• current Phoenix Metropolitan

Real EstatMarket Update 

It has been a good week for optimists. We now have 14 cities showing improvement for sellers over the past months and only 3 still deteriorating. Those 3 are Scottsdale, Goodyear and Maricopa. Maricopa has reversed this trend and started moving up over the past week while Goodyear and Scottsdale are still deteriorating.

The average change in CMI over the last month is +5.3%, a huge improvement over the last few months

Most of this improving trend is due to declining supply, which in turn is caused by the very low arrival rate of new listings. Demand remains pretty weak, but is starting to show a few signs of life now that mortgage rates have dropped well below the peak reached in November.

10 of the cities remain in the buyer's market zone below 90, but Glendale, Chandler and importantly, Phoenix are all in the balanced zone between 90 and 110. 4 cities are seller's markets.

This is table to bring a morsel of seasonal joy to market observers

©2022 Cromford Associate

Dec 14 - Sales prices have declined significantly over the past 6 months and pricing levels right now are roughly similar to December last year.

Prices climbed for the first half of the year, though the first quarter was far more positive than the second. For those who want the most negative picture, it would be best to compare prices now with those six months ago. Here are the monthly median sale prices for December 13 compared with June 13 and also with December 13, 2021.

City	Median Dec 2021	Median Jun 2022	Median Dec 2022	6 Month Change	12 Month Change
Coolidge	$266,500	$315,000	$319,990	+1.6%	+20.1%
Gold Canyon	$512,000	$566,500	$612,000	+8.0%	+19.5%
Scottsdale	$875,000	$1,100,000	$1,022,500	-7.0%	+16.9%
Cave Creek	$707,500	$878,500	$800,000	-8.9%	+13.1%
Casa Grande	$319,995	$391,561	$349,500	-10.7%	+9.2%
Avondale	$399,900	$459,000	$429,000	-6,5%	+7.3%
New River	$586,250	$684,950	$622,500	-9.1%	+6.2%
Goodyear	$475,000	$536,900	$500,000	-6.9%	+5.3%
Peoria	$475,000	$557,500	$499,500	-10.4%	+5.2%
Mesa	$445,000	$515,000	$457,500	-11.2%	+2.8%
Paradise Valley	$3,125,000	$3,405,000	$3,200,000	-6.0%	+2.4%
Sun City West	$393,000	$439,000	$401,000	-8.7%	+2.0%
Gilbert	$550,000	$630,000	$560,450	-11.0%	+1.9%
Anthem	$517,500	$645,000	$525,000	-18.6%	+1.4%
Laveen	$430,000	$484,490	$435,645	-10.1%	+1.3%
El Mirage	$360,000	$407,000	$362.500	-10.9%	+0.7%
Apache Junction	$378,000	$416,500	$380,500	-8.6%	+0.7%
Tolleson	$395,000	$440,000	$397,065	-9.8%	+0.5%
Chandler	$525,000	$610,000	$527,000	-13.6%	+0.4%
Surprise	$424,777	$479,950	$425,000	-11.4%	+0.1%
Buckeye	$400,000	$450,000	$396,250	-11.9%	-0.9%
Maricopa	$370,400	$410,000	$364,740	-11.0%	-1.5%
Glendale	$417,000	$455,000	$410,000	-9.9%	-1.7%
Tempe	$475,000	$580,000	$465,000	-19.8%	-2.1%
Queen Creek	$450,000	$509,250	$440,000	-13.6%	-2.2%
Fountain Hills	$730,750	$870,000	$702,000	-19.3%	-3.9%
Phoenix	$440,000	$495,000	$420,000	-15.2%	-4.5%
Sun City	$330,000	$367,000	$315,000	-14.2%	-4.5%
Arizona City	$350,000	$310,000	$244,995	-21.0%	-5.4%
Sun Lakes	$475,000	$515,000	$440,000	-14.6%	-7.4%
Florence	$350,000	$382,000	$321,495	-15.8%	-8.1%
Litchfield Park	$530,000	$564,990	$444,990	-21.2%	-16.0%

We should remember than monthly medians can be quite volatile, particularly for areas with low sales counts. The highest closing volumes are for Phoenix, with roughly 25% of all sales in Central Arizona. So the numbers for Phoenix carry the highest confidence and lowest volatility. Phoenix shows us prices that have fallen 15% since June and are now down 4.5% from this time last year.

©2022 Cromford Associate

Dec 13 - The Cromford® Market Index for all areas & types has risen from the high eighties to over 90 as of today, so we are now declaring a balanced market again. The buyer's market is a relatively rare thing over the long term and our stay in buyer's market territory lasted less than a month - from November 15 to December 12.

The Demand Index is still dropping - it reached 70.9 today, its lowest level since April 2008. However, the Supply Index is falling even faster - it stands at 78.7 and peaked a month ago at 82.8.

The gap between supply and demand is closing and we expect to head closer to the balanced CMI of 100 over the next 3 weeks.

©2022 Cromford Associate

Dec 10 - We have an extremely low number of new listings being added to the ARMLS database. In the chart below we compare the first week of December with previous years:

Like 2022, we had a very hot market turn cold in 2005. In the first week of December 2005, we had a total of 2,730 new listings added to ARMLS. Yet In 2022 we have seen just 1,099.

This is down so much, that total supply is dropping quickly even though demand is at an extremely low level. New listings are down 45% from this time last year. This is something we have not seen before. There are remarkably few buyers and even fewer new sellers. We are likely to see more of both once 2023 gets underway, but the mystery is which will grow fastest? There are few clues offered in this month's numbers, but it would reasonable to expect that the recent downward trend in mortgage interest rates is likely to cause both supply and demand to slowly recover.

©2022 Cromford Associate

Dec 8 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

We now have 7 cities that have improved for sellers over the past month. Chandler, Peoria and Avondale being the latest to join this group.

Over the past week, most cities have seen increases in their CMI, including:

• Anthem
• Apache Junction
• Arizona City
• Avondale
• Buckeye
• Casa Grande
• Cave Creek
• Chandler
• El Mirage
• Gilbert
• Glendale
• Gold Canyon
• Laveen
• Litchfield Park
• Mesa
• Paradise Valley
• Peoria
• Phoenix
• Queen Creek
• Sun City West
• Sun Lakes
• Surprise
• Tempe

The only cities to decline during the past week have been:

• Fountain Hills
• Goodyear
• Maricopa
• Scottsdale
• Tolleson

We can safely say that this trend is due to declining supply. Demand remains weak, but with many interest rates down as much as 0.75% from their peak some optimism can be justified that demand is establishing a base and could rise once again in the new year.

Dec 7 - Looking at the Maricopa County recordings for November we see huge reductions in buying activity from the iBuyers and Institutional Investors.

iBuyers purchased only 72 homes in Maricopa County between them, representing 1.3% of the transactions, their lowest market share since July 2020 when they paused activity due to COVID. Opendoor accounted for most of the purchases with 67, while OfferPad bought just 5 homes. OfferPad is down 95% from November 2021 while Opendoor is down 80%. Other iBuyers have ceased their buying operation completely.

In fact, iBuyers might be better named iSellers since they sold 293 homes in November, over 4 times as many as they bought. This is 5.3% of the market, not far below the 5.8% share they had one year ago.

Institutional investors bough 163 homes which is 3% of the market. This compares with 659 purchased in November 2021 which represented 6.3% market share.

©2022 Cromford Associate

Dec 6 - We have commented on rental asking prices getting weaker over the past year, and it now appears that achieved rents are falling too. The latest monthly average rent on the leases closed through ARMLS is $1.30 per sq. ft. per month. The peak was $1.40 measured at the end of August, so we have seen a 7% decline in just 3 months. A year ago we measured $1.34.

Our findings are mirrored in national reports that indicate rents are softening in many geographic areas.

Bloomberg Story - US Rents Fall for Third Straight Month in Sharper Pullback

However the sample size for ARMLS data is not huge (typically 2,000 to 2,500 leased closed per month) and the data is a little volatile, so this is more of an indication of weakness rather than an accurate measure of the size of it. Apartment List is quoted saying they expect rents to continue to dip further in coming months and we have no reason to disagree with them.

This will be good news on inflation as rents are an important part of the costs measured by the Federal Reserve when trying to keep costs down using interest rate hikes as their principal weapon.

©2022 Cromford Associate

Dec 5 - The Cromford® Market Index has stopped falling and currently stands between 88 and 89 indicating a mild buyer's market. Demand is lower than supply but supply is falling rather than growing as it is does in most weak markets. Both buyers and sellers have low motivation and general sentiment is poor too. However the fact that we are not seeing escalating supply is much more positive than the situation we faced at the end of 2005 and throughout the period 2006 to 1Q 2009.

Many signs are weak but not unusually so. For example, across all areas and types:

• the listing success rate is around 62%, below the long term average of 67.5%, but not excessively low
• the contract ratio stands at 32.7, well below average (70) but far above the low of 7 that we witnessed in 2007. We are at a similar level to 4Q 2014

The main issue participants face is a chronic lack of volume: few new sellers, few buyers of all types, low contract signings, low closing numbers and low number of applications for mortgages. This means there is not much work around for agents, lenders, title companies, appraisers, inspectors, etc.

This is not pleasant, but it would be much more unpleasant if supply far exceeded demand. We still have very low levels of foreclosures and very few distressed sales.

We should probably bit a little more cheerful than we are.

©2022 Cromford Associate

Dec 3 - Based on affidavits recorded in Maricopa County, we have compiled the following data about November closings:

• There were 1,364 new homes closed with a median sales price of $529,995. The unit count is down just 2% from November 2021 while the median sales price is up 18%. However I suspect that were more concessions hidden in that sales price than there were 12 months ago. Concessions are not recorded by the counties.
• There were 3,969 re-sale homes closed with a median sales price of $429,900. The unit count is down a massive 55% from November 2021 while the median sales price is up less than 1%. The comment about concessions applies here too, so in reality re-sale prices net of concessions are probably lower than they were 12 months ago.

The contrast between the new and re-sale markets is greater than I have ever witnessed. New home closings and recorded prices remain quite strong, but the re-sale market has collapsed since March. 3,969 unit sales is the lowest total for November since 2007 and the median sales price has dropped almost 4% in a single month.

New homes made up 25.6% of unit sales and almost 30% of dollar volume. And this is for Maricopa only. They have an even larger share in Pinal County, although that data will not be available for a few days.

The median for new homes has risen in each of the last 3 months and shows little sign of weakness. The median sales price for re-sales is down almost 12% since peaking in May.

All the above are for single-family and townhomes / condos combined.

Twice as many cities are in the green zone this week with Fountain Hills and Gilbert joining Cave Creek and Surprise in showing an improving environment for sellers over the past month. The other 13 cities have deteriorated for sellers over the last month, but many of them have recently changed direction. Improving over the last week are: Avondale, Glendale, Paradise Valley, Peoria and Tempe. This leaves only 8 of the 17 cities still moving in buyers' direction. The previous deterioration for sellers is continuing to decelerate with an average change in CMI of -4.3%, a big improvement over -7.8% last week.

Confirming this positive trend we see that the overall CMI has turned around, having bottomed out at 88 on Tuesday and has starting to rise again over the last 2 days.                  

©2022 Cromford Associate

Nov 29 - The latest S&P / Case-Shiller® Home Price Index® numbers were published today.

The new report covers home sales during the period July to September 2022. This means they now fully reflect the weakening in the market during the third quarter.

Comparing with the previous month's series we see the following changes:

1. Chicago -0.59%
2. Cleveland -0.69%
3. New York -0.71%
4. Atlanta -0.75%
5. Washington -0.87%
6. Tampa -0.91%
7. Minneapolis -0.96%
8. Miami -1.01%
9. Charlotte -1.13%
10. Detroit -1.20%
11. Portland -1.25%
12. Boston -1.57%
13. Los Angeles -1.82%
14. Denver -2.00%
15. Dallas -2.06%
16. San Diego -2.11%
17. Phoenix -2.16%
18. Las Vegas -2.44%
19. San Francisco -2.90%
20. Seattle -2.93%

Phoenix has dropped from 15th to 17th place and remains below the national average, which was -1.01%.

All 20 cities are in negative territory month to month and the Southeast has started to decline faster. It is a very long time since Chicago and Cleveland were the top performers. The Pacific Coast cities are severely affected by the downturn especially the extremely expensive locations of San Francisco and Seattle.

Comparing year over year, we see the following changes:

1. Miami +24.6%
2. Tampa +23.8%
3. Charlotte +17.8%
4. Atlanta +17.1%
5. Dallas +16.3%
6. Las Vegas +12.9%
7. Phoenix +12.6%
8. Cleveland +10.6%
9. New York +10.6%
10. Chicago +10.0%
11. San Diego +9.5%
12. Denver +9.3%
13. Boston +8.8%
14. Los Angeles +8.8%
15. Detroit +8.0%
16. Portland +6.7%
17. Minneapolis +6.5%
18. Washington +6.5%
19. Seattle +6.2%
20. San Francisco +2.3%

San Francisco and Seattle are at the bottom of this table too, and it looks as though San Francisco could be the first of the 20 to go negative on a year over year basis.

Phoenix is in 7th place the same as last month.

©2022 Cromford Associate

Nov 28 - The single-family building permit counts have collapsed, with only 1,149 being issued in October 2022 for Maricopa and Pinal counties. This is the lowest monthly total since February 2015. It is also down 53% from October 2021. Refer to Cromford® Public chart CP23 for more details.

The single-family permit count year-to-date is 24,442 which is lower than all years from 1996 to 2006.

With such a drop in building plans, we are setting ourselves up for a shortage of supply next year should interest rates drop and demand for purchased single-family homes recover.

The situation is completely different with multi-family permits in Maricopa and Pinal. The construction of multi-family units is accelerating and we now have 15,925 units year to date as of October 2022. This is up more than 30% over this time last year. 2022 will be by far the strongest year ever for multi-family unit permits. Refer to Cromford® Public chart CP34 for more details.

Please note that access to Cromford® Public is not included with the standard Cromford® Report subscription. It is an upgrade costing $150 per year.

©2022 Cromford Associate

Nov 26 - The average sales price per square foot has been drifting slowly down for the last 10 week, but not at any alarming speed. The chart below is for all areas & Types in the ARMS database and is measured weekly:

We are just under $274 today and were just over $279 at the end of September, so have lost about 1% per month. We still remain above last year's peak level by about $8.

Although the lack of demand causes concern, the shortage of supply goes a long way to counter-balance this and downward pressure on prices is fairly light.

For the interactive version of this chart please click here.

©2022 Cromford Associate

Nov 24 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

                      

Cave Creek has joined Surprise in showing an improving environment for sellers over the past month. The other 15 cities have deteriorated for sellers over the last month, but there are numerous signs that the situation is starting to improve gradually over the last 2 weeks. Paradise Valley declined 27% but almost all of this occurred 2 to 4 weeks ago and in the last four days, Paradise Valley's CMI has changed direction and looks to be headed back over 100 again.

The overall deterioration for sellers is starting to decelerate with an average change in CMI of -7.8%, an improvement over -9.8% last week.

With supply now dropping faster than demand, the next 4 weeks will probably show us more signs of stability becoming established.

©2022 Cromford Associate

Nov 23 - Only 6,713 new listings were added in the past 4 weeks. This is down 27% from last year and down 25% from 2020.

What is most amazing is that these unusually low numbers of new listings come less than 5 months after the record high of 12,246 was set on June 28.

Those who think the housing market is a bursting bubble are obviously wrong. In a bubble we have a stampede of sellers trying to get out. You could be forgiven for thinking a bubble was bursting in June, but there is no evidence to support that conclusion today. We have a tired and low volume market, but supply and demand are both very weak. If new supply stays as low as it is now, it would not take a large increase in demand to go back to a balanced market.

©2022 Cromford Associate

Nov 22 - The supply of homes for sale is dropping now and no doubt this trend will continue until the start of 2023, at least. However the supply of homes for rent remains on a strong upward trend.

Active rental listings in the ARMLS database, excluding short-term rentals, now number over 4,000 for the first time since January 2015. This is 123% higher than the same time last year.

All dwelling types are affected by the huge increase in homes listed for rent, for example:

single-family detached are up 128%

townhomes are up 122%

gemini/twin homes are up 110%

apartment-style homes are up 99%

patio homes are up 75%

With all this competition, the rents being asked have been falling for many months, which will please the Federal Reserve, but displease landlords. The average rent being asked for a single-family detached home is now $1.43 per square foot per month, down from $1.76 per square foot per month one year ago, a fall of 19%.

Apartments rents are much higher, because they tend to be located more centrally, but these are now trending down too. The average rent per square foot per month for apartments peaked at $2.26 last February but has declined since then to $1.86.

With interest rates in the mid to high sixes, the case for purchase over renting is weaker than it has been for a very long time, which exacerbates the demand problem that homes for sale are facing.

©2022 Cromford Associate

Nov 21 - With mortgage rates stabilizing for a while at a rate around 6.6% to 6.7% for a 30 year fixed loan, demand for homes has also stabilized, though at a very low level.

Listings under contract, measured daily, look like this:

After plunging in October, there are signs of a slight recovery for demand in November as buyers get accustomed to interest rates that would have seem horrible 3 months ago, but look reasonable after a period when they exceeded 7% by a comfortable margin.

Even so, we have fewer than 7,000 listings under contract across all areas and types and we really should be well over 9,000 in a normal market. We almost achieved 9,000 in late August but the Federal Reserve took an ax to chop that down.

©2022 Cromford Associate

Nov 19 - The weakness of demand has been highlighted in the media but there has been relatively little discussion about the weakness of housing supply.

When we look at new listings arriving into the ARMLS database, we see a startling drop off in all the numbers. The column chart below shows the new listing counts for the first two weeks of November since 2005.

We can regard something around 4,250 new listings as normal, but in 2022 sellers have come up with fewer than 3,000.

Coming soon listings are also far below this time last year with around 400 which compares with over 600 in November 2021.

Back in 2005, when we experienced a rapid cooling of demand during the second half of the year, this brought on a lot of listings from people trying to exit the market before prices fell. There were large numbers of empty homes that had been purchased for speculative reasons. The situation now is completely different. A far higher percentage of homes are occupied and the high mortgage rates means moving home will eliminate a nice cheap mortgage and most likely require a new expensive one to take its place.

When we segment the market by dwelling type we can see that condos and townhomes are the most affected - new listings are down 38%. Single-family detached homes are down 33% while mobile and manufactured homes are largely unaffected.

Homes priced over $1 million are also little affected by the shortage of new listings.

Several of the central cities are experiencing a large drop in new listings - Phoenix is down 43%, Tempe down 37%, Scottsdale down 35%.

Gilbert is down 41%, Chandler down 47% but Mesa is only down 24%. On the west side, Peoria is down 47%, Glendale down 31% but Surprise down only 21%

With such a shortage of new listings, the downward pressure on pricing is moderated and overall active listing counts are starting to decline in the majority of areas.

©2022 Cromford Associate

Nov 17 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

Surprise is living up to its name by delivering a 3% improvement in its CMI over the past month. The other 16 cities, not so much. Paradise Valley declined 34% and appears to be rapidly heading towards a buyer's market. However the decline has slowed over the last week and it may yet stay in the balanced zone instead. Fountain Hills is now in a league of its own and only declined 3% over the last month. Conditions there have started to improve. Cave Creek is also pulling out of its decline and may see stability in the balanced zone pretty soon.

The deterioration for sellers is starting to decelerate with an average change in CMI of -9.8%, an improvement over -10.8% last week. Gilbert is one area where prospects for sellers and starting to improve slightly as supply declines.

Some of the secondary cities are also starting to improve, including Laveen and Tolleson.

©2022 Cromford Associate

Nov 16 - Tina has been looking into buy-downs of mortgage interest rates and found that 1,777 active listings in Maricopa and Pinal refer to the seller being willing to buy down the interest rate of the buyer's loan. This is 9.5% of the active listings in Maricopa and Pinal counties.

This is no doubt something that will appeal to many of today's buyers, who may be able to afford that house after all.

©2022 Cromford Associate

Nov 15 - We all know that demand is extremely low at the moment so you could be forgiven for thinking this would lead to a pile up of unsold active listings. It may therefore surprise you to learn that the active listing counts are now in a declining trend. It seems that sellers are even more discouraged than buyers and new listings are coming to market too slowly to meet demand.

This time of year we usually see active listings fairly stable followed by a decline between Thanksgiving and the end of the year. In 2022, the decline has started early and the numbers are falling at a faster rate than usual. We are going through unusual times, so I would hesitate to read too much into this, but for those looking for silver linings, this is a good one. It is something that should limit the downside risk to home prices.

©2022 Cromford Associate

Nov 14 - The market may not feel any different from yesterday, but the Cromford® Market Index for all areas & types has just slipped below 90. This means we are officially declaring a buyer's market.

The majority of the market has been a buyer's market for some time, but the whole market has been propped up by the relative health of the luxury sector. With most of the Northeast Valley now surrendering to the widespread negativity we have an overall reading of 89.9, despite Fountain Hills holding out as a seller's market.

There is a faint flicker of positivity over the last few days since mortgage rates dropped last Friday. New contract counts are up a little and we also have a slight increase in incoming new listings. This probably won't change the balance in the market much, but it might increase transaction volumes, which would be welcomed by many.

©2022 Cromford Associate

Nov 12 - Dollar volume has obviously collapsed over the last six months. This is mostly due to the decline in sales volume. The decline in average sales price is much less significant.

In the chart below we compared 2022 with 2021, 2019 and 2005

The level of dollar volume is now very close to the left in 2019 at the same point of the year.

For context, 2005 was a bubbly boom year and the current dollar volume is higher than November 2005.

©2022 Cromford Associate

Nov 10 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

Once again all 17 cities have experienced a fall in their CMI over the past month and the average monthly change in CMI dropped to -10.9%, just a tad worse than -10.5% last week. Paradise Valley is again the most notable with a 36% fall in its CMI and is now in the balanced market zone. Cave Creek, Avondale, Mesa, Chandler, Peoria and Maricopa all fell 12% or more.

Least affected were Tempe, , Gilbert, Queen Creek, Surprise and Buckeye.

The Northeast Valley continues to be more favorable for sellers than the rest of the Greater Phoenix area, but it is rapidly losing much of that advantage.

13 cities are buyer's markets, 2 are balanced and 2 are still seller's markets, though Scottsdale is close to reaching balance. Only Fountain Hills remains as a clear seller's market for now.

Supply is starting to fall in several areas, which is a good sign, but demand has stayed stubbornly low. Interest rates dropped sharply today so we might see a few signs of some improvement in demand next week.

©2022 Cromford Associate

Nov 9 - To put the demand situation into context, it helps to look at the count of listings under contract. The chart below shows counts made every Saturday during 2022, 2021 and 2007 (the weakest year ever for demand).

Aug 28 - The listing success rate for all areas & types is down to 70.4%, which is the lowest we have seen for late August since the year 2010. Mind you, in 2010 the reading was a dismal 58.1% thanks to all the short sales and pre-foreclosures crowding the market at that time.

Any new sellers need to be realistic. 30% of listings fail to sell these days. At the end of March the percentage was less than 8%. Listing agents now need to focus on marketing instead of worrying about how to handle the deluge of offers in the first few days.

Another sign that the times have changed is that Coming Soon listings are declining in number. It is no longer a matter for great excitement that your home is shortly to be listed for sale. Welcome to normality!

©2022 Cromford Associat

Aug 27 - Fewer single-family permits are being issued in Maricopa and Pinal counties. As builders scale back their plans, we counted only 1,960 single-family permits issued in July 2022. This is the lowest monthly count since May 2020, when the COVID-19 pandemic was disrupting all business. The current total is 35% lower than July last year.

No similar reticence applies to the multi-family developers. July 2022 saw the largest total of multi-family permits we have ever recorded, namely 2,546. This is up 45% from July 2022 and the first time we have seen multi-family permits exceed single-family permits. The July year-to-date total is 11,186, which smashes the previous record of 9,008, set in 2020.

Developers appear to think there will be a lot more people renting in denser urban areas in the future.

For more details of monthly permit counts, including totals by city or town and for other counties within Arizona, please refer to our optional Cromford® Public section.

©2022 Cromford Associat

Aug 26 - The flow of new listings has eased substantially over the past few weeks. As recently as June 26, we reported a record weekly total of 3,169, which was the culmination of an elevated arrival rate that had lasted since April 26. However this eased in July to a more normal 2,700 per week and during August it has fallen well below normal to reach 2,224 as of today.

This is down 9.7% from the same week last year and down 5.2% from the same week in 2020. New supply can be properly described as weak now, so rather appropriate for a market with weak demand, as we have been experiencing over the last several months.

If new supply stays low, then we are unlikely to see the sharp increases in active listing counts that we have reported between April and July. In fact if demand picks up a bit, supply could start to retreat again. The first sign of this would be counts that fall when comparing the same weekday 7 days earlier. This is not yet occurring for the market as a whole, but several segments are seeing a small drop in active listings comparing today with a week ago. This includes:

apartment-style dwellings

townhomes

single-family detached in:

Chandler

Gilbert

Glendale

Mesa

Peoria

Scottsdale

Tolleson

Of course interest rates could rise again and take the wind out of the sails. But at the moment, overall demand is improving and in the more central parts of the valley such as Phoenix, Tempe and the cities above, it would not be surprising to see the market balance move towards sellers over the next several weeks. The outer areas are more likely to remain weak for sellers, with additional supply coming from new home developers all the time and a stronger flow of new re-sale listings from investors and iBuyers.

©2022 Cromford Associat

Aug 25 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

The average monthly change in CMI was -20%. This is another improvement on the week before when the reading was -25%. Although we are still seeing a deterioration for sellers over the last month, most of that happened in the first two weeks (that is, late July and early August). The deterioration has slowed markedly during the middle of August and CMI readings are falling much less quickly now. The decline over the last week was only 2.5%.

A few cities are even seeing their CMI rising in the last few days, including Paradise Valley, Chandler and Tempe. This is the first significant silver lining to the dark clouds that have hung over the market since April.

Demand has picked up in some areas, in the shape of increased numbers of listings going under contract. This is most noticeable in Chandler, Mesa, Phoenix, Tempe and Paradise Valley but has also occurred to a smaller extent in Glendale, Gilbert and Surprise.

In addition to improving demand, new supply has weakened to below normal. Only a few weeks ago, new listings were arriving at a very fast pace, but this seems to have subsided now.

Some areas remain heavily balanced in the buyer's favor, but overall, the market looks ready to settle into a more stable situation if current trends persist.

Paradise valley has overtaken Fountain Hills to make number one in our table. The top 4 slots are occupied by the 4 most expensive of the 17 cities.

©2022 Cromford Associat

Aug 22 - There is currently an interesting difference between the strategies of the two main iBuyers in the Greater Phoenix area.

Opendoor has roughly 2,520 homes in inventory and only sold 151 in July. That means they have almost 17 months of inventory. Holding costs start to mount when you have that much in stock, to say nothing of the interest on the money tied up. You can see that they are motivated to sell, because they are disposing of many homes well below cost and giving some buyers substantial closing concessions.

For the 47 homes sold since August 10, the average gross profit made (the difference between the purchase price and the sale price) was -4.4%. The average concession was 0.61% and the average buyer broker's compensation was 2.24%. This means an overall gross margin of -7.25%. This does not allow for the fee charged to the seller, which is not public information.

In the same period we saw only 7 sales by OfferPad, since they seem to be less willing to take a write-down on their homes for sale. We calculate that they have roughly 495 homes in inventory, which represents 11 months of supply at their July sales rate of 45. However this strategy means their sales volume in August is very low. The average profit made on homes that sold since August 10 is more healthy at +5.8%. They are being more generous with their buyer broker compensation at an average 2.75% and less generous with their buyer concessions at 0.27%. Overall their gross margin stands at about +2.8% - still positive.

So based on affidavits filed since August 10, OfferPad are making positive gross margins but not recording many closings. Opendoor are closing far more but are doing so by accepting substantial negative gross margins.

OfferPad is achieving an average 95.7% of their original list price while Opendoor is only achieving 87.9%. This is because Opendoor cuts prices more aggressively and more frequently. Their average hold time is 130 days and average days on market is 76. OfferPad has an average hold time of 105 days and 63 average days on market. These figures only count homes that closed, not homes that are for sale or in escrow.

We see signs that both iBuyers are getting far less aggressive with their buying and expect to see them get far more aggressive with their selling.

With over 3,000 homes owned and almost 2,100 active listings, the iBuyers represent 11% of the active listings on ARMLS. They only represent 3% of ARMLS closings. They will probably be trying to get those percentages to be closer to each other in future.

©2022 Cromford Associat

Aug 21 - The bad trends for sellers that have prevailed since April appear to be running out of momentum.

New listings have dropped sharply over the past few weeks, with fewer than 10,000 appearing in the last 28 days. The peak was 12,246 per 4 weeks (on June 28) and the last time we had fewer than 10,000 was April 21. The 4-week count is down 2.7% compared with the same time in 2021. The weekly total is 9% below last year so this downward trend in new supply appears to gaining strength. A shortage of new supply is great news for sellers, though with demand so low, we are still seeing a slight build-up in available inventory.

However, demand is showing signs of life at last - not in the sales counts which will remain awful for some time - but in the rate of listings going under contract. In the 7 days that started on Sunday August 7, we saw 1,803 newly accepted contracts. This is the highest weekly total since June 12 and far more encouraging than the dismal 1,429 for the week beginning July 3.

We would describe these developments as the first signs of a possible improvement in market conditions.

©2022 Cromford Associat

Aug 20 - The rate of arrival of new listings continues to drop while demand has stabilized at a subdued level. This means we are seeing only a modest rise in active supply - up only 132 in the last week. The is less than half the rise during the previous week and dramatically lower than a month ago.

Some cities have even seen supply fall during the last 7 days, including Fountain Hills, Cave Creek, Maricopa, Chandler, Glendale and Tempe.

This new trend, if it continues, will substantially reduce the recent downward pressure on pricing.

©2022 Cromford Associat

Aug 19 - The overall market (all areas & types within the ARMLS database) has seen its Cromford® Market Index fall below 110. This is the first time the CMI has dropped below 110 since February 17, 2015.

We officially declare the market to be balanced. It will remain so while the CMI lies between 90 and 110.

Things vary a lot between segments however. Locations such as Surprise, Gilbert, Tempe, Maricopa, Litchfield Park, Buckeye, Queen Creek & San Tan Valley are buyer's markets, while Fountain Hills, Paradise Valley, Scottsdale and Cave Creek are seller's market

©2022 Cromford Associat

Aug 13 - Tina has returned from a short fishing trip to Alaska and is now available and connected to the internet. However, Mike is about to leave the office for a memorial event for his mother who died last year amid the strongest COVID-19 lock-down restrictions. Daily observations will be limited until August 20 and some of the charts will take longer to update than usual, especially the city charts that are updated weekly on Thursdays. Normal service will resume on August 20.

©2022 Cromford Associat

Aug 12 - For reasons that are not clear to me, a handful of brokerages have been cancelling listings in bulk and then re-listing the same information with a new MLS number over the past 6 weeks. This increases the number of cancelled listings, reducing the listing success rate and also makes the number of new listings higher. The practice has added about 8 to 10% to the cancel count and added about 1.5% to the new listings count. Since cancelling and re-listing does not reduce the days on market, I am wondering what the motivation is. Statistically, it makes the market look a bit weaker than it actually is. However the numbers are not large enough to make the distortion too serious for the overall market. However, the specific brokerages involved will have unusually poor listing success rates.

©2022 Cromford Associat

Aug 11 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

The average monthly change in CMI was -29%. This is another slight improvement on last week when the reading was -31%. Once again it is a large deterioration in a very short time, but there are more signs that the trend is slowing at last. Supply is growing more slowly and in a few areas has stopped growing entirely, at least for a moment. Demand is still very weak, but in a few areas it is stabilizing or even increasing slightly.

In the last week we saw an average change in CMI of -5.7%, and all 17 cities still declined. But if the negative weekly decline continues to reduce, we will eventually find one or more cities showing some improvement.

We have 6 cities in a buyer's market - Surprise, Tempe & Gilbert have joined Buckeye, Queen Creek and Maricopa. The reduced number of buyers now have a strong negotiating advantage with a large number of active listings to select from. However this negotiating power is not yet universally reflected in weaker closed prices. In particular, Queen Creek (which includes San Tan Valley) is maintaining strong closed price numbers, especially considering how unbalanced demand and supply have become. This is unlikely to last.

Above these 6 we have Chandler, Peoria, Glendale, Phoenix, Mesa and Avondale in a balanced market where the buyers and sellers have no particular advantage. This leaves 5 cities that are statistically in the seller's market zone with a CMI over 110. Only one of these is a large market - Scottsdale. One of them (Cave Creek) saw a relatively modest decline in their CMI over the last month of 9%.

The bottom 13 cities saw CMI declines of 24% or more but now there are none worse than -38%. The housing market is still deteriorating for sellers but it is getting worse at a significantly slower rate.

The top four, Fountain Hills, Paradise Valley, Scottsdale and Cave Creek are in a stronger position with supply still less than demand. However, Scottsdale prices have reacted more swiftly than the low-priced areas and averages and medians are weaker than you might expect. This pattern does not apply to Fountain Hills, which is not only still over 200 but is seeing very few signs of price weakness.

©2022 Cromford Associat

Aug 10 - The arrival rate of new listings has subsided over the past month and we are now seeing active listings grow at a slower rate than in July.

There were 10,747 new listings in the last 4 weeks, up 5.6% from the same period in 2021. However in the last 7 days we counted 2,544 new listings, down 5% from the same week in August 2021. Quarter-to-date we have 4% more than last year and 12% more than 2020, but if this slight lull persists, we could see the market move closer to stability rather than a continuing decline.

Active listing counts (excluding UCB and CCBS) are still rising because of weak demand, but the rate of increase has fallen to about 500 per week, instead of the 1,000 per week we were experiencing a month ago. The most recent peak was late June when we almost reached 1,500 per month.

If we were to see a decent recovery in demand, then these 500 per week could get absorbed and the supply situation could stabilize. This would ease the downward pressure on prices.

Of the 500 increase, the bulk (400) are single-family detached homes. About 50 are townhomes, 30 are apartments, 20 are mobile homes, with just a handful of other dwelling types.

©2022 Cromford Associat

Aug 8 - The daily chart showing average list price per sq. ft. is showing massive changes over the past 2 months.

Note that the red line (monthly average sales price per sq. ft.) was 1.26% HIGHER than the monthly average list price per sq. ft. for closed listings on June 7. This has plummeted to 1.48% BELOW list on August 8. Although average sales prices have declined substantially since the beginning of July, the average $/SF for listings under contract (the green line) has not. We are just starting to see the green line display a little weakness, but at the same time the red line and brown line are showing a corresponding resistance to gravity.

The gap between the green and brown lines is much wider than normal, so we would expect this gap to narrow in the coming weeks. Either the green line should fall or the brown line should rise, or maybe a bit of both. This market is certainly not boring.

©2022 Cromford Associat

Aug 7 - Most people are familiar with the idea of "months of supply". One way to explain it is to say it represents how long it would take to sell all the available inventory at the current monthly sales rate if no new listings came onto the market. The longer it takes the cooler the market. Obviously it will tend to increase when the number of available active listings rises. It will also tend to increase when the monthly sales rate falls.

It is important to decide what we are going to include among the active listings. If we include the UCB and CCBS listings (which are technically still active and accumulating days on market), then for a normal everyday location a typical number of months of supply for a balanced market is 4 to 5 months. If we exclude the UCB and CCBS listings (since they are already in escrow with a signed contract), then the typical number is 3 to 4 months.

The numbers tend to be much higher for an expensive market. A normal balanced number for Paradise Valley is 12 to 15 months. For Scottsdale it is 6 to 7 months, for Gold Canyon 7 to 8 months, Cave Creek is 6 to 7 months and Fountain Hills 7 to 8 months. These are excluding UCB and CCBS listings.

Here is where the single-family detached months of supply for major and secondary cities stand at the moment. The numbers in parentheses are the reading for August 2021.:

Paradise Valley - 10.2 (3.5)

Buckeye - 4.4 (1.1)

Scottsdale - 4.4 (1.6)

Queen Creek - 4.3 (1.1)

Litchfield Park - 4.2 (1.3)

Gold Canyon - 4.2 (2.0)

Maricopa - 4.1 (1.2)

Fountain Hills - 4.1 (2.1)

Cave Creek - 3.9 (1.1)

Surprise - 3.9 (1.0)

Apache Junction - 3.5 (1.1)

Sun Lakes - 3.4 (0.9)

Anthem - 3.4 (1.0)

Chandler - 3.3 (1.0)

Gilbert - 3.3 (0.9)

Tolleson - 3.3 (1.1)

Phoenix - 3.2 (1.1)

Mesa - 3.2 (1.0)

Tempe - 3.2 (1.1)

Casa Grande - 3.1 (1.5)

Glendale - 3.0 (1.0)

Goodyear - 3.0 (1.0)

Avondale - 2.9 (0.9)

Peoria - 2.9 (1.0)

Sun City West - 2.8 (0.7)

Laveen - 2.7 (1.0)

Arizona City - 2.6 (1.4)

Sun City - 2.5 (1.0)

El Mirage - 2.0 (0.6)

These figures include the UCB and CCBS active listings. They have clearly moved from extremely low in August 2021 to more normal values in August 2022. However none of them are yet excessive compared with their long-term averages. Buckeye, Queen Creek, Maricopa and Litchfield Park are the coolest cities, which corresponds with their CMI readings. We give a pass to Paradise Valley, Scottsdale, Cave Creek Fountain Hills and Gold Canyon, since their "normal" months of supply are higher than their current readings.

©2022 Cromford Associat

Aug 6 - The closed transaction counts for July were unusually low, but the drop was different for the various categories of sales. Below are the counts compared with July 2021 showing the percentage changes. These numbers are for Maricopa County only, and include single-family and townhouse / condo properties.

Category	July 2021	July 2022	Percentage Change	Comments
All Sales	10,912	7,368	-32.5%
Normal Sale Through MLS	6,698	4,252	-36.5%
FSBO Sale	1,953	1,208	-38.1%
New Construction Sale	1,312	1,249	-4.8%	small decline relative to all sales
Institutional Investor Buys	670	573	-14.5%	small decline relative to all sales
Fix and Flipped	529	336	-36.5%	same decline as for MLS sales
Wholesaler	136	91	-33.1%
iBuyer Buys	810	508	-37.3%
Opendoor Buys	554	406	-26.7%
OfferPad Buys	107	91	-15.0%
Zillow Buys	141	0	-100%	no longer buying
Redfin Buys	8	11	+37.5%	surprising growth
iBuyer Sales	261	160	-38.7%
Opendoor Sale	143	121	-15.4%
OfferPad Sale	65	35	-46.2%
Redfin Sales	6	4	-33.3%
Zillow Sale	47	0	-100%	no longer selling
Pre-foreclosure	18	69	+283%	still small but growing
Trustee Sale to Third Party	14	26	+85.7%	still small but growing
Bank REO Sale	5	3	-40%
GSE REO Sale	0	0	n/a

Between them, iBuyers and institutional investors represented almost 15% of the purchases, but only 2% of the sales.

©2022 Cromford Associat

Aug5 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

The average monthly change in CMI was -31%. This is a slight improvement on last week when the reading was -32%. Once again it is a very large deterioration in a very short time. New listings have slowed down to a normal level. However a normal quantity of new listings is far more than the market can cope with, when demand is as weak as it is at the moment. Demand is falling at a slower rate and is even rising in a few places. However it is currently so far below normal that in most areas it will take a large increase to get back to the level where it can absorb a normal quantity of new listings.

We have 3 cities in a buyer's market - Buckeye, Queen Creek and Maricopa - the same as last week. In all three, the reduced number of buyers now have a strong negotiating advantage with a large number of active listings to select from.

Above them we have Gilbert, Tempe, Surprise, Chandler, Peoria, Glendale, Phoenix and Mesa in a balanced market where the buyers and sellers have no particular advantage. This leaves only 6 cities that are statistically in the seller's market zone with a CMI over 110. Only one of these is a large market - Scottsdale. Two of them (Fountain Hills and Cave Creek) saw relatively modest declines in their CMI over the last month of 15% or less.

The bottom 13 cities saw CMI declines of 29% or more but at least there are none over 40%. The housing market is still deteriorating for sellers but it is getting worse at a slower rate. This is particularly true of Phoenix itself. The next stage we are looking out for is for one or more of these cities to stop deteriorating and edge higher. This means their arrow circle will turn green and point upward. April 21 is the last time we had one or more cities showing green.

Gilbert, Tempe and Surprise look ready to become buyer's markets within days, while Avondale and Goodyear are likely to move into the balanced zone shortly.

©2022 Cromford Associat

Aug 4 - A useful way of measuring how hot the market is is the contract ratio (see definitions section for how it is calculated).

The overall market for all areas and types has seen its contract ratio decline from a high of 285 as recently as February 23 to 46 as of August 3. We usually consider the range 30 to 60 as being normal, with figures over 60 being unusually hot and those under 30 being unusually cold. The high-end sectors tend to have much lower contract ratios so 15 to 30 can be considered normal for an area like carefree or Paradise Valley.

If we look for ZIP codes where the single-family detached market is unusually cold right now we find a few very small ZIP codes with no contracts at all::

Fort McDowell 85264

Arlington 85322

Black Canyon City 85324

The sales volumes are so small in these ZIP codes that having no contracts is not so unusual, so we exclude them from our analysis.

The following have some contracts, but low contract ratios indicating cold markets where buyers have an advantage over sellers. The contract ratios are shown in parentheses.

These are our top 20 targets for buyers:

Mesa 85215 (20)

Phoenix 85003 (20)

Phoenix 85007 (20)

Superior 85173 (20)

Tempe 85283 (24)

Scottsdale 85257 (25)

Casa Grande 85193 (25)

Casa Grande 85194 (25)

Phoenix 85045 (26)

Scottsdale 85258 (27)

Phoenix 85015 (27)

Litchfield Park 85340 (27)

Phoenix 85020 (27)

Phoenix 85048 (27)

Wittmann 85361 (28)

Scottsdale 85251 (28)

Anthem 85086 (28)

San Tan Valley 85140 (29)

Phoenix 85009 (30)

Phoenix 85044 (31)

We note that Ahwatukee is prominently featured in this list with all 3 of its ZIP codes (85044, 85045 and 85048), so as I buyer I would feel free to flex my negotiating muscles if shopping for homes in Ahwatukee.

At the other end of the scale there remain a few ZIP codes where the contract ratio remains relatively high (60 or more), including:

Arizona City 85123 (156)

Tempe 85284 (96)

Eloy 85131 (94)

Phoenix 85054 (86)

Mesa 85203 (83)

Casa Grande 85122 (72)

Phoenix 85053 (72)

Mesa 85201 (71)

Phoenix 85027 (65)

Coolidge 85128 (60)

Gold Canyon 85118 (60)

Mesa 85204 (60)

that's all folks

Pinal County is strongly featured in this list, especially the areas around Casa Grande, Eloy and Arizona City. I would not expect such an easy time as a buyer in the ZIP codes on this (admittedly short) list.

Segmenting by price, we see that the contract ratio for single-family homes priced below $350,000 is still over 60, so this market retains some strength. However prices have risen so much over the past 2 years that this segment represents only 4.5% of the total market.

The contract ratio for homes priced between $350,000 and $400,000 is 59, so at the top end of normal. But for homes over $400,000 and up to $1.5 million we now see contract ratios between 35 and 41. This is at the colder end of normal and the trend is strongly downward. This price range represents 82.4% of the market with $400,000 to $800,000 dominating with a 55.5% market share. This huge segment is where buyers are starting to gain the upper hand.

Over $1.5 million, contract ratios are in the mid-thirties, which is actually higher than usual. Demand has dropped significantly in this price range but supply remains quite low. The luxury market is very quiet, even for August which is always a very slow month, but the low supply means buyers do not have as much bargaining power as they enjoy below $1.5 million.

©2022 Cromford Associat

Aug 3 - The July affidavits in Maricopa County showed a significant reduction in demand from investors.

Of the 7,175 closed transactions, only 18.9% were marked as intended for renting to a third party. The same percentage in June was 22.1%.

In unit counts, purchases to be used as rentals fell by 35% from 2,094 in June to 1,355 in July.

This is a second wave of demand reduction. The first wave was caused by much higher interest rates discouraging buyers for their own occupation. The buyers leaving in the second wave are less affected by interest rates since they mostly pay cash. They are probably getting discouraged by the new direction the market has taken since April.

©2022 Cromford Associat

Aug 2 - One positive consequence of home sales being so low is that it does not take long to count them. We already have the Maricopa County affidavit numbers for July and they look like this:

There were 7,175 closed home sales during July. This compares very unfavorably with July 2021 when we had 10,720. The year-over-year decline in sales is 33%.

The median sales price was $475,000, down from $486,824 in June but up from $409,468 in July 2021. The year-over-year increase in median sales price is 16%, down from 22% last month and 25% in May.

There were 1,256 closed new home sales during July. This is down from 1,316 in July 2021. New home sales are down less than 5% year-over-year

The median sales price for new homes was $516,842, up from $500,454 in June and up 23% from $419,618 in July 2021.

There were 5,919 re-sales during July. This is down 37% from 9,404 in July 2021

The median sales price for re-sales was $464,000 in July, down from $484,000 in June and the lowest median sales price since February 2022. It is up 15% year-over-year however.

Re-sales react far more quickly to changing market conditions because the time between contract signature and closing is much shorter than for new homes. This is especially true in 2022 because of extended lead times on new homes due to shortage of skilled labor and supply-chain problems with many building products.

The re-sale numbers are worse than anticipated with a huge drop in closed volumes and a large fall in median price of $20,000, over 4% in just one month. The new home numbers are better than expected with a new high being reached in the median sale price and only a small drop in units closed.

An optimist might hope for a bounce back in August, but with listings under contract down 6.5% compared with the beginning of July, this is looking unlikely.

Re-sale home prices are clearly falling which would normally increase demand, but if buyers think they will fall further, their motivation is likely to be low. However falling home prices will ultimately help with getting inflation under control. That is a prerequisite to the Federal Reserve halting their program of regular increases in federal funds interest rates.

©2022 Cromford Associat

Aug 1 - The average sales price per square foot for closed listings dropped sharply between June and July, as shown in the daily chart below:

At $286 we are back down to the level we last saw in early March.

That is a 5% drop in July, much larger and faster than we were expecting. The average price dropped even more, from $592,275 to $546,888, a fall of about 8%.

Unfortunately this means those who purchased in May or June 2022 with very small down-payments could now be experiencing negative equity.

©2022 Cromford Associat

Jul 31 - The good news is that the supply of new listings is starting to fall. 2,589 listings were added to the ARMLS database during the last 7 days, which is up only 5.8% from a year ago. It is also well below the peak of 3,169 that we reached on June 25. While it is still considerably more than the current market needs, at least it is not on an increasing trend anymore.

The bad news is that demand not only remains very poor, it is getting weaker still.

We have only 7,887 listings under contract - down 28% from this time last year and the lowest total for the end of July since 2007. Since 2007 was our worst year ever, that is not a good place to be.

We are currently seeing a monthly sales rate of only 6,707 - down 25% from this time last year and the lowest for the end of July since 2014.

These figures are for all areas & types in the ARMLS database.

The average list price per sq. ft. of homes under contract is staying remarkably strong, hardly moving over the past 3 months. However sellers are achieving a far lower percentage of list price. In the past three months the closed price per square foot has dropped from 101.76% to 98.74%, down 302 basis points. This by far the fastest decline in achieved price percentage of list that we have ever seen. As a result, the monthly average sales price per square foot is down 5.3% in the last month. This is across all areas & types in the ARMLS database. The average sales price is down an astonishing 9.6% since the end of June, though the median sales price is down a more modest 4.8%. That is still a loss of $23,000 in one month.

©2022 Cromford Associat

Jul 29 - Of all the large cities in Central Arizona, Phoenix is showing the weakest pricing at the moment. Here is the weekly chart showing the average sales price for single-family homes in Phoenix:

The median sales price peaked at $498,000 at the beginning of June and has since fallen by 8% to $460,100.

The average price per square foot chart is a little less negative

Here the peak of $323.83 was reached in late May and the $/SF has declined just over 5% since then.

It is not clear to me why Phoenix should take the lion's share of the price weakness, but as it represents about 25% of the entire market, it has a strong influence on the overall market numbers. Also looking rather weak are Chandler, Glendale, Mesa, Scottsdale, Sun City, Sun City West and Tempe.

Showing little to no sign of average $/SF declines are Arizona City, Avondale, Buckeye, Casa Grande, El Mirage, Fountain Hills, Maricopa, Sun Lakes and Surprise.

©2022 Cromford Associat

Jul 29 - Of all the large cities in Central Arizona, Phoenix is showing the weakest pricing at the moment. Here is the weekly chart showing the average sales price for single-family homes in Phoenix:

Having peaked at $627,135 in mid-June, the average has fallen by over 9% to $569,056. This takes us back to the levels we last saw in February.

It is not an anomaly of the average price, because the median price chart is similar:

The median sales price peaked at $498,000 at the beginning of June and has since fallen by 8% to $460,100.

The average price per square foot chart is a little less negative:

Here the peak of $323.83 was reached in late May and the $/SF has declined just over 5% since then.

It is not clear to me why Phoenix should take the lion's share of the price weakness, but as it represents about 25% of the entire market, it has a strong influence on the overall market numbers. Also looking rather weak are Chandler, Glendale, Mesa, Scottsdale, Sun City, Sun City West and Tempe.

Showing little to no sign of average $/SF declines are Arizona City, Avondale, Buckeye, Casa Grande, El Mirage, Fountain Hills, Maricopa, Sun Lakes and Surprise.

©2022 Cromford Associat

Jul 28 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

The average monthly change in CMI was -32%. This is an improvement on last week when the reading was -34%. It is still a very large deterioration in a very short time. New listings are still coming at us faster than last year, but not as fast as they were three weeks ago. Demand is still weak and showing only a few modest signs of stabilizing.

We now have 3 cities in a buyer's market - Buckeye, Queen Creek and Maricopa. Here buyers now hold a distinct negotiating advantage and have a total of 2,243 active single-family detached listings to choose from. This compares with 675 just three months ago. Because the majority of these areas cater largely to first-time buyers who are less experienced, it can take a few weeks for these buyers to realize how strong a hand of cards they hold.

Above them we have Gilbert, Tempe, Surprise, Chandler and Peoria in a balanced market where the buyers and sellers have no particular advantage. However astute sellers will realize that the situation is very fluid and slipping away from them. At the current rate of change, Gilbert will become a buyer's market by the end of the first week in August. Tempe is only a day or two behind Gilbert, while Surprise, Chandler and Peoria will probably become buyer's markets by mid-August.

Glendale, Phoenix and Mesa are seller's markets but within a couple of days will enter the balance zone between 90 and 110. At the current rate of change they will become buyer's market before the end of August. Goodyear and Avondale are 2 weeks behind these but unlikely to be still seller's market by the end of next month.

The 4 cities at the top of the table are in a different situation. The luxury market over $1.5 million is seeing far less of a surge in supply and although the market is deteriorating through weakening demand, the deterioration is much slower. However in Scottsdale, the less expensive end of the market is behaving similarly to the rest of the Greater Phoenix area.

Prices have looked wobbly for the last 2 months, but as buyers start to flex their muscles, we should be prepared for more serious consequences. While we cannot forecast accurately several months out, it would be reasonable based on current trends to expect significant declines in average prices, median prices and average $/SF by the end of 2022. Current trends can (and often do) change, so this is not baked in, just a reasonable base case.

We would not be surprised if the growth in supply started to slow down, but what is going to re-start demand? The most obvious answers are that either interest rates have to come down or home prices have to come down. Either or both of these can increase demand so we can get back to a balanced market again.

©2022 Cromford Associat

Jul 27 - We provide monthly counts of Arizona State building permits in the Cromford® Public section of this site. You can filter by County and local jurisdiction (city or town).

To summarize the current situation, single-family permits are now dropping in response to the weak demand but probably not as fast as they should. As of June there have been 17,788 single-family permits issued in Maricopa and Pinal counties year-to-date. This is down slightly from 18,803 last year, but it is otherwise the highest count since 2006. There were only 2,248 single-family permits issued in June, which is the lowest monthly total since May 2020.

Multi-family permits are a different story entirely. These are still in a full-bore gung ho status. There have been 8,640 multi-family permits issued year to date, easily the highest total we have ever seen. Last year there were 6,871 at the same point and that was considered a lot. There were 1,890 issued in June, making it the fourth busiest month ever.

©2022 Cromford Associat

Jul 26 - The latest S&P / Case-Shiller® Home Price Index® numbers were published on July 26.

The new report covers home sales during the period March to May 2022. So they do not reflect sales closed since June 1, 2022, nor the price weakness we have experienced over the past month.

Comparing with the previous month's series we see the following changes:

Miami +2.88%

Tampa +2.80%

Dallas +2.55%

Phoenix +2.48%

Charlotte +2.29%

Atlanta +2.21%

Las Vegas +2.12%

Boston +1.90%

Cleveland +1.88%

Chicago +1.83%

New York +1.65%

Detroit +1.60%

Minneapolis +1.34%

Washington +1.09%

Denver +1.08%

Los Angeles +1.05%

San Francisco +0.93%

Portland +0.91%

San Diego +0.55%

Seattle +0.55%

Phoenix has moved up from 7th to 4th place and remains well above the national average, which was 1.50%. The national average remains high, but down from 2.08% last month.

There is little obvious bad news in the above numbers, but we can be confident it is coming later in the year. The west coast has weakened significantly since last month.

Comparing year of year, we see the following changes:

Tampa +36.1%

Miami +34.0%

Dallas +30.8%

Phoenix +29.7%

Las Vegas +27.4%

Charlotte +26.4%

Atlanta +26.3%

San Diego +25.6%

Seattle +23.4%

Denver +22.2%

Los Angeles +22.1%

San Francisco +20.9%

Portland +17.4%

Boston +15.7%

Detroit +15.0%

New York +14.5%

Cleveland +14.3%

Chicago +12.9%

Washington +12.2%

Minneapolis +11.5%

The national average was +19.7%. As we predicted last month, Dallas has overtaken Phoenix and pushed it into 4th place.

©2022 Cromford Associat

Jul 25 - An update on the Opendoor listings on ARMLS as of July 24:

With 1,682 active listings without a contract, Opendoor represents 9.6% of available supply, which is far in excess of their 1.7% share of the listings under contract.

We estimate Opendoor's total inventory to be 2,286, which means there are another 461 homes that they own but are unlisted. They have about 7 months of inventory at the June sales rate, but the July sales rate looks rather slow in comparison with June.

We would anticipate that Opendoor's buying will slow down to avoid further build up in excess inventory. This would imply lower offer prices and fewer accepted offers, if we are correct. Demand measurements and pricing will weaken in these circumstances.

©2022 Cromford Associat

Jul 24 - Available supply has grown dramatically in most segments of the market since March 16, this year's low point. We had 4,367 active listings without a contract on March 16 and have 17,509 today. This is an increase of 301% across all areas & types. Within Greater Phoenix the growth has been 318% from 3,884 to 16,235.

By dwelling type we have seen supply grow at the following rates:

Single-family Detached - up 344%

Townhouse - up 370%

Apartment-style - up 288%

Gemini / Twin - up 130%

Loft-style - up 240%

Patio Home - up 257%

Mobile Home - up 65%

Modular / Manufactured - up 20%

These figures are for Greater Phoenix locations only. Out of area supply has grown 164%. It is very noticeable that mobile and manufactured homes have seen supply grow much more slowly than the rest of the market.

Largely due to a change in the mix of homes available, with low growth at the high end luxury market compared with the mid-ranges, the average advertised price of a home in Greater Phoenix is down from a peak of $1,010,002 on March 24 to just $731,744 today. The average available home size is also down from 2,430 to 2,172 sq. ft.

©2022 Cromford Associat

Jul 21 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

The average monthly change in CMI was -34%. This is the same as last week and the week before. The week before that it was -35%.

The deterioration in the market for sellers continues with almost as much speed as ever. There has been a slight reduction in the rate of arrival of new listings, but it is still much higher than last year at this time. Demand has not stopped falling and listings under contract are exceptionally low for the time of year. Even our best performing city, Paradise Valley, has slumped 11% over the last month, but it may yet overtake Fountain Hills and grab the top spot, since Fountain Hills fell 18%, the second best result. Cave Creek is third and fell "only" 21%, which looks good by comparison with the other 14 cities which range from -30% (Avondale) to -44% (Glendale).

Buckeye is now a buyer's market by a large margin and Queen Creek is almost as bad for sellers. Maricopa is not quite there yet but it will be a buyer's market in 2 or 3 days. Gilbert, Tempe, Peoria, Chandler and Surprise are all going to be balanced markets within a few days and on their current trajectory they could be buyer's market by mid August. The largest market by far, Phoenix, looks like it will be balanced before the end of July and a buyer's market before the beginning of September. Glendale and Mesa are just a week or so behind.

The high end market is still holding out much better than the mid-range.

Only 3 cities are now over 150. A month ago we had 14. The market has changed dramatically for the worse over the past 4 or 5 weeks.

©2022 Cromford Associat

Jul 19 - An updated chart appears below showing the listing counts for OfferPad in the ARMLS database.

The dramatic change in market conditions has taken their active count from a low of 72 on April 12 to 381 on July 19. This latter number has increased 58% in the last month.

We estimate that OfferPad has 453 homes in inventory, which implies there are only 27 unlisted properties. 45 are under contract which gives OfferPad a contract ratio of less than 12. On April 12, their contract ratio was 204.

Based on their monthly sales rate for June, they have about 6.7 months of homes to sell, even if they stopped buying today.

The rest of us should be grateful that the iBuyers have soaked up so many homes over the last 3 months. Without their activities the market statistics would show a much larger drop in demand than reported. It has not made a lot of different to supply since the homes they have listed would probably still be listed by their former owners if they had not sold them to an iBuyer,

It seems that the iBuyers will need to focus mostly on iSelling during the second half of 2022.

©2022 Cromford Associat

Jul 18 - The long-term rental supply is still growing very quickly - we have 2,916 active listings, up 18% from 2,463 last month and up 113% from 1,367 this time last year.

Most of the supply on ARMLS is single-family detached, with 2,088 listings. This has grown 27% from 1,641 last month and 165% from 795 this time last year. All those people building new homes to rent should take heed that they will have plenty of competition from other landlords to attract a limited pool of prospective tenants.

The average rental asking price on ARMLS is down to $1.57 per square foot per month. This has dropped from $1.63 last month and $1.94 this time last year.

©2022 Cromford Associat

Jul 17 - The listing success rate is one of the simplest yet most revealing of measurement tools for the housing market. Here is the most recent weekly chart for all areas & types.

We can see how 2022 was tracking very close to 2021 until it started losing height in May. The success rate has deteriorated quickly in June and July and now stands at 78.2%. The trend is downward with strong momentum.

We included 2005 for comparison and although the success rate deteriorated during during the second half of the that year, it took quite some time to get back to the long-term average of about 67%.

Based on the current rate of decline we are only 3 or 4 weeks away from hitting that 67% milestone. At that point roughly one in three listings will fail to sell.

©2022 Cromford Associat

Jul 16 - The average list price per square foot for active listings in Greater Phoenix (excluding UCB and CCBS) is $339.56 today

At the same time last year we measured $340.15

This year-over-year decline in the average asking price is mostly caused by the huge growth in the number of mid-range listings. High-end listings have grown by a far smaller percentage. The change in the mix tends to pull the average $/SF lower.

If we confine our analysis to homes priced between $500,000 and $1 million, then the asking price has increased from $266.26 to $286.41 over the last 12 months. The average for this price range peaked $293.08 seven weeks ago and is now trending lower.

But before we draw any big conclusions from that, it also peaked 6 weeks ago in 2021 and trended lower for 3 months before starting to rise again.

©2022 Cromford Associat

Jul 14 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

The average monthly change in CMI was -34%. This is the same as last week. The rate of decline in the CMI readings over the past two months is easily the fastest we have ever witnessed.

The negative trend remains extremely powerful. Supply is still growing at roughly 1,000 listings a week while demand is still weakening despite some (possibly temporary) relief in the mortgage rates. We now have 1 city (Buckeye) which is a buyer's market and 2 cities (Maricopa and Queen Creek) that are in the balanced zone between 90 and 110. It is just a matter of days before Maricopa and Queen Creek become buyer's markets and their time in the balanced zone will have been very short indeed. Peoria, Tempe, Gilbert, Chandler, Surprise and Phoenix are all just a week or two away from a balanced market as they all dropped close to 40% in the last month. Based on current trends, these 6 cities will probably be buyer's markets before the end of August.

Things are different in Paradise Valley where there has been very little increase in supply and the 7% fall in its CMI is entirely due to a drop in demand. Fountain Hills and Cave Creek are also seeing declines in their CMI, but at roughly half the rate of the average city in the valley.

Only 5 cities are now over 150. A month ago we had 15.

Buyers are much more aware of the dramatic change in the market than are sellers. New sellers will need to take time to understand just how different market conditions are today compared with 3 months ago. They should not expect multiple bids. They should plan to market their property, not just sell it.

With the Federal Reserve considering a 1% rise in the federal funds rate in their July meeting, demand could drop even lower next month if mortgage rates move sharply higher again.

Apartments on offer for long-term rent number 443 at an average rent of $2.08 per square foot per month. Last year at this time we had 332 at an average of $2.13.

There are 33% more apartments and 145% more single-family detached homes on offer to tenants compared with 12 months ago.

The average rent asked has dropped 2% for apartments but 17% for single-family homes. The latter does not mean average rents have fallen 17%. It reflects a mix where far more lower priced rentals are being listed than in 2021.

However it is pretty clear that the era of rapidly rising rents is coming to an end.

©2022 Cromford Associat

Jul 12 - Rental supply is growing in the ARMLS database, with single-family detached rentals growing fastest. On July 12, there were 2,012 single-family detached homes available for long-term rent with an average price per square foot of $1.57 per month. One year ago we saw 820 homes at $1.90 per square foot per month.

Apartments on offer for long-term rent number 443 at an average rent of $2.08 per square foot per month. Last year at this time we had 332 at an average of $2.13.

There are 33% more apartments and 145% more single-family detached homes on offer to tenants compared with 12 months ago.

The average rent asked has dropped 2% for apartments but 17% for single-family homes. The latter does not mean average rents have fallen 17%. It reflects a mix where far more lower priced rentals are being listed than in 2021.

However it is pretty clear that the era of rapidly rising rents is coming to an end.

©2022 Cromford Associat

Jul 10 - We have added a new chart - Average Price per Square Foot for Active Listings by Major City

This allows you to compare prices over the last 3 to 4 months for each of the 17 largest cities.

We can see obvious weakness in asking prices for:

Buckeye

Cave Creek

Fountain Hills

Phoenix

Scottsdale

The remaining 12 cities have mostly been moving sideways. However Phoenix and Scottsdale account for about one third of the total market, so if these are trending down, the whole market measures will tend to follow suit.

©2022 Cromford Associat

Jul 11 - The average $/SF for closed listing is looking more than a little weak over the past few weeks:

The peak was May 13 at $306 but we also hit $305.99 on June 2. It was not until June 15 that a declining trend started and a drop of 4% from the peak has now taken place.

©2022 Cromford Associat

Jul 9 - Examining how the contract ratio has changed for the 29 largest cities, we get the table bow, which ranks the cities from least to most affected by the downturn in the market:

Rank	City	Contract Ratio 4/7/22	Contract Ratio 7/7/22	Change %
1	Paradise Valley	82	42	-49%
2	Arizona City	509	188	-63%
3	Fountain Hills	188	59	-69%
4	Casa Grande	315	94	-70%
5	Apache Junction	219	60	-73%
6	Gold Canyon	223	59	-74%
7	Tolleson	359	91	-74%
8	Cave Creek	198	50	-75%
9	Maricopa	261	66	-75%
10	Buckeye	232	57	-75%
11	Sun City	248	59	-76%
12	Scottsdale	182	43	-77%
13	Goodyear	321	74	-77%
14	El Mirage	333	74	-78%
15	Tempe	208	46	-78%
16	Peoria	246	52	-79%
17	Surprise	273	58	-79%
18	Sun City West	286	61	-79%
19	Mesa	294	57	-81%
20	Laveen	356	69	-81%
21	Litchfield Park	231	44	-81%
22	Phoenix	272	48	-82%
23	Glendale	303	50	-84%
24	Chandler	293	48	-84%
25	Avondale	340	54	-84%
26	Queen Creek	334	50	-85%
27	Gilbert	354	51	-86%
28	Anthem	281	39	-86%
29	Sun Lakes	276	35	-87%

All 29 cities have seen their single-family markets cool down, but Paradise Valley has cooled much less than the others.

Casa Grande and Arizona City have also done better than average, perhaps supported by the new industry that has been established in their local area.

The Southeast Valley has fared particularly poorly, as has Phoenix, Glendale and Anthem.

We normally classify readings under 60 as corresponding to a balanced market. By this definition, 19 of the 29 cities are already in a balanced market while Sun Lakes and Anthem are most in danger of slipping into a buyer's market.        

©2022 Cromford Associat

Jul 8 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

If you are looking for some good news, I have a tiny morsel for you. The average monthly change in CMI was -34%. This is smaller than the -35% we saw for each of the past three weeks. However the difference is really small and the negative trend is still very powerful. We now have 2 cities (Buckeye and Queen Creek) that are in the balanced zone between 90 and 110 and a third (Maricopa) that is only a seller's market by one tenth of a point. We can be confident that Maricopa and Queen Creek will be in a balanced zone next week, but on current trends, Buckeye will be the first city to become a buyer's market during the third week of July. Queen Creek and Maricopa look likely to follow before the end of July.

Paradise Valley is seeing a very stable supply and its CMI is down only 3% for the month. Fountain Hills and Cave Creek are next best with falls of 25% and 26% in their CMI

Much worse are all the other 14 cities with CMI dropping by 32% or more. Glendale is worst this week with a 43% fall.

Because the CMI is based on a formula that uses rolling averages and smoothing techniques, at this time of unprecedented rapid change it understates quite how far the market has deteriorated for sellers. With so many new sellers and so few buyers, prices are looking more wobbly by the day and almost all the price readings look very ready to drop during July.

Almost all the monthly median sales prices are below their recent peak. For example on July 7:

Avondale is down from $460,000 to $450,000

Buckeye is down from $451,040 to $445,500

Chandler is down from $630,000 to $577,450

Gilbert is down from $635,000 to $623,950

Goodyear is down from $554,700 to $520,800

Maricopa is down from $415,000 to $410,000

Mesa is down from $520,000 to $500,000

Peoria is down from $570,000 to $550,000

Phoenix is down from $500,000 to $480,000

Queen Creek is down from $515,000 to $510,000

Scottsdale is down from $1,115,000 to $1,100,000

Surprise is down from $494,495 to $490,000

Tempe is down from $585,000 to $555,000

Only Glendale is unchanged at $475,000 but this will probably not last much longer.

We omit Cave Creek, Fountain Hills and Paradise Valley because their monthly medians are far too volatile to be useful, as a result of their very small transaction volumes and wide ranges in home prices.

Unless trends change sharply from their current trajectory, we are likely to see further weakness in median sales prices over the next several months. We are definitely NOT able to forecast 5 months into the future. However it would not be at all surprising if prices in December 2022 were in the same ball-park as those we saw in December 2021. This is just one of many plausible outcomes that would have looked nearly impossible to imagine as recently as March when almost every seller had multiple buyers to chose from.

©2022 Cromford Associat

July 7 - The affidavits from Maricopa County Recorded that were filed in June have now been counted and collated and we have the following preliminary statistics:

There were 9,478 closed transactions in June, down 22.4% from June 2021. New homes were down 7.7% to 1,533 while re-sales were down 24.8% to 7,945.

The median sales price was $486,824. This is down 0.65% from last month but up 21.7% from June 2021.

New home median was $500,454, almost unchanged from last month (down $36) but up 22.8% from June 2021

The re-sale median was $484,000, down 0.41% from last month but up 21% from June 2021.

These are for single-family detached and condo / townhouse properties.

In summary, prices have stopped rising but are still much higher than last year while sales volumes are dramatically lower than last year.

The trends in re-sales tend to show more volatile movement than in new homes.

©2022 Cromford Associat

July 6 - As we look at different price ranges, we can see that all of them have cooled significantly in the three months since April. The least affected is the range over $3 million, where the contract ratio has declined 43% from 67 to 38. In expensive locations like Paradise Valley and Carefree, the supply of active listings remains low by long-term standards and the market is relatively resilient.

Below $3 million contract ratios have declined by at least 74%, a colossal drop in just 3 months and easily the fastest and most significant cooling that has been seen in the Greater Phoenix housing market since we started studying it in 2001.

Hardest hit is the single-family detached price range between $500,000 and $600,000 where the contract ratio has dropped 84% from 296 to below 49. This price range is no longer a seller's market and there are plenty of listings for each buyer to choose from. Bidding wars are almost over. There were 2,434 active listings as of July 1, with 358 of these in UCB or CCBS status leaving 2,076 available for buyers. Is this a lot? It certainly is. It is up 236% from April 1 and up 341% from July 1, 2021. It is also the highest total we have recorded for this price range since June 2008. We must consider it in context. Last month 1,079 homes sold in the price range, so in this light, 2,076 does not seem so high. But most of those sales were contracted well before the latest round of interest rate rises, so we would expect sales rates to drop in July, while the active listing count looks like it is headed considerably higher.

If you have a home in the price range $500,000 to $600,000, our advice is to accept that you have a lot of competition from other sellers and the market trend is not moving in your favor. Be realistic in your expectations and you will probably be fine. But price too high and you could be left chasing a falling market with price cuts that may come too late.

©2022 Cromford Associat

July 4 - Now would be a good time to take stock of where prices have been going. The chart below shows:

In blue - the average list price per square foot of listings in active status

In green - the average list price per square foot of listings in pending status or active with UCB or CCBS status

In brown - the average list price per square foot for one month's worth of closed listings

In red - the average sale price per square foot for one month's worth of closed listings

May 11 - The reported intent of buyers has changed significantly over the past year. In Maricopa County, purchases for owner occupation as a primary residence have declined 19.4% between April 2021 and April 2022. Purchases as a second home have declined by 8.1%. In contrast, purchases to turn into a rental have increased by 8.5%.

Demand from investors for rentals now represents nearly 21% of all home sales. This is sure to be an undercount. Just a cursory inspection shows us that many unscrupulous investors are marking their Affidavits of Value as purchases of a primary residence, no doubt to attract lower taxes. It is perjury to enter incorrect information on an Affidavit of Value and each of these documents are notarized. However we are yet to hear of any government agency taking action to enforce the state laws surrounding Affidavits of Value.

©2022 Cromford Associat

May 9 - The Cromford® Market Index was the first indicator to sound the alarm about the current market direction. However we can now see several other early indicators fall like a sequence of dominoes toppling over.

The first we would like to highlight is days of inventory - 365 times the number of active listings divided by the annual sales rate. Here is the weekly chart 

Over the last month, 5 of the 17 cities have improved for sellers while 12 have deteriorated for sellers. This is a worse picture for sellers than last week, and the average change in the CMI over the past month is -3.2% whereas it was -1.4% last week. The cooling of the market has started to increase, but it remains extremely hot compared to normal.

Surprise was again the weakest city, down 14% while Tempe was again the strongest, up 10%.

The maximum declined 9% from 668.1 to 607.6 while the minimum also declined from 265.4 to 263.3

Despite the cooling, these are all very high CMI readings and they suggest that pricing will continue to move higher over the next several months.

©2022 Cromford Associat

March 30 - The Cromford® Public charts covering single-family and multi-family permits have been updated to include February unit counts.

The multi-family unit count for February was a relatively modest 1,039 for Maricopa and Pinal counties. This is the lowest count since August, but these monthly counts are pretty volatile and it would be foolish to draw too much of a conclusion from a single month of data. The annual rate of 16,187 remains very high - the third highest we have recorded, exceeded only by December 2021 and January 2022.

Multi-family permits are some 60% higher than the long-term typical count of 10,000 per year.

Single-family permits for Maricopa and Pinal counties totaled 3,155 in February. This is the highest total since April 2022. However, it is not higher than the long-term typical rate since 1996. We saw a collapse in permit counts in 2008 which recovered very slowly. The lull lasted until 2020. But typical monthly rates between 1996 and 2007 were around 3,000 and they have resumed at that level since 2020.

The overall picture is that multi-family permits are well above normal while single-family permits are at a normal level..

©2022 Cromford Associat

March 29 - The latest S&P / Case-Shiller® Home Price Index® numbers were published on February 29.

The new report covers home sales during the period November 2021 to January 2022.

Comparing with the previous month's series we see the following changes:

San Diego +2.50%

San Francisco +2.35%

Tampa +2.33%

Seattle +2.02%

Dallas +1.89%

Miami +1.83%

Las Vegas +1.70%

Phoenix +1.69%

Denver +1.61%

Los Angeles +1.59%

Atlanta +1.47%

Charlotte +1.26%

Washington +1.11%

Portland +0.91%

New York +0.86%

Detroit +0.71%

Boston +0.66%

Chicago +0.64%

Minneapolis +0.50%

Cleveland +0.33%

Phoenix has dropped 2 places to eighth place but remains above the national average, which was 1.41%. No city declined month to month. Given that the market data does not include any of the Spring selling season, these are particularly strong numbers, particularly for the West and South of the country

Comparing year of year, we see the following changes:

Phoenix +32.6%

Tampa +30.8%

Miami +28.1%

Dallas +27.3%

San Diego +27.1%

Las Vegas +26.2%

Seattle +24.7%

Charlotte +24.4%

Atlanta +22.5%

San Francisco +20.9%

Denver +20.8%

Los Angeles +19.9%

Portland +17.7%

Detroit +14.0%

New York +13.5%

Cleveland +13.3%

Boston +13.3%

Chicago +12.5%

Minneapolis +11.8%

Washington +11.2%

Phoenix is top of the year-over-year table for the 32nd consecutive month.

The national average was 19.2%, up from 18.8% last month.

©2022 Cromford Associat

March 24 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

Over the last month, 8 of the 17 cities have improved for sellers while 9 have deteriorated for sellers. This is the same split as last week, but the average change in the CMI over the past month is -1.4% whereas it was +0.3% last week. Last week we said we expected today's table to show a negative percentage and we were not wrong.

The market is continuing to cool, though at a glacial pace which would take many years to reach balance.

Surprise was the weakest city, down 11% while Tempe was the strongest, up 12%.

This table confirms that pricing will continue to move higher over the next several months.

©2022 Cromford Associat

March 21 - Despite watching it for over 20 years, it still amazes me that the annual average $/SF chart is so steady and predictable. It is almost as if the market is following pure mathematical principles rather than being controlled by human decisions. Clearly each human decision to buy or sell at a given price is different, yet when we take an average over a large enough sample, each individual decision fades into almost complete irrelevance

Looking at the weekly chart for example:

©2022 Cromford Associat

The lines look so well defined and predictable, that we can easily estimate how much the average $/SF will increase over coming months. $300 a square foot is clearly in view.

The monthly average is nowhere near so well behaved.

©2022 Cromford Associat

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

Over the last month, 8 of the 17 cities have improved for sellers while 9 have deteriorated for sellers. The average change in the CMI over the past month is 0.3%, down from 2.0% last week. We can expect next week's table to show a negative percentage.

Although this indicates the market is gradually cooling, it remains extremely hot and the cooling trend is about as weak as it can be without becoming no trend at all. At this pace of change it would take several years for the market to reach normality.

The top performing cities in the last month are Peoria, Tempe, Mesa and Paradise Valley, while the weakest are Goodyear, Avondale and Surprise.

We need to remind ourselves that CMIs over 110 indicate a seller's market where prices will rise faster than general inflation. Between 90 and 110, prices tend to rise in line with inflation. Below 90 home prices tend to fall or at least rise slower than inflation (which has become a significant number over the last year).

Home prices do not fall without a good reason. Few home owners want less than top price for their home. The weakest hands are always homeowners who wish they did not own the homes. In normal markets, these are banks and other lenders. However these organizations have an extremely low inventory of homes, so they are close to irrelevant at the moment.

The idea that home prices will automatically "correct" is a silly one. The housing market is not like a stock market, where the balance between supply and demand can flip several times a day. The housing market moves extremely slowly. The last time the CMI was below 110 was in January 2015 and the last it time it was below 90 was in November 2010. So the last buyer's market was more than 11 years ago. This is normal for the housing market and it is quite possible that the next buyer's market could still be many years away.

To create a situation which will force prices down, we first have to see more sellers than buyers. This is what a CMI below below 100 means. With the lowest CMI in the table above at 270.5, this is not likely for a very long time. If some of these were to drop below 150, then we might be a few quarters away from prices stabilizing. At the moment this is at least 12 months away, even in the most negative scenario we can imagine.

Sun City stands at 235.6 and is the lowest CMI we have at the moment. However the market there is looking pretty stable. With a median sales price of $350,000 it is also one of the most affordable location in central Arizona

©2022 Cromford Associat

March 21 - Despite watching it for over 20 years, it still amazes me that the annual average $/SF chart is so steady and predictable. It is almost as if the market is following pure mathematical principles rather than being controlled by human decisions. Clearly each human decision to buy or sell at a given price is different, yet when we take an average over a large enough sample, each individual decision fades into almost complete irrelevance.

Looking at the weekly chart for example:

March 15 - During February, Maricopa County recorded 13% fewer homes purchased by owner-occupiers than in February 2021. However this was balanced by a 24% increase in homes purchased by landlords to become rentals and a 20% increase in second homes or for flipping (including iBuyer purchases).

Since owner-occupied homes are still by far the largest segment, overall sales volume dropped 3% compared with February 2021.

Sales were up 6% in the West Valley, the only area to show an increase year over year. The Northeast Valley fell sharply - down 22% from a year ago, while The Southeast Valley was down 4% and Central Valley down 1% All these numbers are for single-family and condo/townhomes combined.

©2022 Cromford Associat

March 13 - We have just updated the city ranking table showing the annual average $/SF for 40 cities in Central Arizona.

The order of the cities does not change dramatically from year to year, with Paradise Valley consistently at the top and Coolidge at the bottom. However Paradise Valley is now well over $600 having been well under $500 just 12 months ago. Coolidge has topped $150, having been less than $110 a year ago.

The fastest appreciation over the last year has been seen in the outlying areas, such as Tonopah, Coolidge, Maricopa, Queen Creek, Arizona City and Anthem. All of these are up more than 35%. The lowest appreciation rates can be observed in Sun Lakes, Tempe and Sun City West, all below 26%, but only just.

©2022 Cromford Associat

March 12 - Despite so many observers claiming that the housing market is heading for imminent trouble, the rate at which prices are still rising is astonishing, even to seasoned old

analysts like us.

The average price per sq. ft. for listings under contract just exceeded $300 for the first time. It was half that just 5 years ago.

It has risen $40 in the last 6 months - a 15% increase.

The average price per square foot for listings under contract is a leading indicator. For sales prices to stabilize, the prices for listings under contract have to stabilize first. There is a 1 to 2 month delay between the 2 measures.

There is currently no sign of price rises halting, never mind reversing.

©2022 Cromford Associat

March 10 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

Over the last month, 11 of the 17 cities have improved for sellers. The average change in the CMI over the past month is 2.0%, down from 3.7% last week.

6 cities have moved in favor of buyers. Fountain Hills and Maricopa have joined that list. but Tempe has left it.

Mesa and Peoria saw the strongest moves in favor of sellers while Avondale and Goodyear had the strongest moves in favor of buyers.

The market is still heavily favoring sellers, with the lowest CMI in the table at 265.3. The trend is for demand to fade very slowly while supply is stable and remains extremely low. The rate of change is currently very slow.

©2022 Cromford Associat

March 9 - We have taken a look at total dollar volume for January 2022 and compared it with January 2021, using chart DV13 from Cromford® Public.

Dollar volume was up 19% from $4,089M to $4,852M - all thanks to higher prices, since unit volume was almost the same

New home dollar volume was up only 3% from $711M to $732M due to lower unit volume

Normal MLS dollar volume was up only 7% from $2.668M to $2,854M

Normal non-MLS dollar volume was up 40% from $431M to $603M

Investor flip dollar volume was up 154% from $250M to $635M

Distressed sale dollar volume was flat at $28M

iBuyers tend to have a normal non-MLS purchase followed by an investor flip, so the rise in these numbers is partially due to the ramp up in transactions from iBuyers.

There is also clear evidence that more transactions are happening without hitting the MLS. This reflects high levels of investor activity.

©2022 Cromford Associat

March 5 - Although the re-sale and new homes markets continue to show very little sign of weakness, the same cannot be said of the rental market.

The vast majority of rentals do not hit the MLS, so we have to be careful because of the poor sample size. However the ARMLS rentals database shows us that the market is nowhere near as favorable to landlords as it was this time last year. Here is why we say that:

Available supply is up from 1,543 to 2,138 units, a rise of 39%, meaning tenants are getting more choice

New rental listings are up 20% year to date compared with 2021, so supply is arriving faster

New rental listings are up 26% over the past 4 weeks, compared with 2021, telling us that the increased supply trend is strengthening

The average lease list price per sq. ft. is $1.80, down from $1.93 this time last year

The average lease list price per sq. ft. peaked at $2.01 on May 22, 2021, fell back then peaked again at $2.00 on Jul 29 before falling again - it is unable to convincingly break the $2 resistance level and has made no attempt to do so in the last 7 months

These conditions suggest that the era of quickly rising rents in Greater Phoenix may be coming to an end. A large amount of new rental supply is coming on board this year, judging by the number of multi-family permits issued in the last 2 years. Rent looks likely to stay fairly flat, which will change the buy versus rent equation as home prices and mortgage rates continue to increase. In the longer term, this could seriously dampen demand for homes to buy.

Interestingly, the supply of active listings varies a lot by dwelling type.

apartments to rent are down 33%

townhouses to rent are up just 1%

single-family detached homes to rent are up 99% - there are 1,546 versus only 777 this time last year.

We are seeing single-family subdivisions under construction intended to be 100% rentals. There are many examples, and not just here in Arizona, but a typical one is Malone Place Parke (MCR 1561-18) in Queen Creek. American Homes 4 Rent has created their own homebuilding subsidiaries. There are 97 single-family homes going up here which will not have affidavits of value since they will be eligible to claim a genuine B7 affidavit exemption. The opportunity to grumble again about Zillow's misuse of the B7 is hereby declined. The investors in these projects should keep in mind that demand is not infinite.

The most likely source of more supply of single-family homes to buy is if landlords tire of owning them. This could be because they have trouble finding tenants for them or they facing declining rental incomes. A house that has no rent coming in becomes a serious problem for its owner who remains liable for the property taxes, maintenance, HOA dues, etc.. Landlords will then compete with each other for tenants and rents will start to drop. Some landlords will drop out and sell their investments.

This is likely to be a slow moving trend in the market but it should be easy to detect, as long as you are watching the correct numbers. US birth rates are very low by historic standards and with the baby boomers reaching advanced ages, we can expect natural growth in the population to be small, or even negative. Population growth will be entirely dependent on incoming transfers from other states or foreign countries. Ivy Zelman has been bearish on the housing market for a couple of years, primarily because of these demographic trends. She has been completely wrong about the market so far, but she is right that the demographics are fundamentally unfavorable for housing in the longer term. In Arizona we are atypical in that so many people have been moving here. This hides the weak natural growth in population (births minus deaths) and has driven our prices up faster than almost any other part of the USA. This will not last forever.

In Arizona, we have a history of building more and more homes until there is a very obvious reason to stop. There will come a time, and nobody knows exactly when it will be, when we have built enough shelter for the population and demand sinks below supply. I seems likely that we will see that in rentals before we see it in homes for purchase.

©2022 Cromford Associat

March 4 - The data from Maricopa County affidavits of value is now available for February, although bulk sales by Zillow are almost completely excluded because of their decision to claim an inappropriate exemption from filing affidavits. So far there does not seem to be any government (county assessor or recorder) effort to challenge that spurious claim. This means our records are much less complete than normal, so this should be borne in mind when reading further.

There were 9,073 closed units during February, down 3% from February 2021

New build closings numbered 1,269, down 14% from February 2021 - the new home market is closing fewer units than 2020 or 2021, but dollar volume is higher

Re-sale closings were 7,804, down 1% from February 2021 - it would have shown growth if Zillow bulk sales had been possible to include

The overall median sales price was $455,000, up 27% from $359,100 in February 2021 - it is up 5% in 2 months.

The new home median was $477,741 - up 26% over the past 12 months and up 7% in the last 2 months

The re-sale median was $450,000, up 28% over February 2021

The new home unit counts are disappointing those who would like to see more supply, but there continue to be a lot of home construction that is held up because of material shortages or limited access to skilled labor. There is also a shift in favor of Pinal County which is not included in these number because data from Pinal comes to us more slowly than Maricopa.

Increases in new home prices were lagging behind re-sales for much of 2021 but have been catching up in 2022.

All the figures above relate to single-family and townhouse/condo properties combined.

©2022 Cromford Associat

March 3 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

February 6 - The total number of active listings without a contract is now higher than a year ago. This is the first time this has happened since June 2019.

This is a tiny sign that a new cooling trend might be developing. Watch carefully to see if it is confirmed by other signals.

Are they really doing intra-company transfers for no or nominal consideration. I very much doubt that is the case. This appears to be deceptive recording.

Nobody i have spoken with thinks B7 applies in this case, since Zillow and Progress are separate and independent companies. Also it is hard to believe Zillow is selling these homes for nothing, or practically nothing. The claim of a B7 exemption is recorded by Selene Title of Florida. Despite the exemption claim seeming to have little to no validity, there appears to be no mechanism for enforcing ARS 11-1134 in a case like this. The result is we have no prices for any of this sales and we never will have, unless someone finds a way to force the title company to re-record with the data they withheld. We are not talking a handful of homes here. We are already well over 130 and it could run into the several hundred over the first quarter of 2022.

It could get worse, since if Zillow is seen to get away with this action, it may encourage many more people to claim exemption from filing affidavits of value and the system we rely on for keeping track of prices in Arizona could start to get very shaky. A title company employee has informed me that title companies have no obligation to ensure that a claim of exemption is valid. If the State of Arizona does nothing to enforce its statutes, we could end up with very poor data compared with what we have had available over the past 20 years.

Another negative effect is that the comps in the affected subdivisions are going to be based on the inflated prices paid by Zillow, not the lower ones paid by Progress. In the current market, this is likely to be a short-term problem that is quickly resolved by more prices being recorded over the coming months.

I do not know the motivation of Zillow in doing this. Why do they want secrecy? It could possibly be to prevent the embarrassment of showing the large losses they are making on the homes they purchased for inflated values during 2021. It certainly takes ingenuity to make a gross loss on reselling homes in this market environment. Making a gross profit is just a matter of waiting a few months when home prices are appreciating at 26% to 28% per year. Making a net profit is something else entirely, of course.

Anyway, for what they are worth here are the numbers for single-family detached and condo / townhouse properties during January in Maricopa County:

There were 8.080 closed sales, down 4% from January 2021

There were only 1,036 new home closings, down 16% from January 2021

Re-sales were down less than 2% at 7,044 - with the Zillow sales included, there would have been a small increase

The median sales price was $441,100, up 26% from $350,000 in January 2021

The median sales price for new homes was $459,948, a rise of 20% from 12 months ago

The median re-sale price was $439,000, up more than 28% from January 2021.

February 3 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

At first glance this is a similar picture to last week, with front-runner Fountain Hills losing ground but the other 16 moving in favor of sellers.

However the average change in the CMI over the past month is 15.4%, down from 18.5% last week. The acceleration phase of this hot market is now over and it is starting to approach its maximum level. Indeed, some cities have even shown a slight decline in their CMI over the last few days. These are Chandler, Gilbert, Glendale and Goodyear

What we are seeing in these 4 cities is a fall off in demand, probably caused by affordability concerns as prices continue to rocket higher. We should not be surprised - this is how markets are supposed to work. Higher prices weaken demand which in turn causes supply to recover. However the change we are seeing is very small and does not amount to a turnround. Not yet anyway.

The high end of the market is largely unaffected by this new trend at the moment and continues to set new records for low supply.                  

©2022 Cromford Associat

January 29 - I hope you are ready for another big increase in home prices over the next few months. The first quarter of 2022 is shaping up to look very similar to the first quarter of 2021.

In most big steps higher we see the average $/SF for active listings as the first to move. What are they doing?

We expect the average $/SF for listings under contract to follow suit shortly and then the average $/SF for closed listings should rise about 6 to 8 weeks later.

The second quarter is still too far away to make reliable forecasts, but the first quarter is pretty much known already based on the incoming data points

©2022 Cromford Associat

January 27 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

All 17 cities stayed on the same page for just one week, with Fountain Hills unable to sustain a CMI over 700. All the other 16 cities improved in favor of sellers over the last month. The market is gaining in

strength in those 16 cities with all but Chandler increasing their CMI by 10% or more, Outstanding improvement for sellers took place in Tempe, Avondale, Goodyear, Surprise, Paradise Valley, Phoenix, Queen Creek, Peoria and Scottsdale, all growing their CMI by 19% or more.

The average change in the CMI over the last month is +18.6%, down just 0.1% from last week. So the momentum in favor of sellers is no longer accelerating, but growing at a steady rte.

©2022 Cromford Associat
January 25 - The latest S&P / Case-Shiller® Home Price Index® numbers were published on January 25.

The new report covers home sales during the period September 2021 to November 2021.

Comparing with the previous month's series we see the following changes:

Tampa +2.07%

Miami +1.99%

Seattle +1.41%

Charlotte +1.40%

Atlanta +1.36%

Los Angeles +1.22%

Dallas +1.20%

Phoenix +1.17%

San Diego +1.05%

New York +1.03%

Las Vegas +0.93%

Denver +0.83%

Detroit +0.65%

Cleveland +0.65%

San Francisco +0.63%

Washington +0.49%

Chicago +0.49%

Portland +0.46%

Minneapolis +.029%

Boston -0.01%

Phoenix has slipped 1 more rung to eighth place but remains well above the national average, which was 0.90%. We see one more month to month decrease - in Boston.

Comparing year of year, we see the following changes:

Phoenix +32.2%

Tampa +29.0%

Miami +26.6%

Las Vegas +25.7%

Dallas +25.1%

San Diego +24.4%

Seattle +23.3%

Charlotte +22.9%

Atlanta +21.6%

Denver +20.1%

Los Angeles +19.0%

San Francisco +18.2%

Portland +17.5%

Detroit +14.4%

Cleveland +14.0%

New York +13.8%

Boston +13.5%

Chicago +11.6%

Minneapolis +11.2%

Washington +11.1%

Phoenix is top for the 30th consecutive month. The national average was 18.8%.

©2022 Cromford Associat

January 24 -The market is cooler than this time last year, but only by a fraction. This makes it the second most frenzied seller's market we have ever seen in January. Here is what the Cromford® Market Index for all areas & types is telling us:

The Greater Phoenix housing market was already very unbalanced in favor of sellers in October, with 100 (not shown on Y axis) representing a balanced market. But over the past 3 months the trend has moved in favor of sellers even more as supply collapsed and demand remained strong, especially from investors and second home purchasers. The upward slope has continued throughout January, although there is a slight reduction in the rate of increase in the last week.

464 is an extremely high reading, surpassed only between Jan 16 and May 9 last year. The record high is 514.9, reached on March 3, 2021.

Even if the market turned around very suddenly, as it did in 2005, we would anticipate a long delay before prices stabilized, probably at least 12 months and more likely 15. This means anyone waiting for a drop in prices is likely to be waiting until the second half of next year (2023) at the earliest. And this is a worst case scenario, which is by no means likely.

©2022 Cromford Associat

January 21 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

All 17 cities are now on the same page, having improved in favor of sellers over the last month. The market is gaining in strength with all but 2 cities increasing their CMI by 10% or more, Outstanding improvement for sellers took place in Tempe, Avondale, Goodyear, Surprise, Paradise Valley, Phoenix, Queen Creek and Scottsdale, all growing their CMI by over 20%

The average change in the CMI over the last month is +18.7%, up from +16.8% last week. So the momentum in favor of sellers is still growing.

Any CMI over 110 is a signal for prices to increase, so with CMI readings between 233 and 704, prices are set to rise significantly over the next 6 months.

©2022 Cromford Associate

January 20 - Some areas are hitting their record lows for supply right now.

For example, in Scottsdale there are only 317 single-family detached homes available for sale without an existing contract in place. This can be compared with a long term average of 2,156 and a maximum of 4,362. It even looks small compared with this time last year when we had 533.

Paradise Valley is also experiencing an extreme shortage. There are just 85 single-family detached homes for sale without a contract, while the long term average is 307 and the maximum is 579

The upscale areas of the valley are experiencing the worst of the supply shortage at the moment. The most affordable areas are comfortably above the extreme lows we saw last year, but are still far below normal.

It is hard to imagine how prices can do anything but rise with supply at such a low level.

©2022 Cromford Associate

January 19 - Based on affidavits of value filed during November we have collected the following statistics on iBuyer activity:

	Opendoor	OfferPad	Zillow	Redfin	All iBuyers Combined
Homes Purchased in December 2021	323	123	63	7	516
Homes Purchased in December 2020	120	92	51	0	263
Annual Change in Purchases	169%	34%	24%	N/A	96%
Homes Sold in December 2021	449	139	216	7	811
Homes Sold in December 2020	75	100	34	0	209
Annual Change in Sales	499%	39%	535%	N/A	288%
Median Purchase Price in December 2021	$409,600	$387,750	$449,016	$332,000	$406,703
Median Purchase Price in December 2020	$299,200	$297,500	$317,350	N/A	$305,600
Median Sale Price in December 2021	$435,000	$435,000	$430,000	$465,000	$435,000
Median Sale Price in December 2020	$316,500	$301,000	$283,250	N/A	$303,000
Homes in Inventory at the End of December 2021	2,038	499	785	13	3,335
Homes in Inventory at the End of December 2020	328	153	94	0	575
Annual Change in Inventory	521%	226%	735%	N/A	480%

The iBuyers as a group bought far fewer homes in December than they had at their peak in August. August saw 1,145 purchases and December was down to 516, a reduction of 55%.

This drop was not just due to Zillow stopping all new offers in early November. Opendoor also reduced its buying volume by more than 50% compared to the summer peak.

Both Zillow and Opendoor overpaid for homes during the late spring and summer, while OfferPad continued to operate pretty much as it done before. Opendoor appears to have gained control over its offers and is now buying less, largely because its offers are now no longer over-generous. Zillow overpaid by a far larger margin, sometimes reaching ridiculous pricing. It appear that senior Zillow management reacted by killing the entire iBuying operation almost as suddenly as it could. As in most things in housing, as suddenly as it could is still pretty slow. There were many signed offers already in place that have continued to close and purchases that were recorded in December were still up 24% from the previous year. They should drop off very quickly in 2022 however, with no new deals in the pipeline.

For those with a subscription to Cromford® Public, you can see from chart FF1 that the homes sold by Zillow in November had a negative median gross margin. Opendoor showed a median gross margin close to zero, while OfferPad continues much as they have done with a positive median gross margin but a much lower market share because their offers are not as aggressive.

The iBuyers still hold a large inventory of 3,335 homes (for sale and under contract) but this is down from last month and we we can expect Zillow to try to drive their inventory to zero as soon as possible by selling many of them in bulk to investment companies,.These will become part of the rental stock and reduce further the supply of homes for sale.

Opendoor and OfferPad also sell to investors when it suits them and in the current market new investors keep arriving.

©2022 Cromford Associate

January 17 - During December in Maricopa County we saw sales intended to be primary residences fall almost 19% from a year earlier. This was counter-balanced by large increases in sales intended to become rentals (up almost 30%) or secondary residences (up almost 24%). Note that Arizona's affidavit document is unsatisfactory in that it only allows for these 3 reasons for purchase. In the real world there is an important fourth reason for buying a house - in order to sell it to someone else, usually either as a fix and flip or as part of an iBuyer's tidy up and flip. In most cases, iBuyers choose option 3 - use as a secondary residence, since neither of the other 2 options apply. I wonder if the State of Arizona will ever fix this problem with the affidavit. Given that it is a legal document subject to perjury law, it seems odd that they force people to sign something in which all three options are inapplicable and therefore untrue.

©2022 Cromford Associate

January 15 - in our latest ranking of cities by average sales price per sq. ft. we can see that, in general, the least expensive cities have out-performed the rest.

The top spot for annual appreciation is held by Coolidge at 40.5%, helped by it still being the most affordable on our list of 40 at $146.94 per sq. ft. Other high appreciation areas include Tonopah at 39.0%, Arizona City at 36.1%, Maricopa at 34.9% and Queen Creek at 34.8%. The latter included the ill-defined but large area of San Tan Valley, parts of which are gradually being incorporated into the towns of Queen Creek or Florence.

The lowest appreciation rate belongs to Eloy at 19.2%, followed by Carefree and Sun City West with a 22.8% increase.

Generally, the areas with a high median age increased at a slower rate than areas with a low median age.

However, more expensive areas have historically moved later than cheaper areas when following house price trends. Supply in Paradise Valley and Carefree has dropped much more than other ears in the last 12 months, so it would not be a surprise if their appreciation catches up over the next 12 months.

©2022 Cromford Associate

January 13 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

 

The market is showing almost no sign of turning in favor of buyers. We have 16 of the 17 cities improving for sellers over the past month and only one (Buckeye) showing a move in favor of buyers. Even in Buckeye, there is a strong seller's market, and the CMI has moved upwards over the past 2 weeks.

The average change in the CMI over the last month is +16.8%, up from 14.4% last week. So the momentum in favor of sellers is growing.

Top movers in favor of sellers over the past month were Tempe, Goodyear, Surprise, Phoenix, Gilbert, Avondale and Scottsdale, all of which saw their CMI increase by 20% or more.

This market desperately needs more homes to buy.

We are starting to see some increase in the number of homes available to rent. However much of that rental supply is being converted by investors from the stock of homes to buy. Many brand new homes are being purchased to either convert into a rental of to immediately flip for a profit.

Without a significant increase in the number of homes for sale, any hope of halting the brisk rate of price increases is likely to be crushed. This remains true even in a higher interest rate environment, because demand is not the controlling factor.

©2022 Cromford Associate

January 12 - There is no way to break it to you gently. The bad supply situation is getting worse. Or at least worse from a buyer's perspective.

In January we should be seeing a lot of new listings piling up ready for the surge of buyers arriving after the Super-bowl is done. But we are not getting more supply, it is already going lower than at the start of the year.

This is quite a shock, but not exactly unprecedented. It happened in January 2021, but that was a precursor to a spring of absolute madness and frenzy.

This is telling us that the bull market in housing has a lot of legs in it yet.

Examples:

Paradise Valley is down to an all time low of just 93 single-family homes for sale (excluding CCBS and UCB). We had 160 this time last year.

Scottsdale is down to 344 single-family homes for sale. There were 569 this time last year.

Mesa is down to 314 single-family homes for sale There were 483 as recently as October 3.

Phoenix is down to 777 single-family homes for sale. There were 1,095 just one month ago.

By the way,  

I sold my home in Mesa in 2018, but I am still getting frequent nuisance phone calls in the UK from people wanting to know if I am interested in selling it. It has already changed hands again since I sold it. Where do these people get their home ownership information? I hope it's cheap because it is apparently worthless.

©2020 Cromford Associate

January 10 - We still see a large number of analysts commenting on what they interpret as very high demand in housing. This is a serious mistake. For most of the market, demand is nothing special, at least when measured mathematically by the number of closed transactions and the number of listings under contract. While demand is above average, it is not unusually high.

What is unusual about the current housing market is the chronic and extreme shortage of supply. When buying a house, it feels like "high demand" because there are far too many buyers for every house. The fact is this is due to there being so few houses available to buy. The number of buyers is only somewhat above average.

Dollar volume is growing sharply, but this has much more to do with increases in unit prices than increases in unit volumes. Indeed new home sales were down in 2021 compared with 2020 across Maricopa County. This was caused by builders' inability to build enough homes. Supply chain issues!

The problem is that many housing analysts pay only scant attention to the numbers and rely too heavily on hearsay and perceptions. There is a tendency for things to believed to be true just because a lot of people say them. This is recognized as a common human trait. We tend to regard as true those things that are familiar to us through repetition. Understanding the numbers properly is hard and makes your head hurt. And trying to get people to understand the truth often just makes you unpopular.

There are some segments where demand is unusually high. The Cromford® Demand Index (CDI) measures demand in a market segment relative to its history. A number over 120 suggest higher demand than normal for that segment.

Casa Grande currently has a CDI of 182.5. That is extremely high and probably represents a large influx of people into Casa Grande to work for the employers newly located there (e.g. Lucid, Attessa, PhoenixMart) . Maricopa is also well above normal at 161.7 and Queen Creek is at 138.1. Arizona City is at 238.9, where homes are relatively cheap and Casa Grande is an easy commute. Demand is generally high in Pinal County, but luckily supply is a bit higher there too, so it balances out. Supply is still very low, but not as low as in Maricopa County.

The CDI is actually below 100 in many of the valley's cities. Anthem, Apache Junction, Avondale, Cave Creek, Chandler, El Mirage, Gilbert. and Sun Lakes are all currently below 100. However, this demand is more than enough to overwhelm the paltry supply of homes in all these locations. So buying a home in these cities is just as hard as in Casa Grande.

So you can tell people the numbers say that demand is generally not especially high, but don't expect these people to agree with you. They will take perceived wisdom over real wisdom any day.

©2022 Cromford Associate

January 7 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

The market continues to strengthen in favor of sellers with extremely low supply and demand well above normal.

We now have 16 of the 17 cities improving for sellers over the past month and only one (Buckeye) showing a move in favor of buyers. Even in Buckeye, there is a strong seller's market, and the CMI has moved upwards over the past week.

The average change in the CMI over the last month is +14.4%, up from 11.4% last week.

Even if higher interest rates suppress demand, the situation is unlikely to change dramatically unless supply starts to build much higher than it is now. There is no signal from the first week of January that such an event is likely. Perhaps the next few weeks will show some new trend, but right now we are looking for more price rises over the coming months

©2022 Cromford Associate

January 6 - We have preliminary data from affidavits of value filed with the Maricopa County Recorder during December:

There were 10,568 closed transactions involving single-family homes, condos and townhouses, of which 1,788 were newly built and 8,780 were resales.

New build closings were down 7.6% compared with December 2020.

The resale count was down 7.4% compared to a year ago.

The overall median sales price was $433,074. This is up 25.5% from December 2020

The new build median sales price was $445,518. This is up 17.1% from December 2020.

The resale median sales price was $430,000. This is up 28.4% from December 2020.

It appears that new home prices have risen more slowly than resales over the past year. This is probably because the prices at completion are established much earlier in the cycle than for resale, which often close within a few weeks of contract signatures.

Closings are down between 7% and 8%, compared to a year ago. Since the number of homes under contract has been down year over year since May 2021, this is not surprising.

©2022 Cromford Associate

January 4 - CoreLogic reports monthly home price appreciation rates for the USA based on the Case-Shiller index. They are respected for their ability to record historical data, but their ability to forecast what will happen during the following twelve months is nothing short of dreadful. Forecasting prices a year out is a difficult task, and we do not attempt it ourselves, but the numbers we do collect allow us to be almost certain that their current forecast will be very wide of the mark, just as their earlier ones have proven to be.

The CoreLogic forecast for annual home price appreciation as of November 2021 was 2.5%. The actual change they have just reported was 18.1%. They do not seem to be learning anything from their past mistakes because they are currently forecasting 2.8% appreciation between November 2021 and November 2022.

In our opinion this is plain silly. especially as their own President and CEO, Frank Martell, is quoted in the same report as saying: "Over the past year, we have seen one of the most robust seller’s markets in a generation. While increased interest rates may help cool down home buying activity, we expect 2022 to be another strong year with continuing upward price growth".

Perhaps Frank should tell his forecasting team to get a grip on reality and stop relying on a model that has lost all credibility..

©2022 Cromford Associate

January 1 - 2022 starts with lower supply than 2021 did.

5,776 active listings excluding UCB and CCBS, across all areas and types. On January 1, 2021 we counted 6,055, so we are down by 5%

If we count UCB and CCBS listings as well, the 2022 total is 8,630, down 12% from 9,788 last year.

Not a good start from a buyer's point of view - the lowest supply level for Jan 1 since we started recording in 2001.

©2022 Cromford Associate

December 30 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

The old year goes out with a move in favor of sellers. Only 2 cities moved in favor of buyers over the last month and the average change in the CMI for all 17 cities is +11.4%

We will be starting 2022 with a massive imbalance in the market. Supply remains very low and wholly inadequate to meet existing demand.

December 29 - The latest S&P / Case-Shiller® Home Price Index® numbers were published on December 28.

The new report covers home sales during the period August 2020 to October 2021.

Comparing with the previous month's series we see the following changes:

Tampa +1.90%

Miami +1.83%

Charlotte +1.51%

Las Vegas +1.46%

Los Angeles +1.35%

Atlanta +1.29%

Phoenix +1.14%

Dallas +1.11%

San Diego +1.09%

New York +0.67%

Seattle +0.61%

Cleveland +0.60%

Chicago +0.56%

Detroit +0.37%

Portland +0.33%

Washington +0.23%

Denver +0.20%

Boston +0.07%

San Francisco +0.01%

Minneapolis -0.06%

Phoenix has slipped 3 more rungs to seventh place but remains well above the national average, which was 0.84%. We see the first month to month decrease for some time - in Minneapolis.

Comparing year of year, we see the following changes:

Phoenix +32.4%

Tampa +28.1%

Miami +25.7%

Las Vegas +25.5%

Dallas +24.6%

San Diego +24.2%

Seattle +22.8%

Charlotte +22.5%

Atlanta +21.4%

Denver +20.3%

Los Angeles +18.5%

San Francisco +18.5%

Portland +17.8%

Boston +15.1%

Detroit +14.7%

New York +14.6%

Cleveland +13.3%

Washington +12.0%

Minneapolis +11.5%

Chicago +11.5%

Phoenix is top for the 29th consecutive month. The national average was 19.1%.

December 28 - Closing prices have drifted sideways to down over the past month. Does this mean the era of price increases is already over?

Probably not!

Take a look at where the price of listings under contract is going. This is the best forecasting tool for future closing $/SF:

 

The average price per sq. ft. for listings under contract has risen from the $270 mark to comfortably over $280 in just 2 months. We can reasonably expect the closing $/SF to be well north of $270 before too long. When the green and red lines on this chart diverge, they always close the gap later. With the CMI still rising, it is most unlikely (but not completely impossible) that the green line will head downwards. Much more likely is that the red and brown lines (which are almost on top of each other these days) will start following the green line upwards.

December 27 - One of the most popular sections within Cromford® Public is the one which shows the history of building permits, for both single and multi-family units.

Building permits are issued well before a home becomes available for sale or rent, so these charts give us some idea about where future supply is coming from. At the moment new multi-family supply looks as though it is going to be hitting new all-time highs in 2022, but new single-family supply will remain quite limited.

At the end of November 2021, we had recorded 32,185 single-family permits for Maricopa and Pinal counties, up from 28,204 in 2020. However this does not exceed the counts we recorded in 1998,1999, or 2002 through 2006. 51,900 was the peak for November YTD counts, achieved in 2004. If we were seeing this kind of number then I think we could expect to see real progress in correcting the current supply shortage.

For multi-family permits, we are definitely in record territory right now, with 13,985 as of November 2021 year-to-date. The previous record was 2020 with 12,224. Before 2020, only 2019 exceeded 10,000 as of November year-to-date.

It is also looks very likely that Q4 2021 will be the strongest quarter ever for multi-family permits.

©2020 Cromford Associate

December 23 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

 

Once again, we have 14 cities where the market moved in favor of sellers over the last month and only 3 where the market moved in favor of buyers. The average change over the past month was +8.7%, having been +7.2% last week.

This trend is primarily due to the reduction in supply over the past 6 weeks.

We see the Northeast Valley in complete domination of this table. Fountain Hills is number 1 and a long way above Scottsdale, thanks to having just 32 active listings (excluding UCB and CCBS). The long term average is 234.

Maricopa and Buckeye are at the bottom of the table. This is partly because they have more new development than most, making the supply problems a little less severe.

©2020 Cromford Associate

Paradise Valley has the lowest number of active listings we have ever recorded, at 105 excluding UCB and CCBS. However this is balanced by a reduction in demand after the huge price rises that have taken place in the last year.

December 20 - The daily Cromford® Market Index chart shows that the market has strengthened for sellers since late October.

Supply has been heading lower again, though not quite at the speed it did this time last year.

There is little support in the data for the popular theory that the market is cooling and heading back to normal. The normal balanced reading for the CMI is 100 and we are currently at 382.5 and heading northeast.

House price appreciation is a very long way from normal, with the monthly average $/SF up 26% from this time last year. Yes this is down from the freakish 40% we saw on May 25, but the pressure on prices is still upward.

If we are to see the market return to normal at some point, a reduction in demand is not sufficient. We would need to see a huge rise in supply too.December 16 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

December 16 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

Once again, we have 14 cities where the market moved in favor of sellers over the last month and only 3 where the market moved in favor of buyers. The average change over the past month was +7.2%, having been +6.2% last week.

As expected, the trend continues to strengthen in favor of sellers although not as quickly as it moved this time last year.

The lower end of the market (e.g. Avondale, Buckeye, Maricopa) is still looking strong, but not as strong as the mid-range (e.g. Chandler, Gilbert, Mesa, Goodyear). The higher end (e.g. Scottsdale, Fountain Hills, Cave Creek), is extremely strong, although Paradise Valley is seeing falling demand over the past month, matching its falling supply.

©2020 Cromford Associate

December 15 - Based on affidavits of value filed during November we have collected the following statistics on iBuyer activity:

	Opendoor	OfferPad	Zillow	Redfin	All iBuyers Combined
Homes Purchased in November 2021	409	146	221	4	780
Homes Purchased in November 2020	107	84	40	0	231
Annual Change in Purchases	282%	74%	453%	N/A	238%
Homes Sold in November 2021	373	117	210	5	705
Homes Sold in November 2020	74	75	22	0	171
Annual Change in Sales	404%	56%	855%	N/A	312%
Median Purchase Price in November 2021	$418,700	$388,500	$442,400	$687,500	$424,494
Median Purchase Price in November 2020	$311,300	$297,650	$287,000	N/A	$302,000
Median Sale Price in November 2021	$430,000	$395,000	$415,000	$367,000	$419,500
Median Sale Price in November 2020	$289,250	$285,000	$290,750	N/A	$290,000
Homes in Inventory at the End of November 2021	2,152	526	944	13	3,635
Homes in Inventory at the End of November 2020	280	163	76	0	519
Annual Change in Inventory	669%	223%	1142%	N/A	600%

The iBuyers as a group continued to purchase a very large number of 780 homes in November, though down 32% from the record total of 1,145 in August.

Although Zillow has pulled out of the iBuying market, it still had a lot of signed contracts to close on and purchased more homes than it sold in November. Embarrassing mismanagement of a ill-considered strategy.

For those with a subscription to Cromford® Public, you can see from chart FF1 that the homes sold by Zillow in October had a significant negative gross margin. The median purchase price was $435,294 and the median sale price was $411,000. This helps explain why Zillow left this business. For Opendoor, the picture was a little brighter with the median acquisition price being $414,700 and median sale price $412,500. A small loss, but this does not include the fee the seller pays to Opendoor. OfferPad did not chase volume the same way and showed a median sale price of $400,000 and a median acquisition price of $380,000, meaning they continued to generate positive gross margins on the vast majority of homes sold. Although they are much smaller, they appear to be closer to a profitable business model.

The iBuyers hold a large inventory of 3,635 homes (for sale and under contract) but we can expect Zillow to want to drive their inventory to zero as soon as possible by selling many of them in bulk to investment companies,.These will become part of the rental stock and reduce further the supply of homes for sale.

©2020 Cromford Associate

December 10 - The latest S&P / Case-Shiller® Home Price Index® numbers were published on November 30, while we were in the middle of our Storm Arwen crisis. We thought a commentary would be better late than never

The new report covers home sales during the period July 2020 to September 2021. As such they reflect the slower appreciation that we experienced during the summer and not the accelerated we have seen since September..

Comparing with the previous month's series we see the following changes:

Tampa +2.74%

Miami +2.16%

Atlanta +1.89%

Phoenix +1.69%

Los Angeles +1.09%

Boston +0.78%

San Diego +0.74%

Charlotte +1.80%

Las Vegas +1.54%

Dallas +1.20%

Chicago +0.64%

New York +0.49%

Portland +0.42%

Denver +0.41%

Seattle +0.40%

Detroit +0.37%

Washington +0.23%

San Francisco +0.13%

Minneapolis +0.06%

Cleveland 0%

Phoenix has slipped one more rung to fourth place but remains well above the national average, which was 0.99%

Comparing year of year, we see the following changes:

Phoenix +33.1%

Tampa +27.7%

Miami +25.2%

Dallas +25.0%

San Diego +25.0%

Las Vegas +24.7%

Seattle +23.3%

Charlotte +22.4%

Atlanta +21.2%

Denver +21.2%

San Francisco +19.8%

Los Angeles +18.3%

Portland +18.2%

Boston +16.8%

New York +15.8%

Detroit +15.2%

Cleveland +14.1%

Washington +13.7%

Minneapolis +12.8%

Chicago +11.8%

Phoenix is top of this table for the 28th consecutive month. Phoenix is by no means the leader since the indexes were arbitrarily set at 100 for the year 2000.

Here are the cities which have appreciated the most since 2000:

Los Angeles

San Diego

Seattle

San Francisco

Miami

Portland

Tampa

Phoenix

Denver

Washington

Boston

Las Vegas

Dallas

New York

Charlotte

Minneapolis

Atlanta

Chicago

Detroit

Cleveland

It seems that relatively few people have taken Frank Zappa's advice - "Let's Move to Cleveland!"

©2020 Cromford Associate

December 9 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

We have 14 cities where the market moved in favor of sellers over the last month and only 3 where the market moved in favor of buyers. The average change over the past month was +6.2%, having been +4.4% two weeks ago. We were unable to publish a table on December 2 due to the power cut.

The trend continues to strengthen in favor of sellers and this is unlikely to change until January at the earliest.

Supply is desperately scarce in Fountain Hills, which has nearly always seen the highest percentage of out of state buyers. Cave Creek and Scottsdale have joined Fountain Hills at the top of the table and this is the first time we ever recorded the top 3 spots being dominated by the Northeast Valley like this.

Most improved for sellers is Gilbert, with Mesa and Gilbert not too far behind.

©2020 Cromford Associate

December 8 - With the low and mid-range markets heavily influenced by iBuyers and investors, it is interesting that some of the fastest appreciation is being experienced by markets where these players are inactive.

The Paradise Valley area has experienced astonishing appreciation rates over the last 12 months. This is partly due to the fact that the very top end of the market is extremely active while supply at the low end is very poor indeed, limiting its contribution to the averages. If we look at the 3-month average price per square foot for single-family homes in Paradise Valley for November 2020 we measure a figure of $459. In November 2021 this had increased by $200 to $659. That is an annual appreciation rate of almost 44%.

Looking at the 6-month average smooths the chart out a bit, but still gives us a 40% increase from $447 to $625.

The 12-month average is much less volatile but still displays a 29% increase from $448 to $578.

These seem like huge numbers to us, but we have to remember that many of these buyers are out-of-state. $600 per square foot probably seems quite a bargain if you are coming from the west coast.

©2020 Cromford Associate

December 5 - The big positive news for us is that after 7 days we finally got electric power restored to our office, home and the Cromford® Report database. The electricity company (a Berkshire Hathaway subsidiary) has installed generators up and down the valley because the electricity infrastructure was so badly damaged that

We have 14 cities where the market moved in favor of sellers over the last month and only 3 where the market moved in favor of buyers. The average change over the past month was +6.2%, having been +4.4% two weeks ago. We were unable to publish a table on December 2 due to the power cut.

The trend continues to strengthen in favor of sellers and this is unlikely to change until January at the earliest.

Supply is desperately scarce in Fountain Hills, which has nearly always seen the highest percentage of out of state buyers. Cave Creek and Scottsdale have joined Fountain Hills at the top of the table and this is the first time we ever recorded the top 3 spots being dominated by the Northeast Valley like this.

Most improved for sellers is Gilbert, with Mesa and Gilbert not too far behind.

There is nothing whatsoever in our data to support a theory that prices might come down any time soon. Supply is currently getting scarcer every week.

©2020 Cromford Associate

November 30 - Sorry for the delay in getting updates to this site over the last several days. On Friday November 26, the UK was hit by Storm Arwen. The strong northerly winds and freezing snow brought down thousands of power lines and trees. The electricity supply, internet and mobile phone networks were badly damaged and Mike Orr and his family have had almost none of these services over the past 5 days. This has made checking e-mail and updating the web site impossible.

Mike has temporarily relocated to Walworth Castle (built in 1189) which now has both electricity and internet and only 2 of the cellular providers are down. He will be working to bring the site up to date again over the next several days.

Thanks for your patience and understanding. We now know that 100 hours without electricity is a sobering experience.

©2020 Cromford Associate

November 25 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

We have 14 cities where the market moved in favor of sellers over the last month and only 3 where the market moved in favor of buyers. The average change over the past month was +4.4%, having been +2.7% last week. The trend continues to strengthen in favor of sellers and after Thanksgiving comes 5 weeks of declining supply so the trend is very likely to continue until January at the very least.

©2020 Cromford Associate

November 23 - On November 11, the average closed price per square foot across all areas & types slipped below 100% of the average list price per square foot for the first time since March 18. We waited a while to report in order to ensure this was not a blip. The percentage on November 11 was 99.99% and it has now dropped to 99.92%. Not a blip.

This signals that the market is cooling slightly. However the long term average is 97.25% and prices still tend to rise when the percentage is above 97%. So this should not be taken as a sign that sales prices may reverse direction any time soon. If it were to drop below the long term average then we would have good reason to become more pessimistic about prices.

©2020 Cromford Associate

November 21 - Based on affidavits of value filed during October we have collected the following statistics on iBuyer activity:

	Opendoor	OfferPad	Zillow	Redfin	All iBuyers Combined
Homes Purchased in October 2021	403	178	356	7	944
Homes Purchased in October 2020	98	89	31	0	218
Annual Change in Purchases	311%	100%	1048%	N/A	333%
Homes Sold in October 2021	395	104	132	11	642
Homes Sold in October 2020	56	77	33	0	166
Annual Change in Sales	605%	35%	300%	N/A	287%
Median Purchase Price in October 2021	$415,500	$395,000	$455,400	$450,000	$428,250
Median Purchase Price in October 2020	$287,700	$276,500	$280,000	N/A	$283,700
Median Sale Price in October 2021	$415,000	$400,000	$409,678	$418,000	$412,000
Median Sale Price in October 2020	$289,250	$285,000	$290,750	N/A	$287,250
Homes in Inventory at the End of October 2021	2,116	497	933	14	3,560
Homes in Inventory at the End of October 2020	247	155	58	0	460
Annual Change in Inventory	757%	221%	1509%	N/A	674%

The iBuyers as a group continued to purchase a very large number of homes in October, though down 18% from the record total of 1,145 in August.

It might be surprising to some that Zillow bought more homes during the month in which they decided to exit the business than in any prior month. However these are contracts which had been signed many weeks earlier which they were legally obligated to complete. We had been puzzled for the last 4 or 5 months why Zillow was willing to pay so much over market value. Perhaps they had some business strategy we were too stupid to understand? It turns out that they were every bit as daft as they looked. Having paid altogether too much for a large number of homes, they made a second big mistake by deciding to sell them in bulk to investors, solidifying their losses. With the current rapid rises in price in full swing again, they could have saved a lot of money by being more patient. It also seems odd that Zillow would blame their 'algorithm' for their many blunders, since they clearly deliberately tweaked that algorithm to over-estimate how home prices would rise during the second and third quarters. Algorithms don't make decisions like that without management input.

Opendoor was also paying too much for many homes over the late spring and summer, but is not cutting many prices and appears to have the necessary patience to eventually sell at a profit, even if it is less than we would normally have expected.

More homes were purchased than sold, yet again, so iBuyer inventory has hit another record high of 3,560.

Going forward, buyers will not be competing with Zillow, but they still have to contend with Opendoor and OfferPad, while buy-to-rent investors are extremely persistent in their acquisition plans and more than make up for the absence of Zillow offers. The big winners over the last several months are the sellers who received freakishly high offers from Zillow and accepted them. That craziness looks to be all over now.

©2020 Cromford Associate

November 21 - Based on affidavits of value filed during October we have collected the following statistics on iBuyer activity:

	Opendoor	OfferPad	Zillow	Redfin	All iBuyers Combined
Homes Purchased in October 2021	403	178	356	7	944
Homes Purchased in October 2020	98	89	31	0	218
Annual Change in Purchases	311%	100%	1048%	N/A	333%
Homes Sold in October 2021	395	104	132	11	642
Homes Sold in October 2020	56	77	33	0	166
Annual Change in Sales	605%	35%	300%	N/A	287%
Median Purchase Price in October 2021	$415,500	$395,000	$455,400	$450,000	$428,250
Median Purchase Price in October 2020	$287,700	$276,500	$280,000	N/A	$283,700
Median Sale Price in October 2021	$415,000	$400,000	$409,678	$418,000	$412,000
Median Sale Price in October 2020	$289,250	$285,000	$290,750	N/A	$287,250
Homes in Inventory at the End of October 2021	2,116	497	933	14	3,560
Homes in Inventory at the End of October 2020	247	155	58	0	460
Annual Change in Inventory	757%	221%	1509%	N/A	674%

The iBuyers as a group continued to purchase a very large number of homes in October, though down 18% from the record total of 1,145 in August.

It might be surprising to some that Zillow bought more homes during the month in which they decided to exit the business than in any prior month. However these are contracts which had been signed many weeks earlier which they were legally obligated to complete. We had been puzzled for the last 4 or 5 months why Zillow was willing to pay so much over market value. Perhaps they had some business strategy we were too stupid to understand? It turns out that they were every bit as daft as they looked. Having paid altogether too much for a large number of homes, they made a second big mistake by deciding to sell them in bulk to investors, solidifying their losses. With the current rapid rises in price in full swing again, they could have saved a lot of money by being more patient. It also seems odd that Zillow would blame their 'algorithm' for their many blunders, since they clearly deliberately tweaked that algorithm to over-estimate how home prices would rise during the second and third quarters. Algorithms don't make decisions like that without management input.

Opendoor was also paying too much for many homes over the late spring and summer, but is not cutting many prices and appears to have the necessary patience to eventually sell at a profit, even if it is less than we would normally have expected.

More homes were purchased than sold, yet again, so iBuyer inventory has hit another record high of 3,560.

Going forward, buyers will not be competing with Zillow, but they still have to contend with Opendoor and OfferPad, while buy-to-rent investors are extremely persistent in their acquisition plans and more than make up for the absence of Zillow offers. The big winners over the last several months are the sellers who received freakishly high offers from Zillow and accepted them. That craziness looks to be all over now.

©2020 Cromford Associate

November 19 - John Burns publishes a Rent Index BSFRI™, which measures the prices for new single-family leases in 63 markets across the USA, including Phoenix.

Their latest numbers are for September 2021 and they find that the effective rent across the USA rose 6% year over year. However Phoenix showed the highest rental rate increase of all 63 markets, coming in at 14% higher year over year.

This shows why investors are extremely interested in purchasing single-family homes in Phoenix. The receipts from rents are rising faster than anywhere else in the country. Rents are rising because there are more people wanting to rent than there are rental properties. Many families are starting to see single-family rentals as preferable to apartments or condo-style rentals. This effect is probably supported by living conditions during a pandemic.

While this continues, we can expect investor demand to remain robust, which in turn prevents the market cooling down as it would if ordinary home buyers were the only source of demand.

©2020 Cromford Associate

November 18 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

We have 7 cities where the market moved in favor of sellers over the last month and 10 where the market moved in favor of buyers. However, the average change over the past month was +1.2%, so the recent trend continues to favor sellers. Over the last week, the majority of cities saw their CMI move higher.

The short term outlook is for prices to move higher into record territory.

©2020 Cromford Associate

November 10 - We have now got preliminary data collated from the Maricopa County affidavits from October and it shows the following:

There were 10,346 closed sales, which is 8,5% below the count for October 2020

New home closings totaled 1,350, down 22% from a year ago

Re-sales totaled 8,996, up 6.6% from October last year

New home sales are down dramatically because of the inability of the builders to complete home construction (shortage of components, supply chain delays, labor shortages), not because of lack of demand.

The overall median was $422,500, up 24% from $342.000 in October 2020.

The new home median was $447,352, up 18% from $379,132 a year ago

The re-sale median was $420,000, up 25% from $335,000 a year ago

©2020 Cromford Associate

November 8 - Despite some observers speculating that a market top has taken place, the data emphatically suggests otherwise. Here is the average $/SF daily chart for all areas & types within the ARMLS database:

We can see that the average $/SF for listings under contract (the green series) is up more than $10 over the past 2 months and set a new all-time record yesterday. The red series shows the monthly average sales price per square foot for closed listings and this is also up around $10 over the past 2 months, with a record high on Monday last week. This should not be surprising since the green series acts as a leading indicator for the red series.

The brown series is the monthly average list price per square foot for closed listings. This tells us that the market is still hot, since the red series is higher than the brown series. In historical terms, the red series is almost always lower than the brown series except when the market is very unbalanced with strong demand and extremely low supply. However the gap between these series is smaller now that is has been for several months. This means the peak of the frenzy is past and we are just in a very strong seller's market.

It should be obvious, I hope, that passing a peak in the frenzy is not the same as a market top. A market top occurs when demand is weaker than supply. This condition is not even on the horizon, never mind behind us.

©2020 Cromford Associate

November 6 - The use of Coming Soon listings peaked in September and has since dropped sharply. Today the number of coming soon listings is 31% lower than it was in September and the trend is still heading down.

I am not sure what this indicates, but the change is so substantial that I thought I should put it out there. No doubt some of our subscribers have a good explanation. If so I shall share it here.

©2020 Cromford Associate

November 4 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

Like last week, we have 5 cities where the market moved in favor of sellers over the last month and 12 where the market moved in favor of buyers. The average change over the past month was -0.4%. One week earlier the average change was -2.2% so the trend is starting to favor sellers. This can be verified when we look at the changes over the last week. The CMIs for most cities have started to move higher.

We note that the higher priced areas of the Northeast Valley are doing much better than usual, occupying 3 out of the top 4 spots. Paradise Valley was the strongest mover, gaining 15% over the past month. Fountain Hills has cooled down, but is still hot enough to occupy the number one spot.

With temperatures back down to pleasant levels it looks like we are going to see a lot of buying interest from out of state, especially from those states that make Arizona home prices look very cheap.

©2020 Cromford Associate

November 3 - It turns out that buying houses at a high price and selling them for less money is not such a great business model.

Zillow has announced that it is winding down its Zillow Offers iBuying business.

See here for the official announcement. About 25% of Zillow's workforce will be terminated as a result.

Our view is that this does not prove the iBuyer business model is unsustainable. Just that Zillow was incapable of determining accurate market values of homes.

©2020 Cromford Associate

November 1 - The Census Bureau has provided the single-family permit counts for September and they are showing a new downward trend. Only 2,325 permits were issued in Maricopa and Pinal counties during September, which is the lowest monthly total since May 2020.

It is also down 25% from September last year.

It would appear that the home builders are unable to meet demand because of shortages of component products and labor. This partly explains why they have been so reluctant to take orders. If they take orders for homes they are unable to build they are in danger of setting prices far too low as well as disappointing their customers.

©2020 Cromford Associate

October 28 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

 

We have 5 cities where the market moved in favor of sellers over the last month and 12 where the market moved in favor of buyers. The average change over the past month was -2.2%. CMIs are still very high by normal standards and falling only slowly.

With all cities over 200, prices are all but certain to rise during the fourth quarter.

©2020 Cromford Associate

October 27 - The latest S&P / Case-Shiller® Home Price Index® numbers were published yesterday. They cover home sales during the period June 2020 to August 2021. As such they reflect the somewhat slower appreciation that we experienced during the summer.

Comparing with the previous month's series we see the following changes:

Tampa +2.46%

Miami +2.26%

Phoenix +2.24%

Las Vegas +2.23%

Atlanta +1.92%

Charlotte +1.53%

Chicago +0.99%

Denver +0.87%

Los Angeles +0.86%

Portland +0.83%

Cleveland +0.79%

Detroit +0.71%

Washington +0.56%

San Diego +0.53%

Boston +0.53%

New York +0.49

San Francisco +0.41%

Minneapolis +0.33%

Dallas +0.18%

Seattle +0.15%

Phoenix has slipped to third place but remains well above the national average, which was 1.2%

Comparing year of year, we see the following changes:

Phoenix +33.3%

San Diego +26.2%

Tampa +25.9%

Dallas +24.6%

Seattle +24.3%

Miami +23.8%

Las Vegas +23.8%

Charlotte +21.7%

Denver +21.5%

San Francisco +21.2%

Atlanta +20.2%

Portland +19.2%

Los Angeles +18.4%

Boston +17.7%

New York +17.2%

Detroit +15.7%

Cleveland +15.5%

Washington +15.1%

Minneapolis +14.0%

Chicago +12.7%

Phoenix is top of the table for the 27th consecutive month.

©2020 Cromford Associate

October 25 - As we predicted, the average price per square foot is resuming its upward trajectory now that the third quarter is over.

The $/SF for closed listings has reached the new record level of $256 having been stuck around $251 for some time. It has further to go, given how much higher the under contract $/SF is (at the $270 level).

It is also very clear that the gap between asking price and contract price has closed significantly over the past 2 months, a sign of a cooling market.

©2020 Cromford Associate

October 21 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

We have 6 cities where the market moved in favor of sellers over the last month and 11 where the market moved in favor of buyers. The average change over the past month was -2.5%. CMIs are still very high by normal standards.

The market is cooling but very slowly. Prices are still on a long term upward trend and now that the third quarter is over we can expect a resumption of home price appreciation.

You would not deduce this by looking at Zillow listings, because so many of them are showing large list price cuts. However this is due to them being purchased at more than market value, for reasons we cannot explain. Opendoor also paid more than market value for many of the homes they purchased during the third quarter. However they appear to be more reluctant to make price cuts on their listings. Their strategy appears to be to wait for the market value to catch up. Eventually the price they paid will probably seem cheap. You need more patience for this strategy and it ties up a lot of capital, but given the CMI table above, it will probably be successful in avoiding having to sell homes at a loss.

At the current rate of decline, it will take a very long time for CMI numbers to drop to where they would indicate balance between buyers and sellers (a number in the region of 100).

However, the picture could change if investors became less enthusiastic. At the moment, residential real estate is seen as a relatively safe place to park excess capital, so funds are flowing towards the purchase of homes as investment. Demand from traditional buyers is relatively light due to growing affordability issues. This does not apply as much to luxury home buyers who have fewer concerns about affordability and are likely to be more active during the fourth quarter than they were during the third.

©2020 Cromford Associate

October 20 - Of 252 Zillow-owned listings in Phoenix, 182 have had at least one price reduction with the average drop $41,000.

Of the listings shown active on Zillow's website, the average current listing price is 6% less than the average price they paid, according to the affidavit of value filed with the county. Of course they charged the seller a fee, but this 6% represents an average gross loss of $28,000 per home.

This is a very strange business model. Buy high, sell low.

The price cuts are being made very swiftly on homes that do not sell. They do not seem to be waiting for the market to catch up with their initial pricing.

©2020 Cromford Associate

October 19 - Some of you may be wondering why the average price per square foot was so unimpressive in September. Compared with September 2020, closings in the Northeast Valley were down 16%. The Southeast Valley was flat while the Central and North Valley was up 13% and the West Valley up 10%.

We all know that the most expensive part of the Greater Phoenix market is the Northeast Valley. So if closings there were down 16% while other areas grew, this is going to have a negative affect on average price, median price and average $/SF.

This is something we see almost every year. Buyers in the Northeast Valley tend to be far more sensitive to the summer heat than buyers elsewhere. Third quarter pricing is therefore weak almost every year.

We are expecting to see much stronger pricing in the fourth quarter, despite the cooling trend in the overall market.

©2020 Cromford Associate

October 17 - An article in Bloomberg News states that Zillow has paused new acquisitions and is now handing leads over to local real estate agents. The claim is that the volume of recent acquisitions has overwhelmed its ability to turn homes round and list them for sale. It is stated that labor for the repainting and refitting of carpets is in short supply. We can see that many homes that have been purchased recently have not been listed on ARMLS yet, but we can also see that some of those that have been listed are seeing quite a high volume of price cuts. Some of the asking prices are now below the price paid by Zillow just a few weeks earlier.

There is no sign of this in the flow of deeds being recorded in Maricopa and Pinal counties, but that is to be expected. If Zillow has paused its purchasing there are probably several week's worth of transactions still going through the process of closing and we would not expect to see much of a drop off in deed numbers until next month.

There would be a more immediate impact in demand measurements. We will be on the lookout for a corresponding change in active listings and listings under contract.

©2020 Cromford Associate

October 14 - All our computer equipment is being moved to a new location today, so the usual table of CMI numbers for the largest 17 cities will not appear this week. Weekly updates of the Squirrel charts are also affected. Tableau charts are not affected and will continue to be updated daily. Normal service will be resumed from our new location in County Durham next week.

©2020 Cromford Associate

October 12 - Based on affidavits of value filed during September we have collected the following statistics on iBuyer activity:

	Opendoor	OfferPad	Zillow	Redfin	Knock	All iBuyers Combined
Homes Purchased in September 2021	585	152	321	4	0	1,062
Homes Purchased in September 2020	73	86	27	0	0	186
Annual Change in Purchases	701%	77%	1089%	N/A	0%	471%
Homes Sold in September 2021	394	103	100	8	0	605
Homes Sold in September 2020	61	50	36	0	3	150
Annual Change in Sales	546%	106%	178%	N/A	-100%	303%
Median Purchase Price in September 2021	$419,900	$397,750	$473,718	$375,000	N/A	$435,396
Median Purchase Price in September 2020	$279,050	$270,750	$261,000	N/A	N/A	$276,000
Median Sale Price in September 2021	$425,000	$400,000	$392,500	$347,450	N/A	$412,000
Median Sale Price in September 2020	$285,000	$290,000	$285,500	N/A	$363,003	$287,250
Homes in Inventory at the End of September 2021	2,108	423	709	18	0	3,258
Homes in Inventory at the End of September 2020	204	142	60	0	0	406
Annual Change in Inventory	933%	198%	1082%	N/A	N/A	702%

The iBuyers as a group continued to purchase a very large number of homes in September, though down 7% from the record total of 1,145 in August. Opendoor has eased up after peaking in late July and the first half of August. Zillow continues to expand and during the first week of October has exceeded Opendoor in weekly purchases for the first time. OfferPad remains steady at about 150 per month.

The median price for homes purchased continued to rise for Zillow, reaching a new record of $473,718. This an increase of 83% over September 2020. The other iBuyers saw their median purchase price fall compared with August. However, they are up 50% for Opendoor and 47% for OfferPad, both much higher than the increase in the median price for the market as a whole (25%).

We note that Zillow is showing many price drops among their active listings and has sold several homes for less than the price they paid for them.

Sales counts are up substantially from their very low numbers last year, reaching 605, but they still lag a long way behind purchase counts. We therefore see another increase in inventory levels. The iBuyers held 3,258 homes at the end of September across Maricopa and Pinal counties. This is a very substantial number when compared with the total number of active listings on ARMLS (6,828). 

©2020 Cromford Associate

October 9 - The number of active listings (excluding UCB and CCBS) across all areas & types in the ARMLS database has just risen above 8,000 for the first time since late 2020. Given that the rate of incoming new listings is not high, this is a sign of a cooling market. Admittedly, 8,000 is still a very low number by historic standards, but it must offer some relief to buyers, given that as recently as March the number was 4,673. The cooling trend is very weak compared with the second quarter, but it is there.

Sellers may take some persuading to curb their enthusiasm, but for the month ending October 9, the average closing price was only 0.26% above list price. On June 23 this average was 1.82%, and the current trend suggests we could be below 100% of list by the end of the year. There is no guarantee that the current trend will hold, of course.

©2020 Cromford Associate

October 7 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

We have 8 cities where the market moved in favor of sellers over the last month and 9 where the market moved in favor of buyers. The average change over the past month was -2.2%.

This is a less positive picture than we saw a week ago. Although we remain is strong seller's market, there are more weakening signs than last week and it looks more likely that the CMI will start falling again after its period of stability over the past several weeks.

Only 1 city remains over 500 and only 2 over 400, while Maricopa is flirting with a drop below 200. Maricopa was the canary in the coal mine in 2006, with appreciation going negative as early as June 2006, long before the housing market was generally perceived to be heading for disaster. The situation now is very different from 2006, but if the weakening trend starts to set in again, the City of Maricopa is a good one to watch. To balance the case, Queen Creek (including San Tan valley) was also an early mover in 2006, but at the moment its CMI is increasing by a monthly rate of 8%, the highest of any city in the top 17. Room for optimists as well as pessimists.

If it were not for investors and iBuyers the market would be cooling much more quickly that it is. However the high end in Fountain Hills and Scottsdale, as well as Cave Creek and Paradise Valley, is little affected by these buyers and all of these cities remain woefully short of supply compared with normal.

©2020 Cromford Associate

October 5 - We have preliminary affidavit counts for Maricopa County in September and they show the following:

Re-sales totaled 9,589 which is up 8% from September 2020. New sales came in at 1,668 which is DOWN 7% from September 2020. The poor showing from new homes is due to the inability to build fast enough rather than a lack of demand. Supply chain problems and chronic labor shortages are limiting the developer's ability to capitalize on the market strength.

The re-sale median was $415,000 up 26% from September 2020. The new home median was $412,686, up only 11%.

The fact that developer prices are usually fixed at contract signing is limiting their ability to sell at market price. We are seeing many examples of brand new homes being re-sold at much higher prices shortly after their initial purchase. One specialist investor has resold a dozen new homes for a profit of more than $600,000. We can expect more developers imposing contract terms to try to prevent this in future.

©2020 Cromford Associate

October 4 - The number of homes purchased last month to be used as rental properties by investors in Maricopa County is up 77% from September 2020.

Homes purchased by owner occupiers as their first or second home are down 4% over the same time frame.

The nature of demand has changed dramatically over the past 12 months.

©2020 Cromford Associate

October 1 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

 

We have 9 cities where the market moved in favor of sellers over the last month and 8 where the market moved in favor of buyers. The average change over the past month was -0.8%

Although several cities moved sharply in one direction (Fountain Hills) or another (Cave Creek, Maricopa), the overall situation saw only a small change. We are still uncertain whether the next major trend will be higher or lower.

New listings have been arriving at a slower pace, although the iBuyers have amassed a large inventory which could come to market over a short period of time. Demand is looking strong and continues to head higher. However a large part of that demand is coming from investors and iBuyers rather than traditional home buyers.

Developers are finding it tough to increase supply, with major problems in the supply chains for building materials and ongoing labor shortages. We are not expecting a huge up-tick in supply from new homes in the near term.

We remain in a market heavily tilted in the seller's favor.

©2020 Cromford Associate

September 28 - The latest S&P / Case-Shiller® Home Price Index® numbers were published today. They cover home sales during the period May 2020 to July 2021. As such they reflect the extremely high rates of appreciation that we experienced during the second quarter of 2021. However July 2021 onward has seen a marked slow down in pricing movement which is not yet reflected in the Case-Shiller HPI.

Comparing with the previous month's series we see the following changes:

Phoenix +3.32%

Tampa +2.94%

Las Vegas +2.77%

Dallas +2.35%

Atlanta +2.21%

Miami +2.17%

Charlotte +2.17%

Denver +1.78%

San Diego +1.62%

Portland +1.53%

Los Angeles +1.43%

Chicago +1.24%

Minneapolis +1.24%

Detroit +1.17%

San Francisco +1.16%

Boston +1.15%

Cleveland +1.12%

New York +1.08%

Seattle +0.89%

Washington +0.81%

The National index gained 1.62%, quite a bit lower than last month. Phoenix once again rose by more than twice the national percentage and retained its position at the top of this table.

The year over year comparisons look like this:

Phoenix +32.4%

San Diego +27.8%

Seattle +25.5%

Tampa +24.4%

Dallas +23.7%

Las Vegas +22.4%

Miami +22.2%

San Francisco +22.0%

Denver +21.3%

Charlotte +20.9%

Portland +19.5%

Los Angeles +19.1%

Boston +18.7%

Atlanta +18.5%

New York +17.8%

Cleveland +16.2%

Detroit +16.1%

Washington +15.8%

Minneapolis +14.5%

Chicago +13.3%

The National Index gained 19.7%, half way up this table. Phoenix has remained at the top of the table for 26 consecutive months, a new all-time record.

©2020 Cromford Associate

September 27 - Looking at the average price and median price charts over the last few months, you might get the impression that house prices are flat. This seems odd given that so many homes are going for more than the asking price. The secret to solving this riddle is to look at the average square foot chart:

Here we see the average size of a closed home dropping from 2,046 to 1,952 between mid-May and late September. Not only is this going to cause a 5% headwind to average prices, it also signifies a change in the mix away from high-end and towards the low and mid-range. This will push the average and median for closed homes downwards.

We do not expect the drop in average home size to be maintained. After all, homes are not shrinking in size. Average and median prices are likely to bounce back once the high end buyers return, when temperatures drop below 100 degrees.

©2020 Cromford Associate

September 25 - iBuyers selling homes to investors is not a new thing. It has been happening for many years. However, just as investors are buying more homes in general, they are also buying more homes from iBuyers. iBuyers have been recruiting specialized staff to focus on serving their investor customers.

If we simplify things, by examining whether the buyer is an individual or couple (which we will call private), or a company of some sort, then we see the following counts of iBuyer sales by year across Maricopa and Pinal Counties:

	2018	2019	2020	2021
Company	273	592	341	617
Private	2509	5561	2896	1790
% Company	10%	10%	11%	26%

We can see that the iBuyers have traditionally sold about 1 in 10 of their inventory to a company rather than a private buyer. In 2021 this has grown to almost in 3

Look at how the trend has accelerated during 2021:

2021	Q1	Q2	Q3
Company	163	208	246
Private	680	570	540
% Company	19%	27%	31%

It will be interesting to see how far this trend will run.

©2020 Cromford Associate

September 23 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

We have 4 more cities where the market moved in favor of sellers over the last month. These cities now include Scottsdale, Gilbert, Phoenix and Queen Creek.

However some of the cities moving in favor of buyers have moved to a larger extent than last week, including Cave Creek, Paradise Valley, Mesa and Tempe.

The average change over the past month is +0.4%, a smaller rise than we reported a week ago. So we do not have much of a reversal of the downward trend, just a plateau where the future direction is uncertain.

We must remember that all cities are very much in a seller's market with supply unable to get even close to meeting demand, but the important thing to watch for is the trend. Right now there is not much of a trend, just uncertainty. If history is any guide, then a new trend will emerge pretty soon. Watch this space for early news of its direction.

©2020 Cromford Associate

September 20 - The Cromford® Market Index has stabilized over the past few weeks and failed to follow through on its threat to drop below 240.

We can see a slight upward trend over the past 3 weeks confirming that demand has grown faster than supply. The rate of arrival of new listings has fallen back after a busy August. Demand is improving but a lot of this is coming from investors and iBuyers so could die away quickly. Demand from ordinary home-buyers is subdued, no matter what the media might be telling you.

If the iBuyers stop their spending spree then demand could fall quickly and the CMI would probably resume a downward trend.

©2020 Cromford Associate

September 16 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

Like last week, we have 6 cities where the market moved in favor of sellers over the last month. These cities now exclude Cave Creek, but Chandler has taken its place.

Three more cities (Gilbert, Scottsdale and Phoenix) moved lower by less than 1% over the last month and two of these (Phoenix and Scottsdale) have moved in favor of sellers over the last week.

The average change over the past month is +0.7%, the same as we reported a week ago.

©2020 Cromford Associate

September 15 - We have mentioned several times that demand has shifted away from owner-occupiers of primary residences towards landlords, investors, fix-and-flips and second homes.

We can see this from the intended use stated in the affidavits of value and comparing August 2021 with August 2020 in Maricopa County we see:

Sales of homes intended to be primary residences are down 14% to 6,906

Sales of homes intended to be rented are up 97% to 2,176

Sales of home intended to be secondary residences are up 98% to 2,01

©2020 Cromford Associate

September 12 - Based on affidavits of value filed during July we have collected the following statistics on iBuyer activity:

	Opendoor	OfferPad	Zillow	Redfin	Knock	All iBuyers Combined
Homes Purchased in August 2021	728	152	255	10	0	1,145
Homes Purchased in August 2020	66	81	34	0	0	181
Annual Change in Purchases	1003%	88%	650%	N/A	0%	533%
Homes Sold in August 2021	255	87	36	6	0	384
Homes Sold in August 2020	54	48	25	0	2	129
Annual Change in Sales	372%	81%	44%	N/A	-100%	198%
Median Purchase Price in August 2021	$445,100	$400,000	$448,300	$412,500	N/A	$439,800
Median Purchase Price in August 2020	$254,000	$261,500	$281,000	N/A	N/A	$260,100
Median Sale Price in August 2021	$431,000	$397,798	$369,500	$532,500	N/A	$420,000
Median Sale Price in August 2020	$284,750	$272,950	$263,000	N/A	$394,005	$280,000
Homes in Inventory at the End of August 2021	1,917	374	488	22	0	2,801
Homes in Inventory at the End of August 2020	191	106	69	0	5	371
Annual Change in Inventory	904%	253%	607%	N/A	-100%	655%

The unprecedented buying spree accelerated during August, with Opendoor and Zillow in particular paying extremely high prices in order to grow their inventory. OfferPad has been somewhat less aggressive in its offers but still grew acquisitions by 88% compared to this time last year.

As a group, the iBuyers acquired 1,145 homes in August, by far their highest monthly total ever. In the last 3 months they have bought 2,869 homes and sold only 983. Buying three times as many homes as they sell means they have grown inventory to a record of 2,801. We need to consider that the active listing count on ARMLS for Maricopa and Pinal was around 6,800 at the end of August, excluding UCB and CCBS listings. Some but not all of the inventory is listed on ARMLS, but either way, the iBuyers now hold a substantial percentage of the overall available stock of homes for sale.

As of September 1, Opendoor had 331 listings in active status (not UCB or CCBS) while Zillow had 202 and OfferPad 162. This represents over 10% of the active listings excluding UCB and CCBS.

We note that all the iBuyers are paying more for the homes they are buying then the homes they sell during the same month. The majority of the homes do not sell in the same month they are purchased, though this is becoming more common as an increasing number are sold to institutional investors. We should remember that the buy price is gross and includes the service charge that the iBuyer makes to the seller.

The median price paid by Opendoor has increased by 75% over the past year. For Zillow the number is 60% and for OfferPad, 53%.

The median price of homes sold in the overall market has increased by only 26%.

©2020 Cromford Associate

September 9 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

Up from 4 last week, we have 6 cities where the market moved in favor of sellers over the last month. These cities now include Glendale and Peoria, so we can see the West Valley market is strengthening

We have 11 cities which moved in favor of buyers, with Maricopa, Paradise Valley, Buckeye and Goodyear the most prominent among them.

The average change for the 17 cities is +0.7%. This is the first time we have seen a positive average change since early March.

Some of the cities that are showing a negative move over the last month, are showing a positive move over the last week. These are Phoenix, Chandler and Queen Creek, all 3 very substantial markets.

The overall CMI has stabilized for now around 345 to 350. Given that normal balance is between 90 and 110, this remains a market that is very skewed in favor of sellers. However the demand is being heavily driven by investors and iBuyers, very different from this time last year.

©2020 Cromford Associate

September 8 - The average rental price per square foot, based on ARMLS listings, has increased from $1.00 in September 2019 to $1.36 this month. That is a 36% increase in just two years and must be a budget problem for tens of thousands of tenants. The 19 year period from September 2000 to September 2019 saw only a 28% rise, so the cost of renting has escalated over a very short period. The housing bubble of 2004-2008 saw little to no rise in rents and in fact the low point was 64 cents in February 2005, just as the for sale market was reaching its highest frenzy. This time is very different - showing that the rapid appreciation in home values is due to real shortage of housing rather than speculative activity based on easy money.

Although the cost of renting has jumped 36% over 2 years, the average home price per square foot has increased by far more - from $169.26 to $262.21 (September month to date), a jump of 55%.

©2020 Cromford Associate

September 2 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

 

Like last week, we have 4 cities where the market moved in favor of sellers over the last month. These cities now include Surprise but Scottsdale lost its place in this short list.

We have 13 cities which moved in favor of buyers, with Maricopa and Goodyear the most prominent among them

Fountain Hills jumped into first place and is in a class of its own with falling supply and rapidly rising demand. More than any other location, Fountain Hills appeals to out of state buyers.

We still have no city under 200, but 5 are now under 300, up from 3 last month.

©2020 Cromford Associate 

August 31 - The latest S&P / Case-Shiller® Home Price Index® numbers were published today. They cover home sales during the period April 2020 to June 2021. As such they reflect f the extremely high rates of appreciation that we experienced during the second quarter of 2021. These have not occurred during the third quarter which saw little change over the last 2 months.

Comparing with the previous month's series we see the following changes:

Phoenix +3.58%

Las Vegas +3.35%

Tampa +3.04%

Dallas +3.02%

Miami +2.97%

San Francisco +2.65%

San Diego +2.56%

Charlotte +2.56%

Atlanta +2.47%

Denver +2.35%

Detroit +2.25%

Portland +2.18%

Los Angeles +1.93%

Chicago +1.93%

Minneapolis +1.84%

Washington +1.72%

Cleveland +1.68%

Seattle +1.54%

Boston +1.28%

New York +0.82%

The National index gained 2.18%, so Phoenix once again rose by far more than the average and retained its position at the top of this table.

The year over year comparisons look like this:

Phoenix +29.3%

San Diego +27.1%

Seattle +25.0%

San Francisco +21.9%

Tampa +21.5%

Dallas +21.3%

Miami +20.1%

Las Vegas +19.8%

Denver +19.6%

Portland +19.2%

Charlotte +19.0%

Los Angeles +18.7%

Boston +18.6%

New York +16.7%

Atlanta +16.5%

Detroit +16.3%

Washington +16.1%

Cleveland +15.4%

Minneapolis +13.8%

Chicago +13.3%

The national index increased by 18.6%. Phoenix has now been at the top of this table for 25 consecutive months, a new record.

©2020 Cromford Associate

August 30 - We are leaving August with the average closed sale $/SF lower than we entered July, as can be seen from the red line in in the chart below:

The red line is 2021, the green is 2020 and yellow is 2019. The date is in DD/MM/YYY format because I captured it from my screen in the UK and Tableau automatically adjusts dates for the user's location.

This situation is similar for $500K to $800K but not quite so striking.

Outside the price range $300K to $800K there is no increase and the red line is far below the green one.

I believe the primary cause is the buying spree that the iBuyers are indulging in, but they are not the only buyers competing for homes in this price range, which now dominates the market.

©2020 Cromford Associate

August 26 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

More signs of the market stabilizing appear in this chart. We now have 4 cities showing improving conditions for sellers and they are all at the top of the table. We also have 3 cities with CMIs over 500 in contrast to zero last week.

There are still 13 cities showing declines in their CMI over the last month, but 4 of these have seen an INCREASE in their CMI over the last week. These are:

Glendale

Peoria

Surprise

Tempe

Gilbert has seen little change over the last 2 weeks with its CMI stuck at a high level around 320.

The current CMI numbers indicate a strong seller's market with the only good news for buyers being that it is not as insane as during the first and second quarters.

Among the secondary cities we see Anthem, Apache Junction, El Mirage, Litchfield Park, Sun Lakes and Tolleson all with CMIs that have moved higher over the last week. There is no city under 200.

The total number of active listings without a contract is still rising, but only very slightly. Only 44 net listings were added over the past week across all areas and types and just 15 in the prior week. It would take many years to get back to a balanced market at this rate. We have just under 7,000 active listings without a contract and a balanced market would need between 25,000 and 30,000.

August 24 - The active listing counts (excluding UCB and CCBS) have almost stabilized over the last 2 weeks and are now showing very little upward momentum. This is bad news for buyers because they are stabilizing at a very low level, although not as low as they were during the early spring. Several cities are seeing declines in supply over the last week, for example:

Scottsdale - 523 listings (529 last week, 545 two weeks ago) - long term average is 2,202

Mesa - 374 listings (378 last week) - long term average is 1,521

Avondale - 36 listings (39 last week, 40 two weeks ago) - long term average 333

The situation is vastly different from that in 2005 when supply exploded and caused the market to crash starting in 2006. We still have a severe shortage of homes for sale, and although affordability problems are reducing normal owner-occupier demand, the demand from investors and iBuyers is taking their place.

©2020 Cromford Associate

August 19 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

 

The cooling trend is definitely slowing down and we now have another town showing a positive change in CMI over the past month - Fountain Hills. The Northeast Valley is clearly out-performing the rest of the valley with inventory staying lower and improving demand trends. Paradise Valley also has stable low inventory but demand there has weakened over the past month.

We are also seeing CMI increases over the past week in two other major cities: Surprise and Tempe. Among the secondary cities we see Apache Junction, El Mirage, Laveen, Sun City West, Sun Lakes and Tolleson all moving higher in the last week. Several more major cities have their CMI move down by very little in the past 7 days: Gilbert, Glendale, Peoria and Phoenix are in that category. They look ripe for a possible turnaround.

Because it is the most leading of leading indicators, there is nothing we can use to forecast the CMI. It is telling us that increases in demand are helping to balance the rise in supply, but supply is still nowhere near enough to meet the demand. Much of that increased demand is coming from iBuyers and buy-to-rent investors. These buyers do not have to worry about the affordability of their monthly mortgage payments. However their demand can be switched off in seconds by a simple business decision, as happened in 2Q 2020. We therefore need to treat their demand as less sustainable than that from regular owner-occupiers. These owner-occupiers are struggling with affordability concerns right now, despite interest rates that remain low.

If the overall CMI stabilizes above 300, it means prices still have upward momentum that will probably manifest during the fourth quarter after a relatively quiet third quarter.

©2020 Cromford Associate

August 18 - Based on affidavits of value filed during July we have collected the following statistics on iBuyer activity: 

	Opendoor	OfferPad	Zillow	Redfin	Knock	All iBuyers Combined
Homes Purchased in July 2021	657	143	156	6	0	962
Homes Purchased in July 2020	59	40	44	0	0	143
Annual Change in Purchases	1014%	258%	255%	N/A	0%	573%
Homes Sold in July 2021	171	84	50	7	0	312
Homes Sold in July 2020	90	53	15	0	4	162
Annual Change in Sales	90%	58%	233%	N/A	-100%	93%
Median Purchase Price in July 2021	$427,800	$387,500	$424,794	$380,000	N/A	$422,900
Median Purchase Price in July 2020	$259,750	$240,000	$260,000	N/A	N/A	$259,200
Median Sale Price in July 2021	$408,000	$397,800	$389,000	$357,601	N/A	$400,000
Median Sale Price in July 2020	$272,000	$289,000	$256,000	N/A	$351,617	$274,000
Homes in Inventory at the End of July 2021	1,444	309	269	18	0	2,040
Homes in Inventory at the End of July 2020	181	71	60	0	5	317
Annual Change in Inventory	698%	335%	348%	N/A	-100%	544%

The numbers may be slightly higher than real life, because we have been unable to remove all the duplicate recordings, of which there are quite a few. Duplicate deeds are a common occurrence, and a constant problem for data analysts. We take the time to eliminate them in our Cromford® Public charts. However in the interest of timeliness, we use the uncorrected counts in the table above.

The iBuyers have been on an unprecedented buying spree over the summer, with Opendoor and Zillow in particular paying extremely high prices in order to do so. We have seen reports of them paying $30,000, $50,000 and in one case $75,000 more than the next highest offer. OfferPad has been less aggressive in its offers and as a result, slipped into third place for purchase volumes in July. 

Opendoor made 657 purchases, by far their busiest month ever. Their previous record was 366 in September 2019, except for last month's 489.

OfferPad purchased 143 homes, less than in June, but still close to their high point.

Zillow purchased 156, a record total since their previous high was 132 in February 2019.

Redfin are still an insignificant player as far as their iBuying volumes are concerned and do not appear to be interested in building a big inventory of homes to sell. 

Sales are ramping up, but currently lag far behind the purchases, with a large increase in inventory over the last months for all the current players except Redfin.

We have frequently seen a few homes going to investors, but in the last 3 months more iBuyer homes are being resold to large scale landlords, including RS, AH4R and Progress. Since June 1, Opendoor has resold 37 homes to RS, 21 to AH4R and 8 homes to Progress. Smaller investors have also obtained a few homes from Opendoor, including Pagaya, FKH, Mile High and Olympus. Of 398 Opendoor sales since June 1, 91 have gone to companies rather than individuals, which is a 23% share pf their sales.

Zillow disposed of 19% of its sales to companies, with Progress (10) the largest single buyer.

OfferPad was not quite so active in selling to investors, with 11% of its sales going to 4 companies.

Compared to 12 months ago, when owner-occupiers were driving the market, we are seeing much more demand being driven by investors and iBuyers. It is not all large scale investors - much of the current demand is from small-scale investors too.

©2020 Cromford Associate

August 14 - The listing success rate for all areas & types has dropped to 88.9% and for the first time in 15 months is lower than a year earlier.

However demand has picked up over the last couple of weeks and is starting to slow the cooling trend that started in March. This can be seen in the number of listings under contract which has jumped higher for 2 weeks now.

©2020 Cromford Associate

August 12 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

This table is gradually starting to show a deceleration in the cooling of the market. Scottsdale has joined Cave Creek in showing a positive change in CMI over the past month.

Although the other 15 cities have all seen their CMI decline over the last month, two are reporting increases over the last week. These are Fountain Hills and Avondale.

Supply is still growing in the vast majority of locations, but demand is also starting to increase in many of them

©2020 Cromford Associate

August 11 - Over the past 3 or 4 months, the percentage of single-family homes purchased to rent to a third party has increased from around 14% to around 18% in Maricopa County. We have seen much higher percentages in the past, particularly between 2009 and 2014, but the current level is the highest level of investor buying since 2014. The peak buying month for investors was July 2012 with more than 33%, and the percentages always seem to hit a high point during the third quarter, mainly because investors are not put off by the high temperatures of summer, like owner occupiers often are.

Rapidly escalating rental prices and appreciating asset values are encouraging more investors to build up their inventory of homes to rent. This means they are willing to offer higher prices and compete more aggressively with other buyers. Normal home buyers appear to have lost some of their enthusiasm for paying 30% more than last year, but investors and iBuyers appear to be OK with that situation.

Institutional investors have increased their buying along with "mom & pop" investors. Because they use such a large variety of legal entity names, it can be tricky to identify quite how many different institutional players there are. However if we focus on the mailing address, we can group buyers together into clusters with the same address.

In the last 3 months, the buyers with more than 200 properties added are:

410 N Scottsdale Rd #1600 - 1,034 properties - this is Opendoor - an iBuyer

PO Box 4090 - 660 properties - this is Progress Residential - a large scale rental operator with headquarters in Scottsdale AZ

717 N Harwood #2800 - 385 properties - this is RS - very active in rental ownership and headquartered in Dallas TX

2150 E Germann Rd #1 - 262 properties - this is OfferPad - an iBuyer

4343 N Scottsdale Rd #390 - 224 properties - this is Zillow - an iBuyer

The larger scale institutional buyers attract a lot of attention but we can see that the iBuyers as a group are acquiring more homes. Of course they usually re-market those homes within a month or two, whereas the homes purchased to become rentals are removed from the re-sale inventory for a much longer term. We also note that small scale investors are still more significant as a whole than the large scale ones. Roughly 3 out of every 4 homes purchased as a rental are acquired by small scale investors. However 15 years ago, the small scale investors had 100% market share and large scale investors did not play in the single-family detached home space at all. The trend towards consolidation is also accelerated by many mergers between the large players.

©2020 Cromford Associate

August 8 - The appreciation rate is tumbling quickly now that inventory is growing. The appreciation can be measured in many different ways, but based on the monthly average $/SF, the appreciation rate for all areas & types within the ARMLS database is now below 30%, having peaked at over 39% at the end of May. Obviously the rate based on the annual average $/SF is slower to react and is now leveling off near its peak at 24.4%.

Both measures of appreciation are likely to fall further over the rest of 2021, though they are unlikely get back down to what we could consider normal during the next 4 months. Normal would be something less than 5%. We last saw that in 2016

©2020 Cromford Associate

August 7 - The affidavit counts for Maricopa County in July give us the following key numbers:

overall units closed dropped 4.3% compared with a year earlier, from 11,205 to 10,720

the median sales price increased by 26.0% from $325,000 to $409,468

new homes closed fell 20.8% from 1,662 to 1,316

the new home median sales price rose 15.4% from $363,511 to $419,618

re-sale units closed fell 1.5% from 9,543 to 9,404

the re-sale home median sales price rose 27.9% from $317,000 to $405450

New production has suffered from a number of problems with supply of essential materials. There is no shortage of demand, but they cannot complete homes quickly enough. For this reason many builders are not accepting orders until much later in the production cycle. That way prices realized will tend to be higher. The median price of a new homes is once again higher than a re-sale, but re-sales are still more expensive at the moment based on average price per square foot.

There is more re-sale supply than there was a year ago in the high volume price range from $400,000 to $800,000. However supply below $400,000 is down sharply and supply over $1 million is lower than this time last year.

©2020 Cromford Associate

August 5 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

A similar table to last week but with a handful of developments that look positive for sellers. Cave Creek has consolidated its position at the top of the table and its CMI has increased for 7 consecutive weeks. This is primarily because its supply has been declining for 7 weeks, but during the last 3 weeks its demand has also increased.

Cave Creek looks lonely at the top right now, but Scottsdale is making a serious attempt to join it. Scottsdale's CMI has increased for 2 weeks with lower supply and higher demand over that short period.

Fountain Hills has also seen demand increase over the last 3 weeks, while supply has stabilized after a 14 week period of continuous increases.

Our conclusion is that the Northeast Valley is behaving differently from the rest of Greater Phoenix. Across the whole market, supply is growing fastest between $400,000 and $800,000 while there is very little increase in supply over $1,500,000.

Among the secondary cities, Anthem, Apache Junction, Laveen, Litchfield Park, Sun City West and Sun Lakes have improved for sellers over the past week. Casa Grande has seen a very sharp increase in active listings and now has more homes available than this time last year.

©2020 Cromford Associate

August 3 - CoreLogic has just issued their Home Price Insights report for June 2021.

This reports the highest ever annual appreciation rate in the USA of +17.2%

One year ago their forecast for appreciation was -6.6%.This must go down as the most inaccurate home price forecast ever. Missed by 23.8 points.

Their current forecast for June 2022 is +3.2%. We will see how that turns out next year.

©2020 Cromford Associate

August 1 - Although inventory levels remain very low by normal market standards, the rise in the active listing counts over the past 4 months has been very noticeable. Here are a few examples, using the single-family detached segment and excluding UCB and CCBS listings:

Buckeye - up from 60 on April 1 to 155 on August 1

Casa Grande - up from 39 on April 1 to 125 on August 1

El Mirage - up from 6 on April 1 to 18 on August 1

Fountain Hills - up from 27 on April 1 to 70 on August 1

Laveen - up from 20 on April 1 to 51 on August 1

Maricopa - up from 46 on April 1 to 143 on August 1

Waddell - up from 9 on April 1 to 28 on August 1

Wittmann - up from 9 on April 1 to 27 on August 1

However the active-adult and luxury segments have not experienced the same rise in supply, for example:

Paradise Valley - up from 117 to 120 between April1 and August 1

Rio Verde - down from 18 to 13 between April 1 and August 1

Sun City - unchanged between April 1 and August 1 at 65

Sun City West - unchanged between April 1 and August 1 at 36

©2020 Cromford Associate

July 29 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

A similar table to last week with all but one city seeing their CMI drop quickly over the last month. Cave Creek is still the exception thanks to a fall in supply and has now reached the number one spot for the first time ever.

Scottsdale is making an attempt to join Cave Creek. It's CMI has risen during the last week from 390.6 to 394.1 thanks to improving demand and a slight fall in supply. We do not know yet if this is an anomaly or a new trend.

All the other 15 cities are moving in favor of buyers.

©2020 Cromford Associate

July 27 - The latest S&P / Case-Shiller® Home Price Index® numbers were published today. They cover home sales during the period March 2020 to May 2021. As such they reflect more of the extremely high rates of appreciation that we experienced during the second quarter of 2021.

Comparing with the previous month's series we see the following changes:

Phoenix +3.75%

Las Vegas +2.92%

San Diego +2.86%

Dallas +2.77%

Seattle +2.76%

San Francisco +2.56%

Tampa +2.50%

Charlotte +2.43%

Portland +2.41%

Miami +2.37%

Denver +2.24%

Atlanta +2.19%

Los Angeles +2.14%

Minneapolis +2.14%

Chicago +1.77%

Detroit +1.74%

Washington +1.71%

Cleveland +1.52%

Boston +1.42%

New York +1.08%

Phoenix is on top of this table once again, comfortably ahead of the national average, which was 2.14%

The year over year comparisons look like this:

Phoenix +25.9%

San Diego +24.7%

Seattle +23.4%

Dallas +18.5%

San Francisco +18.2%

Tampa +18.0%

Portland +17.5%

Denver +17.4%

Boston +17.4%

Los Angeles +17.0%

Charlotte +16.9%

Miami +16.6%

Las Vegas +15.5%

New York +15.2%

Detroit +15.2%

Washington +14.8%

Atlanta +14.3%

Cleveland +13.6%

Minneapolis +12.8%

Chicago +11.1%

The national figure was +16.6%, the highest appreciation rate ever recorded by Case-Shiller for the country as a whole.

Phoenix has been in the top spot in the annual table for the last 24 months, breaking a record of 23 set in 1992 by Portland.

©2020 Cromford Associate

July 24 - The weakening in demand that we have been reporting for several months is now showing up in the monthly sales numbers:

The monthly sales rate is now just over 9,000, well below last year when it was over 10,000.

Although the monthly sales rate has only declined for the last 5 weeks, our Cromford® Demand Index has been anticipating this since the end of the first quarter. This is because the CDI uses data from listings under contract to compute demand, not just closed listings.

Currently demand appears to be stable and still above normal, but nowhere near as impressive as it was during the second half of 2020. If demand had stayed as strong as last year, I have little doubt that supply would not be rising as it is now. Having said that, supply is only rising at a modest rate and nothing like as fast as it did back in the summer of 2005.

The summer of 2005 looked exactly like a bubble bursting with prices continuing to rise even as demand plummeted and supply soared. In those days the bubble was primed by rampant, mindless speculation and the widespread belief that prices only ever went up. In 2021 we have a very different situation with widespread caution, largely because so many people vividly remember the lessons of 2005. This caution will keep the rate of price increases lower than 2005 and we are already seeing a significant slowdown in appreciation. This is a healthy sign and a per-requisite to avoiding a painful period of declining prices. The latter still looks unlikely based on the current market readings.

©2020 Cromford Associate

July 22 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest citie

 

A similar table to last week with all but one city seeing their CMI drop quickly over the last month. Cave Creek is still the exception thanks to a fall in supply.

All cities are now below 500 for the first time since July 2020.

©2020 Cromford Associate

June 21 - Based on affidavits of value filed during June we have collected the following statistics on iBuyer activity:

	Opendoor	OfferPad	Zillow	Redfin	Knock	All iBuyers Combined
Homes Purchased in June 2021	489	153	112	10	0	764
Homes Purchased in June 2020	28	47	18	0	1	94
Annual Change in Purchases	1646%	226%	522%	N/A	-100%	713%
Homes Sold in June 2021	145	94	42	7	0	288
Homes Sold in June 2020	136	76	33	0	7	252
Annual Change in Sales	7%	24%	27%	N/A	-100%	14%
Median Purchase Price in June 2021	$421,900	$385,000	$372,200	$319,250	N/A	$402,600
Median Purchase Price in June 2020	$264,500	$250,000	$280,750	N/A	$385,000	$255,500
Median Sale Price in June 2021	$377,500	$371,124	$416,450	$446,000	N/A	$377,750
Median Sale Price in June 2020	$270,000	$305,000	$290,000	N/A	$333,881	$278,950
Homes in Inventory at the End of June 2021	958	250	163	19	0	1,390
Homes in Inventory at the End of June 2020	214	84	31	0	9	338
Annual Change in Inventory	348%	198%	426%	N/A	-100%	311%

All the iBuyers grew their purchases in June, clearly driving to recover from the slump in their volumes that started in 4Q 2019. In this most were very successful:

Opendoor made 489 purchases, easily their busiest month ever. Their previous record was 366 in September 2019.

OfferPad purchased 153 homes, also setting a new record for themselves. The previous high point was October 2018 when they bought 134.

Zillow purchased 112, not a record since they bought 132 in February 2019, but a large increase compared with any month in the last 2 years and back to the level of June 2019.

Redfin are a recent new-entrant, but 10 is their highest monthly total to date.

Sales were much less noteworthy, with only 14% growth compared to June 2020 for the iBuyers as a group. However, sales are now growing after many months with sales decline due to lack of inventory.

With purchases exceeding sales by a very large margin, iBuyer inventory has increased sharply during the month of June. Inventory is up 311% from a year ago with Opendoor holding the lion's share - 69%. OfferPad is second with 18% while Zillow has 12% and Redfin just 1%.

764 purchases represent a much higher share of the market than we have seen for the last 18 months. The iBuyers have bought themselves back into the game.

©2020 Cromford Associate

July 17 - One of our favorite ways to measure the state of the market is the Contract Ratio. Please see the Definitions section if you are not familiar with it.

It compares available listings with the number of homes under contract and a high number means we have a hot market.

In every sector, the contract ratio is down from March, and in some it is now lower than this time last year.

Lower than July 2020:

Avondale

Buckeye

El Mirage

Gilbert

Glendale

Mesa

Phoenix

Queen Creek

Surprise

Tempe

Tolleson

Same as July 2020

Anthem

Chandler

Laveen

Litchfield Park

Maricopa

Higher than July 2020

Apache Junction

Arizona City

Casa Grande

Cave Creek

Fountain Hills

Gold Canyon

Goodyear

Paradise Valley

Peoria

Scottsdale

Sun City

Sun City West

Sun Lakes

The locations that are hotter than last year are mostly either adult-oriented or luxury home areas.

The largest cities (Phoenix, Mesa) are mostly cooler than they were 12 months ago.

©2020 Cromford Associate

July 15 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

Most cities are seeing their CMI drop quickly now as inventory rises. Because supply has been so low recently, the increases are large in percentage terms. For example Chandler has 150 active single-family listings (excluding UCB and CCBS) which is double the 75 it had at the beginning of April. However, the long term average count for Chandler is 940 and the maximum we have measured was 2,481. So 150 would seem very low if we had not seen 75 three months earlier.

Paradise Valley is not seeing much of an increase in supply so far, but its demand has been falling from unusually high levels.

Cave Creek is unusual in that its supply is at a similar level to April. It has been zooming up the chart and looks likely to reach the number two spot soon.

With more supply to choose from, and list prices increasing more slowly, some buyers are being attracted back into the market. We are seeing a slight rise in demand in several cities. These include Glendale, Maricopa and Queen Creek. When supply increases and demand falls, the CMI heads down very quickly, but if demand starts to rise at the same time as supply increases, the CMI's rate of decline could well moderate.

An interesting time to be watching the market.

©2020 Cromford Associate

July 11 - A quick glance at the chart showing the average $/SF for active listings shows us that it is now declining from the peak of $361.32 reached during week 22 (early June)

 

This is for all dwelling types across Greater Phoenix and excludes listings in UCB or CCBS status.

However, you would be mistaken if you think most sellers are asking less for their homes. The primary reason for the decline is the unbalanced increase in the number of active listings since early June. Most of the extra listings have been in the price range between $250,000 and $1.000,000. The number of active listings over $1,000,000 has not changed much. This means the mix has moved away from luxury homes and this has caused most of the decline in the average price per square foot. Here is the chart for homes between $250,000 and $1,000,000:

We can see signs of stabilization in the luxury market, which appears to be range-bound between $549 and $558 per square foot.

I recommend that you experiment with the filters on this chart to determine which segments remain strong and which are weakening. The Condo segment looks to be the weakest of the 3 dwelling types.

©2020 Cromford Associate

July 8 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

Cave Creek has taken over from Goodyear as the only city to have improved for sellers over the past month. The other 16 cities are moving in a direction that is favorable for buyers. The average change in the CMI over the past month is -14.5%, which is an acceleration of the downward trend from -13.2% last week.

We now have only 6 cities with a CMI over 400. They are all still far above normal, but the trend is clearly downwards.

©2020 Cromford Associate

June 7 - The affidavits of value have been counted for Maricopa County and although the prices have not all been double-checked, we have preliminary pricing statistics for June 2021.

For single-family and condo / townhouse properties:

total units closed were 12,220 which is up 19% from June 2020

newly built units closed were 1,661, up 2% while re-sale units were 10,559, up 23%

the monthly median sales price was $400,000 which is up 24.2% from June 2020

the new build median was $407,047 which is up only 9.3% from June 2020

the re-sale median was $400,000, which is up 28.2% from June 2020

The new build median is back above the re-sale median, unlike last month. However, the rate of increase of re-sale prices continues to out-perform new home prices by a wide margin.

©2020 Cromford Associate

July 5 - Although the market is starting to cool, it remains very hot and favorable to sellers, so we should be looking for indicators that help us determine how far it is below the peak and how far it has to go before it becomes normal. Today I will look at one measurement that is very poor for doing this and another that is very good. Surprisingly, the one that is very poor is widely measured and discussed while the one that is very good is hardly used at all.

The poor indicator is average days on market. This is something we have found to be a trailing indicator, often 6 months behind the current state of the market. It is also unreliable and plagued by accuracy difficulties. It is currently on a declining trend and has not yet recognized the cooling that started in mid-March. It will probably start increasing by October. My advice is to ignore it.

The useful indicator is the listing success rate. This is currently reading 91.1% for all areas & types in ARMLS. This is down from the peak of 93.3% that was reached around the end of May. We can see that it is a little slower to react than the Cromford® Market Index, but when it does react, it provides a nice reliable signal. It is now in a clear declining trend. However it has only fallen by 2.2 points. A normal reading would be around 66.5% - the long term average. So we would need to see another 24.6 point fall before it suggested we were back to a normal balanced market.

Below is the weekly chart showing the listing success rate measured weekly during 2021 and 2015, the last year where it fell below 66.5%. Go here to see the interactive version.

 

Clearly we have a long way to go before we get down to 66.5% and it is not within striking distance in the near term.

The chart also illustrates the one drawback of the listing success rate - it takes a dive every year in January due to the large number of listings that expire on December 31.

©2020 Cromford Associate

July 1 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

Goodyear stands out as the only city to have improved for sellers over the past month. However the other 16 cities are moving quickly in a direction that is favorable for buyers. The average change in the CMI over the past month is -13.2%, which is an acceleration of the downward trend from -9.7% last week.

Active listings are still at low levels but they are growing fast. Several cities, such as Avondale, El Mirage, Gilbert, Maricopa and Queen Creek, have an active count (excluding UCB and CCBS) that is at least double what it was in March. This is still a low number, but the additional choice for buyers must be welcome.

Buyers have lost some of their motivation, faced with vastly higher prices and bidding wars that make them feel under-valued. We have been saying that demand is much weaker than the second half of last year for some time and many people have questioned how we can believe that. It is just mathematics. When supply is very low, weak demand looks and feels like strong demand. It is only when the supply grows that you realize how weak the demand really was. New listings are getting fewer showings and fewer offers, but still enough to sell quickly at a nice percentage of the asking price (often more than 100%). Demand still exceeds supply by a long way, but the gap is narrowing fast.

©2020 Cromford Associate

June 30 - A couple of weeks ago we commented that the rate of decline for the Cromford® Market Index was less than the rate of increase during the first quarter.

This is no longer the case, as can be seen from the daily chart below:

The CMI is now dropping quickly. The number of active listings is increasing by roughly 300 per week. The number of showings is in decline and the number of contracts getting signed is getting smaller as each week goes by.

All this makes sense. When prices leap by over 35%, demand is suppressed and supply stimulated.

The obvious question is how far this trend will go before it levels out. The honest answer is that no-one knows. Buyers are more cautious now than they were in 2005. Sellers' normal first reaction will be denial. Some will blame their agent. These sellers will probably be complaining that they are not getting the viewings and offers their house deserves. This is because they have so quickly become accustomed to a frenzied market. They will now need to get re-adjusted. The market still favors sellers, but buyers will start to gain a little more respect.

400 is still a very high CMI, but the change in the market that we first detected and reported in mid-March is now very palpable.

©2020 Cromford Associate

June 29 - The latest S&P / Case-Shiller® Home Price Index® numbers were published today. They cover home sales during the period February 2020 to April 2021. As such they do not include all of the extremely high rates of appreciation that we experienced during the second quarter of 2021, but they are starting to show rapid price gains..

Comparing with the previous month's series we see the following changes:

Phoenix +3.29%

San Diego +3.17%

San Francisco +3.14%

Seattle +3.08%

Dallas +2.90%

Denver +2.71%

Las Vegas +2.52%

Boston +2.49%

Charlotte +2.42%

Miami +2.36%

Tampa +2.33%

Washington +2.30%

Minneapolis +2.17%

Detroit +2.16%

Portland +2.11%

Chicago +1.93%

Cleveland +1.89%

Los Angeles 1.78%

Atlanta +1.75%

New York +0.85%

Phoenix is back on top of this table again, comfortably ahead of the national average, which was 2.09%

The year over year comparisons look like this:

Phoenix +22.3%

San Diego +21.6%

Seattle +20.2%

Boston +16.2%

Dallas +15.9%

Denver +15.4%

Tampa +15.4%

Portland +15.4%

San Francisco +15.1%

Charlotte +15.0%

Los Angeles +14.7%

Miami +14.2%

Washington +13.6%

New York +13.5%

Detroit +13.3%

Cleveland +13.3%

Las Vegas +12.5%

Atlanta +12.3%

Minneapolis +11.3%

Chicago +9.9%

Phoenix was top of this table for the 23rd consecutive month. The national average was 14.6%

©2020 Cromford Associate

June 26 - Back in 2008 everybody was focused on forclosures,, but in 2021 I have yet to get a single question about them.

We still maintain the foreclosure database and the REO inventory, but there is precious little going on. Despite speculation that the COVID-19 pandemic would lead to increasing numbers of homes going into foreclosure, all that has happened so far is that the number of pending foreclosures in Maricopa County has dropped from 1,238 a year ago to just 611 today. This is close to an all-time low since we started measuring in 2002.

For comparison, the number of pending forclosures for this week in June was:

2002 - 7,241

2005 - 3,385

2009 - 45,365

The current count of 611 is so low that even if we saw a ten-fold increase in foreclosures, it would still be considered normal, not excessive.

If there is anyone still interested, the pending foreclosure chart is here.

©2020 Cromford Associate

June 24 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

For the third week running, we have all 17 cities moving in the same direction over the last month - favorable to buyers. The average change for the month is -10.7%, which compares with -9.7% last week.

The flow of new listings has been strong with just over 10,000 being added per 28 day period across all areas & types. This excludes Coming Soon listings. In the same period in 2020 and 2019 we saw between 8,500 and 9,000 new listings every 28 days. The extra 250 to 400 listings per week are helping to grow inventory back towards normality, but there is a very long way to go still. The bottom city, Tempe, is the first to see its CMI fall below 300 during this phase. Our top 2 cities, Avondale and Fountain Hills both saw declines of 19% over the last month and we no longer have any city over 700. Normality is bo longer such a far-fetched idea. Normality corresponds to a CMI between 90 and 100.

Contrary to the overall trend, some cities are starting to see an increase in their CMI over the past week. These include Goodyear and Cave Creek in the above list of 17. Among the secondary cities we find Arizona City, Gold Canyon, Litchfield Park, Sun City, Sun City West and Sun Lakes where the same is true.

It is still very hard work buying a home, but it should by now be obvious that this is not really due to strong demand; it is almost entirely due to the weakness of supply. This means it is crucial to keep a close watch on how long the new listings trend lasts and how much inventory starts to build. 

©2020 Cromford Associate

June 22 - The pricing action has been very interesting over the past couple of month. Below is the chart showing the last 6 months with daily readings of

the average $/SF list price forn active listings

the average $/SF list price for listings under contract

the average $/SF list price for listings that closed in the last month

the average $/SF sale price for the same closed listings

 

The average $/SF for active listings has become range bound between $310 and $320 and is just bouncing between these levels, though this is much higher than the $280 we measured in mid December. The new listing flow is favoring the mid range rather than the top end of the market, so although sellers have not lost any of their optimism, the mix is less biased towards very expensive homes than it was a few months ago. On April 28, the average sq. ft. for an active listing was 2,659 with a price of $1,011,267. This has now fallen to 2,516 and $887,159 reflecting far more mid range homes offered for sale.

This same change in the mix is likely to keep the closed pricing flatter during the summer months, usually a quiet time for luxury market.

We can see that the gap between the asking price and the selling price has widened. A premium of 1.79% over list price is now the average, up from 1.27% last month.

Do not be misled into thinking prices have lost their underlying momentum. Although supply is now increasing, it remains a very long way below the quantity necessary to keep prices flat.

©2020 Cromford Associate

June 21 - Based on affidavits of value filed during April we have collected the following statistics on iBuyer activity:

	Opendoor	OfferPad	Zillow	Redfin	Knock	All iBuyers Combined
Homes Purchased in May 2021	347	93	56	7	0	503
Homes Purchased in May 2020	23	27	1	0	2	53
Annual Change in Purchases	1409%	244%	5500%	N/A	-100%	849%
Homes Sold in May 2021	142	76	31	0	0	249
Homes Sold in May 2020	147	84	28	0	6	265
Annual Change in Sales	-3%	-10%	11%	N/A	-100%	-6%
Median Purchase Price in May 2021	$400,200	$363,200	$351,650	$550,000	N/A	$390,300
Median Purchase Price in May 2020	$283,800	$263,500	$336,600	N/A	$343,400	$278,700
Median Sale Price in May 2021	$385,750	$344,000	$355,000	N/A	N/A	$346,000
Median Sale Price in May 2020	$265,000	$270,050	$269.950	N/A	$399,668	$273,950
Homes in Inventory at the End of May 2021	614	191	93	16	0	914
Homes in Inventory at the End of May 2020	318	115	71	0	15	519
Annual Change in Inventory	93%	66%	31%	N/A	-100%	76%

Opendoor went on a spending spree in May, buying 347 homes, up from 200 in April and their biggest month since September 2019. In order to do so they increased their offers to a median of $400,200. This is up 41% compared with a year ago, more than the market as a whole.

All iBuyers were very quiet in May 2020, and in particular, buying was very subdued (probably a strategic mistake). As a result the purchase counts are up by outrageous percentages, and 849% as a group.

All the iBuyers (except Knock who has left the market) are increasing their purchase volumes faster than sales, so inventory is up sharply from last month and up 76% compared to a year ago.

It is a sign of the times that iBuyers are mostly paying higher prices to buy homes than they are achieving for homes they are selling. Most of the homes they sell were purchased in prior months, so this does not mean they make negative margins, but it does mean replenishing inventory gets increasingly expensive.

©2020 Cromford Associate

June 17 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

For the second week running, we have all 17 cities moving in the same direction over the last month - favorable to buyers. The cooling trend is becoming more apparent as inventory levels start to recover from the extreme lows reached 3 or 4 months ago. Sales counts remain very healthy but the number of listings under contract is in a falling trend meaning that demand is in decline, albeit a very mild decline.

Most areas are seeing higher active counts due to the fast arrival of new listings. Although many of these go under contract in a matter of days, if not hours, the number of listings available has grown by quite large percentages since February. Examples include:

Phoenix - minimum was 530 on Feb 24 - now we have 809 - up 53%

Mesa - minimum was 124 on Feb 17 - now we have 255 - up 106%

Scottsdale - minimum was 377 on Mar 3 - now we have 499 - up 32%

To put these into context, the long term averages are:

Phoenix - 4,327

Mesa - 1,536

Scottsdale - 2,222

Normal levels of supply are still a long way over the horizon.

All 17 cities still have CMI readings over 300 which indicate there are plenty of price increases still to come. However, the pace of appreciation should start to fall off if the CMI continues to show in a strong declining trend.

©2020 Cromford Associate

June 14 - Looking at the daily chart for the Cromford Market Index, we can see that the downward trend is weaker than the prior upward trend.

It has taken 95 days to fall from the peak of 515 to 436. It took only 67 days to rise by the same amount.

In 2005, the CMI lost 23.6% of its value during the first 95 days following the peak in April that year. In 2021 we have seen a fall of only 15.3%, a significantly slower cool down.

©2020 Cromford Associate

June 12 - New listings continue to arrive at a strong pace and supply is growing at the fastest rate we have seen since April 2020. Those who did not believe us when we said the market had started to cool in the second half of March must surely believe us now. This is cooling akin to an Arizona Summer when 110 degrees feels quite a bit less toasty than 117 degrees. But still hot.

Here is the weekly chart showing active listings excluding actives listings in UCB and CCBS status.

 

Active counts are leading indicators and it is tricky to predict where they will go, but the last 2 weeks suggest that more people are getting tempted by the high prices.

If you go to the interactive version of this chart you can check out 2005 and see how active listings grew massively from around 9,000 to almost 24,000 between June and December. The key question is whether our counts in 2021 will follow a similar trajectory or increase at a more moderate pace. It looks unlikely that the current upward trend will be reversed, but you never know for sure.

Nobody can accuse this market of being boring.

©2020 Cromford Associate

June 10 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

” 

We have all 17 cities moving in the same direction over the last month - favorable to buyers. Given how unfavorable to buyers the market has been for the last 12 months, this is not a surprising development.

The market is working pretty much as any economics student would expect. Higher prices reduce demand and tend to encourage more supply. Although sales volumes remain well above normal, the number of listings under contract is unimpressive and demand is once again slowly dissipating.

Supply is still very low by any standard, but it is clearly rising, largely thanks to a healthy dose of new listings. The pace at which it is rising is still slow, but it is enough to cause all of the CMIs to retreat from the highs established in March.

However, we should still remember that any CMI over 300 is extraordinary and predictive of yet more price increases. Only when it drops below 110 do we have a balanced market where buyers and sellers are equally matched in negotiation power. At this point prices would be expected to rise in line with general inflation.

©2020 Cromford Associate

June 8 - Interesting chart activity for the average list price per sq. ft. - see below

The under contract line (green) had moved far higher than the closed line (brown) at the start of April, which is a signal that sales prices will move sharply higher. The green line then went sideways for an extended time until late May. The closed line caught up with the under contract line in mid-May and inevitably it now has to wait for the green line to move before it can move higher. The green line has moved higher over the past 2 weeks but it will take time for the brown line to follow suit. In the meantime we see the closed price line move sideways and even lower, reflecting the earlier flat patch for the green line.

There may be some who see the weakness in the closed pricing and think this is the start of a downward trend. Nope. Two things tell us this is not the case. The green line is moving up again and the gap between the brown and red lines is widening, showing us that buyers are paying increasing premiums over list price. This is not an environment where closing prices can drop for long, though a brief pause is quite normal and has already occurred a couple of times over the past year. November to December 2020 was the most recent example. A brief pause may last several weeks or even a couple of months. Based on the green line above, this pause is expected to last about 6 weeks.

©2020 Cromford Associate

June 5 - The monthly median sales price in May 2021 was $390,000.

This means the median has doubled since January 2015. Half of that increase occurred in the most recent 12 months.

The owner of the median house has seen their home equity increase by $97,500 during the last year.

Turning to the average sale price, this exceeded half a million dollars in May 2021 for the first time ever, coming in at $506,226.

This means the average has doubled since February 2015. Half of that increase took place during the last 11 months.

The owner of the average house has seen their home equity increase by $126,557

If you are not sure what the difference is between median and average you can find plenty of examples and definitions using Google, so I won't repeat the information here.

However, in housing, a median price can be thought of as a "typical house price" where half the homes are more expensive and half are cheaper.

The average is usually quite a bit higher because high end homes distort the distribution pattern. It sounds weird to say it, but most houses are cheaper than average.

©2020 Cromford Associate

June 4 - The affidavits of value have been counted for Maricopa County and although the prices have not all been double-checked, we have preliminary pricing statistics for May 2021.

For single-family and condo / townhouse properties:

total units closed were 11,535 which is up 47% from May 2021 (which was heavily retarded by the COVID-19 restrictions in spring last year)

newly built units closed were 1,832, up 18% while re-sale units were 9,703, up 55%

the monthly median sales price was $392,500 which is up 24.6% from May 2020

the new build median was $391,475 which is up only 5.3% from May 2020

the re-sale median was $393,000, which is up 31.4% from May 2020

We have never seen the re-sale median over-take the new build median like this before. A fascinating example of the negotiation power of sellers in a supply-constrained market.

We can clearly see why home builders are motivated to get away from a list price policy towards a more auction-based pricing mechanism. Not good news for buyers but probably good news for the builders' shareholders.

©2020 Cromford Associate

June 3 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

Buckeye again stands out as the only city showing an improving situation for sellers. However all 17 cities are still well over 300 indicating a very strong imbalance in the entire market which puts buyers at a huge disadvantage.

Although some cities like Glendale, Goodyear and Maricopa have seen their CMI decline significantly over the past month, we are seeing others including Tempe, Avondale, Scottsdale and Phoenix where the CMI has stabilized. Unlike the situation in 2005, this is no rout. The declining trend in demand has almost run out of steam and is rising again in a few crucial places including Phoenix and Queen Creek.

The downward trend in the CMI is being caused by a stronger flow of new listings. This increased flow of new listings and whether it continues is key to the direction of the market. If it falls off we could see another increase in the CMI, but if it continues at the current rate we can expect the CMI to continue to fall at a gradual pace. If the flow increases still further then this will give buyers more flexibility and allow the CMI to drop back towards more normal levels.

My advice is watch the flow of new listings very carefully.

©2020 Cromford Associate

May 31 - The latest building permit numbers have been added to the Tableau charts in the Cromford® Public section of this site.

Year-to-date (at the end of April) we have seen 40% more single family permits than in 2020. The total of 12,815 across Maricopa and Pinal counties is the sixth highest we have seen, but lower than 1999, 2003, 2004, 2005 and 2006.

We are finally back to a "normal level" of single-family permits after 13 consecutive years of low growth.

©2020 Cromford Associate

May 30 - Major changes are happening in new construction as developers adjust to the market conditions. Some builders are now moving away from price lists to auction-style sales. They realize that the re-sale market has been operating that way and achieving higher prices than similar new homes. They are also becoming increasingly reluctant to spend money on buyer's agent commissions, as selling new homes has become more of an exercise in fending off the excess potential buyers. This happened in 2005 too and we see this trend getting stronger. Many have reduced commission from 3% to 2.5% or 2% and most are paying based on the base price without lot premiums and upgrades.

County recordings are showing new homes purchased from builders immediately resold for much higher sums of money, the profit for the first buyer sometimes running into 6 figures.

©2020 Cromford Associate

May 27 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

The picture is similar to last week except that Buckeye has taken over from Surprise as the only city that is improving for sellers.

All the other 16 cities are improving for buyers, in almost all cases thanks to having a few more active listings than this time last month. However supply remains extremely low compared with normal. The market has been cooling for about 10 weeks now but remains extremely lop-sided with sellers having a strong advantage everywhere because of the scarce supply.

We still hear many people (including several who should know better) referring to very strong demand. This is almost completely wrong. Not completely because demand is pretty high at the top end of the market. But lower priced areas like Avondale are showing demand that is below normal. I know this is hard to believe but the fact is that 99 people out of a 100 cannot tell the difference between a market that is hot because of strong demand and a market that is hot because of weak supply. If you want to be able to tell the difference you have to do the mathematics and measure supply and demand independently, as we do.

It is true that demand was unusually strong in the second half of 2020, but that is long gone now and the sharp upward trajectory of prices is doing what it is supposed to do according to Economics 101 - reducing demand. Listings under contract look weaker than in 2019 and similar to 2018. The difference is that in 2018 and 2018 supply was only very low, not excruciatingly, eye-wateringly low as it has been throughout 2021.

Most buyers don't care either way, they just know that the market is crazy. But it is useful to know that each week that passes is seeing it get less crazy rather than more crazy.

We are seeing the CMI fall more slowly than it rose, which confirms we are not in a bubble bursting situation. It also means there is almost no chance of prices falling in the short or medium term. Worst case would probably be 2023 and that would take most things to deteriorate much more than we currently expect. We would describe a fall in prices as very unlikely but not impossible by 2024. We would need the CMIs to fall well below 100 and the lowest one in the table above is 321.                    

©2020 Cromford Associate

May 25 - The latest S&P / Case-Shiller® Home Price Index® numbers were published today. They cover home sales during the period January 2020 to March 2021. As such they do NOT include the extremely high rates of appreciation that we are experiencing during the second quarter of 2021.

Comparing with the previous month's series we see the following changes:

Seattle +4.68%

Phoenix +3.30%

Denver +3.30%

San Diego +3.22%

San Francisco +3.16%

Dallas +2.81%

Boston +2.61%

Charlotte +2.55%

Portland +2.55%

Washington +2.35%

Los Angeles +2.29%

Las Vegas +2.29%

Cleveland +2.02%

Tampa +1.93%

Chicago +1.88%

Miami +1.84%

Atlanta +1.80%

Minneapolis +1.72%

Detroit +1.15%

New York +0.58%

Despite coming in with 3.3% appreciation in one month, Phoenix was beaten by Seattle and equalled by Denver.

The national average increase was 1.95% over the prior month, a very large number, but 13 of the 20 cities above came in higher than this.

New York stands out as this month's laggard.

Comparing with this time last year we see the following changes in the indexes:

Phoenix +20.0%

San Diego +19.1%

Seattle +18.3%

Boston +14.9%

Tampa +13.7%

Charlotte +13.5%

Portland +13.5%

Dallas +13.4%

Denver +13.4%

Los Angeles +13.4%

Cleveland +12.9%

New York +12.3%

San Francisco +12.2%

Washington +12.2%

Miami 12.2%

Detroit +12.1%

Atlanta +11.2%

Minneapolis +11.0%

Las Vegas +10.6%

Chicago +9.0%

Phoenix remains in the number one spot for the 22nd consecutive month. The national average was 13.2%, the highest reported since 2005.

The housing market is not complicated. Yet the headline in Bloomberg reads "U.S. Home Prices Surge Most Since 2005, Fueled by Low Rates". Wrong reason again. Why is it that everything in housing is attributed to interest rates? This is intellectual laziness. The surge in home prices has almost nothing to do with the interest rate environment. It has everything to do with the longest period of underbuilding that the USA has experienced since the 1930s. The number of homes built since 2007 has stayed extraordinarily low by any standard - 14 years of low output. We would need to see roughly 10 years of home construction at 2 million homes a year to escape from the under built situation.

Raising interest rates does not create new supply. In fact it encourages people to make do with the homes they already own, since would risk paying a higher rate for their home loan if they moved. So fewer homes come to market. Rasing interest rates would certainly reduce demand, but high demand is NOT the problem that is driving up prices.

Sounding like a broken record: we have too little supply, not too much demand. It is not complicated but it is not amenable to a quick fix. The Case-Shiller numbers will go a lot higher from today before they start to lose momentum.

Meanwhile home builders are deliberately slowing down their sales due to global supply constraints. This will not bother them too much, since they will achieve higher prices the longer they wait. Their waiting lists are just going to grow longer.

For home builders this is a wonderful opportunity that comes perhaps once or twice a century. Compensation perhaps for the misery they endured between 2007 and 2012.

©2020 Cromford Associate

May 24 - We have added a new Tableau chart (FT21) to the Cromford® Public section which shows recorded sales in Maricopa and Pinal counties, broken down by finance type. This allows us to track the percentage of all-cash purchases.

I have heard many incorrect things stated about cash purchases, so I hope this chart will enable subscribers to Cromford® Public to see for themselves what is really going on. Being based on recorded documents, Cromford® Public is much less timely than the main section of the Cromford® Report (which is based on daily ARMLS data). It takes many weeks to get the images of the deeds and affidavits converted into database form and to find and correct the majority of the data errors, of which there are many hundreds every month.

However the data in the Cromford® Public tends to be more accurate and is certainly more complete than the ARMLS data, so it is a good source when time is not of the essence.

We can see that cash purchases hit a very low point of 14.1% in May 2020 but they have been recovering to a more normal level of 23.1% in March 2020. The trend favors cash over finance because sellers prefer the certainty of a cash offer compared with a financed offer which the lender might not approve. In a very competitive market, the percentage of cash sales tends to increase, but as of March 2021, the 23.1% level is similar to March 2018 and March 2019 not unusually high. In April 2021 and May 2021 we would not be surprised to see higher than normal percentages as many investors compete with each other for the very limited number of homes on offer.

The percentage of cash purchases is much higher for homes over $2 million. In March 2021, 55.7% of buys over $2 million were all-cash.

The percentage of cash purchases is much lower for new homes. In March 2021, only 8.6% of new homes were all-cash.

The percentage of cash purchases is higher in Age-Restricted or Age-Targeted communities, 33.5% in March 2021. Here the buyers are mostly over 55 and tend to borrow less than younger home buyers.

Cash purchases are also more common in non-MLS re-sales. Here we see 35% cash in March 2021, though this is well down from 2018 and 2019 levels when it was common to see 50% cash or more. A big swing towards financed non-MLS transactions occurred in April 2020, which may be because government measures to combat COVID-19 made borrowing money easier and more attractive.

©2020 Cromford Associate

May 22 - I am surprised to see the story "Mega Landlord Are Snapping Up Zillow Homes Before the Public Can See Them" was the number one most-read article on Bloomberg News today.

Surprised because

This is old news - the large corporate investors have been buying homes from the iBuyers for several years now.

The volume of homes involved is so tiny (a handful per month) that it has almost no measurable effect on the overall market.

The story is written as if there is some reason why both parties should not be doing this.

Anyone relying on Zillow-owned property as their source of homes is in for some big disappointment. Their inventory is very small. Opendoor is still the big player, with OfferPad providing serious competition and Zillow trailing a very long way behind these two. Redfin is also operating in this space but their volumes are still tiny.

The article quotes "more than 200 homes during the first quarter", but that is for the entire country. Central Arizona is less than 2% of the country, so our share would be 3 or 4 homes over 3 months. Not even a rounding error given we see about 120,000 closed sales a year,

I am not quite sure why there is such a negative attitude to large corporate landlords. They are not doing much different from your regular mom-and-pop landlords. They buy single-family homes and perhaps a few condos to rent to people who need to rent a home. It's not like we have a glut of homes to rent. In fact tenants probably regret the shortage of rentals just as much as buyers decry the lack of homes for sale. The vast majority of homes to rent are owned by small scale landlords. The large scale ones (such as Invitation Homes, Cerberus and Progress) have about 15,000 homes between them, which in a conurbation like Greater Phoenix, is less than 5% of the rental homes and less than 1% of the total number of homes in the valley.

Really nothing to see here, so we will stop writing about it.

©2020 Cromford Associate

May 21 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

Only Surprise is showing improvement for sellers over the past month. All the other 16 cities are improving for buyers, in almost all cases thanks to having a few more active listings than this time last month. Demand is mostly stable and growing slightly in a handful of cities. The improvement in supply is quite modest, but when you had only 50 listings, moving to 75 is a 50% growth, a spectacular percentage. The growth in supply is due to a stronger flow of new listings, rather than a shortage of eager buyers. New listing numbers are now higher than 2020 and comparable with 2019.

We are still in a totally lop-sided situation given that a CMI of 100 represents a balanced market and anything over 200 is abnormal situation that strongly favors sellers.

©2020 Cromford Associate

May 20 - Barry Habib made some very good points in a recent podcast. You can find it in Episode 50 here: https://soundcloud.com/realestateconsulting

One of them is that many people look at home price appreciation and assume that if home prices rise by 20% and median earnings only rise by 5%, we have a big drop in affordability. However, this is an illusion. If your monthly mortgage payment is $1,000 then a 20% increase in home prices will push that payment up by $200. If your monthly income was $4,000, then a 5% increase in earnings is also $200. So your 5% increase in earnings is enough to cover the extra $200 mortgage payment.

Admittedly your mortgage payment used to be 25% of your budget and it is now 28.6%, but to most people, this will not put them off buying a home, especially when they foresee their home equity increasing, making them wealthier over time. In fact many home owners in Greater Phoenix have been earning more from their home ownership than from their employment over the last 12 months.

There will be an impact on the down payment too, which may be more of a disincentive. However we are seeing a proposal for a $15,000 tax credit for first time home buyers, which could offset this. In fact we are concerned that a $15,000 tax credit could increase demand when the market already has more demand than it can handle. There are no obvious plans to increase supply, so market balance still seems to be a distant spot well over the horizon.

©2020 Cromford Associate

May 19 - Based on affidavits of value filed during April we have collected the following statistics on iBuyer activity:

	Opendoor	OfferPad	Zillow	Redfin	Knock	All iBuyers Combined
Homes Purchased in April 2021	200	116	52	5	0	373
Homes Purchased in April 2020	56	30	0	0	1	87
Annual Change in Purchases	+257%	287%	N/A	N/A	-100%	329%
Homes Sold in April 2021	129	86	26	0	0	241
Homes Sold in April 2020	153	67	45	0	4	269
Annual Change in Sales	-16%	28%	-42%	N/A	-100%	-10%
Median Purchase Price in April 2021	$375,350	$325,750	$333,900	$328,500	N/A	$358,000
Median Purchase Price in April 2020	$257,000	$263,750	N/A	N/A	$332,000	$258,350
Median Sale Price in April 2021	$343,000	$346,250	$358,000	N/A	N/A	$346,000
Median Sale Price in April 2020	$274,000	$264,900	$281.000	N/A	$271,284	$273,950
Homes in Inventory at the End of April 2021	409	174	68	11	0	662
Homes in Inventory at the End of April 2020	440	174	71	0	19	704
Annual Change in Inventory	-7%	0%	-4%	N/A	-100%	-6%

We are seeing extremely high percentage growth in purchases compared with this time last year. However this is not due to huge volumes in April 2021, but the tiny numbers reported in April 2020 as the iBuyers shut down most of their operations in the face of COVID-19. This turned out to be a unfortunate business decision, although understandable at the time. April 2021 was a fantastic opportunity to buy homes at cheap prices when many other buyers were absent. Unfortunately for the iBuyers, they were even more absent than most during April and May last year.

We are now recording Redfin Now purchases, though we have not seen any sales recorded before the end of April.

iBuyer sales were weak in April 2021, down 10% from a year ago. Only OfferPad was able to show a year on year growth, up 28%. Zillow's sales numbers were particularly weak at just 26, but then their inventory had declined to just 42 at the start of the month, so this is not too surprising. The additional purchases made during April should allow all iBuyers more room to grow during May because of larger inventories. These have come as a result of making far higher offer prices to secure the sellers' agreement, necessary at a time of rapid appreciation. However this rapid appreciation also makes it easier for an iBuyer to show a gross margin, as the home will appreciate significantly during the short time it is owned by them.

To illustrate the latter point, we note that the median purchase price has jumped from $258,350 to $358,000 over the last 12 months - a rise of 39%. This is considerably more than the rise in the median sales price, which was 26%.

The downside is that home sold from inventory have to be replaced by homes purchased at higher prices. Note that the purchase median was $358,000 in April, when the sales median was only $346,000. The latter is for homes that were almost all purchased prior to April when the market was lower.

The aggressive offers mean the iBuyers have increased their inventory to 662. This is still down 6% from a year ago, but when you consider how far the overall supply is down from last year (67%), this is quite an impressive achievement.

©2020 Cromford Associate

May 16 - All this rampant appreciation has led to some interesting changes in the city ranking table based on annual average closed $/SF. Paradise Valley is still top at $490.07 per sq. ft. (up 11.8%) while Coolidge is still bottom at $116.06 (up 18.1%).

However, I am a little surprised to see Apache Junction (up 20.6%) overtake Mesa (up 16.4%) and Arizona City (up 22.8%) overtake Casa Grande (up18.1%). For most of the last 20 years, the greater proximity to the center of Phoenix has favored Mesa over Apache Junction and Casa Grande over Arizona City.

Perhaps the wider-open spaces of Pinal have become more popular over the last pandemic-focused year. AJ does tend to have a mixed reputation, but also offers some of the best mountain views in the valley, under the crags of the majestic Superstitions. But then Northeast Mesa also has excellent mountain landscapes that some think rival those of North Scottsdale (but at half the price).

©2020 Cromford Associate

May 14 - For the first time in history the monthly average price of a single-family home in Phoenix (the city - as defined by the USPS) has exceeded $509,000.

One year ago, the average was just over $390,000

The difference between these 2 numbers is over 30%.

To see how the other cities are doing by the same measurements click here.

©2020 Cromford Associate

May 13 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

Glendale and Paradise Valley have started trending lower, leaving only 3 cities moving in favor of sellers. The average change for the 17 cities is -7.5%, a somewhat greater decline than last week's -6.6%.

The downward trend is primarily caused by an increase in supply. Demand remains stable and is even strengthening in a few areas. However new listings have been arriving at a higher rate than we have seen for many months. Patience is rewarded with slightly more choice for buyers, but waiting comes at a steep cost. Prices continue to rise at a very high rate. Any CMI over 110 indicates prices will rise, so with the lowest CMI at 325, we can expect much higher prices over the next several months.                    

First - the gap is growing between the list price per sq. ft. for homes that closed in the last month and their actual sales price per sq ft. It is rare for the latter to exceed the former and ever rarer for the gap to grow as fast as it has over the last 30 days. This indicates that contract prices set during March and April were agreed with extremely motivated buyers, prepared to go beyond what the seller was asking in order to clinch the deal.

Secondly - an opposite indicator - the average price per sq. ft. for listings under contract has drifted sideways for a whole month and is now LESS than the average $/SF for homes that have closed. I don't remember ever seeing this latter phenomenon before. It implies that the very fast rise in the brown line above must come to a temporary halt soon. It is pretty hard for the average $/SF of closed listings to exceed the average $/SF of listings under contract during the prior month. We therefore expect the brown and red lines to start moving sideways for several weeks. If we are wrong, it means the market has become more unpredictable than normal. That is not a good thing. We must watch this chart with more than the usual amount of attention.

©2020 Cromford Associate

May 8 - The weekly appreciation chart, based on the monthly average price per square foot, is looking pretty interesting today:

Last year (on September 5) we made the comment that as far as home price appreciation goes, you ain't see nuthin' yet.

Now we are really seeing something as we head over 35% and beyond.

Anyone care to forecast the highest percentage we will see?

“©2020 Cromford Associate

May 7 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

 

Goodyear, Glendale, Fountain Hills and Paradise Valley are still moving in favor of sellers. Surprise has joined them too. However, the other 12 cities are moving in favor of buyers though they remain very much seller's markets. We see declines of 10% or more in Avondale, Cave Creek, Phoenix, Tempe, Gilbert, Queen Creek, Peoria and Maricopa over the last month. The average change for the 17 cities is -6.6%, a somewhat greater decline than last week's -5.8%.

The downward trend is caused mainly by an increase in supply. The decline in demand that we reported for the last 7 weeks is petering out in most areas and some are seeing a slight rebound. When supply is extremely low, as is the case in 2021, a small increase in active listings is a large change in percentage terms and can make a big difference to the CMI.

Among the secondary cities, we see many with their CMI rising over the last month. These are: Anthem, Apache Junction, Arizona City, Casa Grande, Gold Canyon, Sun City West and Sun Lakes, so 7 out of 12 cities are moving in a direction that is favorable to sellers.

The overall, CMI stands at 467, which is the same level we measured in mid-January. The difference is that in January it was on a rising trend, while in May it is falling.

“©2020 Cromford Associate

May 6 - The affidavits of value recorded in April for Maricopa County have now been processed and we have the following statistics:

There were 11,984 homes closed comprising 1,516 new builds and 10,468 re-sales

Closings were up 48.0% from the COVID-depressed level of April 2020 with new builds up only 6.4% and re-sales up a massive 56.9%.

The overall median sales price was $376,000, with $395,452 for new builds and $375,000 for re-sales

The overall median was up 19.4% from a year ago with new builds up only 8.9% and re-sales up 24.6%

These numbers include single-family homes and townhouse / condominiums. Pinal County affidavits are not yet fully processed.

We note that re-sale prices are still accelerating much faster than new build prices. Despite some evidence of buyer fatigue, there are so few active listings that every re-sale is effectively an emotion-packed auction process resulting in a majority of sales closing for more than the asking price. New homes usually do not sell for more than the list price. They sell at the list price and builders get to charge premiums for nicer lots and optional extras. Despite these opportunities, the home builders still seem unable to raise their prices fast enough to match the upward speed of the re-sale market. Luckily for new home buyers, once they have a signed contract their price is fixed, even though it will probably sell for more by the time it closes. Although they are leaving money on the table, home builders' profitability has rarely been higher than it is today. This is despite huge increases in many of their costs, especially lumber.

“©2020 Cromford Associate

May 5 - With the imbalance between buyers and sellers reaching its peak in mid-March, April saw many closings at record high percentages of list price.

Here are the percentages of list achieved for single-family homes in the largest cities:

City	% List During April 2021	Long Term Average % List	2005 Peak
Gilbert	103.5%	98.3%	100.5%
Avondale	103.4%	98.9%	101.2%
Cave Creek	103.2%	96.8%	99.5%
Chandler	103.1%	98.0%	100.6%
Queen Creek	102.6%	98.5%	100.2%
Peoria	102.2%	98.1%	100.1%
Surprise	102.2%	98.2%	100.1%
Glendale	102.2%	98.3%	100.8%
Mesa	102.1%	98,0%	100.4%
Goodyear	102.0%	97.9%	100.4%
Tempe	101.5%	97.5%	101.1%
Maricopa	101.4%	98.3%	100.8%
Buckeye	101.4%	98.3%	100.5%
Phoenix	101.4%	97.6%	100.3%
Fountain Hills	100.5%	95.7%	98.7%
Scottsdale	99.1%	95.5%	98.3%
Paradise Valley	97.8%	92.4%	96.8%

We can see that almost all the cities are seeing between 4% and 5% higher prices achieved than average. Cave Creek is the highest over-achiever being up by more than 6% compared with its long term average..

These cities did not over-achieve to the same extent during the 2005 peak. Peak percentage of list occurred between 2 and 5 months later than the peak Cromford® Market Index.

“©2020 Cromford Associate

“©2020 Cromford Associates

August 31 - The building permit interest is not confined to the single-family segment. The multi-family permits have also been generating excitement over the past few months.

The last 2 months (June & July) have recorded building permits for a total of 3,499 multi-family units. This is a colossal total given that the annual permit count has rarely exceed 10,000 across Maricopa and Pinal counties.

We are at 9,008 year-to-date units at the end of July, so with 5 months still to go, we have already exceeded the full year totals for 14 of the last 18 years.

There is no doubt that 2020 will generate the largest number of multi-family building permits that Maricopa and Pinal counties have ever seen.

We know that there is a housing shortage in the valley, but the building permit counts suggest that developers have noticed and are planning to do something about it.

“©2020 Cromford Associates

August 29 - Lots of action in building permits during July.

The single-family permit count for Maricopa and Pinal Counties was 3,003. This is first time we have seen permits over 3,000 for a single month since March 2007.

The largest contributions to new permits during July 2020 were:

Phoenix - 460

Surprise - 354

Buckeye - 291

Unincorporated Maricopa County - 282

Mesa - 240

Unincorporated Pinal County - 205

Goodyear - 196

Queen Creek - 164

Casa Grande - 160

Peoria - 146

Conspicuous by its absence is Gilbert, which used to feature prominently in the top 10 but has been overtaken over the past few years.

“©2020 Cromford Associates

April 27 - The latest S&P / Case-Shiller® Home Price Index® numbers were published today. They cover home sales during the period December 2020 to February 2021.

Comparing with the previous month's series we see the following changes 

San Diego +2.87%

Seattle +2.39%

San Francisco +2.05%

Phoenix +2.03%

Denver +1.77%

Dallas +1.68%

Los Angeles +1.32%

Tampa +1.30%

Portland +1.29%

New York +0.55%

Washington +1.04%

Las Vegas +1.03%

Miami +1.02%

Detroit +0.98%

Charlotte +0.96%

Minneapolis +0.95%

Atlanta +0.87%

Boston +0.87%

Cleveland +0.79%

Chicago +0.30%

Phoenix surrendered the number one spot to San Diego, Seattle and San Francisco. Earthquake zones are back in fashion.The national average increase was 1.05% over the prior month, another very strong number, but Phoenix increased at almost twice the national average.

Chicago is running well behind at the back at less than one third of the national average.

Comparing with this time last year we see the following changes in the indexes:

Phoenix +17.4%

San Diego +17.0%

Seattle +15.4%

Boston +13.7%

Tampa +12.7%

Cleveland +12.5%

Los Angeles +11.9%

Charlotte +11.7%

Detroit +11.7%

New York +11.6%

Portland +11.4%

Denver +11.2%

Washington +11.1%

San Francisco +11.0%

Miami +11.0%

Dallas +10.9%

Minneapolis +10.4%

Atlanta +10.0%

Las Vegas +9.1%

Chicago +8.6%

The national average was +11.9%, so once again Phoenix stayed well ahead of the national average. For the 21st consecutive month, Phoenix was top of the annual appreciation table, but San Diego is now close behind.

We note that Chicago is bottom of both tables.

To see a chart of the 20 cities and their home price indexes over the long term, please visit here

“©2020 Cromford Associates

April 25 - Many commentators continue to ascribe the current rapid appreciation rates to high demand. As regular readers of the Cromford® Report will know, this is not exactly accurate. Demand is higher than average, but not dramatically so. What is much more important is the extremely low level of supply. In the last 20 years, I have noticed that the majority of market commentators are obsessed with demand, which is why they always overstate the impact of interest rates and also why they are surprised when the market does not conform with their predictions based on affordability.

Supply has almost always been the more important factor. Over the long term, it varies much more than demand and is the number one thing to watch. Most of the numbers people measure are either trailing indicators like sales prices (or even more trailing the Case-Shiller® Home Price Index®), or measurements of demand like new home sales (meaning contracts signed) or affordability.

I did read one article last week that got the phrase right - it referred to "insatiable demand for homes". Now I admit that most people wrongly interpret that to mean the same as strong demand, but more careful interpretation is that the demand for homes is incapable of being satisfied. Demand can be very weak and still be insatiable, if supply is sufficiently hard to find.

We currently have several market segments where demand is actually below normal, but it is still insatiable. In fact, it could drop by 50% and still be insatiable, unless supply rose at the same time.

If you are talking with the majority of people who will refuse to change the subject from demand, you can tell them demand is insatiable and still be 100% accurate. They will no doubt agree with you.

However, between you and me, we need to keep an eye on the supply and we can ignore what demand is doing - it is irrelevant until supply rises to more normal levels and the majority of homes are no longer getting multiple offers.“©2020 Cromford Associates

April 22 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

Goodyear joins Glendale, Maricopa, Fountain Hills and Paradise Valley in moving in a direction favorable to sellers. The other 12 cities are moving in favor of buyers but remain very much seller's markets. Some of these have cooled more than others - Tempe, Gilbert, Peoria and Avondale have all seen their CMI decline 13% or more.

The overall situation is that demand is moderating slightly while supply has seen a minor increase. The number of new listings has risen over the past 10 days and is now at or slightly above what we would consider normal. So the reason the active listing counts remains so low is not due to the lack of new listings. However, It would take many months if not years to build inventory back to normal at the current rate of new listings. We would need to see new supply coming in far higher than normal for an extended period to achieve an adequate supply level of 25,000 to 30,000 active listings. Hence prices will continue to rise throughout the short and medium term.

The current slight cooling of the market is barely perceptible on the ground and is a healthy phenomenon. What we don't want to see is a sudden sharp retreat from the all time high. Apart from the CMI, almost all of the other market indicators are still showing positive trends, so we have a gentle and orderly process.

“©2020 Cromford Associates

April 21 - Based on affidavits of value filed during March we have collected the following statistics on iBuyer activity:

	Opendoor	OfferPad	Zillow	Knock	All iBuyers Combined
Homes Purchased in March 2021	186	88	31	0	305
Homes Purchased in March 2020	163	114	55	8	340
Annual Change in Purchases	+14%	-23%	-44%	-100%	-10%
Homes Sold in March 2021	187	88	58	0	333
Homes Sold in March 2020	256	102	66	1	425
Annual Change in Sales	-27%	-14%	-12%	-100%	-22%
Median Purchase Price in March 2021	$331,400	$296,250	$333,900	N/A	$322,500
Median Purchase Price in March 2020	$248,500	$277,300	$269,750	$407,745	$263,300
Median Sale Price in March 2021	$336,500	$341,000	$329,000	N/A	$322,500
Median Sale Price in March 2020	$270,000	$279,900	$300.000	$304,925	$263,300
Homes in Inventory at the End of March 2021	338	144	42	0	524
Homes in Inventory at the End of March 2020	537	211	116	22	886
Annual Change in Inventory	-37%	-32%	-64%	-100%	-42%

As a group, the iBuyers are still showing negative growth year over year, both in terms of purchases and sales. This is comparing March 2021 with March 2020. The annual comparison should look brighter in April because April 2020 was such a weak month for them. There has been a noticeable shift in market share away from Zillow and towards Opendoor, with the latter making some very competitive offer price quotes during the last 2 months. We note that the median purchase price for Opendoor has increase from $248,500 to $331,400, a rise of over 33%.

As a result Opendoor has shown an annual increase in purchase volumes for the first time since November 2019, and now has inventory that represents a roughly 65% market share. OfferPad retains 27% market share while Zillow is fading to just 8%.                    

“©2020 Cromford Associates

April 18 - For the first time, our weekly chart measuring Monthly Dollar Volume is showing more than 5 billion dollars was closed in the ARMLS database during the past month.

“©2020 Cromford Associates

April 17 - Annual appreciation (measured using the monthly average price per sq. ft.) has exceeded 27% today and is clearly going higher still. If we compare 2021 with 2005 we see the following chart:

Both years started around 17%. In 2021 we are almost but not quite keeping pace with 2005, which had reached 30.2% by week 16. We have reached 27.9% at the same point.

“©2020 Cromford Associates

April 15 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

 

Glendale and Maricopa continue to move in sellers' favor, along with Fountain Hills and Paradise Valley. However Cave Creek has joined the majority and is moving in favor of buyers. So we have 13 cities moving in a trend favorable for buyers and 4 for sellers. However even the lowest CMI (in Tempe) is extremely unbalance in favor of sellers at 348.1. Remember than the normal balanced level is 100.

We are seeing a small increase in supply in many areas (but not Glendale or Maricopa). The recent downward trend in demand appears to be losing some momentum. The market remains extremely difficult for buyers while most sellers are inundated with multiple offers, some involving imaginative techniques to make them stand out from the crowd.

“©2020 Cromford Associates

April 14 - A recent article published in Inman suggested that the high cost of building materials is making homes more expensive. This is wrong.

While many building supplies are selling at unusually high prices, this is NOT a reason why home prices are rising. New home developers do not set home prices based on the cost of building a home. They price it based on the competitive alternatives available to home buyers. The most important one is the price of a similar re-sale home. Obviously the price of building materials has absolutely no relevance to the market price of a re-sale. The laws of supply versus demand control re-sale pricing. It therefore follows that the laws of supply and demand also drive new home pricing. The cost of building materials is inconsequential.

Developers are having difficulty keeping their price lists in line. The costs of re-sale homes are rising so fast that new home prices appear too cheap a few weeks after they are published. They need to be repeatedly raised to avoid selling homes too cheaply. Builders also have to pay more for their supplies, but this presents little problem when their headline prices are rising even faster.

If homes were easy to find, the high cost of building supplies would squeeze gross margins for builders and their profitability would suffer. However homes are so hard to find we are starting to see lottery arrangements when new tranches of lots are released to buyers. This is what we saw in 2004. At that time we also so buying agent commissions cut or disappear.

Supply chains are inadequate for many types of building products, so lead times for home completions are stretching out. This makes the supply of homes to buy even worse, so driving greater imbalance between supply and demand. Thus the poor availability of building supplies will help to drive up home prices, but the cost of building supplies will not.

And of course, when the cost of building supplies comes down again, will house prices go down as a result? Don't be silly.

“©2020 Cromford Associates

April 12 - Over the last 4 days we have seen the first signs of a noticeable increase in supply since the start of the year. This is not going to make much difference immediately, but if the trend continues for several months (which is a big if), then we could see some reduction in the levels of craziness that have been found all over Greater Phoenix.

I would like to thank subscribers Ben Graham, Scott Gaertner and Vladimar Rabinovich for the following examples of the current levels of craziness:

20568 N 93rd Pl was purchased for $825,000 in August 2013 and then re-sold for $1,287,500 in December 2019 for $37,500 over the asking price. It was listed a couple of weeks ago for $1,500,000 and closed for $1,700,000 (all cash) last Friday. So it rose by $412,500 in just 16 months, or almost $26,000 a month. It also went under contract after just 3 days.

26071 N 74th Dr was purchased 12 months ago for $520,000 and was listed 3 weeks ago at $675,000. It has gone under contract for $810,000. Inspection period reduced to 5 days and $30,000 earnest money becomes non-refundable after inspection. The home was built by Taylor Morrison for $379,275 in 2014.

A property "coming soon" at $565,000 went under contract within 24 hours at $620,000 with a fully waived appraisal

These things would have been unbelievable just 6 months ago, but are becoming commonplace today.

Many people immediately conclude that demand is extremely strong. They are wrong. Demand is nothing special, only 10% above normal and falling. It is the supply situation that is extraordinary. This is significant because demand can dry up quite quickly. However increasing supply can take a long time unless huge numbers of homes are already vacant, as was the case in 2005. Homes lying vacant in Greater Phoenix are unusual today, so any increases in supply are likely to be gradual.

“©2020 Cromford Associates

April 11 - There was a change in the nature of the demand during March. We can see this by examining the intended use recorded on the affidavits of value. For Maricopa County single-family and townhouse / condo sales:

unit sales were 29.3% higher than in March 2020

sales for owner occupancy as a primary residence were up 12.7%

sales for use as a rental property were up 52.1%

sales for use as a second or vacation home were up 36.2%

March 2021 had 4,5% more closing days than March 2020, so all of these high numbers should be shaded by that fact.

It is clear that compared to last year, far more sales are going to investors and those buying second homes. The primary residence buyer seems to be the segment that is losing out. Perhaps the rising prices and interest rates are having a greater impact on these buyers (who probably have less financial resources than investors and people buying their second or third home).

By itself, this is not a huge development, but it is a new sign that the market may be starting to get a little frothy. Primary residence purchases are the backbone of the market and we do not want to see a market dominated by other buyers when we are looking for signs of good health. In other words, we do not want enthusiasm to morph into euphoria.

“©2020 Cromford Associates

April 10 - The affidavits of value recorded in March for Maricopa County have now been processed and we have the following statistics:

There were 12,032 homes closed comprising 1,753 new builds and 10,279 re-sales

Closings were up 20.5% from March 2020 with new builds up 13.7% and re-sales up 21.7%.

The overall median sales price was $365,000, with $391,640 for new builds and $360,000 for re-sales

The overall median was up 15.9% from a year ago with new builds up 8.5% and re-sales up 18.8%

These numbers include single-family homes and townhouse / condominiums. Pinal County affidavits are not yet fully processed.

We note that re-sale prices are still accelerating much faster than new build prices. Every re-sale is effectively an auction with fervent bidding by desperate buyers. The home builders are unable to raise their list prices fast enough to match the effervescence of the re-sale market, and once they have a signed contract the price is fixed, even though it will seem very cheap by the time it closes.

This is why we are not surprised to see Fulton Homes allowing buyers a window to cancel their contracts in April. Completion dates have become very uncertain in the face of supply-chain disruption and the last thing a builder needs is signed fixed price contracts. They will be able to sell all the homes they can build over the next year and they might as well let prices rise with the general market. If you are one of those buyers thinking about cancelling, my advice would be to stick with the deal you have agreed.

Meanwhile all sorts of unusual things are happening in the re-sale market:

to increase their chances of being accepted, some potential buyers are included a signed BINSR with their offer, forgoing the fight to withdraw if anything unexpected is found during the inspection period

a 1,965 sq. ft. home built just 5 years ago in Peoria for $264,256 just closed for $589,000. That's a rise of 123% in just 5 years and a price of $299.75 per sq. ft.

We would like to thank our subscribers Nate Brill and Sara Waide for contacting us to let us know about some of the more unusual things occurring. To other subscribers, please feel free to email us with anything crazy you come across.

We are living through an unusual period in housing history and first hand accounts are worth recording.

“©2020 Cromford Associates

April 9 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

Since last week, 2 more cities have turned positive for sellers, though the overall CMI trend is down, with an average monthly change of -5.8%

The two cities joining the rising list are Glendale and Maricopa. Leading the way lower are Tempe, Mesa, Peoria and Surprise.

There is still almost no sign of supply increasing. Incoming new listings are down compared with 2020, both for the year to date and for the quarter to date. The slight decline in demand that has caused the CMIs to fall from their all-time peaks is not going to be enough to take them a lot lower unless supply cooperates by trending higher.

“©2020 Cromford Associates

April 8 - The activity in the luxury market is unlike anything we have seen before. During March, there were 411 closed single family listings over $1 million in the Northeast Valley alone. This is almost double the number in March 2020, which was previously the highest March number we had ever seen. If look at all dwelling types across Greater Phoenix, the total closed listing count is 557. The total in March 2020 was just 265. The latter was the prior March record. In the supposedly boom year of 2005, there were only 202 homes closed over $1 million.

To see the amazing numbers for yourself go to the Sales per Month Tableau chart and filter out the price ranges below $1 million.

It is no wonder that the agents who specialize in luxury sales are dominating the year-to-date production table.

“©2020 Cromford Associates

April 5 - Over the last few weeks the Cromford® Market Index has fallen back slightly from its peak of 514.9 and is now dipping below 500. We want to make sure people do not over-react to this development. A level around 500 is extremely high and represents a huge imbalance between supply and demand which will force prices much higher than they currently are. The CMI is specifically designed to be the earliest of leading indicators and therefore gives us a signal of a change in the market before any of the other indicators is ready to do so. The CMI is telling us that demand is slightly weaker and supply has stopped falling. However a drop in the CMI from 515 to 500 represents an almost imperceptible change in the real world. Trying to feel a 3% cooling of a market that is on fire is an exercise in mathematics not something that will be obvious to many buyers or sellers. Currently there is no sign of a rapid fall from the top as supply remains extremely weak while demand is weakening only slightly with very strong sales counts. It is only the listings under contract that are less than impressive and it can be argued that listings can only go under contract if they exist in the first place. Low supply imposes an upper limit on the number of listings under contract.

Almost all of the other key indicators are still at extremes. The listing success rate stands at a level around 92.5%, close to a record high. We have never achieved anything over 90% in previous periods. In the 2005 bubble year we maxed out at 86%.

At the peak of the bubble the CMI hit 313, far below the currently measured 499. So until the CMI drops below 313, this 2020-2021 housing boom remains stronger than the peak of the 2004-2005 boom.

Pricing is of course a trailing indicator, especially closed sales prices. Here is the chart showing the average $/SF for under contract and closed listings.

“©2020 Cromford Associates

The under contract line has been rising at a strong pace and if sales prices were going to enter a declining trend, this green line would have to show a significant falling trend first. We can also see that the average closed sales price is now higher than the average list price for these same listings and the gap is increasing. This did not occur in 2005. We have never seen this phenomenon before, where the average house is selling above list price.

“©2020 Cromford Associates

April 3 - You may have already seen this article about the Arizona housing market.

https://azbigmedia.com/real-estate/residential-real-estate/is-a-housing-market-crash-on-the-way-in-2021/

While I would agree with much of the content of this article there are a few statements that interest me:

1. "Today’s mini-boom cannot be sustained"

Calling the current market conditions a "mini-boom" is ridiculous. If this is not a full scale boom, then I don't know what would qualify. This is a more significant and long-lived increase in price than any of the booms we have witnessed since the 1950s. We have over a decade of sustained under-building in the face of population growth to work off. This is not some market aberration that will quickly resolve itself. The annual appreciation rate has already exceeded 24% (measured by monthly average $/SF) and there are higher numbers to come. Also what does "cannot be sustained" mean. If it means that prices will one day be lower than today, that we would consider an unlikely prospect. At some stage the boom will fade but we expect prices to stabilize at a much higher level than 2Q 2021. In the words of Stephen Kim of Evercore ISI, we are entering housing's "Golden Age".

2. "Few people foresaw the housing market crash 15 years ago that ignited a worldwide recession"

This is true, but we were one of those people. We forecast the crash in June 2005 and sold our investment property holding for $940,000 that we purchased for $521,336 3 years earlier. In 2005 many people were reluctant to believe a crash was coming, but in 2021 there are far too many people willing to believe that a crash is coming, despite all the evidence to the contrary. This widespread belief is one of the factors that prevents it becoming a bubble. In a bubble, almost everyone believes the price rises will be sustained and fear of missing out is far higher than the fear of a crash. We see evidence of such bubbles in many places today, but housing in Phoenix is not one of them.

3. "Fueled by low interest rates, loose mortgage lending standards, and the nation’s unshakable faith in home ownership, home values rose at record rates year after year".

This is actually referring to a brief period of massive price rises in 2004 through 2006. This was not really "year after year" but a fairly short period compared with what we are currently experiencing. It was also not fueled by low interest rates, unless you consider 6% low. This would be considered a high rate today. It was certainly fuelled by loose lending standards, driven by Wall Street's insatiable appetite for mortgage backed securities. You can't sell mortgage backed securities unless you have mortgages to build them with, so mortgage brokers were incented to sell mortgages to almost anybody. Many of the borrowers went along with the scam and didn't even make the first repayment. Having secured a 100% loan, they lived rent-free for quite some time before they were eventually foreclosed and had to move out. Not every foreclosed homeowner was an innocent party at that time. Many home buyers fraudulently exploited the situation. The lenders take much of the blame but I know many borrows who were complicit. This is very different to today's lending industry and today's borrowers. Today's USA has a fairly shaky faith in home ownership thanks to the 2005 boom and 2007 bust, which is another reason why we are probably not in a bubble today. The fact that so many people think we are in a bubble is itself a reason to doubt we are in a bubble.

“©2020 Cromford Associates

April 2 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

Once again, all but 3 cities see their CMI falling with Fountain Hills joining Paradise Valley and Cave Creek as the 3 notable exceptions. Tempe has joined the declining list and replaced Paradise Valley at the bottom of the table. Mesa, Goodyear and Surprise top the list of declining CMIs.

The average monthly fall in 5.1% and we think this is a sign of a healthy market. When a market is behaving properly, demand should decline when affordability drops. Affordability is certainly falling because all measures of pricing have been on a rapid upward run over the last month. Interest rates are also up - the typical rate for 30 year fixed loan at 3.08% according to Freddie Mac. A month earlier this number was 2.81%. However a year ago we were looking at 3.45% so interest rates can hardly be called expensive.

In an unhealthy market, euphoria takes over and demand increases as prices rise, To avoid a disastrous bubble like we experienced in 2004 and 2005, buyers need to keep a grip on reality and realize when they cannot afford the house they want. Throughout most of history, lenders have been only too willing to inform borrowers that they cannot afford the loan they want. This factor was almost entirely absent in 2003 through 2005, which led to the out of control price inflation followed by a rapid bust that started in 2006. As long as lenders remain suitably cautious, the market should continue to stay healthy.

In the real world, demand falling is of little consequence when supply remains close to all-time lows. Prices must continue to rise for a long time yet - until supply and demand get back in balance. Once balanced then prices should rise at the same rate as inflation. In 2006, supply rocketed past demand and prices started to decline from mid-2006 onwards. The price declines sparked the foreclosure wave (not the other way round).

Demand varies a lot less than supply, and it is inconceivable that demand should fall far enough to match the current level of supply. So instead, we should look for signs that supply is increasing if the market is to return to anything approaching normal balance. At the moment we see few signs of that happening, but the supply situation can change quickly and monitoring active listing and new listing counts is top priority.                  

“©2020 Cromford Associates

March 30 - The latest S&P / Case-Shiller® Home Price Index® numbers were published today. They cover home sales during the period November 2020 to January 2021.

Comparing with the previous month's series we see the following changes:

Phoenix +1.54%

Seattle +1.45%

San Diego +1.40%

Miami +1.20%

Tampa +1.09%

Portland +1.06%

Denver +1.01%

Los Angeles +0.98%

Las Vegas +0.92%

New York +0.87%

Washington +0.85%

Dallas +0.83%

Atlanta +0.79%

Boston +0.77%

Charlotte +0.70%

Detroit +0.65%

Chicago +0.45%

San Francisco +0.19%

Minneapolis +0.06%

Cleveland -0.06%

For the second month, Phoenix's Case-Shiller index exceeded that measured at the height of the housing bubble in June 2006

The national average increase was 0.76% over the prior months, another very strong number. Phoenix jumped from fifth to first place. San Francisco, Minneapolis and Cleveland stand out as the weakest of the 20 cities, but otherwise the price gains are quite broad based.

Comparing with this time last year we see the following changes in the indexes:

Phoenix +15.6%

Seattle +14.3%

San Diego +14.2%

Boston +12.7%

Tampa +11.9%

Cleveland +11.7%

New York +11.3%

Charlotte +11.0%

Detroit +11.0%

Los Angeles +10.8%

Washington +10.7%

Minneapolis +10.7%

Portland +10.6%

Miami +10.4%

Denver +10.0%

Atlanta +9.6%

San Francisco +9.5%

Dallas +9.2%

Chicago +8.9%

Las Vegas +8.5%

The national average was +11.2%, so once again Phoenix stayed well ahead of the national average. For the 20th consecutive month, Phoenix was top of the annual appreciation table.

To see a chart of the 20 cities and their home price indexes over the long term, please visit here

“©2020 Cromford Associates

March 26 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

All but 3 cities now see their CMI falling with Paradise Valley and Cave Creek notable exceptions and Tempe just squeaking out a gain over the last 4 weeks.

The reason for the decline is a significant drop in our demand readings. Many cities now have a Cromford® Demand Index below 100, meaning demand is below normal. Tell that to a buyer facing multiple competing offers and they will not believe you, but it is still true. The vast majority of people are unable to distinguish between a hot market because demand is high and a hot market because supply is low. The Greater Phoenix market is hot because of extremely low supply. So low in fact that fluctuations in demand is almost irrelevant. The heat is generated by the difference between supply and demand. Demand could drop in half and it would still vastly exceed the available supply.

If local people are deciding not to move, then this reduces demand and supply at the same time, because they do not list their home for sale. However incoming people from out of the area generate demand without adding to the supply. The top end of the market is still heating up because so many buyers are from out of state.

It is quite understandable for some buyers to drop out of the market because prices are rising beyond their reach. This is one way rising prices re-balance the market. However with all 17 cities over 395, we still have some very large price increases ahead of us. A lot more buyers will have to drop out before prices start to stabilize. By the time prices stop rising, they will be at a yet more unaffordable level. Unless supply starts to recover dramatically, this could be many years away.

A sharp rise in active listings would be the main signal to watch for over the next 12 months.

“©2020 Cromford Associates

March 25 - The recent decline in new listings is causing the number of active listings to drop to extreme lows in some areas. Examples of the number of single-family homes available (excluding UCB and CCBS listings) are:

Buckeye - a low of 56 listings - down from 68 last month and 282 last year. The long term average is 477 and the record high is 1,279

Fountain Hills - a record low of 27 listings - down from 45 last month and 159 last year. The long term average is 245 and the record high is 531.

Maricopa - a record low of 41 listings - down from 52 last month and 185 last year. The long term average is 406 and the record high is 1,092.

In the case of Buckeye, 56 is not quite a record low, since we hit 55 in early March and then rebounded to 85 by the 14th.

In the case of Maricopa, 14 of the homes listed are new builds, so the number of re-sales is just 27

“©2020 Cromford Associates

March 24 - Based on affidavits of value filed during February we have collected the following statistics on iBuyer activity:

	Opendoor	OfferPad	Zillow	Knock	All iBuyers Combined
Homes Purchased in February 2021	130	93	28	0	251
Homes Purchased in February 2020	177	89	49	6	321
Annual Change in Purchases	-27%	+4%	-43%	-100%	-22%
Homes Sold in February 2021	138	96	48	0	282
Homes Sold in February 2020	345	123	85	6	559
Annual Change in Sales	-60%	-22%	-44%	-100%	-50%
Median Purchase Price in February 2021	$324,800	$314,000	$309,936	N/A	$318,400
Median Purchase Price in February 2020	$260,200	$248,148	$254,300	$351,544	$256,600
Median Sale Price in February 2021	$330,000	$336,325	$357,600	N/A	$335,825
Median Sale Price in February 2020	$257,000	$257,900	$275.000	$288,425	$260,000
Homes in Inventory at the End of February 2021	339	144	69	0	552
Homes in Inventory at the End of February 2020	630	199	128	15	972
Annual Change in Inventory	-46%	-28%	-46%	-100%	-43%

Opendoor maintained their lead over OfferPad in February on both purchase and sales volumes. However the entire iBuyer sector has contracted sharply over the last 12 months. From March onwards the comparisons will get much easier, because these companies slowed down the operations dramatically with the onset of the COVID-19 pandemic.

“©2020 Cromford Associates

March 23 - During early to mid March we saw an increase in the rate of arrival of new listings. This encouraged us to think perhaps the listings drought had seen its lowest point. The last 7 days have dashed those hopes with a return to poor inflows, well below normal. Active counts are going south again.

The situation with rental listings is no better. Year to date we have seen 15% fewer new rental listings (excluding short term rentals) compared with 2020. Over the last 4 weeks, the comparison with 2020 reveals a decline of 24%, an unusually large deterioration in new supply. As a result, the number of active rental listings is down to just 1,492. We had 2,297 on March 23 last year, so we are down 35% in the last year. The long term average is 4,864 and the shortage explains why rents are rising so rapidly with no sign of relief for tenants.

“©2020 Cromford Associates

March 20 - They may a few people who are skeptical that the rate of home price appreciation may reach 40% in 2021. For these, I have the average list price per sq. ft. chart for listings under contract.

From the chart, updated weekly, you can that the reading has increased from $220.63 at the beginning of January, to $242.20 in the middle of March. That is an increase of 9.8% in just 11 weeks.

This is entirely consistent with an annual rate of over 40% (in fact it suggests over 45%).

We know that the rate may change and we continue to monitor carefully, but charts like this suggest that appreciation rates over 40% are more likely than not.

“©2020 Cromford Associates

March 18 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

Although the minimum CMI in the table is extremely high at 383.7 the majority of cities (10 out of 17) are now seeing a decline. Paradise Valley and Cave Creek are holding out with increases over 19%, but these are two of the smallest among the larger cities.

Demand is trending down and supply is no longer falling in most cities. This means the market is starting to move back in the direction of "not crazy". However the pace of change is still slow and the average CMI fell by only 1.6% over the past month. Upward pressure on prices remains very strong.                    

“©2020 Cromford Associates

March 17 - Despite the Cromford® Market Index topping out, the level of competitive bidding for the few available homes is pushing other measures into record territory. The average percentage of list price achieved across all areas & types is 99.98% as of today, the highest we have ever recorded and up from 99.00% this time last month.

This measure would be higher still if agents did not artificially change their list price after the contract it accepted. Presumably because they are worried about appraisal, some agents increase the list price to match the contract price after the offer has been accepted. This is unlikely to fool even the most inexperienced appraiser. Most appraisers are members of ARMLS and therefore have access to the listing history. This shows all the changes made to the list price.

Unfortunately this practice makes it hard to count accurately all the listings that sold for more than list price.

“©2020 Cromford Associates

March 15 - The monthly average sales price per sq. ft. has not moved much for 2 weeks now, so we are expecting a sudden large move upward.

 

The chart above is interesting because it shows a widening gap between under contract listings closed listings. This is a signal that the latter will move upwards to close the gap.

It is also interesting because the average sales price is almost the same as the average list price over the last several days, something we very rarely see. Another sign of a very strong market.

“©2020 Cromford Associates

March 11 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

 

This is a different picture than we have seen for some time.

We have 7 cities moving in favor of sellers and 10 moving in favor of buyers. However the average change in CMI over the past month is still slightly positive at +0.4%, down from +2.15% last week.

The Cromford® Market Index looks like it has reached a maximum and is unlikely to go much higher.

demand readings have declined, especially listings under contract, with unit sales likely to follow in due course

demand levels are moving back to normal,or even lower in a few areas

supply remains excruciatingly low, but is not showing much inclination to go lower still

as long as new listings keep coming, the lower demand should allow supply to stabilize and even start to recover, though this could take a very long time

The higher end of the market, especially Paradise Valley, Scottsdale, Fountain Hills and Cave Creek, has not stopped moving in sellers' favor, but elsewhere we are seeing a turning point in the CMI at last.

Of course, this does NOT mean that prices will fall. It means that no more fuel is being added to the rocket that is taking price higher over the coming months. It still has a massive amount of fuel already on board. But as prices rise, demand should fall and gradually bring us back to some semblance of normality.

The lowest CMI in the table is 370.5. Prices will not fall until CMI values drop below 90. We are a very long way from that point. The market will stay crazy for quite some time, but the craziness may be hitting its peak this week.

“©2020 Cromford Associates

March 8 - The listing success rate across all areas & types has just set a new record high at 92.1%. If you want an early warning of a weakening in the market, watch this statistic. The long term average is 66%, so 92% represents an extremely strong market. It is unlikely that the market can sustain levels over 90% for a long time, but a drop below 80% would be a signal of weakness.

“©2020 Cromford Associates

March 7 - For anybody who thinks homes are getting too expensive to buy, I would ask - what are the alternatives? Rents in Greater Phoenix have risen from an average of $1.01 per sq. ft. per month to $1.22 per sq. ft. per month over the last year. That is a 21% rise - the highest we have ever recorded. The third option of being homeless is not very attractive. So I think we are going to see a large increase in the number of people taking the fourth option - sharing with friends or relatives. This seems to be the only practical solution to keep the cost of shelter down. This will build up latent demand for the longer term, as many of these people will have ambitions to create their own independent household when they can afford to.

For those who are drawing parallels with 2005, I would point out that rents FELL 6% between March 2004 and March 2005. This is because there were huge quantities of vacant homes that had been bought by speculators with nobody available to live in them. In those days, the pace of home building had exceeded the rate of population increase, the opposite of the situation today.

It should always be a red flag when rents and purchase prices move in opposite directions. Something is wrong in a market that does that.

“©2020 Cromford Associates

March 6 - The affidavits of value have been compiled for Maricopa County and give us the following statistics for February 2021:

There were 9,342 homes closed comprising 1,479 new builds and 7,863 re-sales

Closings were up 6.9% from February 2020 with new builds up 6.9% and re-sales also up 6.9%. It is rare we see both new and re-sale match like that

The overall median sales price was $359,100, with $379,900 for new builds and $352,000 for re-sales

The overall median was up 17% from a year ago with new builds up 4.9% and re-sales up19.5%

These numbers include single-family homes and townhouse / condominiums.

We note that re-sale prices are accelerating much faster than new build prices.

“©2020 Cromford Associates

March 4 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

 

We have 9 cities moving in favor of sellers and 8 moving in favor of buyers. The average change in CMI over the past month is +2.1%, down from +3.5% last week.

Although this is closest we have been to balance in the CMI direction for quite some time, the market remains enormously out of balance in favor of sellers. The lowest CMI in the table is 345.5, which is unprecedented.

For the low and mid-range markets, demand is being crimped by higher interest rates and affordability concerns. Even so demand is far higher than the truly miserable level of supply, which means prices are going to rise sharply over the next several months. This is the way markets are supposed to work - prices have to rise until buyers lose enough enthusiasm so balancing demand with the supply. This can take a very long time. Supply is so weak that demand will need to collapse to get a balanced situation in less than 3 years. Demand is not collapsing, but it is in a declining trend, particularly for cities like Gilbert, Chandler, Glendale, Maricopa, Buckeye and Queen Creek.

The higher end of the market is going from crazy to ludicrous. We have never experienced such low supply of luxury homes alongside exceptional demand, fueled in part by well-funded migration from other states. In the table above, Paradise Valley, Cave Creek, Scottsdale and Fountain Hills are all moving strongly in favor of sellers and finding a home is tough even if you have more than $2 million to spend. New luxury homes have a long lead time, so it is very hard to image how supply can be increased to meet this enormous boom in demand for high end homes. This demand level is far higher than we have ever seen before in Greater Phoenix.

“©2020 Cromford Associates

March 2 - CoreLogic publishes a monthly report called US Home Price Insights. It is a worthwhile read, although it illustrates just how amazingly wrong a large organization can be in its forecasting of home prices.

For example in the June 2020 report, it forecast that US home prices would fall by 6.6% over the following 12 months. Since then it has reported that prices have actually risen by 7.7% over just 7 months. It has modified its forecast since then and but continues to predict a sharp turn-round and is now projection a tiny 3.3% rise by January 2022. We believe this will prove to be as hopelessly wrong as every forecast it has provided over the last 12 months. All its forecast have been far lower than reality, yet it has not changed its forecasting method and stubbornly clings to the idea that demand will weaken enough to reverse the current price trends. We could not disagree more.

Like many (if not most) mathematical models of the market, CoreLogic's model fails to take proper account of extreme supply shortages.March 1 - For the first time we have zero active listings for single-family homes in ZIP codes 85012 and 85378.

“©2020 Cromford Associates

February 28 - The listing success rate is a solid indicator for the state of any market and the reading yesterday was 91.8% for all areas & types. This is the highest we have ever recorded.

If you want to see prices start to fall, you will have to wait until the listing success rate drops below 60% for that to become a possibility.

That is an awful long way down from the current levels. Massive changes would have to take place for listings to fail at a 40% rate,

“©2020 Cromford Associates

February 27 - There is a slight glimmer of hope for dejected buyers in today's new listing counts. We have been lagging behind the last 3 years in terms of year-to-date new listings. By yesterday 2021 was 2.4% below 2020, 11.7% below 2019 and 12.3% below 2018. However the last 7 days have seen an up-tick in new listings and the year to date count is now only 210, or 1.2% below last year. That was brought about by last week's load, which was up 5.6% compared with the same 7 days in 2020.

These numbers are for all areas & types of residential listings in ARMLS. A few more weeks like this and the supply situation could perhaps stop getting worse.

“©2020 Cromford Associates

February 25 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

We have 11 cities moving in favor of sellers and 6 moving in favor of buyers. The average change in CMI over the past month is +3.5%, down from +5.7% last week.

Avondale is the first large city to exceed 1,000, although El Mirage was the first among all the cities we measure.

Buying a home is not only desperately stressful, it is getting a lot more expensive. So we should expect demand to come down, and it has started to decline in many areas. It is hard to notice any decline in demand when supply continues to fall. Most sellers cannot tell much practical difference between receiving 30 offers and receiving 25 offers. It is still more than enough demand to keep prices rising quickly.

Eventually prices will rise so much that demand starts to drop below normal. This may possibly give supply a chance to expand from the extreme lows it keeps hitting week after week. We will have to wait and see - there is very little sign of that in any of the current numbers.

Every single large city is over 330. This is well over the CMI for the entire market that we saw in April 2005 at the peak of the housing bubble. That high was 312.9, which now looks rather modest compared with the 504.6 we are measuring today. In April 2005, we observed the first signs that the bubble was about to go pop as increasing numbers of mostly vacant homes hit the market from May 2005 onwards, the result of canny speculators timing their exit from the market well before pricing peaked the following year. No such pressure relief is looking likely in 2021. But it pays to watch the numbers every day for any change in conditions.

“©2020 Cromford Associates

February 24 - January was a good month for new single-family building permits with a total of 2,656 reported by the Census Bureau for Maricopa and Pinal counties.

This makes it the best January since 2006, when we saw 3,593.

We are now seeing single-family home construction at the same sort of rate that we had in 1996 through 2002, but less than during the over-building of 2003 through 2006.

Charts giving detailed counts from 1996 onwards with filters for city and county are available in the optional Cromford Public section of this site.

“©2020 Cromford Associates

February 23 - The latest S&P / Case-Shiller® Home Price Index® numbers were published today. They cover home sales during the period October to December 2020.

Comparing with the previous month's series we see the following changes:

Miami +1.24%

Tampa +1.22%

Washington +1.22%

New York +1.22%

Phoenix +1.14%

Las Vegas +1.11%

Seattle +0.94%

Denver +0.92%

Dallas +0.91%

Cleveland +0.87%

Atlanta +0.84%

Boston +0.81%

Los Angeles +0.74%

Charlotte +0.66%

San Diego +0.64%

Portland +0.48%

Minneapolis +0.35%

Chicago +0.29%

San Francisco +0.03%

For the first time, Phoenix's Case-Shiller index exceeded that measured at the height of the housing bubble in June 2006

The national average increase was 0.86% over the prior months, another very strong number. Phoenix was comfortably ahead of the national average but slipped to fifth place. San Francisco stands out as the weakest of the 19 cities, but still managed a positive number.

Comparing with this time last year we see the following changes in the indexes:

Phoenix +14.4%

Seattle +13.6%

San Diego +13.0%

Cleveland +11.5%

Boston +11.4%

Tampa +10.7%

Washington +10.3%

Minneapolis +10.2%

Charlotte +10.2%

Los Angeles +9.9%

New York +9.9%

Denver +9.2%

Miami +9.2%

Atlanta +8.9%

San Francisco +8.7%

Dallas +8.4%

Las Vegas +7.9%

Chicago +7.7%

The national average was +10.4%, so once again Phoenix stayed ahead of the national average. For the 19th consecutive month, Phoenix was top of the annual appreciation table.

To see a chart of the 20 cities and their home price indexes over the long term, please visit here.

“©2020 Cromford Associates

February 20 - It can be hard to explain to people just how bad the supply of re-sale homes has become in Greater Phoenix. The reality is quite difficult to grasp unless you are trying to buy one. Many people mistakenly think demand must be exceptionally high, but that is not really the issue. It is above average but not unusual.

Not only is the supply extraordinarily low, it has dropped by a large percentage since the beginning of the year.

In a normal year we would expect to have more available supply in mid-February than we had at the start of the year. For example in 2015 active listings rose from 22,879 in week one to 24,041 by week 8. This excludes listings in UCB or CCBS status but includes all areas & types found in ARMLS. This is a 5% increase.

In 2021 we started the year at 6,113 and by week 8 we have dropped to 4,731, a decline of 23%. This is unprecedented.

You can compare the years easily using the chart here.

If active listings were a species of animal, they would have to go on the critically endangered list.

“©2020 Cromford Associates

February 18 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

We have 12 cities moving in favor of sellers and 5 moving in favor of buyers. The average change in CMI over the past month is +5.7%, down from +9.2% last week.

The more expensive areas like Scottsdale, Paradise Valley and Fountain Hills are tending to show the largest percentage increases. However Avondale is in a class of its own with supply at an excruciatingly low level.

The minimum CMI of 322.9 in the above table is easily the highest we have ever seen. It means there is nowhere where a buyer can expect any quarter in their battle to secure a home for purchase.

“©2020 Cromford Associates

February 17 - For those who are interested in iBuyers and their business model, I can recommend the research analyst Mike DelPrete. You can find his most recent report on profitability here.

Based on affidavits of value filed during January we have collected the following statistics on iBuyer activity:

	Opendoor	OfferPad	Zillow	Knock	All iBuyers Combined
Homes Purchased in January 2021	136	73	39	0	248
Homes Purchased in January 2020	207	89	66	2	364
Annual Change in Purchases	-34%	-18%	-41%	-100%	-32%
Homes Sold in January 2021	108	79	40	0	227
Homes Sold in January 2019	306	103	61	4	474
Annual Change in Sales	-65%	-23%	-34%	-100%	-52%
Median Purchase Price in January 2021	$310,450	$314,000	$335,000	N/A	$318,150
Median Purchase Price in January 2020	$245,700	$266,000	$259,200	$447,980	$251,900
Median Sale Price in January 2021	$315,100	$310,000	$321,500	N/A	$315,000
Median Sale Price in January 2020	$260,000	$274,900	$293.950	$476,347	$264,950
Homes in Inventory at the End of January 2021	347	147	89	0	583
Homes in Inventory at the End of January 2020	798	234	162	16	1,210
Annual Change in Inventory	-57%	-37%	-45%	-100%	-52%

Opendoor overtook OfferPad in January on both purchase and sales volumes, but remains a much smaller business than it was this time last year with sales down 65%.

Despite its name recognition, Zillow has been unable to capture much market share from the other iBuyers in Phoenix and appears to be stuck at little more than one sale per day. Zillow represents 16% of the iBuyer market, which itself was under 3% of the total market by unit count. In hindsight the peak iBuyer penetration was in August 2019, when they acquired 560 homes between them. Based on current trends, it looks very doubtful that they could return to that level of activity in the near to medium term.

Estimated current market share based on unit counts:

Opendoor - 1.5%

OfferPad - 1%

Zillow - 0.5%

“©2020 Cromford Associates

February 14 - For many years the record monthly average sales price per sq. ft. across the entire ARMLS database was $190.61, set on May 5, 2006, almost 15 years ago.

We exceeded that level for the first time on August 1, 2020.

It only took until October 2, 2020 to exceed $200 and then $210 was passed on November 23, 2020.

February 9 saw us break over $220, so in the space of just over 6 months we have seen $30 added to the average price per sq. ft. This is a rise of almost 16% in half a year.

Maybe you think this is unusual and will not last long. I would disagree with that opinion. With the Cromford® Market Index about to exceed 500 for the first time in the next few days, the speed of appreciation is about to step higher, not lower.

It will not take much for appreciation rates to exceed 30% and possibly 40% over the next few months. If appreciation is to slow down we need to see a clear sign of something that could cause that to occur. At the moment there is no such sign. We will let you know when we see such a sign, but right now, the market is primed for an explosive rise in house prices.

“©2020 Cromford Associates

February 12 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

 

We are now starting to see more divergence between the cities, ranging from -6% for Queen Creek and Cave Creek up to +32% for Avondale. All 17 cities are extremely unbalanced in favor of sellers, but when supply is as low as it is now, small changes can have a big impact on the CMI.

The average change is +9.2% so despite a fall in demand, supply has weakened to a greater extent.

If you are wondering why Avondale is so far out in front, it has only 11 active single-family listings without a contract. In a normal market we would expect to see between 300 and 400. Back in 2007, Avondale has over 1,100, so it is down 99% from that level. Incredible, but true.

The above table is based on monthly changes. If we look at the trend over the past week then several more cities have seen a downward trend in their CMI: Buckeye, Chandler, Gilbert, Maricopa, Mesa and Peoria.

The level of imbalance between supply and demand may hit a record peak during February.

“©2020 Cromford Associates

February 11 - When we segment the market by broad geographic regions, it is clear than the Northeast Valley is having the best time at the moment.

Closed sales in the Northeast Valley during January (measured by affidavits recorded) were up 24% compared to a year earlier. This is by far the best performance in Maricopa County, with the West Valley up 10%. the Central & North Valley up 5% and the Southeast Valley up only 4%.

It is is similar story looking at median sales prices. The Northeast valley is up 25% in 12 months from $490,000 to $610,000. The Central & North Valley is at 19% the West Valley at 18% and the Southeast Valley lagging behind at 13%.

All these numbers are for single-family and townhouse / condo properties within Maricopa County.

“©2020 Cromford Associates

February 10- Let us take a deep dive into the active listings to see exactly how dire the supply situation is on February 10, 2021.

Across the ARMLS residential sales database there are a total of 9,440 active listings. Among these we have 365 (4%) that have a contract contingent on buyer's sale (CCBS). We also have 4,515 that in UCB status. This means they have a contract agreed and signed, but are (in theory) open to back-up offers. In most cases this is a ruse to allow the listing to stay on external web sites like Zillow. If it changed to the more realistic pending status then it is no longer being marketed so it will disappear from external sites, reducing the agents exposure. A small percentage is actively welcoming buyers to make an offer, but it is hard to tell how small that percentage really is.

What we can see is that 48% of active listings are in UCB status and if we add the CCBS listings, more than half (52%) already have a contract agreed and signed. Whether you consider them part of the active inventory is up to you. This why we have some charts that include them and other charts that do not.

We are left with 4,560 listings that have no signed contract - 48% of the total).

How do these 4,560 listings break down by segment:

Segment	Count	Percentage	Days Inventory
Out of Area	533	12%	40.3
Within Greater Phoenix	4,027	88%	14.4
For Homes Within Greater Phoenix:
Greater Phoenix - New Build	576	14%	46.0
Greater Phoenix - Built Before 2020	3,451	86%	13.0
For Homes Built Before 2020 Within Greater Phoenix:
List Price Under $300,000	1,113	32%	9.5
List Price Between $300,000 and $500,000	926	27%	9.2
List Price Between $500,000 and $1,000,000	709	21%	18.1
List Price over $1,000,000	703	20%	74.9

We can conclude:

out of area listings are 12% of what is available (normally this is less than 2 or 3%)

new home listings are 14% of what is available in Greater Phoenix (normally less than 5%)

Below $500,000 there is less than 10 days of inventory. Normal inventory is 120 to 150 days.

Over $1 million there is over 2 months of inventory, but we would expect to see 10 to 12 months in a normal market

The re-sale supply is not only the scarcest we have ever seen, it is a lot worse than it looks at first sight. On top of that, the trend is currently headed further down.

“©2020 Cromford Associates

ebruary 9 - Core Logic published their Loan Performance Insights report for November 2020 today. 5.9% of mortgages were delinquent by 30 or more days in November, which is up from 3.9% in November 2019, before the COVID-19 pandemic hit. Serious delinquent loans plus loans in foreclosure are at 3.9%, which is the lowest rate reported since June 2020.

The declining level of delinquency suggests increasing stabilization and reinforces our view that we are unlikely to see a large amount of distressed inventory coming to market over the next 12 months.

“©2020 Cromford Associates

February 6 - The appreciation rate for all areas & types, measured by the annual change in the monthly average closing price per square foot, exceeded 20% this week. The last time appreciation was over 20% was in August 2013.

“©2020 Cromford Associates

February 5 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

16 out of 17 cities are still moving in a direction that is favorable to sellers, despite demand falling in most areas. This is because supply has declined more than demand over the past month.

We are starting to see some cities reach a peak and fall back. Cave Creek is the only one that is clearly visible from the above table, but over the last week a few more have seen a downward trend develop. This includes Chandler, Glendale, Peoria and Queen Creek. In all these cases, demand has weakened enough to pull the CMI back from the peak. This is going to be hard to detect on the ground, because each home that is newly listed will still have dozens of potential buyers eager to view and/or submit offers. Even if the CMI fell to half the current level, the market would still favor sellers and prices would still rise.

Remember that when the CMI falls below 90, prices will experience downward pressure. That level is a long, long way down from where we are now.                    

“©2020 Cromford Associates

January 31 - The Census Bureau has now published its building permit counts for December so we have a complete picture for 2020.

As the re-sale supply dries up, new homes comprise a growing segment of the market, so it makes sense to pay more attention to what is happening in the new-build market even though it is very poorly represented within the MLS.

If you want to see details about single-family permit counts by city over the last 25 years, then the Cromford Public section of this web-site id designed to meet your needs. There are also multi-family permit counts from 2002 onwards.

Across Maricopa and Pinal counties, we saw 31,475 single-family permits in 2020. These 2 counties saw over 76% of the single-family permits issued in Arizona, so the other 13 counties only provided less than 24%. These ranged from 4,240 in Pima to zero in Greenlee.

The 2019 total was 24,674, so the new total represents growth of almost 28%. We can expect even higher numbers in 2021, but we are still not back to the peaks of 1998 through 2006. All these years saw permits exceed 33,000 and reach almost 56,000 in 2004, the peak of the house building boom. Building permit numbers collapsed in 2008 and we have seen 13 consecutive years with permits under 30,000. Now ask me again why we have a supply problem in 2021.

The table below shows total single-family permits issued by city or place name:

Phoenix - 4,562

Buckeye - 3,341

Mesa - 2,826

Unincorporated Maricopa County - 2,544

Surprise - 2,468

Unincorporated Pinal County - 2,376

Queen Creek - 1,986

Goodyear - 1,928

Maricopa - 1,512

Peoria - 1,474

Our leader 8 years ago (Gilbert) does not even make the top 10 in 2020. Also missing from the top 10 are Chandler, Glendale, Scottsdale. These cities are now growing by a slower rate than they have historically

Significant increases can be seen in Casa Grande (1,045), Florence (399) and Coolidge (367). The large cities of Tempe, Fountain Hills, Cave Creek and Paradise Valley are now running behind Wickenburg, Eloy and Apache junction for new home permit numbers. Litchfield Park and Tolleson have also gone very quiet.

“©2020 Cromford Associates

January 28 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest citie

Demand is still on a downward trend, but this has had almost no benefit for buyers as supply is dropping to unprecedented lows across large parts of the valley.

Demand would have to collapse for some semblance of normality to return to this market. We have all 17 cities showing a rise in their CMI with the average increase now at 18% over the past month. This is all due to worsening supply.

Avondale has overtaken Chandler and reclaimed the number 1 position - largely because there are only 20 single-family homes for sale (excluding UCB and CCBS listings). This is a city of about 85,000 people which, in a normal market, would expect to have about 340 single-family homes for sale. There were 1,100 single-family homes listed in Avondale during 2007. Supply has dropped in half since January 8. 20 homes represents just 5.7 days of inventory. So if there were no new listings, the current stock would sell out completely in less than 6 days. I am starting to wonder if inventory could go to zero in places like Avondale. Dividing by zero is not something a mathematician likes to do.

Outside of the large cities, we see critical low inventory in places like Anthem, Arizona City, Carefree, El Mirage, Florence, Litchfield Park, Sun Lakes, Tolleson, Tonopah and Youngtown.

Maricopa is another city with a very strong 35% increase in its CMI over the last month. There are 62 single-family homes for sale in Maricopa (excluding UCB and CCBS). Normally we would expect over 400. Demand has remained strong in Maricopa with over 2,200 single-family closings a year. There are 10 days of inventory, down from 13 last month.

These are strange times indeed.

“©2020 Cromford Associates

January 26 - The latest S&P / Case-Shiller® Home Price Index® numbers were published today. They cover home sales during the period September to November 2020.

Comparing with the previous month's series we see the following changes:

New York +1.79%

Boston +1.42%

Tampa +1.38%

Phoenix +1.28%

Miami +1.26%

Atlanta +1.19%

Charlotte +1.14%

Washington +1.10%

Denver +1.01%

Los Angeles +0.94%

San Diego +0.94%

Seattle +0.91%

Dallas +0.82%

Minneapolis 0.73%

Las Vegas +0.72%

Portland +0.70%

San Francisco +0.58%

Chicago +0.35%

Cleveland +0.06%

The national average increase was 1.07% over the prior months, a very strong number. However, Phoenix was comfortably ahead of that curve and remained in third place. The northeast cities of New York and Boston are doing unusually well at the moment.

Comparing with this time last year we see the following changes in the indexes:

Phoenix +13.8%

Seattle +12.7%

San Diego +12.3%

Boston +10.4%

Cleveland +9.8%

Portland +9.5%

Tampa +9.5%

Charlotte +9.4%

Minneapolis +9.4%

Los Angeles +9.1%

Washington +9.1%

San Francisco +8.3%

New York +8.2%

Denver +8.1%

Miami +7.9%

Atlanta +7.9%

Chicago +7.5%

Dallas +7.2%

Las Vegas +6.8%

The national average was +9.5%, so once again Phoenix is well above average and retains its position as the fastest appreciating city of the 19 that Case-Shiller focuses on.

“©2020 Cromford Associates

January 24 - The average price per sq. ft. of active listings is a leading indicator of sales price movement. It is not based on supply and demand but on seller's perceptions of their prospects. It can also be somewhat skewed by the mix of what is available for sale, in that more expensive homes tend to stay on the market longer.

However, despite those caveats, we are currently recording an average of $330.64 per sq. ft. across Greater Phoenix, using active listings that are not in UCB or CCBS status. This is up from $260.52 at this time last year. This means asking prices have inflated by 27% in the last 12 months.

If we confine our research to listings under $500,000, then the average price has risen from $161.56 to $187.50 per sq. ft., an increase of only 16%. The opposite segment, listings over $500,000, has moved from $341.11 to $412.08, a rise of 21%.

This shows us that prices have risen very quickly over the past year (and mostly since June). However, they have not moved quite as much as the headline figure of 27% would suggest. Part of that increase is because homes under $500,000 have lost some of their share of the total available homes while those over $500,000 have gained share. All price ranges have much lower supply than last year, but the lower price ranges have declined the most.

“©2020 Cromford Associates

January 22 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

Demand is fading a little, but supply has faded much more, moving the balance even further in favor of sellers in all 17 cities. The table above is quite extraordinary and represents the largest imbalance between supply and demand we have ever witnessed.

Avondale has overtaken Gilbert in number 2 position and 7 cities are over 600 (only 1 last month).

The extent to which supply has collapsed just in the last 2 months can be seen from the following declines in single-family detached active listings without a contract:

El Mirage - down 70% to 6

Chandler - down 55% to 78

Anthem - down 52% to 13

Maricopa - down 48% to 61

Avondale - down 48% to 26

Gilbert - down 48% to 83

Peoria - down 47% to 120

Mesa - down 46% to 201

Litchfield Park - down 46% to 31

Arizona City - down 45% to 11

The smallest declines were in Apache Junction, Sun Lakes and Tolleson. There are no cities where supply has increased in the last 2 months.

At times like this, we see many homes never making it to active status, being sold before they are listed, or sold while they are still in "Coming Soon" status.

There is still no sign of more supply arriving. In fact this looks less likely than it did last month as new listings drop off relative to last year.

“©2020 Cromford Associates

January 21 - At the start of 2021 we have a very low number of pending foreclosures in Maricopa County - just 580 as of January 14. This compares with 1,789 at the same time last year and 50,001 in January 2010. At the moment there is no sign of significant inventory arriving through the foreclosure process. If you are concerned about this changing in the future I suggest you keep your eye on the pending foreclosure chart which can be found here.

“©2020 Cromford Associates

January 20 - We have seen a modest rise in interest rates over the past few weeks. May observers over-rate the importance of interest rates when it comes to the effect on the housing market. A rise will tend to make homes less affordable and therefore soften demand. However we have far more demand than we know what to do with, so a bit less would be a good thing. In addition, people moving home is the primary source of re-sale supply, so if demand falls it can often result in a corresponding drop in supply. Since we have a ridiculous shortage of re-sales already, further reductions in new listings would be most unhelpful.

So far in 2021, rental new listings are down 13% compared with 2020, while for-sale new listings are also down 13%

This is an unexpectedly slow start to the year for new listings. Unexpected, because the fourth quarter of 2020 had seen new listings arrive at a slightly higher pace than a year earlier.

If the current trend in interest rates persists, I would expect to see re-sale unit volumes decline a little but prices continue to rise strongly as the imbalance between supply and demand continues. New home sales counts will probably increase too, since permits issued in 2020 were substantially above 2019 giving us more supply relative to the paltry re-sale numbers. The opportunity for builders to increase their asking prices is large.

“©2020 Cromford Associates

January 18 - Based on affidavits of value filed during December we have collected the following statistics on iBuyer activity:

	Opendoor	OfferPad	Zillow	Knock	All iBuyers Combined
Homes Purchased in December 2020	113	87	46	0	246
Homes Purchased in December 2019	253	96	68	6	422
Annual Change in Purchases	-55%	-9%	-32%	-100%	-42%
Homes Sold in December 2020	74	97	32	0	203
Homes Sold in December 2019	298	104	79	4	485
Annual Change in Sales	-75%	-7%	-59%	-100%	-58%
Median Purchase Price in December 2020	$299,200	$297,500	$317,350	N/A	$305,000
Median Purchase Price in December 2019	$252,300	$256,400	$271,200	$263,940	$256,900
Median Sale Price in December 2020	$316,500	$301,000	$283,250	N/A	$303,000
Median Sale Price in December 2019	$256,000	$259,950	$290.000	$398,580	$263,000
Homes in Inventory at the End of December 2020	319	153	90	0	562
Homes in Inventory at the End of December 2019	897	248	157	16	1,318
Annual Change in Inventory	-64%	-38%	-43%	-100%	-57%

The iBuyers as a group purchased 246 homes in Maricopa & Pinal counties during December. That represents a small improvement over November's low number of 229 but reflects how hard it is to find properties to buy at the moment.

They purchased 422 in December 2019, when the market was less competitive. The annual percentage decline in business volume is moderating slowly now as the 4Q of 2019 saw business decline for the iBuyers and so makes for an easier comparison a year later. However, the idea that iBuying is a fast growing part of the housing market has been largely dispelled.

To avoid further decline in market share the iBuyers have significantly increased what they are prepared to pay for a home. The median purchase price is up 19% from a year ago. In contrast the median sales price is up 15% from December 2019.

Strangely, Zillow's median sales price was lower in December 2020 than it was a year earlier. However, Zillow is just an also-ran in this race. Opendoor is in the lead based on purchases but OfferPad is now leading when it comes to sales counts.

“©2020 Cromford Associates

January 16 - There are currently 5,422 active listings on ARMLS located in Greater Phoenix and not in UCB or CCBS status.

There are 5,556 broker's offices in the ARMLS database.

So we have reached a rather strange milestone - there is on average less than 1 active listing per office.

For every active listing there are 8 ARMLS members. Presumably 1 of them has the listing and 7 of them are writing offers on it.

“©2020 Cromford Associates

January 14 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

If you were expecting the craziness to stop in 2021 you were badly mistaken. Supply is still collapsing, driving the CMIs higher at a rapid pace in 16 of the 17 cities. Paradise Valley is the exception, where demand has declined a little over the past 2 months. At 275.2, the PV CMI is still close to its record high.

Chandler has overtaken Gilbert at the top of the table and 12 cities are over 500 (only 4 last month).

It does not make the list of 17 largest cities but El Mirage has already broken through the 800 level and is closing in on 900.

When will this wild ride run out of steam?

“©2020 Cromford Associates

January 12 - Since the turn of the year we have been closely watching to see if the arrival rate of new listings would improve and make the supply situation somewhat easier.

After 12 days we can report that new listings have instead arrived at a feeble rate, lower than the January of the last 3 years and well below what we had been expecting based on December's patterns.

As a result the overall supply situation has got worse. not better.

The following large cities now have fewer than 100 single-family active listings without a contract:

Maricopa 67

Fountain Hills 70

Tempe 73

Goodyear 75

Chandler 86

Cave Creek 87

Buckeye 90

Gilbert 95

Glendale 98

These numbers are pathetic, just a fraction of what we would normally see . Tiny Wickenburg has 75 so is enjoying a relatively abundant supply.

The situation for buyers is getting even more desperate and since January is usually the BEST month for new listings the outlook for 2021 is already dire from a buyer's point of view. Buyers are likely to outnumber sellers by at least 5 to 1 for the foreseeable future. This is the most extreme example of a seller's market we have ever witnessed.

Basic economic theory should tell us what this will do to pricing. It is likely to rise even faster than it has done over the last 6 months.

“©2020 Cromford Associates

January 10 - We used the weekly active listings Tableau chart to create the custom chart below:

This is for single-family detached homes across Greater Phoenix, priced at $500,000 or less. There are just 1,943 of them for sale compared with 10,253 in December 2018. At the time we thought 10,254 was low compared with normal, and it still is. 1,943 is a crazy number for a metropolitan area of nearly 5 million people.

We also note:

there are hardly any distressed homes for sale

the first week of January has seen the number stabilize, but not increase

last year the count also stabilized for a couple of weeks but then started falling away rapidly between mid January and mid March

The jump in April and May 2020 was caused by lock down and looks unlikely to re-occur in 2021.

Prices are likely to increase massively over the next 6 months in these current circumstances. This applies even if demand cools considerably.

“©2020 Cromford Associates

January 7 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

“©2020 Cromford Associates LLC”. 

November 29 - We now have just 27.8 days of inventory across all ARMLS areas & types. That is less than 4 weeks. A normal balanced market would be expected to have between 120 and 150 days of inventory. For buyers this means most decently priced and affordable listings will be under contract within days if not hours of hitting the market.

It also means what is still available on the MLS is mostly unaffordable to the majority of potential buyers. This is obvious from the average list price, which is way above what most people would expect to pay for a home in the area. Here are some examples for single-family detached homes:

Paradise Valley - $4,269,814

Scottsdale - $1,986,268

Fountain Hills = $1,191,397

Cave Creek - $1,141,853

Gold Canyon - $823,082

Chandler - $720,865

Anthem - $676,483

Phoenix - $673,757

Gilbert - $665,072

Mesa - $613,602

Litchfield Park - $570,702

Queen Creek - $566,637

Peoria - $553,516

Tempe - $551,160

Buckeye - $477,365

Apache Junction - $453,180

Glendale - $445,598

Surprise - $439,235

Goodyear - $433,937

Sun Lakes - $421,418

Laveen - $395,686

Avondale - $356,111

Tolleson - $348,987

Sun City West - $341,342

Casa Grande - $318,329

Maricopa - $316,943

Sun City - $303,936

El Mirage - $280,075

Arizona City - $224,721

These are all much higher than they were a year ago and it it is not because high-end homes are piling up - the top end of the market is seeing unprecedented demand.

We have been short of supply since 2015 and the situation has become steadily more severe. There are just not enough homes to buy for the people who want them. Millennials who continued to rent long after earlier generations are now anxious to get their foot on the ladder. Investors are back in volume having taken a pause during the second quarter. However unlike 2004, investors remain a relatively small part of the demand. Most of the people buying homes are doing so because they want a primary residence. During October the intended use for single-family and condo/townhouse properties in Maricopa and Pinal counties was as follows:

Owner-occupied primary residence - 77.3%

Investment - 12.2%

Owner-occupied secondary residence - 8.6%

iBuyer for re-sale - 1.6%

Unknown - 0.3%

People who are worrying about mortgage delinquency rates should remember that foreclosures did NOT create the huge excess supply of 2006. The excess supply arrived 2 years before the foreclosures started in earnest. When the bank owned homes hit the market, it was already dreadfully over-supplied, so their prices dropped sharply. If we saw a new wave of distressed homes right now, they would be soaked up very quickly by eager buyers and prices would continue to rise. It would help move the market back to a more normal balance, so prices would rise at a more moderate pace. Most distressed homes would be unlikely to get to foreclosure because almost all of them have substantial owner equity and can be marketed as normal sales, or at worst pre-foreclosures, not short sales (which can often be tricky to close).

The current situation is very different from 2004 or 2005. Then a large number of newly built homes had been purchased by investors with 100% loans and were lying unoccupied with no tenants interested in renting them, despite record low rental rates. Many other homes had been purchased by owner-occupiers on fraudulent loan applications, who never even made the first monthly loan payment, living in their new home for free with minimal money down. Loan fraud was rampant in 2005 and 2006, largely driven by the mortgage industry itself rather than the borrowers. Wall Street firms (like Lehman Brothers) demanded mortgages to chop up and sell as securities and mortgage brokers could not supply enough without resorting to abnormal practices focused mainly on sub-prime loans. Remember Countrywide and Washington Mutual? Stated income loans? No documentation loans?

I repeat - 2020 is nothing like 2005. The 2020 housing market is not abnormally pumped with artificial credit, just starved of supply. Forecasting the future is extremely difficult, but drawing parallels with 2005-2008 is not helpful, nor is it logically appropriate.

“©2020 Cromford Associates LLC”. 

November 28 - Not to be outdone by the closed listings, active single-family detached listings in Scottsdale have chosen yesterday to be the first time they have an average price of over $2,000,000. Last year at this time the average asking price was $1,615,694.

“©2020 Cromford Associates LLC”. 

November 27 - We note that the monthly average closing price for single-family homes in Scottsdale exceeded $1,000,000 for the first time this week, Last year it was less than $870,000 and during the bubble years (2005-2007) it never exceeded $882,000

“©2020 Cromford Associates LLC”. 

November 26 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

 

The number of cities showing a CMI decline (favorable to buyers) rose from 4 last week to 5 today. But do not be fooled - the market is swinging even further in favor of sellers. The average percentage change in CMI is 5.5%, up from 4.3% last week.

Maricopa is down 11%, but we have a more impressive list of cities that are moving strongly higher - Gilbert, Scottsdale, Chandler, Queen Creek, Tempe & Fountain Hills.

Almost every day we see a new all-time high in the CMI for all ARMLS areas & types. The market is celebrating Thanksgiving by moving over 370 for the very first time.

Demand is fading a little as we approach the holiday season, as it usually does, but supply is falling fast again. We have so little supply it is hard to imagine the effect of another reduction. However we won't have to imagine it for very long, because active listing counts are sure to drop significantly over the next 5 weeks. This is a normal seasonal effect.

Equally certain is that they will start to rise once January begins, but whether they can rise enough to meet the buyers' demand is an open question. The first 2 weeks of January will see a rise, but how long the rising trend is sustained after that will be a key signal for 2021.

“©2020 Cromford Associates LLC”. 

November 24 - The latest S&P / Case-Shiller® Home Price Index® numbers were published today. They cover home sales during the period July to September 2020.

Comparing with the previous month's series we see the following changes:

Phoenix 1.86%

San Diego 1.78%

Boston 1.51%

New York 1.38%

Tampa 1.37%

Portland 1.31%

Los Angeles 1.30%

Cleveland 1.25%

Chicago 1.21%

Seattle 1.19%

Charlotte 1.18%

Miami 1.07%

Washington 1.03%

San Francisco 1.01%

Minneapolis 0.99%

Atlanta 0.96%

Dallas 0.90%

Las Vegas 0.83%

Denver 0.63%

The national average was +1.15% so Phoenix home prices increased at a much higher rate than the national average, and rose from 3rd to 1st place compared with last month. All cities saw accelerating prices, marking a strengthening of the housing market across the nation.

The year over year comparisons are below:

Phoenix 11.4%

Seattle 10.1%

San Diego 9.5%

Boston 7.7%

Los Angeles 7.7%

Cleveland 7.7%

Portland 7.6%

Charlotte 7.6%

Tampa 7.5%

Washington 7.0%

Minneapolis 6.6%

Denver 6.0%

San Francisco 6.0%

Atlanta 6.0%

Miami 5.6%

Las Vegas 5.4%

Dallas 4.9%

Chicago 4.7%

New York 4.3%

The national average was 7.0%. Phoenix remains on top for the 16th consecutive month.

“©2020 Cromford Associates LLC”. 

November 23 - New supply tends to be thin on the ground between mid November and the end of December, though we are seeing a higher rate of arrival than we did in 2019 and 2018. This increased rate is not enough to compensate for the elevated demand and the number of homes available for sale is declining in the vast majority of areas.

We have had so little supply for so long, it is easy to forget what normal is like. Here are a few examples of what is available compared with the long term average:

Market Segment	Active excluding UCB & CCBS	Long Term Average	Difference
All Areas & Types	8,257	27,009	-69%
Greater Phoenix	7,616	21,678	-65%
Greater Phoenix Single-Family Detached	5,564	16,850	-67%
Greater Phoenix Townhomes	643	1.385	-54%
Greater Phoenix Apartment Style	752	1,298	-42%
Greater Phoenix Twin / Duplex	62	127	-51%
Greater Phoenix Patio Home	109	286	-62%
Greater Phoenix Mobile Home	464	679	-32%
Greater Phoenix Loft Style	17	39	-56%
Greater Phoenix Modular / Manufactured	5	16	-69%
Single-Family Detached Homes in:
Phoenix	1,193	4.469	-73%
Mesa	390	1,587	-75%
Scottsdale	809	2,290	-65%
Peoria	245	886	-72%
Queen Creek / San Tan Valley	196	958	-80%
Avondale	56	349	-84%
Paradise Valley	195	325	-40%
Fountain Hills	83	250	-67%
Cave Creek	105	259	-59%
Buckeye	151	487	-69%
Maricopa	115	415	-72%
Chandler	196	977	-80%
Glendale	168	908	-81%
Gilbert	179	1,109	-84%
Surprise	243	907	-73%
Goodyear	133	552	-76%
Tempe	99	293	-66%
Gold Canyon	79	209	-62%
Sun Lakes	36	150	-76%
Arizona City	20	107	-81%
Tolleson	11	170	-94%
Litchfield Park	57	198	-71%
Sun City West	82	292	-72%
Laveen	45	232	-81%
Anthem	27	211	-87%
Apache Junction	40	195	-79%
Casa Grande	81	330	-75%
El Mirage	20	150	-87%
Sun City	115	301	-62%
Florence	43	160	-73%
Coolidge	34	98	-65%

The housing market is short of everything, everywhere.

The dwelling types that are least scarce are mobile homes & apartment-style condos. Geographically, the most expensive areas are down less but are still massively short of supply compared with average. This is exacerbated by the unusually high demand for high-end homes

Tolleson wins the prize for the lowest supply compared with its long term average. Anthem and El Mirage are runners-up..

“©2020 Cromford Associates LLC”.

November 19 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

 

The Cromford® Market Indexes continue to accelerate higher. Supply is falling again in the majority of areas and demand remains extremely strong for the time of year. .

Maricopa, Cave Creek, Surprise and Paradise Valley are all a little lower than last month but in all four cases are still in the grip of a strong seller's market.

We see growing strength in many cities which are moving even further in favor of sellers. These include Chandler, Scottsdale, Gilbert, Goodyear and Tempe.

The average change in CMI over the last month is +4.3%, up from 2.7% last week.

Between now and year end we are likely to see further reductions in the number of active listings, as relatively few people list their homes between Thanksgiving and New Year. The chances are good that the CMI will continue to move higher at least until January. That strongly suggests prices will continue to rise quickly through the middle of 2021.

“©2020 Cromford Associates LLC”.

November 18 - As if to underscore just how wild the luxury market has become in the last few months, we observed our first ever MLS sale over $20 million in October.

In fact there were 2 sales in October over $20 million!

The previous record was $19,250,000 which was set in November 2019.

There have now been 8 sales through ARMLS over $15,000,000 and all of them occurred since December 2017. Prior to 2017, the record was $12,500,000, set in the year 2000.

The 2 new top sales were:

10696 E Wingspan Way in DC Ranch (Scottsdale) - 15,534 sq. ft. on 17 acres of land - originally listed in 2016 at $32,000,000

5710 N Yucca Road in Jokake Camelback Properties (Paradise Valley) - 28,043 sq. ft. on 5 acres - originally listed in 2019 at $25,000,000

These sales certainly push the average price per sq. ft. limits. They make the average percent of list price look bad though.

“©2020 Cromford Associates LLC”.

November 17 - We hear that many Californians are buying homes in the Phoenix area, which would explain why the top end of the market is so strong. Unfortunately it is not easy to confirm this fact from the Affidavits of Value. So many out of state buyers are not putting their former address on the Affidavits as they used to.

We are not sure if this is a deliberate ploy to hide the fact that are from California, but they often

enter the new address instead of the old one

create an Arizona LLC to be the legal owner and enter that as the buyer's address

rent prior to buying and put their local rental address as their old address

When a similar exodus occurred in 2001 to 2004 we saw a massive increase in California addresses, but this is not visible today.

However we can look to other indicators. The average cost of a U-Haul one-way rental to San Francisco from Phoenix is only $311. Coming in the other direction the cost is $2,500. U-Haul prices based on demand and supply and they have an acute shortage of moving trucks in San Francisco and a glut in Phoenix, left by the people who recently moved here.

Reports from California suggest that 2 people are leaving the state for everty one that arrives. They also report that it is the comparatively wealthy who are more likely to move out.

“©2020 Cromford Associates LLC”. 

November 16 - Based on affidavits of value filed during October we have collected the following statistics on iBuyer activity:

	Opendoor	OfferPad	Zillow	Knock	All iBuyers Combined
Homes Purchased in October 2020	99	90	32	0	221
Homes Purchased in October 2019	287	112	65	2	466
Annual Change in Purchases	-66%	-20%	-51%	-100%	-53%
Homes Sold in October 2020	56	77	34	0	167
Homes Sold in October 2019	357	82	86	2	527
Annual Change in Sales	-84%	-6%	-60%	-100%	-68%
Median Purchase Price in October 2020	$288,900	$276,500	$278,000	N/A	$283,700
Median Purchase Price in October 2019	$248,300	$250,000	$269,750	$276,000	$250,300
Median Sale Price in October 2020	$289,250	$285,000	$290,750	N/A	$289,000
Median Sale Price in October 2019	$250,000	$249,900	$333.000	$293,381	$260,100
Homes in Inventory at the End of October 2020	247	155	58	0	460
Homes in Inventory at the End of October 2019	941	224	186	15	1,366
Annual Change in Inventory	-74%	-31%	-69%	-100%	-66%

The iBuyers as a group purchased 221 homes in Maricopa & Pinal counties during October. That represents only 1.8% of the total market. A year ago they purchased 466 homes, about 4.2% of the total market. This decline in market share started in 4Q 2019, well before the COVID-19 virus had been discovered, but accelerated during the first half of 2020 as iBuyer operations were severely curtailed. Trying to buy homes under $300,000 is a tough job in current market conditions and it looks nearly impossible for the iBuyers to regain the market presence they held between 2018 and 2019 during what now looks in hindsight to be their glory years. Inventory has fallen 66% over the last 12 months. Our inventory counts are probably on the high side, especially for Opendoor.

OfferPad has become the largest iBuyer by property sales but Opendoor slightly surpassed them in terms of properties purchased in October. Zillow is looking like a minor player with both sales and purchases a tiny fraction of what they were achieving prior to 4Q 2019.

“©2020 Cromford Associates LLC”. 

November 15 - During the first 2 complete weeks of November, 771 listings over $500,000 were closed across Greater Phoenix. This is an increase of 90% compared with the same 2 weeks last year. In 2018 there were only 272, The higher end of the market is having its best season ever, despite it being in the traditionally quiet fourth quarter.

November 14 - The market keeps setting new records for dollar volume. The monthly figure for all areas & types is $4,518 million as of November 14. This is up an astonishing 54% from the same time last year.

To put this in context, the dollar volume at the peak of the bubble in 2005 was $3,339 million which occurred during June that year. By June 2005 peak demand had already been detected and the market was sliding towards disaster as a slew of supply came onto the market from wise speculators getting out early. The current situation has market dynamics that bear little resemblance to 2005.

“©2020 Cromford Associates LLC”. 

November 12 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

The trend has reversed this week and in a gravity-defying move, the Cromford® Market Indexes have started to accelerate higher again. Given that many of them already stand at a record high level, this is astonishing and tells us a lot about the strength of the current market. After a gentle rise in October, supply is now trending down in most but not all areas. Demand keeps creeping higher despite all the (apparently incorrect) theories as to why it should not.

Cave Creek is the one city that has moved significantly in favor of buyers over the last month, thanks to an increase in active listings and a drop in the monthly sales rate. Maricopa also has more supply than last month but its CMI is only down by 4% because demand continues to increase. The CMIs for Phoenix and Fountain Hills are slightly lower than last month but are now on a climbing trend.

The standouts for sellers are Chandler, Gilbert, Goodyear and Scottsdale. These areas are a nightmare for buyers who are facing even stiffer competition from their fellow buyers.

The overall average increase over the month was 2.7%, up from 1.6% last week.

The lowest CMI is still over 280 and moving higher. This situation means there is still a lot of price appreciation baked in to the future. We do not like to speculate but we would would not be at all surprised to see the average price per square foot rise another 20% to 25% from its current level.

The overall average CMI rose by 1.6%, down from 2.2% last week. Despite continued expectations for the market to cool, it keeps getting hotter, although at a slower pace.

November has started with fewer new listings than expected, while demand has shown no sign of easing. Although the CMI is at the highest level we have ever recorded, our expectation is that it will continue to rise in the short term. 

“©2020 Cromford Associates LLC”. 

November 11 - In the third quarter of 2020 we have seen a massive change in the mix of homes sold through the MLS in Greater Phoenix, compared to the same quarter last year:

Dollar Volume for Closed Listings	3Q 2019	3Q 2020	Change
Under $250,000	$1,937M	$1,363M	-30%
$250,000 to $500,000	$4,304M	$5,460M	+27%
$500,000 to $1 million	$1,651M	$2,719M	+65%
Over $1 million	$759M	$1,635M	+115%

The range between $250,000 and $500,000 is still the largest, but "only" grew 27%. The growth rate increases as we move up-market.

This pattern continues into the fourth quarter and the luxury market is seeing the highest sales volumes it has ever experienced.

Who would have predicted this during a recession?

“©2020 Cromford Associates LLC”. 

November 9 - Using the affidavits filed in Maricopa County during October, we can derive the following statistics:

Closed sales totalled 11,303, up 17% from October 2019

New home closings came in at 1,740, up 20% from October 2019

Re-sales totalled 9,563, up 16% from October 2019

The overall median sales price in September was $342,000, up 16% from $295,000 in October 2019

The new home median sales price was $379,132, up 3%

The re-sale median sales price was $335,000, up 20% from $280,000

As we saw last month, volume is increasing faster for new homes than re-sales but prices are increasing faster for re-sales.

New home prices are low relative to re-sales because they are determined at contract signature. This often pre-dates completion by several months which means the homes eventually close at prices that are below current market value. Many developers are taking steps to remedy that shortfall which will increase builder gross margins but make new homes more expensive.

All the numbers above include single-family and townhouse / condo properties.

“©2020 Cromford Associates LLC”. 

November 8 - The explosion in demand for luxury homes continues to amaze. During October there were 101 closed listings across Greater Phoenix with prices over $2 million. This is a truly colossal total, given that the previous record for October was 38. In fact it is quite rare for the over $2M count to exceed 50 during any month. Since January 2000 it has happened only 13 times, all but 2 of these occurring since 2018.

The monthly total has exceeded 66 only 3 times. All 3 of those time have been during the last 4 months.

There have been 627 closed listings over $2 million in 2020, Last year we counted 445. The annual increase is therefore 41%.

Is it going to continue in November? Probably, given that there have been 25 closings during the first 5 working days alone.

“©2020 Cromford Associates LLC”. 

November 5 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

Compared with last week, we have 1 fewer cities improving for sellers. Extra supply has take Surprise into the red zone.

The overall average CMI rose by 1.6%, down from 2.2% last week. Despite continued expectations for the market to cool, it keeps getting hotter, although at a slower pace.

November has started with fewer new listings than expected, while demand has shown no sign of easing. Although the CMI is at the highest level we have ever recorded, our expectation is that it will continue to rise in the short term.

“©2020 Cromford Associates LLC”. 

November 3 - Like King Canute (Cnut) ineffectively commanding the ocean tide to recede, CoreLogic continues to command home prices to stop rising, and with similar effect.

Last month they forecast that month-over-month prices for September would increase by 0.1% over August. Today they report that the actual increase was 1.1%, 11 times greater than their forecast. One month is not difficult to forecast, especially as they are forecasting for a month that has already ended. However they still manage to get it wildly wrong again and again. They are forecasting a month over month increase for October of 0.2%. In Greater Phoenix we have already measured 4.8%, for October. I am going to go out on a limb here are predict that their forecast fro October will be extremely low again.

Their longer term forecast is for US home prices to rise by 0.2% between September 2020 and September 2021. This is likely to prove even more incorrect than their short-term forecast, but I do admit that long term forecasting is a fool's game in which the Cromford® Report does not participate.

We make no price forecast at all for September 2021, but we do know a silly forecast when we see one.

“©2020 Cromford Associates LLC”. 

November 1 - We are taking a look at the active listings on November 1 and comparing them with last month. We shall ignore those in UCB or CCBS status.

Overall across the entire ARMLS database, we see 8,682 active listings available on November 1, with an average list price of $734,416. From the latter figure you can immediately tell that the majority of the supply is at the higher end of the market. This is not unusual, but if you ask the average person what is the average price of a house for sale in our area, I am willing to bet they guess lower than $734,416.

Last month on October 1, we counted 8,101 and the average price was $753,722. So we might jump to the conclusion that supply has gone up by 7% and prices have gone down. From a strictly mathematical point of view this is correct, but it would not be a realistic reflection of the market. This is because Oct 1 was a Thursday while Nov 1 was a Sunday. Every week there is a surge of listings added between Thursday and Saturday and relatively few coming between Sunday and Wednesday. On the other hand, a lot of contracts get written and accepted between Saturday and Wednesday. This means that the supply tends to reach a peak on Saturday and a trough around Wednesday. The difference between the peak and trough is usually around 5 to 6% in today's supply-starved market. In normal times it is usually around 1% and not so noticeable.

So to make a fair comparison you really need to compare the same day of the week, not the first of each month. A better comparison for Nov 1 would be either Sep 27 or Oct 4, both Sundays. These had 8,625 and 8,733 actives respectively, and the average list price was $733,754 and $733,652.

So after this adaptation to the weekly cycle, we see that the count of active listings has barely changed at all, either in total number or in average list price.

Does this mean list prices have stopped increasing? No - if you check the average price per square foot, they changed from $287.86 to $292.95 over the last 5 weeks. That is equivalent to an annual rate of 18%.

See how misleading statistics can be if they are not done correctly?

What has happened is that the mix of homes for sale has changed in favor of smaller homes. 1.6% smaller does not sound like a lot, but in fact we are witnessing quite an interesting set of changes that are revealed when we start looking at specific ZIP codes:

There are more single-family listings than last month in many cheaper locations in the inner West Valley:

Phoenix 85009 up 50%

Phoenix 85019 up 33%

Phoenix 85031 up 114%

Phoenix 85033 up 50%

Phoenix 85035 up 92%

Phoenix 85053 up 200%

Glendale 85307 up 200%

Avondale 85323 up 36%

El Mirage 85335 up 57%

Peoria 85345 up 90%

The least expensive parts of the Southeast Valley are also seeing more listings:

Mesa 85201 up 100%

Mesa 85204 up 73%

These percentages are large but they are from a very low base.

However, many of the more expensive locations are seeing further falls in supply at a time of year when they usually report increases:

Phoenix 85018 down 15%

Scottsdale 85250 down 25%

Scottsdale 85251 down 28%

Scottsdale 85255 down 5%

Scottsdale 85262 down 11%

Carefree 85377 down 7%

In addition, certain less expensive remote locations in Pinal county are seeing falls in supply too:

Coolidge 85128 down 38%

Florence 85132 down 6%

These are balanced by increases in Maricopa 85138 and 85139.

The luxury and high mid-range markets are very active and gobbling up supply quickly. At the other end we still have incredibly low supply, but the turnaround in active counts in some ZIP codes is quite noticeable are worth watching..

I am not sure whether to put it down to evidence of a K-shaped recovery (distressed owners) or certain landlords getting tired of not collecting rents. However it is something new, so I felt we should report it.

“©2020 Cromford Associates LLC”. 

October 31 - It has been quite a while since we made any observations on the COVID-19 pandemic itself. Last month on September 18 we observed that the statistics were looking ominous and that things could be heading in the wrong direction after more promising numbers in August. Unfortunately, things have become even worse than we expected and not just in the USA. The pandemic is coming back with a vengeance and many countries are facing severe restrictions on normal activities.

For the USA, yesterday was the first day with over 100,000 new cases reported and almost all states are reporting significant growth. The only exceptions where we can report a declining weekly trend in new infections are Guam, Hawaii, Louisiana, Northern Mariana Islands, Oklahoma and the US Virgin Islands. This represents only 10.3 million in population so the remaining 321 million are living in states where the virus is accelerating. Of these an increasing number are hitting new record highs of weekly new cases:

Alaska

Arkansas

Colorado

Iowa

Idaho

Illinois

Indiana

Kansas

Kentucky

Michigan

Minnesota

Missouri

Montana

North Carolina

North Dakota

Nebraska

New Mexico

Ohio

Oregon

Pennsylvania

Puerto Rico

Rhode Island

South Dakota

Tennessee

Utah

Virginia

Wisconsin

West Virginia

Wyoming

We see a similar surge in cases in most parts of Europe where attempts to resume normal activity, especially students going to university, have been met with an alarming increase in new infection rates.

It helps to be an island, as proven by New Zealand and Taiwan. South East Asia and Africa have been relatively mildly affected so far.

What does this mean for the housing market? Well we have seen some trends emerge across the whole world, most of which are positive for the housing market:

Work-from-home and social distancing increase the importance of suitable housing in people's priorities

More people are re-considering the place they live and making plans to change it

Rural villages and less crowded cities are becoming far more popular

Densely populated cities are becoming far less popular

Single-family detached homes are becoming more popular than apartments

Apartments with little outside space are less popular than those with plenty of outside space

Widespread and misplaced fear of house price falls creates more fuel for house price increases

National economic problems cause interest rates to be kept low, improving affordability

Central Arizona looks increasing attractive in this environment with very few crowded streets and plenty of wild open spaces nearby to roam freely. Although prices are rising faster than in most parts of the country, they remain very low relative to California. Associated taxes are also a positive. We have no tax on the transfer of ownership (which is fairly common elsewhere) and real estate taxes are not excessive, compared with some other states. The processes involved in building, buying and selling homes are adaptable to social distancing and with a little planning can be considered relatively safe.

Although the pandemic will have real and lasting negative effects on many parts of the economy and on millions of individuals and their families, home ownership still looks very attractive and will probably continue that way for the foreseeable future. Predictions of housing market crashes in 2021 are almost certainly mistaken and would take a surprise event that has so far not occurred. I would make an exception for central urban markets such as Manhattan or the City of London. These are extremely expensive locations and even a big drop in demand will merely bring them back to very expensive instead of insanely expensive.

“©2020 Cromford Associates LLC”. 

October 29 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

Compared with last week, we have 13 cities improving for sellers instead of 12. Scottsdale turned around and now has its supply dropping fast, so it is likely to see its CMI rise over the next few weeks.

The overall average CMI rose by 2.2%, down from 2.8% last week. Despite all expectations for the market to cool, it keeps getting hotter, although at a slower pace.

October has brought us a healthy flow of new listings, but the demand has strengthened so much these have done almost nothing to affect the chronic shortage of homes for sale.

With the CMI for every one of the 17 cities over 275, prices are certain to rise from their current level. It will take a massive increase in supply for prices to change direction and there is currently no sign of this happening. In fact we would expect supply to deteriorate between now and year end.

October 28 - We have just witnessed the largest annual increase in monthly dollar volume ever recorded across all areas & types in the ARMLS database - up 66.5% compared with October 28, 2019.

“©2020 Cromford Associates LLC”. 

October 27 - The latest S&P / Case-Shiller® Home Price Index® numbers were published today. They cover home sales during the period June to August 2020.

Comparing with the previous month's series we see the following changes:

San Diego +1.90%

Cleveland +1.64%

Phoenix +1.54%

Los Angeles +1.36%

Boston 1.33%

Tampa +1.27%

Washington +1.15%

Seattle 1.14%

Las Vegas +1.13%

Portland +1.10%

Miami +1.08%

Dallas +0.98%

New York +0.95%

Charlotte +0.87%

San Francisco +0.83%

Denver +0.72%

Minneapolis +0.68%

Atlanta +0.50%

Chicago +0.41%

The national average was +1.06% so Phoenix home prices increased at a much higher rate than the national average, and rose from 36th to 3rd place compared with last month.

These are very strong price rises for a single month and show the earlier CoreLogic home price forecasts to be wildly inaccurate. These forecasts will have to be revised upwards substantially over the next few months.

The year over year comparisons are below:

Phoenix 9.0%

Seattle 7.8%

San Diego 7.1%

Cleveland 6.4%

Tampa 6.4%

Los Angeles 6.4%

Charlotte 6.3%

Portland 5.8%

Minneapolis 5.4%

Washington 5.4%

Boston 5.4%

Denver 5.0%

Atlanta 4.9%

Miami 4.6%

Las Vegas 4.4%

Dallas 4.0%

San Francisco 4.0%

New York 2.7%

Chicago 1.2%

The national average was 5.4%, up from 4.8% and showing a rapidly rising trend.. Phoenix remains well out in front on the annual measurement.

“©2020 Cromford Associates LLC”. 

October 26 - The Census Bureau has just published the single-family building permit counts for September. The good news for buyers is that the rate of construction is increasing which will provide a little more supply over the months to come. There have been 22,378 permits issued in Maricopa and Pinal Counties during the first 9 months of 2020. This is up over 21% from the 18,469 we saw by the end of September in 2019 and represents the highest year to date total since 2006. It is almost the same as the 2007 figure which was a year in which the builders were hitting the brakes.. Now their collective feet are firmly on the gas pedal as they try to respond to the very strong demand for single family housing in Central Arizona.

The third quarter of 2020 has seen a dramatic acceleration in permits with 8,920 issued between July and September. This is the largest 3Q total since 2005, though 1998, 1999, 2002, 2003 and 2004 were also higher.

The top 10 locations for 3Q 2020 were:

Phoenix - 1,330

Buckeye - 926

Surprise - 811

Unincorporated Maricopa County - 718

Mesa - 634

Goodyear - 615

Unincorporated Pinal County - 585

Queen Creek - 523

Maricopa - 506

Casa Grande - 478

It is remarkable that only 3 cities in Maricopa County produced more than the unincorporated county areas, while in Pinal no city beat the unincorporated county, which mostly comprise the areas known collectively as San Tan Valley. The town of Queen Creek has been incorporating parts of San Tan Valley (not without controversy) and continues to do so. Thus what counts as Queen Creek and what counts as San Tan Valley is continually changing. However, even though Queen Creek has a great deal of new home construction, the San Tan Valley areas outside its boundaries provide even more new housing.

Further down the list, we see that Florence is almost as active as Chandler and Coolidge is almost as active as Scottsdale. Pinal is rising in significance and growing faster than Maricopa.

“©2020 Cromford Associates LLC”. 

October 24 - Highlights from the Black Knight Mortgage Monitor's first look at September's mortgage data:

The number of seriously delinquent mortgages (90+ days overdue) fell by 43,000 - the first fall since the start of the pandemic

More than 2.3 million homeowners are seriously delinquent, but not in foreclosure

The national delinquency rate fell from 6.88% to 6.66% during September

Early stage delinquencies show strong improvement with many measures returning to pre-pandemic levels

Loan pre-payment rose above 3% in September, the first time in 16 years. This high rate is partly driven by the very low interest rates causing a lot of refinance activity. In addition, the strong out-of-season home buying is causing buyers to pay off the loans on their former homes

The states with the highest percentages of non-current first loans are

Mississippi 11.54%

Louisiana 11.15%

Hawaii 9.15%

New York 8.92%

Texas 8.76%

Home equity is at a record high and 45 million homeowners have positive (tappable) equity in their homes. This the largest number ever.

Average tappable equity stands at nearly $125,000, up $3,200 from this time last year

Of borrowers who are in forbearance, just 9% have less than 10% equity in their homes. This offers both the borrowers and lenders multiple options in lieu of foreclosure.

“©2020 Cromford Associates LLC”. 

October 22 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

 

Compared with last week, we have the same 12 cities improving for sellers and the same 5 deteriorating. The overall average CMI rose by 2.8%, down from 3.9% last week.

I am surprised to see the movement still favoring sellers. October is almost always a strong month for new listings and this October is no exception. What I expected to see was a mild fall in the CMI because of the slight increase in supply. However demand has continued to grow from its already very high level, despite the upward charge in prices. By the time we get to Thanksgiving, the flow of new listings is likely to slacken and we will probably see supply fall away even further as listings get removed for the holiday season. Whether this still holds true during a pandemic we will have to see.

There is still no sign of any weakness developing in the market with buyers having to fight for every scrap of housing that comes available.

As they were last week, Maricopa and Paradise Valley are the star performers at this moment. This is intriguing because they represent the two extremes in pricing among the 17 cities.

“©2020 Cromford Associates LLC”. 

October 20 - A reliable indicator of market strength is the listing success rate. This is currently reading around 89%, and has been at this level since July. Here is the daily chart for all areas & types:

89.6% is as high as this indicator has ever been. The long term average (since 2002) is 66.8%. The maximum reached during the bubble years was 87% in May 2005. By the end of 2005 the listing success rate has plunged back to 63%, an early warning of the impending collapse.

We can conclude that this is the strongest that the Greater Phoenix market has been since 2002. If you want to look out for future sings of weakness, we advise you to look at this chart on a weekly basis. It is updated every Tuesday morning.

“©2020 Cromford Associates LLC”. 

October 19 - For those who need to track pricing closely we recommend the chart in this link

Here is what it looks like today:

We can see that the monthly average sales price per square foot has increased from $193.29 on August 18 to $203.73 on October 19.

That is a 5.4% increase in 2 months. This is equivalent to an annual rate of 37%.

The under contract list price has flattened out during October so there may be less upward movement on sales pricing for 2 or 3 weeks. The green line in the chart is a leading indicator for the brown and red lines. The delay is typically 4 to 6 weeks. However the Cromford® Market Index remains above 350 so upward pressure on pricing is still in full force.

“©2020 Cromford Associates LLC”. 

October 17 - The current monthly dollar volume across all areas & types in the ARMLS database is $4,267 million.

This is a truly colossal number for the middle of October. Last year at this time we measured $2,882 million, so this year has last year beaten by an astonishing 48%. And last year's number was the previous record high for the same period.

Obviously dollar volume has a direct bearing on commissions earned by agents. In times like these the number of licensed agents tends to increase. However the increase compared with this time last year is about 4%. So 4% more agents are sharing 48% more commission. That sounds like a nice situation. As news gets out, we can expect more people to choose a career in residential real estate, especially if they had been working in one of the sectors that is badly hit by the pandemic.

“©2020 Cromford Associates LLC”. 

October 15 - Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

The number of cities improving for sellers fell from 13 to 12 compared with last week. Surprise turned positive, while Cave Creek and Fountain Hills went into the red.

The overall picture has not changed much from last week - the average increase in the CMI was 3.9%, down from 4.6% last week. We are seeing more supply, as is normal for October, but demand continues to strengthen in most areas. The flow of new listings remains well ahead of this time last year.

As they were last week, Maricopa and Paradise Valley are the star performers at this moment.

“©2020 Cromford Associates LLC”. 

October 14 - Based on affidavits of value filed during August we have collected the following statistics on iBuyer activity:

	Opendoor	OfferPad	Zillow	Knock	All iBuyers Combined
Homes Purchased in September 2020	74	86	27	0	181
Homes Purchased in September 2019	366	82	51	2	501
Annual Change in Purchases	-80%	5%	-59%	-100%	-64%
Homes Sold in September 2020	61	50	36	3	150
Homes Sold in September 2019	342	97	124	2	565
Annual Change in Sales	-82%	-48%	-71%	+50%	-73%
Median Purchase Price in September 2020	$279,050	$270,750	$261,000	N/A	$276,000
Median Purchase Price in September 2019	$243,300	$224,865	$259,700	$354,773	$242,850
Median Sale Price in September 2020	$285,000	$290,000	$285,500	$363,003	$287,250
Median Sale Price in September 2019	$247,000	$260,000	$300.500	$292,388	$262,000
Homes in Inventory at the End of September 2020	204	142	60	0	406
Homes in Inventory at the End of September 2019	1,011	194	207	18	1,430
Annual Change in Inventory	-80%	-27%	-71%	-100%	-72%

The iBuyers as a group purchased just 181 homes in Maricopa & Pinal counties during September. That represents only 1.5% of the market. A year ago they purchased 501 homes, about 4.5% of the total market. This decline in market share started in 4Q 2019, before the COVID-19 virus had been discovered, but accelerated during the first half of 2020 as iBuyer operations were severely curtailed. Trying to buy homes under $300,000 is a tough job in current market conditions and it will a very long time before the iBuyers can regain the market presence they held between 2018 and 2019. Inventory has fallen 72% with Opendoor down 80% (or more). Our inventory counts are probably on the high side.

OfferPad has become the largest iBuyer by properties purchased but has not overtaken Opendoor in terms of properties sold. It is currently growing inventory at the fastest rate, while Zillow's inventory is still declining. Buying fewer than one home a day, Zillow is not really a major player in the Phoenix market any more - it bought fewer homes during September than it did during its third month in operation (July 2018). Its peak was 132 in February 2019.

Knock has exited the iBuying business and has bought nothing for 3 months. They have no homes left in inventory and we will not be monitoring them from next month.

“©2020 Cromford Associates LLC”. 

October 13 - As a follow-up to yesterday's observations, here are the 10 ZIP codes with the slowest appreciation rates in the 12 months that ended on September 30, 2020:

Phoenix 85054 (3.0%)

Carefree 85377 (4.4%)

Scottsdale 85259 (4.4%)

Glendale 85305 (4.5%)

Mesa 85213 (5.0%)

Scottsdale 85262 (5.0%)

Phoenix 85083 (5.0%)

Wickenburg 85390 (5.3%)

Goodyear 85395 (5.6%)

“©2020 Cromford Associates LLC”. 

October 12 - Most ZIP Codes are not very big, so it can be problematic extracting reliable statistics on sales prices. The sample size has to be large enough to ensure we are getting an accurate signal instead of just noise.

The easiest way to get more samples is to lengthen the period over which we measure. An annual average is going to be far less volatile than a monthly average for this reason. However, including samples from 6 to 12 months ago will usually make the average price much lower than using just the last 6 months. There is no single best solution, so when I was asked recently to rank the ZIP codes for appreciation, I had to decide what would be the fairest way to do it.

I took 12 months of sales, used single-family detached homes only, then measured the average price per square foot. I excluded any ZIP code which had fewer than 100 sales in 12 months.

The top ZIP codes for the year ending September 30, 2020 were as follows:

Phoenix 85009 (17.6%)

Scottsdale 85251 (15.5%)

Mesa 85201 (15.1%)

Wittmann 85361 (14.9%)

Phoenix 85015 (14.3%

Waddell 85355 (14.2%)

Phoenix 85021 (13.8%0

Tempe 85283 (13.5%)

Apache Junction 85119 (13.2%)

Phoenix 85041 (13.2%)

“©2020 Cromford Associates LLC”. 

October 10 - The COVID-19 pandemic is not letting up any time soon and this morning over 92% of the US population lives in states where the weekly count of new cases is rising. The only exceptions are Alabama, Arkansas, Hawaii, Maine, Nebraska, North Carolina, Puerto Rico and the US Virgin Islands. Record numbers of new confirmed cases are being reported by the health authorities in Alaska, Indiana, Kansas, Kentucky, Minneapolis, Missouri, Montana, North Dakota, South Dakota, Utah, Wisconsin and Wyoming.

While the pandemic is wreaking havoc in parts of the real estate market, especially, the retail, office and hospitality sectors, single detached housing is more popular than ever. In a trend seen around the world, buyers are seeking some open space with privacy, so larger yards are at a premium but flats in tower blocks are out of favor. Big expensive cities with crowded downtown areas are seeing an exodus to the suburbs, especially for people who can effectively work from home.

Because Phoenix does not have much dense downtown housing (none at all that is comparable to New York, Paris, Tokyo or London), its residential sector is looking very strong even for the central areas. To get some idea how much of a shock the pandemic has caused elsewhere, look to the exclusive area of Kensington and Chelsea in London. This is unaffordable to most people, but it is getting cheaper. Residential rents have fallen by a staggering 25% in the past 12 months. Landlords are in despair as their property values fall and they fail to collect an unusually large percentage of rents, especially if they include retail units. New listings are flooding onto the market, bringing prices down.

One of those landlords is the Queen. Forbes estimates that her real property portfolio has fallen by $700 million since March this year.

However, the remote parts of the UK, such as Scotland, Wales and the North of England are experiencing the highest rates of appreciation they have witnessed since 2009. Suddenly a rural location is seen as an advantage not an inconvenience.

Similar effects can be found in Arizona with small villages in Gila, Yavapai and Coconino counties being overwhelmed with buyers from outside the area and often outside the state.

“©2020 Cromford Associates LLC”. 

October 9 - Here is our table of Cromford® Market Index values for the single-family markets in the 17 largest cities

The number of cities improving for sellers rose from 11 to 13 compared with last week. Chandler, Avondale and Glendale turned positive, while Scottsdale went into the red.

The overall picture has not changed much from last week - the average increase in the CMI was 4.6%, rising from 4.2% last week.

Maricopa and Paradise Valley are the star performers at this moment, both with supply that is unusually low for the time of year.

It is surprising that the CMI continues to rise having already set a record high many weeks ago. However October is traditionally a strong month for new listings so it will be a big challenge for the CMI to keep moving higher in the weeks ahead. Can the strong demand soak up everything the sellers throw at it?

If we look at the individual cities and compare this week with last week we find the following have moved lower:

Anthem

Buckeye

Casa Grande

Cave Creek

Gold Canyon

Litchfield park

Phoenix

Scottsdale

Sun City

Tolleson

That is 10 cities out of 29 which leaves 19 that saw their CMI move higher.

“©2020 Cromford Associates LLC”. 

October 8 - With low supply and high demand we see the unusual situation where the average selling price exceeds the average list price becoming more commonplace. Here is a list of all the ZIP codes where this happened in September for single-family detached homes:

Casa Grande 85193 - average sales price 102.29% of average list price

Phoenix 85031 - 101.49%

El Mirage 85335 - 101.37%

Mesa 85210 - 101.28%

Tolleson 85353 - 101.17%

Phoenix 85051 - 101.15%

Chandler 85226 - 100.92%

San Tan valley 85143 - 100.91%

Mesa 85204 - 100.86%

Arizona City 85123 - 100.84%

Glendale 85302 - 100.84%

Avondale 85392 - 100.83%

Mesa 85208 - 100.78%

Chandler 85225 - 100.78%

Gilbert 85233 - 100.74%

Mesa 85203 - 100.72%

Glendale 85308 - 100.67%

Phoenix 85017 - 100.65%

Avondale 85323 - 100.62%

Glendale 85304 - 100.61%

Chandler 85224 - 100.60%

Phoenix 85037 - 100.59%

Surprise 85388 - 100.54%

Gilbert 85295 - 100.53%

Surprise 85379 - 100.52%

Phoenix 85043 - 100.50%

Phoenix 85033 - 100.49%

Phoenix 85029 - 100.46%

Maricopa 85138 - 100.44%

Phoenix 85027 - 100.44%

San Tan Valley 85140 - 100.30%

Gilbert 85234 - 100.29%

Peoria 85345 0 100.27%

Goodyear 85338 - 100.26%

Mesa 85209 - 100.21%

Peoria 85381 - 100.21%

Phoenix 85053 - 100.19%

Gilbert 85296 - 100.19%

Buckeye 85326 - 100.19%

Mesa 85212 - 100.16%

Glendale 85306 - 100.16%

Phoenix 85008 - 100.13%

Surprise 85378 - 100.10%

Maricopa 85139 - 100.04%

Phoenix 85044 - 100.03%

Phoenix 85083 - 100.02%

Glendale 85301 - 100.00%

That is almost one third of all the ZIP codes in Greater Phoenix.

“©2020 Cromford Associates LLC”. 

October 7 - The September numbers for Maricopa County affidavits are in and show the following:

Closed sales totalled 10,667, up 11% from September 2019

New home closings came in at 1,802, up 18% from September 2019 and the highest monthly total since 2007

Re-sales totalled 8,865, up 10% from last year

The overall median sales price in September was $338,000, up 17% from $290,000 in September 2019

The new home median sales price was $370,397, up 5%

The re-sale median sales price was $330,000, up 19% from $277,000

Clearly volume is increasing faster for new homes than re-sales but prices are increasing faster for re-sales.

New home prices are low relative to re-sales because they are determined at contract signature. This often pre-dates completion by several months which means the homes eventually close at prices that are below current market value. Many developers are taking steps to remedy that shortfall which will increase builder gross margins but make new homes more expensive.

“©2020 Cromford Associates LLC”. 

October 6 - Despite having a huge database of historical data and a large team of analysts, CoreLogic has an surprisingly poor record when it comes to forecasting home prices. They completely failed to foresee the turnaround in the market between 2011 and 2012 and in my opinion their forecasts for 2021 are probably going to end up looking just as wildly off the mark.

In May 2020, they forecast that home prices across the USA would fall by 6.6% between May 2021 and by May 2021. One month later they revised their 12 month outlook for June 2021 to a drop of 1%. Their latest projections for July 2021 is that it will be up 0.6% from July 2020. That is a huge shift in opinion - up 7.2% in just 2 months, but they have still not got their long-term projection in the right ball park.

Even their short-term forecasts have been very inaccurate in 2020. For July they predicted a month to month change of 0.01%. The actual result was a gain of 1.22% - more than a hundred times larger than their projection.

For August they are forecasting a month to month change of 0.10%. We will have to wait a month to see how badly off the forecast is, but I have no doubt that the real world number will be dramatically higher than the CoreLogic forecast.

Frankly, their model seems to needs serious redesign, though this is unlikely to happen. It drastically over-estimates the impact of unemployment and underestimates the impact of low supply.

Since they do not make it easy to find old copies of their reports, I recommend that you keep a written record of their forecasts, so you can compare the actual results down the line. This is just in case you come across a client who takes their forecast seriously. Comparing their monthly and annual forecasts with the actual market behavior will soon dispel that opinion.

October 5 - Many people are worrying about what happens when COVID-related forbearance plans expire. However the Black Knight Mortgage Monitor report released today suggest that the problem is likely to be less severe than might be expected.

I refer you to the original release, but some highlights are worth picking out:

Of the 6.1 million homeowners who have been in COVID-19-related forbearance plans, 41% (2.4M) have since exited, with the vast majority of those borrowers currently performing; of those who remain past due, 267,000 are in active loss mitigation with their lenders

Just 54,000 loans are past due and not in active loss mitigation, and 70% of these were already past due in February before the pandemic began to impact mortgage performance

Record levels of equity continue to help mitigate foreclosure risk, with only 9% of homeowners in forbearance having less than 10% equity in their homes

The average homeowner now has nearly $125,000 in tappable equity; an increase of more than $3200 from last year – also a record. These strong equity positions help to provide a backstop to elevated delinquency levels and slow recovery from COVID-19-related impacts. 

The state of Arizona has 5.7% of first position loans that are delinquent by 30 days or more. Only 0.1% are in foreclosure and the remaining 5.6% are non-current. This is around double what we saw in August 2019. Arizona ranks 38th among the states, with Mississippi worst (11.7% noncurrent) and Idaho best (3.8% non-current).

“©2020 Cromford Associates LLC”. 

October 3 - Although single-family building permit counts are rising, they are still short of the numbers we saw between 1996 and 2007.

For Maricopa and Pinal counties, we have a 12-month rolling average of 2,283 permits per month as of August 2020. Although this is the highest number since October 2007, from February 1996 to October 2007 we consistently saw numbers higher than this, peaking at 4,754 (more than twice the current volume) in February 2005.

The current increase in new home building is a good thing for the market, but it is unlikely to solve our chronic under-supply problem for many years.

In contrast, the rate of new building from 2003 through 2007 was far too high and led to an over-supply situation which was one of the contributing reasons for the housing crash in 2007-2009. It was not the primary cause; that honor belongs to the lax lending. This made it too easy for so-called investors with almost no money of their own to buy many houses for speculative purposes. The developers built house for them, having to ration them out because demand was so high. But this demand was unreal. The buyers were not interested in living in the homes, or even renting them out as landlords. They just wanted to trade in houses like people trade in technology stocks in 2020. They paid no heed to the underlying value (in terms of rental income or construction cost).

The numbers of single-family permits since 2017 are distributed as follows:

Phoenix - 12,810

Mesa - 9,045

Buckeye - 8,882

Unincorporated Pinal County - 8,856

Unincorporated Maricopa County - 6,200

Surprise - 5,514

Peoria - 5,258

Goodyear - 5,184

Queen Creek - 5,117

Gilbert - 4,878

Maricopa - 3,815

Scottsdale - 2,231

Chandler - 2,160

Casa Grande - 1,595

Florence - 1,093

Glendale - 882

Avondale - 861

Wickenburg - 599

Eloy - 466

Tempe - 376

“©2020 Cromford Associates LLC”. 

October 1 - Here is our table of Cromford® Market Index values for the single-family markets in the 17 largest cities

The number of cities improving for sellers rose from 10 to 11 compared with last week. Queen Creek was the town that turned positive.

The average improvement across all 17 cities went up from 3.9% to 4.2% and additional momentum in favor of sellers was again detected over the past 7 days. This is not due to supply, which is slowly increasing, but because demand continued to grow despite higher pricing.

Paradise Valley and Maricopa are now the fastest improving cities for sellers, with Cave Creek losing a little steam.

All 17 cities are over 260, something we have not seen before. The market is still showing no sign of weakness.

“©2020 Cromford Associates LLC”. 

September 29 - The latest S&P / Case-Shiller® Home Price Index® numbers were published today. They cover home sales during the period May to July 2020.

Comparing with the previous month's series we see the following changes:

Portland +1.32%

Cleveland +1.27%

Los Angeles +1.14%

San Diego +1.07%

Boston +1.02%

Phoenix +0.88%

San Francisco +0.87%

Washington +0.82%

Charlotte +0.59%

Seattle +0.59%

Las Vegas +0.58%

Tampa +0.56%

Chicago +0.53%

Minneapolis +0.53%

Atlanta +0.51%

Miami +0.45%

Denver +0.38%

Dallas +0.36%

New York -0.14%

The national average was +0.78% so Phoenix home prices increased at a higher rate than the national average, but slipped from 3rd to 6th place compared with last month..

The year over year comparisons are below:

Phoenix 9.2%

Seattle 7.0%

Charlotte 6.0%

Tampa 5.9%

San Diego 5.5%

Cleveland 5.5%

Los Angeles 5.3%

Minneapolis 5.2%

Portland 5.0%

Atlanta 4.8%

Denver 4.4%

Washington 4.4%

Boston 4.4%

Miami 4.1%

Las Vegas 3.3%

Dallas 3.2%

San Francisco 2.5%

New York 1.3%

Chicago 0.8%

The national average was 4.8%. Phoenix remains well out in front on the annual measurement.

“©2020 Cromford Associates LLC”. 

September 28 - The latest version of the chart comparing annual appreciation with the Cromford® Market Index looks like this:

The full size original can be found here

We can see why many people will be thinking 2020 looks a lot like 2004/2005 with the CMI suddenly rising to over 300. We certainly agree that annual appreciation is likely to rise sharply over the next 6 months reaching well over 20%.

However there is no sign at the moment that the CMI will crash back to below 100, as it did in 2005/2006. It is currently struggling to inch higher but while supply remains tight and demand strong, the status quo will likely continue.

There are dozens of things that are different now compared with 2005, but the most significant include:

In 2005, thousands of homes were being purchased and left vacant as they were snapped up by speculators

In 2005, rents were low and headed lower because there were more homes than people who wanted to live in them

In 2005, almost anyone could get a 100% loan with minimal documentation, and thus had no skin in the game if prices were to fall (as they did)

In 2005, few people thought the market could decline

Mortgage fraud was rampant creating artificial demand

The developers had built (an would continue to build through 2007) more homes than were demanded by the population growth

For all 6 of these, the opposite condition exists today.

Vacancies are very low

Rents are high and rising sharply

Qualifying for a mortgage requires financial resources (for example, a job) and must be supported by documentation, and almost all home owners have equity

Many people think the market could go down, supported by articles claiming this is likely (although it is not)

Mortgage fraud is at a relatively low level

The developers have built fewer homes than demanded by population growth between 2008 and 2020.

It is not normal for the CMI to be above 200, never mind 300, so it will certainly come down form its current level eventually. However this is more likely to be as a result of much higher prices damping down demand, rather than a flood of supply entering the market. We would need to see almost three times the current level of supply to get back to normal.

September 26 - The Cromford® market Index continues to edge higher into record territory. To help people understand why we have published 2 new charts

Cromford® Demand Index by Major City - weekly chart

Cromford® Supply Index by Major City - weekly chart

The Market Index is combination of the demand and the supply, so these charts go one level deeper. They cover the 17 largest cities individually. but you can compare cities with each other using these charts.

“©2020 Cromford Associates LLC”. 

September 25 - How best to measure house price appreciation? There are so many choices:

average sales price

median sales price

average price per square foot

median price per square foot

index based on sales of the same property

Case-Shiller's approach is the last of these and tries to eliminate the distortion that occurs when the mix of homes changes. However it still does not account for huge improvements in the property that may account for some of the sales price appreciation. During the housing crash of 2007 to 2011 it failed to account for huge deteriorations in the properties that occurred when owners abandoned their foreclosed homes. In addition, using an index tends to make the data very old by the time it is published. With Case-Shiller we are always 2 to 3 months behind the current market.

The other question is what period to measure

monthly sales

quarterly sales

annual sales

The longer the period measured the higher the number of measurements and therefore a much steadier picture emerges. However when prices are moving quickly, the long measurement period tends to obscure the recent price movements.

We therefore like to use a wide variety of measurements of appreciation, rather than just one.

At the moment we have extremely fast upward movement in home prices and they are accelerating. This pushes us in favor of using a short measurement period like a month. However we need to make sure the sample size remains adequate. Most ZIP codes are too small to qualify, but the major and secondary cities are big enough.

As predicted by the huge rise in the Cromford® Market Index that started back in May, we are now getting high rates of appreciation and they are rapidly moving higher still. Here are yesterday's numbers for annual appreciation based on the average price per square foot for single-family sales that closed between August 24 and September 23, 2020, compared with the same period in 2019.

Cave Creek - 23.6%

Sun Lakes - 23.1%

Arizona City - 19.4%

Scottsdale - 19.4%

El Mirage - 19.0%

Avondale - 18.6%

Gold Canyon - 18.2%

Phoenix - 18.1%

Litchfield Park - 18.0%

Peoria - 17.3%

Queen Creek - 16.9%

Casa Grande - 15.7%

Gilbert - 15.6%

Fountain Hills - 15.5%

Tolleson 15.0%

Tempe - 14.9%

Apache Junction - 14.7%

Sun City West - 14.6%

Maricopa - 14.1%

Paradise Valley - 13.6%

Surprise - 13.1%

Laveen - 12.9%

Sun City - 12.6%

Goodyear - 12.0%

Mesa - 11.9%

Glendale - 11.9%

Anthem - 10.6%

Chandler - 9.6%

Buckeye - 9.0%

The greater part of those price rises happened in the last 4 months and the next 4 months will also see rapid escalation of pricing. This will continue until the prices have risen enough to cure buyers of their enthusiasm.

“©2020 Cromford Associates LLC”. 

September 24 - Here is our table of Cromford® Market Index values for the single-family markets in the 17 largest cities

The number of cities improving for sellers fell from 12 to 10 compared with last week. Buckeye and Surprise joined the list of cities that are lower than last month.

However the average improvement across all 17 cities went up from 3.5% to 3.9% and additional momentum in favor of sellers is detected over the past 7 days.

Cave Creek is still the fastest improving city for sellers but Maricopa, Tempe and Paradise valley are all showing double figure percentages.

All 17 cities are now over 250, something we have not seen before. No sign of a weakening market here.

“©2020 Cromford Associates LLC”. 

September 22 - It is not just homes for sale that are scarce. Judging by active rental listings on ARMLS, homes to rent are just as hard to find. Now we know most rentals are not listed on the MLS, but the MLS counts do give us a reasonable guide to how hard it is to find a home to rent. The long term average number of active rental listings since mid 2006 is 4,986. We currently have just 1,740 available. We had 2,659 this time last year. This is a drop of 35%.

Part of the reason is that we are getting a low number of new rental listings. So far this year we are down 4% compared with 2019. But after a strong first quarter, the new listings dropped away and at the moment we are seeing a monthly rate which is down 20% compared to a year ago.

The inability to evict a tenant who is not paying rent means there are fewer landlords looking for new tenants, so this is one obvious reason why rentals are hard to find.

You would expect such a shortage of supply in the face of strong demand to result in a healthy increase in rents (or unhealthy if you a prospective tenant). You would be correct, as the average rental rate per square foot for leases closed so far in September is $1.15. This is up 15% from the same time last year, the fastest rate of rent increases that we have ever recorded. Note that this does not mean that the average rent in the real world went up by 15%, it means the average lease closed through the MLS increased by 15%. The MLS tends to have a higher concentration of high-cost rental homes which take longer to market.

If you want to study the rental market we have a very useful Tableau chart package here. You will find:

average lease price per sq. ft. per month since 2000

median lease price per quarter since 2000

median sq. ft. by quarter for rentals leased since 2000

ZIP codes ranked by average lease price per sq. ft. over the last 3 months

ZIP codes ranked by median lease price over the last 3 months

a map of leased rentals over the past 3 months, color coded by their lease price per sq. ft.

The fast rate of increase in rents is a very important reason why 2020 is so very different from the bubble year of 2005. Rents did not increase at all between 2000 and 2005, in fact they went down on a rent per square foot basis, reaching a low point of 65 cents just as the purchase market reached its most extreme Cromford® Market Index. When home prices go up very fast but rents go down, this is a very strong signal that you in a real estate bubble. Houses are being purchased that no-one wants to live in, merely for speculation. This was rampant in 2004 and 2005, a sign of a very unhealthy situation which would end in disaster. Few people paid attention in those years, but they did when the damage spread to Wall Street in 2008.

The situation in 2020 is the opposite. We have too few homes for the people who wish to live in them, whether they wish to rent or purchase. We also have people who remember the housing crash and are far too fearful that it will happen again, even though this is most unlikely in the present circumstances. People still need homes to live in and the pandemic would need to have a much higher mortality rate for it to impact the overall demand for homes. A damaged economy does not imply a damaged housing market. However the housing market is so large that a severely damaged housing market can bring down the whole economy, as it did between 2005 and 2009.

We are not currently in a housing bubble even though prices are accelerating. People who think we are experiencing bubble conditions and that prices will shortly start falling have misinterpreted the situation.

“©2020 Cromford Associates LLC”.