes listed for sale without a contract:

  1. Mesa 85212 - 7.4%
  2. Phoenix 85045 - 5.6%
  3. Phoenix 85004 - 5.3%
  4. Phoenix 85003 - 5.9%
  5. Rio Verde 85263 - 4.9%
  6. Scottsdale 85262 - 4.6%
  7. Phoenix 85054 - 3.4%
  8. Glendale 85305 - 3.3%
  9. Carefree 85377 - 3.3%
  10. Phoenix 85012 - 3.1%
  11. Wickenburg 85390 - 3.1%
  12. Goodyear 85395 - 2.9%
  13. Phoenix 85006 - 2.8%
  14. Scottsdale 85266 - 2.8%
  15. Sun Lakes 85248 - 2.6%
  16. Phoenix 85050 - 2.5%
  17. Paradise Valley 85253 - 2.4%
  18. Phoenix 85016 - 2.3%
  19. Scottsdale 85255 - 2.3%
  20. Buckeye 85396 - 2.1%

May 1 - The contract ratio compares the number of listings under contract with the number of listings active with no contract. It tells us how hot the market is for any chosen sector. It tends to be lower for higher priced segments where there is always a good supply of active listings. Rather than compare with a standard value, it makes sense to compare segment with its long term average and maximum values. This way we can see how hot the segment is compared with its history.

In the table below we are studying single-family homes in Greater Phoenix by price range:

Price RangeContract Ratio May 1, 2018Long Term AverageMaxLast Time at This LevelComments
Under $100K 65.1 146.7 800.3 Feb 2018  
$100K - $125K 153.8 136.9 518.3 Jun 2017  
$125K - $150K 170.0 117.1 325.1 Apr 2018  
$150K - $175K 275.5 101.7 275.5 never record high
$175K - $200K 234.2 83.1 234.2 never record high
$200K - $225K 167.5 66.4 189.4 June 2012  
$225K - $250K 131.5 58.6 146.4 June 2012  
$250K - $275K 117.8 56.1 124.5 April 2018 record high last month
$275K - $300K 105.1 49.3 113.3 June 2012  
$300K - $350K 93.5 43.6 95.1 June 2012  
$350K - $400K 74.3 37.9 90.2 May 2013  
$400K - $500K 69.1 32.3 75.7 June 2012  
$500K - $600K 53.4 26.3 60.5 May 2012  
$600K - $800K 42.7 22.2 51.9 June 2013  
$800K - $1M 28.9 16.9 33.6 May 2013  
$1M - $1.5M 27.9 14.4 30.0 June 2012  
$1.5M - $2M 14.0 11.7 21.9 April 2018 record high was June 2013
$2M - $3M 15.4 8.1 15.4 never record high
Over $3M 9.9 5.1 10.0 June 2015  

 

  • Under $150K, the fire is going out for lack of fuel. There are simply too few listings for it to function as a normal market.
  • Between $150K and $200K we have just set new records for the contract ratio (which has only been measured since October 2006). This market is extremely hot, but is in danger of running out of fuel before too long.
  • Between $200K and $350K the market is very hot, but not quite as frenzied as the summer of 2012. However the range $250K to $275K did set a new record last month.
  • Between $350K and $1.5M the market is much hotter than average but not yet close to breaking record levels set in 2012 or 2013.
  • The range between $1.5M and $2M is the coolest but is still well above average. Not in sight of its record set in 2013
  • The range between $2M and $3M has not been this hot since we started measuring contract ratios in 2006. It is unusual that its contract ratio exceeds that for $1.5M to $2M.
  • The range over $3M is very hot and very close to its all time record.

The supply over $1M remains adequate, but the number of homes going under contract is very strong.

Contract ratio is a seasonal measurement so we expect it to peak in May or June for each year.

April 30 - Over the last year here is how the big cities rank for appreciation rate. Here we have used the change in the annual average $/SF for single-family homes.

  1. Avondale 9.0%
  2. Maricopa 9.0%
  3. Queen Creek 8.4% (includes San Tan Valley unincorporated area)
  4. Buckeye 8.2%
  5. Surprise 7.8%
  6. Glendale 7.4%
  7. Peoria 6.9%
  8. Mesa 6.9%
  9. Fountain Hills 6.2%
  10. Gilbert 6.0%
  11. Chandler 5.9%
  12. Phoenix 5.9%
  13. Goodyear 5.3%
  14. Cave Creek 5.0%
  15. Tempe 4.9%
  16. Scottsdale 4.3%
  17. Paradise Valley 3.4%

We can see clearly that the highest appreciation rates have been in the cities with lower overall pricing while those with higher pricing have appreciated more slowly. However they are all bunched together more closely now than they were this time last year. The range at the end of April 2017 was 2.2% (Fountain Hills) to 9.7% (Avondale). Two years ago the spread was even wider with Paradise Valley at -1.5% and Glendale at 10.0%.

In the Southeast valley, Mesa has consistently out-performed Chandler, Gilbert and Tempe. However the top performing cities have been Maricopa and Queen Creek throughout most of the last 2 years.

In the West Valley, Avondale and Buckeye have outperformed the rest while Goodyear and Peoria have been the laggards.

In the Northeast Valley there has been less consistency, although Paradise Valley and Fountain Hills has generally lagged the other cities. Having said this, Fountain Hills is currently number one among the Northeast cities,

April 27 - The housing market in Greater Phoenix is very strong but it is no longer improving for sellers. The Cromford® Market Index for the single-family markets in the top 17 cities is shown in the table below:

We note that only 6 out of the 17 are showing improved conditions for sellers compared with March 26 while 11 are showing some deterioration.

The 3 cities with the strongest improvement are Fountain Hills, Buckeye and Maricopa, on the fringes of the valley.

Among the cities where conditions are worsening for sellers, Tempe, Goodyear, Chandler, Paradise Valley, Glendale and Peoria are most prominent.

Gilbert has overtaken Chandler to take the number 2 slot. At number 9, Buckeye is now at its highest place ever.

To puts things into perspective, 16 of the cities are still seller's markets while Paradise Valley is in the balanced zone with a slight bias in favor of sellers. Not really anything for buyers to celebrate, but at least things have stopped moving against them.

April 26 - Zillow is actively soliciting Instant Offers on its web-site now. If you enter a Phoenix area address, the home will appear with a prominent "Get Started" button which did not appear last week.

A couple of obvious differences from Opendoor and OfferPad:

  • Zillow does not appear to be limiting themselves to homes under $500,000
  • They state that it will take 2-3 business days to get an offer, rather longer than the existing iBuyers, where 24 hours is the norm

Having flirted with high sellers charges of around 9% this time last year, Opendoor seems to have settled down to a seller's fee of 5.5% to 6% in 2018. The 9% level hurt their volume, but 6% seems to be pulling in an increasing number of sellers. The monthly rates for Opendoor are currently 278 purchases per month and 254 sales per month. This is up from 210 and 241 respectively at this point last month.

OfferPad are less active, with a purchase rate of 72 and a sales rate of 86 per month.

On top of these we still have Cerberus acquiring homes in the same price range to turn them into rentals. Their buying rate has eased from 270 last month to 155 in April.

For once, a new entrant has decided not to launch first in Phoenix. The UK-based flat-fee brokerage Purplebricks has targeted Californio and New York with massive marketing spending. Good luck with that. The Purplebricks model has been extremely successful in the UK and Australia, but we will have to wait and see how they fare in the USA. The rules of the housing game are very different between the UK and the USA, in fact there is very little common ground. Almost everything you learn at AZ real estate school does not apply in the UK. There is no licensing of real estate agents in the UK, caveat emptor is the legal guide (i.e. no disclosures), there are almost no buyer's agents and seller's agents have no fiduciary duty to their clients. They also charge a lot less, but you tend to get less than what you pay for.

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

Here are the month to month change percentages:

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

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

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

Here are the year over year changes:

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

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

April 23 - A quick look at the rental market on ARMLS shows we currently have 1.1 months of supply, the same as this time last year. The average rent per sq. ft. per month stands at 90.3 cents. On April 23, 2017 it stood at 85.8 cents, so the annual increase is 5.3%.

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

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

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

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

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

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

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

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

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

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

Avondale consolidated its position at the top of the table.

There are two modest trends influencing the action:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

April 12 - Based on 2017 Agent Production numbers:

  • To be in the top 20%, an agent needed at least 10 transaction sides
  • To be in the top 10%, an agent needed at least 17 transaction sides
  • To be in the top 5%, an agent needed at least 25 transaction sides
  • To be in the top 2%, an agent needed at least 38 transaction sides
  • To be in the top 1%, an agent needed at least 50 transaction sides
  • To be in the top 100, an agent needed at least 71 transaction sides

These calculations exclude iBuyer agents and new home sales people. Agents are ranked by numbers of transaction sides rather than by dollar volume.

April 11 - We have updated the Agent Production Tableau chart to include all of the 1Q transactions. You can find it here.

A new name has sprung to the top - Daniel Noma, who represents Cerberus Capital Management when it buys homes. With 482 sides up to April 8, Daniel is second only to Jacqueline Moore (698 sides), who represents Opendoor when they purchase homes. In third place is Brian Bair who represents the second major iBuyer in Phoenix - OfferPad (339 sides).

Among the more traditional agents, the top 10 based on transaction dollars so far in 2018 are:

  1. Jeffrey Sibbach
  2. Beth Rider
  3. Walter Danley
  4. Jason Mitchell
  5. Mike Domer
  6. Joan Levinson
  7. Lisa Lucky
  8. JoAnn Callaway
  9. Robert Joffe
  10. Scott Grigg

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

Here are the top 20 for low long term appreciation.

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

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Purchase quantities:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Taking the year over year view we see the following:

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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


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

Measuring year-to-date as of March 18:

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

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

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

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

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

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

That is the complete (short) list.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The following are within 5% of recovery:

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

The following are within 10% of recovery:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Previous periods where appreciation has exceeded 7% were:

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

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

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

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

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

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

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

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

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

Big totals came in from:

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

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

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

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

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

When we examine the year over year changes we find:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

RankCityZIP2017 $/SF2016 $/SF% Change
1Paradise Valley 85253 $367.50 $329.45 +11.5%
2Phoenix 85018 $271.92 $255.32 +6.5%
3Scottsdale 85262 $271.83 $262.16 +3.7%
4Scottsdale 85255 $270.80 $275.28 -1.6%
5Scottsdale 85251 $244.06 $230.10 +6.1%
6Scottsdale 85266 $242.81 $228.50 +6.3%
7Rio Verde 85263 $231.69 $202.32 +14.5%
8Scottsdale 85258 $230.78 $221.76 +4.1%
9Carefree 85377 $229.91 $226.34 +1.6%
10Scottsdale 85259 $228.52 $219.23 +4.2%
11Phoenix 85016 $220.25 $198.47 +11.0%
12Phoenix 85054 $213.80 $202.23 +5.7%
13Scottsdale 85260 $210.56 $199.58 +5.5%
14 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The year over year table looks like this:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The worst performing areas for appreciation were:

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

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

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The numbers above include all dwelling types and price ranges.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

  1. Tonopah
  2. Carefree

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

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

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

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

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

The areas with the lowest annual turnover are as follows:

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

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

Here are the top spots in Maricopa County:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

 

 

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

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

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

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

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

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

Cities showing a declining trend in appreciation rate:

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

Cities on an improving appreciation trend:

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

Cities with little change in appreciation rates:

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

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

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

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

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

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

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

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

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

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

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

Supply:

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

Demand:

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

Supply versus Demand:

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

Pricing:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The changes over the past year have been:

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

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

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

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

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

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

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

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

September 30 - According to the Census Bureau there were 1,954 single-family permits in Maricopa and Pinal Counties during August. This is a 19% increase over August 2016. The annual rate (i.e. for the last 12 months) is up 9.69% from last year. the last 2 months have seen an acceleration in permits which suggests that developers are at least trying to address the long-term shortage of homes for sale. However they are still back to the level of 1996 when there were 2,397.

The top ten sources of permits in 2017 are:

  1. Phoenix - 1891
  2. Mesa - 1763
  3. Buckeye - 1448
  4. Unincorporated Pinal County - 1442
  5. Peoria - 1293
  6. Gilbert - 1155
  7. Queen Creek - 850
  8. Goodyear - 763
  9. Maricopa - 760
  10. Unincorporated Maricopa County - 518

Note that Queen Creek and San Tan Valley, the latter comprising the better part of Unincorporated Pinal County, would overtake Phoenix at the top of the table if we went back and counted them together..... after all hey were just one ZIP code (85242) in 2007. This part of the valley is building at high speed.

Surprise, Scottsdale and Chandler all just failed to make the top ten.

Wickenburg is getting much more active with 117 permits year to date and is almost at the same level as Glendale (121). It is more active than Casa Grande, Litchfield Park, Fountain Hills and Apache Junction.

September 29 - Let us take another look at the single-family markets in the 17 largest cities and see how the Cromford® Market Index has changed over the past month:

We have 11 cities showing improved conditions for sellers and 6 deteriorating. Only Mesa and Cave Creek have deteriorated more than 2%, but this is enough to allow Avondale back into the top spot again.

Gilbert and Maricopa are the most improved after Avondale.

If Buckeye keeps on its current trend we will get all 17 cities in the seller's market zone over 110.

September 28 - I was wondering what size home had recovered pricing best compared with the peak levels of the housing boom. So using the ARMLS Sq. Ft. Ranges and selecting all closed listings in Greater Phoenix, I found the following:

Sq. Ft. RangePeak $/SFDate of PeakTrough $/SFDate of TroughCurrent $/SF% of Peak
Less Than 1,000 $170.80 Jan 2007 $52.88 Sep 2011 $136.77 80.1%
1,000 - 1,200 $174.12 Jan 2007 $59.41 Oct 2011 $145.62 83.6%
1,201 - 1,400 $169.58 Dec 2006 $64.28 Oct 2011 $144.13 85.0%
1,401 - 1,600 $165.42 Aug 2006 $65.50 Nov 2011 $140.43 84.9%
1,601 - 1,800 $166.20 Aug 2006 $69.85 Nov 2011 $140.59 84.6%
1,801 - 2,000 $168.17 Aug 2006 $74.03 Nov 2011 $140.41 83.5%
2,001 - 2,250 $171.63 Aug 2006 $74.45 Nov 2011 $137.79 80.3%
2,251 - 2,500 $180.31 Jul 2006 $77.73 Oct 2011 $138.42 76.8%
2,501 - 2,750 $189.56 Jul 2006 $84.89 Nov 2011 $141.02 74.4%
2,751 - 3,000 $204.60 Aug 2006 $92.90 Oct 2011 $148.19 72.4%
3,001 - 3,500 $206.27 Jun 2006 $90.33 Sep 2011 $148.21 71.9%
3,501 - 4,000 $223.69 Sep 2006 $98.97 Mar 2011 $153.53 68.6%
4,001 - 4,500 $237.28 Jul 2006 $108.17 Dec 2009 $166.34 70.1%
4,501 - 5000 $276.55 May 2006 $130.96 Mar 2011 $197.60 71.5%
5,001+ $392.30 Apr 2008 $202.51 Jul 2011 $279.18 71.2%

The $/SF numbers are annual averages.

The ranges 1,000 to 2,000 have recovered closest to the peak (83% to 85%) while homes over 2,750 still have a long way to go (68% to 73% of peak). Although prices did not fall as far for larger homes, they have not bounced back as much either. Though homes generally get more expensive on a $/SF basis as they get larger, the above table shows that this does not hold true under 2,500 sq. ft. at the moment.

Two data points stand out. Homes of 4,001-4,500 sq. ft. hit bottom much earlier in 2009 than the other ranges in 2011. Homes over 5,001 sq. ft. peaked much later than other homes size in 2008 rather than 2006.

September 27 - The new S&P/Case-Shiller® Home Price Index® report was published yesterday giving us numbers for the sales period May through July 2017. The 20 conurbations that are reported in detail are ranked below by the change in price index over the last month:

  1. Los Angeles 1.12%
  2. Boston 1.11%
  3. New York 0.82%
  4. Detroit 0.80%
  5. Las Vegas 0.78%
  6. Cleveland 0.76%
  7. Chicago 0.74%
  8. Minneapolis 0.72%
  9. Seattle 0.65%
  10. Tampa 0.63%
  11. San Diego 0.62%
  12. Charlotte 0.61%
  13. Portland 0.59%
  14. Phoenix 0.59%
  15. Miami 0.58%
  16. San Francisco 0.56%
  17. Denver 0.55%
  18. Dallas 0.37%
  19. Washington 0.35%
  20. Atlanta 0.32%

Phoenix was in 10th place last month and has slipped to 14th this month. Not at all bubbly, I would say. Given the shortage of supply and the seller`s market in Phoenix, this percentage increase is very modest. This is even more true when we consider the national average of 0.73%. You can view the long term indexes here.

Looking at the year over year change we see:

  1. Seattle 13.5%
  2. Portland 7.6%
  3. Las Vegas 7.4%
  4. Dallas 7.3%
  5. Detroit 7.3%
  6. Denver 7.2%
  7. San Diego 7.1%
  8. Tampa 7.0%
  9. Boston 6.8%
  10. San Francisco 6.7%
  11. Charlotte 6.4%
  12. Los Angeles 6.1%
  13. Minneapolis 5.8%
  14. Phoenix 5.6%
  15. Atlanta 5.3%
  16. Miami 5.2%
  17. New York 3.9%
  18. Cleveland 3.8%
  19. Washington 3.3%
  20. Chicago 3.3%

Phoenix is again in 14th place, this time down from 12th place last month. In the context of the national average (5.9%), Phoenix`s 5.6% annual rise is thoroughly unexceptional.

Among the 20 cities that Case-Shiller reports, the following 8 have exceeded their price index levels during the housing boom:

  • Atlanta
  • Boston
  • Charlotte
  • Dallas
  • Denver
  • Portland
  • San Francisco
  • Seattle

The remaining 12 cities, including Phoenix, have yet to recover their peak price index levels from the housing boom.

September 26 - Although sales are generally stronger in 2017 than in 2016, there are a few places where that is not true. Surprisingly those few places include Gilbert and Chandler.

Here are the cities (with Phoenix broken into smaller regions) ranked by home sales growth (year-to-date) based on county recordings. The numbers include single family homes, condos and townhomes and are correct up to the end of August in each year:

RankCityYTD Sales 2015YTD Sales 2016YTD Sales 2017Growth 2016-2017
1 Phoenix - Downtown 203 167 309 85.0%
2 Waddell 218 201 265 31.8%
3 Paradise Valley 370 350 453 29.4%
4 Carefree 141 101 130 28.7%
5 Wickenburg 117 119 151 26.9%
6 Rio Verde 98 120 151 25.8%
7 Gold Canyon 356 354 439 24.0%
8 Youngtown 100 108 133 23.1%
9 Coolidge 161 182 223 22.5%
10 San Tan Valley 2246 2622 3188 21.6%
11 Buckeye 1817 2143 2554 19.2%
12 Maricopa 1334 1424 1661 16.6%
13 Phoenix - West 3844 3942 4595 16.6%
14 New River 209 144 166 15.3%
15 Arizona City 173 207 236 14.0%
16 Queen Creek 965 1293 1473 13.9%
17 Glendale 3485 3511 3980 13.4%
18 Peoria 3263 3708 4197 13.2%
19 Apache Junction 556 581 655 12.7%
20 Mesa 7069 8105 9098 12.3%
21 Tempe 1810 1876 2107 12.3%
22 Phoenix - Northeast 1148 1158 1294 11.7%
23 Florence 474 574 636 10.8%
24 Wittmann 69 74 82 10.8%
25 Phoenix - Far North 1262 1448 1597 10.3%
26 Surprise 2848 3045 3350 10.0%
27 Sun City 1703 1793 1965 9.6%
28 Scottsdale 6180 6415 6995 9.0%
29 Avondale 1101 1206 1306 8.3%
30 Casa Grande 807 845 914 8.2%
31 Phoenix - Biltmore & Arcadia 1442 1477 1594 7.9%
32 Cave Creek 655 669 720 7.6%
33 Phoenix - Northwest 2685 2952 3154 6.8%
34 Phoenix - East 682 778 830 6.7%
35 Litchfield Park 585 600 636 6.0%
36 Sun City West 1097 1105 1169 5.8%
37 Phoenix - North 2586 2715 2845 4.8%
38 El Mirage 541 487 510 4.7%
39 Goodyear 1801 1991 2048 2.9%
40 Phoenix - Ahwatukee 1346 1361 1385 1.8%
41 Phoenix - Uptown 867 940 957 1.8%
42 Fountain Hills 632 659 668 1.4%
43 Laveen 763 879 887 0.9%
44 Gilbert 4896 5225 5215 -0.2%
45 Chandler 3844 4703 4659 -0.9%
46 Anthem 363 384 379 -1.3%
47 Sun Lakes 446 458 432 -5.7%
48 Tolleson 553 612 568 -7.2%
49 Eloy 116 161 148 -8.1%

I imagine the top 10 is a surprise to many people. With all the downtown development and the fashion for urban living, Downtown Phoenix is no surprise at number 1. But Waddell, Paradise Valley, Carefree, Wickenburg, Rio Verde and Gold Canyon have not generally been regarded as hot-spots. What they do have is plenty of supply. Lack of supply is a boon for sellers but is not necessarily good for agents and brokers because poor supply can easily lead to poor sales growth.

Who would have expected a decline in sales in Chandler or Gilbert? In the Southeast Valley, it is Queen Creek, Apache Junction, Mesa and Tempe that have been growing fastest.

Given the large inflow of retirees, the lack of growth in Sun Lakes is a bit of surprise. New developments focused on the 55+ sector of the market have contributed to the rapid growth in places like Wickenburg, Rio Verde and San Tan Valley.

September 25 - One simple way of measuring the level of distress in the housing market is to count the number of HUD homes sold per month. In August 2017 there were 4 such sales, the lowest we have ever seen, and implying a very low level of distress among home-owners. Of course renters may be experiencing financial distress, but we know home owners with FHA loans are doing much better than usual in avoiding losing their homes to foreclosure.

To put the August 2017 total of 4 sales into context, remember that in August 2011 we saw 458 such sales.

September 24 - The overall Greater Phoenix market is starting to look even more favorable to sellers than it did last month, despite a slight decline in the Cromford® Market Index. Here are the reasons we say that:

  • the listing success rate stands at 80.5%, the highest since 2005 for this time of year
  • growth in active listings is very small, and normally we see significant increases at this time of year
  • new listing counts are weakening relative to last year
  • the weekly pending listing chart has started to look stronger relative to 2016

The average price chart has looked quite weak for the last 3 months, but that is partly a result of seasonal effects and partly because of a decline in the average home size of homes that sold. We now expect the average price chart to look stronger for the next couple of months.

September 23 - The number of parcels in Maricopa County that are pending foreclosure just hit a new low point of 1,929. This is the smallest pre-foreclosure inventory we have ever recorded (from 2002 onwards). To put the current number in context we were at 5,880 in the last week of 2002 and 2,225 was the low point before the housing bubble burst. The high point during the foreclosure wave was 51,022.

We read earlier this week that Ed Delgado, President and CEO of Five Star, presented at the Federation of Certified REO Experts ("FORCE"). He claimed that REOs are going to increase in 2018. He believes micro bubbles are going to burst in Denver, Dallas, San Antonio, Las Vegas, Phoenix, Los Angeles and San Francisco. He predicts that delinquencies will rise and foreclosures will increase. You have to feel a little sorry for REO experts since the subject matter they specialize in is getting rarer and rarer. It is not surprising that they believe REOs will rise. People tend to believe what they want to believe.

The Cromford® Report is neutral on the REO subject. We just count them. But I would point out that a pre-requisite for REOs rising is for pre-foreclosures to rise significantly first. So if you are an REO expert (certified or not) the latest foreclosure pending numbers will be a big disappointment..

September 22 - Here is the table showing the Cromford® Market Index for the 17 largest single-family markets by dollar volume:

This is still looking favorable for sellers with 11 cities improving and 6 deteriorating for them.

Avondale is staging a a recovery and threatening to take back the number 1 spot it held for so long. A recent increase in supply is threatening to unseat Mesa from its present position at the head of the table.

Overall there is little for sellers to grumble about in this table, particularly those in the Northeast Valley. Buyers have our permission to complain, but we have little to no good news for them at the moment.

September 21 - People often focus on monthly median sales prices but these can be very volatile from month to month, especially for small or very diverse areas. For example, the monthly median sales price for Paradise Valley single-family detached homes has varied between $1,177,500 and $1,840,000 over the past 12 months which tells us little more than what we already know - Paradise Valley is rather expensive.

In contrast the annual median sales price is based on a much larger sample and tends to be a slow moving and reliable indicator. The same Paradise Valley has an annual median sales price that has only varied between $1,400,000 and $1,450,000 during the last 12 months and this tells us that prices are stable and changing very little.

Let us have a look at the annual median sales prices for single-family detached homes in the cities around the valley. They are ranked by percentage change from a year ago.

RankCityAnnual Median Sales Price September 2016Annual Median Sales Price September 2017ChangePeak 2005-2008Current Median % of Peak
1 Eloy $145,000 $208,000 +43.4% $210,000 99.1%
2 Wickenburg $227,000 $257,000 +13.2% $340,500 75.5%
3 El Mirage $155,000 $175,000 +12.9% $223,000 78.5%
4 Arizona City $103,000 $115,000 +11.7% $160,000 71.9%
5 Tolleson $180,000 $197,638 +9.8% $257,000 76.9%
6 Apache Junction $169,900 $185,450 +9.2% $216,500 85.7%
7 Sun City $165,000 $180,000 +9.1% $210,000 85.7%
8 Waddell $263,000 $287,000 +9.1% $529,000 54.3%
9 Maricopa $165,000 $179,900 +9.0% $258,650 69.6%
10 Wittmann $263,250 $287,000 +9.0% $355,000 80.9%
11 Avondale $192,000 $209,000 +8.9% $264,950 78.9%
12 Tonopah $159,995 $174,000 +8.8% $244,000 71.3%
13 Coolidge $113,000 $123,000 +8.8% $149,995 82.0%
14 Laveen $195,000 $212,000 +8.7% $299,900 70.7%
15 Sun City West $210,000 $227,500 +8.3% $262,950 86.5%
16 Buckeye $184,896 $199,950 +8.2% $255,000 78.4%
17 Florence $150,520 $162,500 +8.0% $203,900 79.7%
18 Mesa $225,000 $242,500 +7.8% $249,998 95.1%
19 Queen Creek $200,000 $214,900 +7.5% $259,900 82.7%
20 Glendale $212,000 $227,000 +7.1% $257,000 88.3%
21 Chandler $279,900 $299,652 +7.1% $315,000 95.1%
22 Gilbert $277,500 $297,000 +7.0% $330,000 90.0%
23 Sun Lakes $255,800 $272,500 +6.5% $320,000 85.2%
24 Scottsdale $492,250 $523,825 +6.4% $640,000 81.9%
25 Tempe $265,000 $281,000 +6.0% $295,000 95.3%
26 Carefree $717,500 $760,000 +5.9% $975,000 78.0%
27 Peoria $257,500 $272,500 +5.8% $286,500 95.1%
28 Phoenix $225,000 $238,000 +5.8% $255,000 93.3%
29 Casa Grande $159,000 $168,000 +5.7% $199,900 84.0%
30 Surprise $215,000 $226,853 +5.5% $268,000 84.7%
31 Youngtown $150,000 $157,500 +5.0% $193,000 81.6%
32 Goodyear $247,000 $257,000 +4.0% $300,000 85.7%
33 Anthem $285,000 $295,000 +3.5% $385,000 76.6%
34 Cave Creek $426,800 $439,000 +2.9% $537,000 81.8%
35 Litchfield Park $278,000 $285,500 +2.7% $330,000 86.5%
36 Fountain Hills $430,000 $439,000 +2.1% $565,000 77.7%
37 Gold Canyon $255,000 $257,000 +0.8% $312,000 82.4%
38 New River $325,000 $325,000 +0.0% $435,000 74.7%
39 Rio Verde $430,500 $428,750 -0.4% $759,900 56.4%
40 Paradise Valley $1,450,000 $1,435,000 -1.0% $2,000,000 71.8%

There are some special cases here. Eloy's market has changed since 2006 thanks to the development of Robson Ranch, moving prices substantially higher over the past 2 years. Waddell used to be a much smaller market with just a few more expensive homes. It is going to have a very hard regaining the peak median of 2006.

It is noticeable that some larger cities are within striking distance of their peak median. These include Tempe, Peoria, Chandler and Mesa. Phoenix is not so far behind.

It is also noteworthy that many of the more expensive cities that did not see as large a collapse in pricing still have a long way to go to regain their peak. Examples include Paradise Valley, Rio Verde, Fountain Hills, Anthem, Carefree.

It will probably surprise many to see that Coolidge and Apache Junction are closer to regaining their peak than Scottsdale.

September 20 - For Pinal County, the single-family market has seen almost as big a percentage drop in supply as the Southeast Valley over the last 12 months. Active listings are down 16% and down 23% for homes priced under $250,000. The market for homes over $500,000 is tiny in Pinal County, but we have seen an 11% decline in supply from 105 to 93 in the last 12 months. Mid-range supply has been healthier moving up 5% from 391 to 409 listings.

The overall quarterly sales rate is fairly stable, up just 4% from the same time last year. However the mid range has grown 39% while the bottom end has declined 2% and the high end has fallen14%.

Overall appreciation is a very strong 10.5% but almost all of that is generated by the price range under $250,000.The mid range is up only 3.8% and the homes over $500,000 actually lost 0.2%.

September 19 - In the Southeast Valley, active listing counts for single-family homes have dropped much more than the areas we discussed over the last few days. The annual change is -17% with even the highest priced range (over $500,000) down 11%. Listings under $250,000 are down a massive 40% since September 2016.

With this loss of supply, the quarterly sales rate has struggled to rise higher than last year and we are seeing only a 0.5% increase overall. The best price range for sales growth is over $500,000 which has seen a 30% increase from 377 to 490 for the 3 month period June through August. The mid-range from $250,000 to $500,000 has performed reasonably well with a 15% increase in sales from 3,292 to 3,797. The dismal supply below $250,000 has resulted in sales collapsing by 24% from 2,494 to 1,905.

As of September 1, 2017, there were only 22 days of inventory for homes under $250,000. As you might expect, these lower priced homes have appreciated at the fastest rate, namely 7.5% while those over $500,000 have only increased by 0.4% on a price per sq. ft. basis. The mid-range is rising more quickly at 5.6% per year.

September 17 - In the West Valley single-family market, we have a 1.6% decline in active listing counts compared to last year. However homes under $250,000 are down 20% while homes over $500,000 are up 3% and mid-range homes between $250,000 and $500,000 are up 14%. The quarterly sales rate follows a similar pattern with homes under $250,000 down 5%, those between $250,000 and $500,000 up 26% and the big change, those over $500,000 up 53%. Mind you the market for homes over $500,000 is not huge in the West Valley. The quarterly sales count increased from 100 to 153.

Overall appreciation based on quarterly $/SF was 8.0% and perhaps surprisingly, the highest rate was for those homes over $500,000 which increased 9.5% from $160.09 to $175.34. The lowest appreciation was for the mid-range at 4.6% while the low end under $250,000 enjoyed a 8.3% increase in average $/SF.

September 16 - In the City of Phoenix single-family market, we are only seeing a 1% decline in active listings compared to last year. However active listings for homes under $250,000 are down 8%, while those priced over $250,000 are up 3%. It is a similar story with sales numbers. Quarterly sales for homes under $250,000 are down 4% but sales of homes over $250,000 are up 16%.

The overall appreciation rate in Phoenix is 6.8%, with the range below $250,000 doing slightly better than average at 7.3%. Pricing per sq. ft. is up 4.3% for the mid range and up 2.1% for homes over $500,000.

September 15 - In the Northeast Valley single-family market we are looking at 5% fewer active listings than we had this time last year. However this drop is far from evenly spread across the price ranges. Over $1 million we have a 1% increase, between $500,000 and $1 million a 4% drop and under $500,000 a significant 18% fall.

We typically see 4 times as many sales under $500,000 as we do sales over $1 million, yet there is less than half the number of active listings below $500,000 (503) than over $1 million (1,055). Clearly the market will feel very different for buyers under $500,000 than for those with a budget over $1 million.

The supply over $1 million has not grown for lack of sales. Indeed, the quarterly sales rate for June through August was up a strong 32% from 222 to 293. With its limited supply, sales activity below $500,000 was weaker than in 2016 with a 10% drop in quarterly closings from 914 down to 823. Overall we see a modest 4% increase in sales across all price ranges.

As you might expect, appreciation is strongest for homes under $500,000 with the average $/SF moving up 5.3% from $184.08 to $193.81. For homes over $1 million the average $/SF fell 1.4% from $329.73 to $325.18. So despite the strong demand the excess supply prevented the high end of the market from enjoying the appreciation rates seen by the rest of the market.

September 14 - The Cromford® Market Index for the single-family markets in the 17 largest cities by dollar volume:

With the exception of Fountain Hills and Paradise Valley (two of the smallest markets in this list), there has been no change greater than 4% over the last month.

However the balance still favors sellers with 12 cities showing improving conditions for sellers and only 5 showing improvements for buyers. The Southeast Valley still looks strong with Chandler and Gilbert up 4% , but Tempe, Mesa & Queen Creek all slipped a little. Avondale has regained its footing and is now challenging Surprise for the highest ranked West Valley city.

September 11 - For single-family homes in the mid-price range the supply situation looks like this:

Price Range Active Sep 2015 Active Sep 2016 Active Sep 2017 2 Year Change 2015 Days of Inventory 2017 Days of Inventory
$250K-$275K 988 1,142 1,196 +21% 87 71
$275K-$300K 1,097 1,204 1,197 +9% 94 71
$300K-$350K 1,680 1,758 1,716 +2% 117 83
$350K-$400K 1,543 1,518 1,525 -1% 146 101
$400K-$500K 1,682 1,934 1,884 +12% 155 117
All the above 6,990 7,556 7,518 +8% 119 88

The number of active listings is 8% higher than 2 years ago and a shade lower than in 2016, so at first sight the market looks well-supplied. However the annual sales rate has increased 46% from 21,430 to 31,248 over the last 2 years, so the extra supply is completely overwhelmed by the growth in demand in this price range. Inventory has declined from 119 to 88 days which means sellers have a strong advantage and continued appreciation is in the short-term forecast.

September 10 - Above $500,000 the market conditions have improved for single-family homes up to $1.5 million. Above that price point the mood is rather different:. Let us take a look at supply above $500,000:

Price Range Active Sep 2015 Active Sep 2016 Active Sep 2017 2 Year Change 2015 Days of Inventory 2017 Days of Inventory
$500K-$600K 1,030 1,374 1,048 +2% 204 142
$600K-$800K 1,063 1,419 1,163 +9% 232 180
$800K-$1M 535 800 651 +22% 258 229
$1M-$1.5M 532 751 582 +9% 301 268
$1.5M-$2M 272 436 372 +37% 362 438
$2M-$3M 254 369 307 +21% 475 529
Over $3M 211 302 227 +8% 733 618
All the above 3,89 4,396 4,350 +12% 259 211

We have 12% more supply than 2 years ago, so there is still plenty of choice for buyers. However, the annual sales rate for homes over $500,000 has increased from 5,491 to 7,531, a rise of 37%. So here we can see that the growth in demand is much faster than the growth in supply and after a weak period since peaking in mid-summer 2015, prices in most luxury areas are starting to rise again, particularly for homes under $1.5 million. It is between $1.5 million and $3 million where the market starts to change for the worse.

Days of inventory have increased from 409 to 475 for single-family homes priced between $1.5 million and $3 million. In this price range annual sales have risen from 547 to 596, an increase of only 11%, while supply is up from 526 to 679, a rise of 29%. Now we see a problem. When supply increases as a faster rate than demand, sellers are at a disadvantage. Pricing for homes between $1.5 million and $3 million will have a hard time making substantial upward progress until this condition changes.

September 9 - Last year the minimum number of active listings across all areas and types but excluding UCB and CCBS was 19,186, the reading on September 1, 2016. This year the minimum reading was 17,315 which occurred on August 16. So our peak was about 10% lower than last year, but our autumn season increase started 2 weeks earlier.

Average days on market for these active listings is currently 113, down from 120 this time last year.

Last year we had seen 62,800 sales through ARMLS while this year to date total is 67,728, up 8.2% on 2016. This is a very healthy increase in sales volume, but the year over year comparison is weakening. Last month we had 9.2%, while July was 9.9% and June 11.1%.

September 8 - The Cromford® Market Index peaked at 158.3 on September 1 and is now starting to slip gently backwards. The reasons are that supply is no longer in decline and demand is slowly weakening. The changes are very small and hard to detect out in the marketplace, although some areas will be affected more than others. Last year we saw the peak CMI on September 23, three weeks later than in 2017.

September 7 - Once again we take a look at the Cromford® Market Index for the single-family markets in the 17 largest cities by dollar volume:

This paints a pretty picture for sellers with 12 cities improving and only 5 deteriorating compared with a month ago. However 6 of those 12 improvements were of only 1% and if we look at the changes over the last week, several of them have reached an inflection point and are now in decline. These include Mesa, Chandler, Surprise and Goodyear.

We often see the market weaken during September and October as more new listings arrive ahead of the influx of snowbird buyers. However, to put things in their proper context, we remain in a seller`s market with no index below 100 and only one (Buckeye) below 110.

September 6 - The preliminary August sales counts from the Maricopa County Recorder are now available. We see 9,899 in total, up from 9,167 in July and 9,353 in August 2016. That`s a 6% increase year over year, healthy but not as dramatic as we were seeing earlier in the year. As both August 2016 and August 2017 had 23 working days, the 6% is a fair comparison. The 8% increase over July 2017 is not so fair, since July only had 20 working days. The rate of sales per working day declined 6% between July and August, in line with normal seasonal patterns.

The overall median sales price in August was $251,000, up 5% from $238,888 a year ago. This includes single family, townhomes and condos.

For new homes, the sales count in August was up 15% from 2016 to 1,406. The new home median sales price was up just 1% to $319,430.

Re-sale counts grew 4% year over year and the re-sale median sales price was up 6% to $239,000.

Clearly new home sales are growing much faster than re-sales, though their median price is not increasing as fast. This is partly because we are seeing more new homes at the lower price points with smaller square footage.

September 5 - Phoenix as a whole only managed to rank 27th with 5.7% in the table of appreciation rates that we created yesterday. However we can find a wide range of rates within the city of Phoenix.

  1. 85004 19.7%
  2. 85009 19.0%
  3. 85035 13.4%
  4. 84040 13.3%
  5. 85041 12.1%
  6. 85051 12.0%
  7. 85031 11.5%
  8. 85033 11.2%
  9. 85006 10.5%
  10. 85007 10.5%
  11. 85019 10.0%
  12. 85027 10.0%
  13. 85029 10.0%
  14. 85037 9.9%
  15. 85043 9.3%
  16. 85053 9.2%
  17. 85008 8.7%
  18. 85003 7.7%
  19. 85017 7.4%
  20. 85015 7.2%
  21. 85032 6.7%
  22. 85024 6.5%
  23. 85021 6.1%
  24. 85054 6.0%
  25. 85023 5.7%
  26. 85028 5.4%
  27. 85083 5.3%
  28. 85018 5.2%
  29. 85042 4.8%
  30. 85012 4.7%
  31. 85045 4.5%
  32. 85014 4.4%
  33. 85020 4.4%
  34. 85022 4.3%
  35. 85085 4.1%
  36. 85050 4.1%
  37. 85013 3.8%
  38. 85016 3.6%
  39. 85086 3.4%
  40. 85048 2.7%
  41. 85044 0.8%

There were too few sales in 85034 to come up with a realistic appreciation rate.

The West Phoenix, Downtown and South Phoenix areas are generally dominating the top of the table, while Ahwatukee, North and Northeast Phoenix are clustered at the bottom.

September 4 - Appreciation has been gradually getting stronger over the past few months but it is not spread equally over the Greater Phoenix area. Here is a table ranking the cities by annual appreciation rate based on the change in the annual average $/SF between August 2016 and August 2017. The data is for single family homes only.

  1. Coolidge 14.0%
  2. El Mirage 13.9%
  3. Arizona City 12.4%
  4. Florence 10.7%
  5. Wickenburg 10.0%
  6. Avondale 9.8%
  7. Youngtown 9.7%
  8. Eloy 9.6%
  9. Sun City 8.7%
  10. Laveen 8.1%
  11. Litchfield Park 8.1%
  12. Casa Grande 8.0%
  13. Surprise 8.0%
  14. Tolleson 8.0%
  15. Apache Junction 7.9%
  16. Queen Creek 7.8%
  17. Goodyear 7.1%
  18. Glendale 6.9%
  19. Buckeye 6.8%
  20. Mesa 6.7%
  21. Sun City West 6.4%
  22. Gold Canyon 6.4%
  23. Peoria 6.2%
  24. Maricopa 6.1%
  25. Waddell 6.0%
  26. Gilbert 5.8%
  27. Phoenix 5.7%
  28. Chandler 5.5%
  29. Sun Lakes 5.4%
  30. Rio Verde 5.0%
  31. Tempe 4.8%
  32. Scottsdale 4.4%
  33. Paradise Valley 3.2%
  34. Anthem 3.0%
  35. Cave Creek 2.7%
  36. New River 2.7%
  37. Fountain Hills 0.9%
  38. Carefree 0.7%
  39. Wittmann -1.1%
  40. Tonopah -9.5%

Pinal County and the West Valley are well represented at the top of this list. Given that Queen Creek (which includes the unincorporated San Tan Valley area) encompasses a lot of Pinal County territory, we have to get down to 20th placed Mesa before we find a city or town from some other area.

The North Valley is dominating the bottom of the list with Anthem, Cave Creek, Carefree and New River at position 34 or lower. The Northeast Valley locations also remain near the bottom, despite significant improvement compared to this time last year.

September 3 - It is interesting to compare days of inventory by price range and how this has changed over the last year. Here is the chart for September 2017:

and here is what it looked like a year earlier:

As a buyer you would like as many days of inventory as possible, to give you more choice and put sellers under pressure from their competitors. In only 2 price ranges have we seen days of inventory increase - between $25K and $50K (up 31%) and between $1.5M and $2M (up 3%). The largest drops can be seen between $50K to $75K (down 58%) and over $3M (down 35%). The latter makes a big difference to the top end of the market. It is not due to a decrease in active listings, but to a large increase in the annual sales rate.

Significant falls in days of inventory apply all the way from $50K up to $1.5M. This is no surprise for the price ranges up to $500K, but unlike last year we are seeing major improvements between $500K and $1.5M.

All the above are for single-family detached properties within Greater Phoenix.

September 2 - At 7.9% the annual appreciation rate (based on monthly average $/SF) just hit the highest mark in August since June 2014. This is measured for all areas & types within the ARMLS database. The lowest point in between then and now was March 2015 with just 1.0%.

September 1 - In August we saw the largest number of Notices of Trustee Sales since August 2016, when there were 698. The August 2017 total of 689 was up 29% from July. Mind you, 15% of that increase was due to the trustees having 15% more working days in August over July. The remaining 14% was a real increase and is the first time in several years that we have seen any negative signals from foreclosures.

One month does not make a trend, but it does suggest we need to pay a little more than zero attention to the foreclosure notices over the next few months.