2019-08 Market Report

LOWEST Number of New Listings Posted in at Least 18 Years
Contracts in Escrow Up Over 15%!

 

For Buyers:
It’s slim pickings for buyers in Greater Phoenix these days unless your budget is over $500,000.  Overall supply is 14% lower than last August while contracts in escrow are 15.5% higher!  There are a plethora of zip codes considered “frenzies”, where there are literally more properties under contract than there are active for sale; all of them with an average sale price below $400,000.  This is unusual for August, which is typically a much softer month. Buyers will have a slightly easier time in more expensive areas such as Central Phoenix, Ahwatukee, South Tempe and the Northeast Valley, but not much unless they’re willing to go further out or increase their budget.  Any projections of prices flattening out or coming down in Greater Phoenix this year have been obliterated.

For Sellers:
As supply plummets, fewer sellers are deciding to sell.  July was THE lowest month for brand new listings going all the way back to the year 2001.  That’s significant because the population today is 50% larger and the number of housing units is 63% higher than it was 18 years ago.  19% of all MLS sales and 26% of sales between $100K and $250K sold over asking price last July.  Coincidentally (or not), 32% of sales within that same price range still included some form of seller-paid closing cost assistance.  Despite the frenzy market, the annual appreciation rate for Greater Phoenix is just 6.4% and sales between $225K-$500K are clocking 3.5-4.0% on average.  This may seem surprising given the widening gap between supply and demand; but appraisers remain conservative in their valuations and with at least 80% of buyers needing a loan, they’re riding the brakes on runaway appreciation thus far.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2019 Cromford Associates LLC and Tamboer Consulting LLC


Posted on August 15, 2019 at 2:35 pm
Matthew Hoedt | Posted in Market Snapshots |

2019-07 Market Report

Contracts up 19% in this Price Range!
Flip Sales Rebounding Strong after Weak First Quarter

 

For Buyers:
New listings activated in June were down 10.0% compared to last June and overall supply has dropped 9.5% in 4 weeks, putting it below last year’s count for the first time all year.  Buyers have gotten used to very little supply under $200K but now they’re feeling it hard between $200K-$250K, where new listings were down a whopping 15.1%.  Trying to fill the gap, brand new town home/condo sales have been strongest between $200K-$250K with a median size of 1,362sf.  The top two builders that have sold the highest number of condos in this price range this year are Lennar in Gilbert and DR Horton in Mesa.  Other competing developers building multi-family between $200K-$250K include Bela Flor in Mesa and Maracay in Goodyear.  In Mesa, new condos in this price range have been extremely competitive with resale with an average price per square foot of $155.70 versus $157.47 for resale.

For Sellers:
Listings in escrow are up 7.4% and have soared nearly 19% over last year between $250K and $600K.  Homeowners with property valued under $250K are inundated with offers from investors as flip sales* have rebounded strongly over the past few months.  Making up for lost time after being down 4.2% in the first quarter, successful flip sales have now outperformed 2018 by 4.8%. The median sale price for a flipped home in May was $245K, up 8.4%, and the average size sold was 1,710sf.  The median gross gain for a traditional flip investor was $53K between their acquisition and sale price.  iBuyer companies such as OpenDoor, OfferPad and Zillow showed a median gross gain of just $9,900, however that doesn’t account for significant service charges to the sellers during escrow.

*A flip sale is defined in this case as the sale of property within 6 months of acquiring it.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2019 Cromford Associates LLC and Tamboer Consulting LLC


Posted on July 13, 2019 at 2:23 pm
Matthew Hoedt | Posted in Market Snapshots |

2019-06 Market Snapshot

Monthly Sales Up 7.1% in Greater Phoenix
Higher Incomes in Greater Phoenix Fueling More Contracts and Rising Prices

 

For Buyers:
Re-sale prices are not predicted to come down this year.  Between August 2018 and January 2019 it looked like the market was going to balance out and cause prices to stabilize around the 2nd half of 2019.  However two things happened to change that prediction.  First, average 30-year mortgage rates dropped from a high of 4.94% in November 2018 to 3.82% as of June 2019.  That alone has saved buyers around $177/month on a median-priced $279,000 home with 4% down.  Second, private sector annual earnings in Greater Phoenix rose 1.8% in April after an 8-month period of stagnation.  In the last decade home prices have gone flat just twice, in 2011 and 2014.  Both times there was a corresponding decline in annual earnings. If annual earnings continue to grow and interest rates remain low, the Greater Phoenix seller market will continue to push home prices up this year.

For Sellers:
The May peak buyer season is over.  From this point through the end of the year it’s not uncommon to see contract activity gradually decline 30-40%.  The good news is that despite the predictable decline, listings under contract are coming in 3.7% higher than this time last year.  It’s not evenly distributed along all price points however.  Contracts on listings over $600K are up 3.4% while the $500K-$600K range is up an impressive 33.5%!! Contracts between $250K-$500K are up 16.1% and the low $200K’s are up 8.1%.  Lack of inventory under $200K means that contracts in this range are down 20.6%.  Expect your highest annual appreciation rates to be between 6-10% in the $150K-$225K range as this is where the majority of investor flip activity lies. $225K-$500K appreciation is between 3-5% and over $500K is between 1-3%.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2019 Cromford Associates LLC and Tamboer Consulting LLC


Posted on June 15, 2019 at 2:20 pm
Matthew Hoedt | Posted in Market Snapshots |

2019-05 Market Report

Median Sales Price up 5.9% to $270,000 in Greater Phoenix
Sales Rebound, Up 3.7% Over Last Year

 

For Buyers:
The median rent paid on single family rentals through the Arizona Regional MLS is currently $1,625 per month, which is comparable to what the mortgage payment would be on a median-priced $270,000 home with 4% down at today’s interest rate (including approximate taxes, homeowners insurance and mortgage insurance).  If a buyer were to purchase that home today, within 5 years they would have nearly $35,000 in equity just from making their mortgage payment, not including any appreciation in value.  If prices were to rise at a modest 2.1% per year (the average long term rate of inflation) within that same 5 years, then they would have an additional $43,000 in equity just from appreciation.  This scenario would result in $78,000 in total equity within 5 years and by year 3 they would be able to remove any mortgage insurance from their payment, which would save another $200 per month approximately.

For Sellers:
Low interest rates are continuing to fuel buyer demand and there are now 2.5% more listings under contract today than there were last year at this time and 3.7% more sales. All in all an impressive rebound as interest rates have remained below 4.2%, keeping affordability stable for the time being.  Increased demand in the 2nd quarter has resulted in strengthening the weakening seller market after a full 7 months of decline.  May is typically the highest month for listings under contract and buyer activity is expected to decline from here through December as it typically does every year.  Don’t think you’ve missed the boat if you need to list however.  On average since 2001, about 52% of all sales happen in the first half of the year and 48% in the second.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2019 Cromford Associates LLC and Tamboer Consulting LLC


Posted on May 5, 2019 at 2:16 pm
Matthew Hoedt | Posted in Market Snapshots |

2019-04 Market Snapshot

Mortgage Payments Drop $50 per Month on a Median Priced Home
Listings Under Contract Up 19% in 5 Weeks!

 

For Buyers:
Buyers got a break last month as 30-year mortgage rates dropped significantly from an average of 4.41% to 4.08%, which is the lowest they have been since January 2018.  On a $267,000 home (the median sales price in Greater Phoenix) the drop equated to nearly $50 per month in savings on principal and interest, which was enough to get many buyers off the couch and looking for homes.  This rate drop combined with an increased conventional loan limit up to $484K and a 32% increase in weekly seller price reductions meant that price ranges between $200K all the way up to $800K saw a combined 19% increase in contracts written over the last 5 weeks.  Contract activity is expected to increase at this time of year anyway due to seasonality, but last year over the same 5 weeks it only increased 8.6%.  For buyers who are still waiting for prices to begin declining, their wait just got longer.

For Sellers:
The drop in mortgage rates could not have come at a better time for sellers.  Up until 6 weeks ago the negotiating advantage sellers have been enjoying for years in Greater Phoenix had weakened to the point where the market was on track to enter balance within a matter of months and price appreciation would have begun to slow even more.  However by April 4th the average 30-year mortgage rate (as reported by Freddie Mac) had dropped to a 15-month low.  This spurred buyer activity and resulted in Listings Under Contract, which were 10.2% below 2018 last month, to sharply increase and surpass 2018’s April count by 0.8%.  Currently sales volume is down 9.6% from last April, however when these contracts close escrow over the next 4-6 weeks May and June should fare much better.  Don’t get too excited though, the seller market is still much weaker than last year.  Affordability and demand were helped by this interest rate drop but could quickly be negated as prices continue to rise.  Sellers still need to be mindful of their asking price to get under contract before buyer activity seasonally begins to decline between May and the end of the year.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2019 Cromford Associates LLC and Tamboer Consulting LLC


Posted on April 13, 2019 at 2:08 pm
Matthew Hoedt | Posted in Market Snapshots |

2019-03 Market Snapshot

Price Reductions up 71% on Listings $200K-$250K
Sellers: Get Competitive, It’s “Buyer Season”

 

For Buyers:
Good news for buyers over the past few weeks, interest rates came down a few notches.  That combined with the increased loan limit for conventional financing gave buyers a little boost.  The new loan limit for conventional financing in Maricopa County is $484,350 as of a few months ago and the new limit for FHA financing is $314,827.  Just 3 years ago, the limits were $417,000 and $271,050 respectively.  The FHA limit increase hasn’t had as much impact on buyer demand as the conventional increase thus far.  While the overall market is down 8.7% in sales this month, the biggest winner has been the $500K-$600K price range which is up 15%.

For Sellers:
“Buyer Season” in Greater Phoenix typically lasts from February to May with a peak in April.  Sellers who decide to list their home in March should be aware that they have just 8-10 more weeks of peak buyer activity before the summer slowdown.  This is a very competitive time for sellers. Price reductions are at their seasonal peak in the luxury price ranges, however it’s most noticeable in the battleground price range of $200K-$400K.  The number of weekly price reductions on listings between $200K-$250K are up a whopping 71% where competing supply is 32% higher than last year and price reductions are up 42% between $250K-$400K where supply is 26% higher.  It’s a good idea to be competitive in both price and condition right out of the gate as buyer demand remains below normal overall in Greater Phoenix.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2019 Cromford Associates LLC and Tamboer Consulting LLC


Posted on March 15, 2019 at 2:03 pm
Matthew Hoedt | Posted in Market Snapshots |

2019-02 Market Snapshot

List Price Reductions up 24% in Greater Phoenix, Up 42% in Some Areas
Sellers: Stop Trying to Time the Market

 

For Buyers:
A weak 4th quarter for sales in 2018 has resulted in 11,874 price reductions in the first 5 weeks of 2019.  That’s 24% higher than this same time last year.  Price reductions on listings between $200K-$500K specifically are up 40%.  The most notable price range with a 42% increase is $200K-$250K. This may come as a surprise to some because this price range is below the median sales price of $263K.  However this area is currently a battleground of competition between traditional sellers, flip investors and new construction as inventory is up 26% and contracts are down 10%.  Flip investors acquire and sell over 50% of their inventory in this price range.  New home builders increased their sales by 22% in this range last year. Traditional sellers are now under more pressure to improve the condition of their home and provide incentives for buyers in order to compete.

For Sellers:
This is not a good time for sellers to get caught up in timing the market so as to sell their home at the ideal “peak of price”.  While it’s understandable for sellers not to want to leave any money on the table, the reality is that price peaks don’t happen in seller markets.  They occur in balanced markets.  Balanced markets are fine to sell in, but they’re not as fun or profitable for sellers as they expect; especially if their property is hard to sell due to condition or location.  As the seller market continues to weaken, it’s more important than ever for sellers to list their property while they still have the advantage of low competition, price it competitively and don’t spit on the first contract.  Buyer activity, while lower, will continue to accelerate through May.  This is go time.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2019 Cromford Associates LLC and Tamboer Consulting LLC


Posted on February 19, 2019 at 1:59 pm
Matthew Hoedt | Posted in Market Snapshots |

2019-01 Market Snapshot

Greater Phoenix Buyer Contracts Down 15%
It’s Still a Good Time to Sell… For Now

 

For Buyers:
The monthly average interest rate rose to 4.64% in December 2018, up 0.69% from the previous December’s 3.95%. For buyers who will purchase at the current median sales price of $260,000, that equates to approximately $100 added to their monthly payment compared to last year.  Buyers averaged 1,845 square feet at this price; nearly 100 square feet smaller than if they had purchased last year.  It doesn’t help matters by renting either.  As single family homes appreciated 8.1% per square foot, single family lease payments also rose 8.6% during the same time frame. With that, buying is still a good option over renting if only to stabilize one’s monthly housing expense. Sale prices will continue rising in the first half of 2019, but at a slower rate and they’re not expected to decline at this juncture. Instead, buyers may see a little more flexibility from sellers in the form of repairs, closing costs, and possibly interest rate buy-downs in the higher price ranges.

For Sellers:
The market continues to favor sellers entering into 2019, but not nearly as much as it did at the beginning of 2018. Supply is still 34% below normal compared to 36% below normal this time last year.  It’s buyer demand that has shifted as buyers grapple with affordability and concerns about an overvalued market.  Demand at this time last year was measured 1% above normal; today it’s 13% below normal.  While it may feel like a buyers market compared to the last four years, it is far from one. Greater Phoenix is still in a seller’s market, however it’s weaker out of the gate.  This means there is still more demand than supply, but multiple offers will not be as common, there will be fewer sales overall and scenarios will vary widely depending on price range.  Demand could change in either direction depending on interest rates, however for the time being buyers and sellers have to play the hand they’ve been dealt.  For those wondering if it’s still a good time to sell, the answer is “yes” for now.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2019 Cromford Associates LLC and Tamboer Consulting LLC


Posted on January 11, 2019 at 1:56 pm
Matthew Hoedt | Posted in Market Snapshots |

2018-12 Market Snapshot

Greater Phoenix Demand Down 16% in Q4
Seasonally, This is the Calm Before the Storm for Buyer Activity

 

For Buyers:
Remember when you would not eat your dinner as a kid and your parents would serve it to you for breakfast or lunch until it was gone?  Okay even if you can’t relate, you can imagine a kid’s disappointment in having to see the same thing day after day until they reluctantly eat it. Buyers may be feeling the same way this month as existing inventory has gotten stale and very little new inventory has been added in the first weeks of December. It’s down a whopping 26% from last December with nearly every price range under $1.5M participating in the decline.  This reluctance to list in December has offset the 16% decline in listings under contract and the market has managed to maintain a seller market, albeit a weaker one.  In the meantime, existing sellers are dressing up their leftovers with incentives.  Seller-assisted closing costs have risen on sales between $175K-$300K and price reductions were up 25% in the first week of December compared to last year.

For Sellers:
Seasonally, this is the calm before the storm in terms of buyer activity.  Every year, listings under contract drop sharply in the latter half of December before reaching their lowest point on January 1st.  Conversely, between January and April buyer contract activity will sharply accelerate.  How much it will increase this year remains to be seen depending on interest rates and other lending factors. The past 3 years has seen contracts rise roughly between 70-90%  in the first 4 months.  Despite this expectation, sellers need to be prepared to compete more in 2019 than they had to this year. The first 4 months are also typically strong for new listings to enter the market.  Even though 2019 looks like it will start off with a seller’s advantage, it will be much weaker than last year.  The market appears to be resisting higher prices for homes that don’t live up to buyers’ expectation of value for their money.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2018 Cromford Associates LLC and Tamboer Consulting LLC


Posted on December 16, 2018 at 1:52 pm
Matthew Hoedt | Posted in Market Snapshots |

2018-11 Market Snapshot

New Listings Up 18% in October between $250K-$400K
The 4th Quarter is Seasonally the Best Time to be a Buyer

 

For Buyers:
Seasonally the 4th Quarter is the best time to be a buyer and this year is no exception.  Typically buyer contract activity is at its strongest from March through May and weakest between November and January.  Buyers who were out-bid by competing offers last Spring will have a different experience now.  October saw 18% more new listings hit the market between $250K-$400K compared to last October while buyer contracts are about the same within the same price range.  There was only a 1% increase in new listings in the lower price range between $200K-$250K but a 12% drop in buyer contracts which caused overall supply to rise another 11%.  The market is still a seller’s market, but more seller competition for fewer buyers translates into more price reductions and seller concessions until the Spring “Buyer Season” is upon us once again.

For Sellers:
The market may be softening between $200K-$400K (which accounts for over 56% of MLS sales), but that doesn’t mean sellers are getting a raw deal.  Monthly average sale prices per square foot in this price range have appreciated 5% since October last year and nearly 19% in last 5 years.  Under $200K, the appreciation rate is 9.5% in the past year and 44% in 5 years.    $400K-$800K has appreciated 6% in the last year and 14% in 5 years and the annual average sale price per square foot* over $800K has appreciated 3% in the last year and 10.5% in 5 years.  What’s happening underneath that contract price, however, is an increased cost to sell at “top dollar”.  That cost can take the shape of longer days on market with multiple price reductions, repairs, needed upgrades to the home prior to list and closing cost assistance.

*Annual averages are used in the higher price ranges to mitigate the sharp price fluctuations that affect this market.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2018 Cromford Associates LLC and Tamboer Consulting LLC


Posted on November 14, 2018 at 1:47 pm
Matthew Hoedt | Posted in Market Snapshots |

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