Market Summary January 2022

Here are the basics - the ARMLS numbers for January 1, 2022 compared with January 1, 2021 for all areas & types:

• Active Listings (excluding UCB & CCBS): 5,776 versus 6,055 last year - down 4.5% - and down 15.4% from 6,825 last month 
• Active Listings (including UCB & CCBS): 8,630 versus 9,788 last year - down 11.8% - but down 18.7% compared with 10,609 last month
• Pending Listings: 6,359 versus 6,135 last year - up 7.5% - but down 15.8% from 7,830 last month 
• Under Contract Listings (including Pending, CCBS & UCB): 9,353 versus 9,868 last year - down 5.2% - and down 19.5% from 11,614 last month 
• Monthly Sales: 9,307 versus 10,017 last year - down 7.1% - but up 4.0% from 8,951 last month
• Monthly Average Sales Price per Sq. Ft.: $267.31 versus $211.44 last year - up 26.4% - and up 1.1% from $264.43 last month 
• Monthly Median Sales Price: $425,000 versus $332,000 last year - up 28.0% - and up 1.2% from $420,000 last month

The downward trend in supply that started in late October accelerated throughout December, taking us to the lowest number of active listings at year end that we have ever recorded.

To the consternation of those who harbor theories that the market is cooling off, this tells us that the real-world data does not agree with their theory. The housing market heated up in the last 10 weeks of 2021 and starts 2022 with a huge excess of demand over supply. This is not because of colossal demand. It is because of the unusually low supply. 

We normally see a strong flow of new listings in January while buyers tend to stay quiet until February. It is too early to tell if that will occur in 2022. It did NOT occur in 2021 and this was a striking reminder that the market was abnormal. In the next 4 weeks we will find out if the market remains in an abnormal state.

Prices continued to advance during December, more than 1% higher over the month. It would be surprising if we don't see at least a 3% increase over the next 3 months. My money would be on a move in excess of this, but nobody knows for sure what the future will bring, and the market continues to spring surprises on everyone.

Cost to Rent vs. Buy in 2022
Owner Occupant Buyers Retreated in 2021

For Buyers:
As the cost of purchasing a home increases in Greater Phoenix, the question of whether to rent or buy becomes harder to answer for some buyers.  The overall median cost of a home is currently $425,000, and for a typical 1,500-2,000 square foot home, the median cost is $420,000.  The estimated payment, assuming 10% down and including principal, interest, taxes and insurance, is $2,123.  The median monthly rental rate for the same size range, recorded through the Arizona Regional MLS, was $2,195 in the 4th quarter of 2021; just $72 per month more.
  
Some buyers might question the advantage of purchasing a home in order to save $72 per month. However, the financial advantage of owning vs. renting is typically realized for those who own their home for at least 3-5 years.

Let’s assume, hypothetically, that a buyer purchased a home today for $420,000 with a $42,000 down payment (10%).  Over the next 5 years, their home’s value fluctuates up and down and, in the end, doesn’t appreciate. That may sound horrifying, however during this time the loan principle has been paid down to $336,000. The homeowner’s equity has doubled from $42,000 to $84,000 without their home appreciating a dime, and with 20% equity they no longer have to pay private mortgage insurance. Their payment declines $200.  Still a win.

Now let’s assume, hypothetically again, that while our homeowner is paying down their loan, the home value fluctuates up, down and sideways, but still averages a 6% appreciation rate over 5 years (close to the current rate of inflation).  The home would be then be worth $562,000, an increase of $142,000.  

After 5 years, this hypothetical homeowner went from $42,000 to $226,000 in equity, and their monthly cost was nearly the same as what they would have paid in rent anyway. For this reason, even when the monthly payment required to buy is close to that to rent, buying still wins in the long game.

For Sellers: 
Despite rumors of the U.S. housing market cooling off, Greater Phoenix has moved farther into a seller’s market over the past month.Growing disparity between supply and demand in our market means there is little evidence to suggest price appreciation will slow in the first quarter. After a strong summer, new listings slowed down in the 4th quarter of 2021, while the number of accepted contracts remained high. The result is 2022 starting off with another historically low supply level, and listings under contract, while 7.6% below 2021, still strong with the 2nd highest count since 2014.

It’s an accepted opinion among local analysts that income levels in Greater Phoenix cannot sustain another year of 28% annual appreciation, especially if interest rates continue to increase. However, seeing there is little relief from home builders adding more supply to the equation, it’s reasonable to expect the market to respond with a softening of demand. This trend started to reveal itself in the 2nd Quarter of 2021 in a subtle manner. 

Since 2014, buyers purchasing their primary residence have made up 70%-76% of total residential purchases in Maricopa and Pinal County. In Q2 2021, that percentage dipped to 67%, and declined to 63% by October. While traditional buyers retreated, competing buyers for 2nd homes and institutional buyers made up of Wall Street-backed iBuyers, hedge funds and other investment groups stepped in. Price appreciation slowed from an average of 3.3% per month to 1.1%.

While 2022 is coming out of the gate strong, and the Spring is typically the strongest season for buyers, it remains to be seen how much control investors and 2nd home buyers will take if traditional home buyers retreat. The last time they ignored affordability issues within the community, everyone lost in the end.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2022 Cromford Associates LLC and Tamboer Consulting LLC

If you, or anyone you know, is looking to buy or sell, Please let me know!

Troy Holland

Cell:  480-773-5792

Email:  TroyHolland44@yahoo.com

Web:  www.AZ-RealEstateGroup.com 

Raving Fans: Client Reviews Here

Information provided courtesy The Cromford Report.

Market Summary December 2021

Here are the basics - the ARMLS numbers for December 1, 2021 compared with December 1, 2020 for all areas & types:

• Active Listings (excluding UCB & CCBS): 6,825 versus 7,388 last year - down 7.6% - and down 12.2% from 7,777 last month 
• Active Listings (including UCB & CCBS): 10,609 versus 12,481 last year - down 15.0% - but down 12.3% compared with 12,104 last month
• Pending Listings: 7,830 versus 7,347 last year - up 6.6% - but down 8.0% from 8,507 last month 
• Under Contract Listings (including Pending, CCBS & UCB): 11,614 versus 12,440 last year - down 6.6% - and down 9.5% from 12,834 last month 
• Monthly Sales: 8,964 versus 9,171 last year - down 2.3% - but up 2.1% from 8,780 last month
• Monthly Average Sales Price per Sq. Ft.: $264.36 versus $207.78 last year - up 27.2% - and up 0.7% from $262.40 last month 
• Monthly Median Sales Price: $420,000 versus $330,000 last year - up 27.3% - and up 1.2% from $415,000 last month

The slight downward trend in supply that we reported last month has turned into a much stronger dip - down over 12% in just 30 days. This is not too surprising since a fall in active listings happens in November during most years. We can expect further falls during December and by January 1 we will probably see another record low for the time of year. So, there is really no good news for buyers here.

There has been a significant drop in the use of UCB status since this time last year. UCB listings are down 26% but pending listings are up almost 7%. Overall, demand is still looking much stronger than normal. However, it has weakened just a shade over the past week, with the Cromford® Demand Index fading from a peak of 123.6 on November 26.

Prices are still moving higher, of course, and with the Cromford® Market Index over 360, there is little sign of that changing in the near to medium term.

December is unlikely to give us much housing market excitement as thoughts turn to things other than real estate. We are almost certain to see supply fall faster than demand. and prices are likely to rise by another 1 to 2%.

The next big signal will come in January when we see what the fresh supply looks like.

2022 Housing Predictions: Who to Believe?
Median Price Currently Rising 1% per Month on Average

For Buyers:
‘Tis the season for 2022 projections in the housing market and, as expected, there are conflicting opinions among national housing analysts. Zillow and Goldman Sachs predict home values will rise nationally 14-16% between now and the end of 2022. CoreLogic released their prediction that home values will only rise 1.9% next year, citing a concern with rising interest rates. Then there’s Zelman and Associates warning that investors are over-building and over-buying as household formation and population growth are weak, challenging the notion of a housing shortage.

Who do we believe?  Zillow recently pulled out of the business of buying homes after realizing their algorithm was failing to accurately value homes under current market conditions. CoreLogic’s prediction last year, that home values would drop 6.6% by May 2021, was a gross misfire as values soared instead. While Zelman is waiving a caution flag, the organization is stopping short of issuing a price prediction for next year.

In the meantime, prices in Greater Phoenix continue to rise. Prior to 2020, the median had been rising at 0.6%-0.8% per month on average (7-10% per year) which was in response to a milder seller market.  In the 2020-2021 extreme seller market, that average rose to 1.3% per month in 2020 and 2.3% per month so far in 2021, with a peak in the Spring between 3-5% and 1% per month average since June.  
Many local analysts agree the past rate of increase is indeed unsustainable. The payment for a 1,500-2,000 sqft home has risen 33%, or $500/month since last November, and the median rent on the MLS for the same sized home increased $372/month. At the rate prices have been increasing for the past 2 years, returning to a mere 7-10% annually would be considered a massive relief for buyers.

For Sellers:
While the caution flags are waving for a softer housing market next year, there are a number of positive indicators in Greater Phoenix that may keep our market appreciating, albeit slower. While interest rates, affordability, sluggish population growth and household formation are valid reasons for concern, here are a few counter-indicators to consider:

• Lending practices have loosened up with the new $625,000 loan limit and more consideration of self-employed borrowers
• Arizona is ranked in the top 10 states for population growth and household formation over the past decade due primarily to domestic migration
• Per the Arizona Department of Economic Opportunity’s October Employment Report:
• Jobs and the labor force have completely recovered from last year’s pandemic losses
• Unemployment claims have fallen to pre-pandemic levels
• W-2 Incomes have continued to rise and are up 3.4% YOY

While the market is expected to downshift sometime next year, the local economy and current supply and demand indicators for Greater Phoenix still point to strong price appreciation for at least 3-6 months.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2021 Cromford Associates LLC and Tamboer Consulting LLC

If you, or anyone you know, is looking to buy or sell, Please let me know!

Troy Holland

Cell:  480-773-5792

Email:  TroyHolland44@yahoo.com

Web:  www.AZ-RealEstateGroup.com 

Raving Fans: Client Reviews Here

Information provided courtesy The Cromford Report.

Market Summary November 2021

Here are the basics - the ARMLS numbers for November 1, 2021 compared with November 1, 2020 for all areas & types:

• Active Listings (excluding UCB & CCBS): 7,777 versus 8,682 last year - down 10.4% - but up 1.7% from 7,649 last month 
• Active Listings (including UCB & CCBS): 12,104 versus 13,901 last year - down 12.9% - but up 4.1% compared with 11,622 last month
• Pending Listings: 8,507 versus 7,862 last year - up 8.2% - and up 11.9% from 7,605 last month 
• Under Contract Listings (including Pending, CCBS & UCB): 12,834 versus 13,081 last year - down 1.9% - but up 10.8% from 11,578 last month 
• Monthly Sales: 8,765 versus 10,019 last year - down 12.5% - and down 6.6% from 9,383 last month
• Monthly Average Sales Price per Sq. Ft.: $262.12 versus $207.38 last year - up 26.4% - and up 4.0% from $252.14 last month 
• Monthly Median Sales Price: $415,000 versus $332,000 last year - up 25.0% - and up 1.2% from $410,000 last month

Supply has started on a slight downward trend once more, which will dismay buyers and please sellers. This trend is only a couple of weeks old, but is very likely to continue through the rest of 2021 since that would conform to the usual seasonal pattern. We are certainly not seeing the flood of new supply that would suggest an end to house price appreciation.

Demand is more complicated. The closed sales count for November was unimpressive, down over 12% when compared to November 2020. However the counts of listings under contract and pending listings are up sharply from last month. This indicates that demand is strengthening but closings are taking longer. Overall, demand is rising again.

The combination of the demand and supply trends is causing the Cromford® Market Index to start increasing once more. It is already at a very high level around 345 to 350, so we can expect more price rises over the near term. During November the average $/SF rose a massive 4% bringing the summer lull to an emphatic end. You should expect more increases to come.

Some people appear to think Zillow exiting the home buying business signals a top in the market. These people are mistaken. It indicates that Zillow did not understand how to operate a home buying business. They drastically overpaid for homes and were then surprised when they could not sell them for a profit. If they had waited a few months, that problem would have gone away because of market appreciation. However, that would have tied up an enormous amount of capital. Their primary mistake was over-paying for homes compared to their market value. Since the fundamental claim for Zillow is that they can calculate any home's market value, this rather undermines their core value proposition. Zestimates are not very accurate, but they are an effective way of drawing visitors to the Zillow site. Those visitors are not in a position to judge the accuracy of the Zestimate and in a frame of mind to believe it. That Zillow believe their own Zestimates led to their downfall in the home buying business.  (You can see a list of Zillow Owned homes by clicking this link....link shows the first 200 of 1004 listings...it is interesting to click the tax records to see what they purchased the home for.  you will see most of the homes are selling for a loss....Zillow Owned Homes (200 out of 1004)

New homes are still scarce thanks to supply chain and skilled labor shortages. So there is little sign of imminent improvement in the chronic shortages of homes for sale, whether new or resale. There is therefore still room for further increases in home prices. We are now well into levels that make homes much harder to afford for typical home buyers. But there appears to be still plenty of appetite to buy among investors and several new players entering the buy-to-rent business. 

Home prices do not go down when interest rates rise. Home prices do not go down just because they have gone up. What goes up must come down is a saying that relies on gravity. There is no gravity involved in home prices.

Home prices go down when supply exceeds demand. With supply as low as it is at present, demand would have to collapse far below normal. Instead demand remains well above normal right now and appears to be on the rise.

The End of Forbearance is Not the End of a Seller Market
Supply Up 93% Since April, Prices Continue to Rise

For Buyers:
The housing supply shortage is still in full swing, and there is online speculation that the end of forbearance may be the source of relief as some homeowners may need to sell.  According to Black Knight, the national number of mortgages in forbearance has declined 67% from a peak of 4.76M in May of last year to 1.6M as of September 28th, 2021. Surveys from the Mortgage Bankers Association indicate that at least 80% of homeowners have stayed in their homes after forbearance. That means roughly 600,000 properties have already been added to the national supply of homes for sale over the past year without causing home values to decline. If we can expect 20% of the 1.6M remaining homeowners in forbearance to leave their home; that’s roughly 6,400 properties per state on average. Since Greater Phoenix alone records roughly 11,000-14,000 closings per month, the number of properties exiting forbearance may be enough to ease the lack of supply for a short while, but probably not enough to cause prices to decline in Greater Phoenix.

For Sellers: 
The Greater Phoenix housing market is cooling, but it is far from cold.  To put the last 6 months in perspective, from April 1st to October 1st, supply rose 92% from 3,591 to 6,883* active listings in the Arizona Regional MLS. In the same time frame, listings under contract dropped 9% from 11,939 to 10,878*.  While a rise in supply combined with a decline in contracts in escrow indicates a cooling of the market, it’s important to put it in perspective from a seasonal and a non-seasonal point of view. Seasonally, it’s normal for listings in escrow to drop between April and October.  However, despite the most recent drop to 10,878 is still higher than previous counts on October 1st from 2014-2019, which ranged between 8,100 and 9,800. This places demand notably higher than even the pre-pandemic seller markets. It is not seasonal for supply to rise between April and October, so a 93% increase is a notable shift.  However, a count of 6,883 active listings is extremely low. In the last balanced market of 2014, the count on October 1st was 21,796.  During the seller markets from 2015-2019, October 1st counts declined from 18,000 to just over 12,000 listings. So despite the 93% increase in supply, it’s still 45% lower than the pre-pandemic 2019 seller market and 68% below the last balanced market of 2014. 
The effects of this 6-month weakening are mild.  Here are a few: 
· The Median Days on Market prior to contract has increased from 5 days to 11 days
· The Sale Price to List Price ratio has decreased from 101.8% (1.8% over list price) to 0.3%
· Sales over Asking Price have decreased from 60% of sales to 47% of sales
· The Median Amount over List has decreased from $20,000 to $11,000.

It’s good to be a seller.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2021 Cromford Associates LLC and Tamboer Consulting LLC

If you, or anyone you know, is looking to buy or sell, Please let me know!

Troy Holland

Cell:  480-773-5792

Email:  TroyHolland44@yahoo.com

Web:  www.AZ-RealEstateGroup.com 

Raving Fans: Client Reviews Here

Information provided courtesy The Cromford Report.

Market Summary October 2021

Here are the basics - the ARMLS numbers for October 1, 2021 compared with October 1, 2020 for all areas & types:

• Active Listings (excluding UCB & CCBS): 7,649 versus 8,101 last year - down 5.6% - but up 11.3% from 6,873 last month 
• Active Listings (including UCB & CCBS): 11,622 versus 13,305 last year - down 12.6% - but up 5.8% compared with 10,988 last month
• Pending Listings: 7,605 versus 7,999 last year - down 4.9% - and down 3.9% from 7,917 last month 
• Under Contract Listings (including Pending, CCBS & UCB): 11,578 versus 13,203 last year - down 12.3% - and down 3.8% from 12,032 last month 
• Monthly Sales: 9,374 versus 9,632 last year - down 2.7% - but up 3.6% from 9,045 last month
• Monthly Average Sales Price per Sq. Ft.: $252.19 versus $198.80 last year - up 26.9% - and up 1.1% from $249.41 last month 
• Monthly Median Sales Price: $410,000 versus $326,800 last year - up 25.5% - and up 2.2% from $401,000 last month

More short-term twists and turns in the market are creating a confused situation. Yes, we still have very much a seller's market with supply inadequate to meet demand. However, the demand is increasingly dictated by investors and iBuyers rather than traditional buyers - the owner-occupiers that make up the heart of the housing market. Demand from iBuyers surged dramatically in June, July and August, but not all iBuyers behaved the same. Opendoor increased their purchases from 66 in August 2020 to 728 in August 2021, but their buying tailed off in the second half of September. Zillow went from 34 in August 2020 to 253 in August 2021. Their purchases peaked at 90 during the second week of September but have since dropped back a little. OfferPad has been less volatile with 82 purchases in August 2020 growing to 152 in August 2021. 

All the iBuyers have sold far less than they have bought, meaning there are many properties in inventory. This could mean an increase in supply over the next several weeks.

Active listing counts (excluding UCB and CCBS) are moving higher again after a lull in August. There was a rise of almost 25% during July, so the September increase of just over 11% is not as dramatic. However, the underlying trend seems to be for buyers to find a few more homes for sale, which must be a relief for them. 

Demand looked strong all the way through September, but not so much at the beginning of October. Under contract counts and sales numbers suggest we may have seen the best of 2021 demand. With supply rising and demand appearing to plateau, we could possibly be in for some cooling during 4Q. But do not expect prices to fall. Indeed, September pricing was significantly higher than August and brings to an end the summer lull that started in June.

Contract Activity Spiked 20% In This Price Range
Luxury Sellers Over $1M Enjoying a Hot Summer

For Buyers:
Buyer demand has rallied sharply over the past 4 weeks, which is unusual for this time of year.  The rally is exclusively between $400K-$800K, spiking nearly 20% in contract activity since the end of July.  We have to wait until the transactions close and record to identify the buyers, but judging from July’s closing analysis we expect to find a surge in iBuyer purchases (aka “Internet Buyers”). The most notable iBuyers active in Greater Phoenix are OpenDoor, OfferPad, Zillow, and now RedFin. At least one of these organizations has increased their approved acquisition price to a $750,000 limit, which could explain the sudden spike in sales. iBuyers do not buy and hold property, they primarily engage in a short-term flip strategy and their activity does not constitute true demand. True demand is someone who will live in the home or rent it to someone who will live in the home. Flip investors are strictly the middlemen between the seller and the final buyer, which adds one extra closing to the books and makes true demand appear larger than reality by increasing the total number of sales without increasing the level of supply. The existence of institutional flip investors in the marketplace can be frustrating for buyers from a competition standpoint, but in the end these buyers still need to re-sell the home to someone. As prices have reached levels beyond the affordability threshold for a larger percentage of residents, the question is whether or not iBuyers will be able to flip their acquisitions with the same profit margins going forward. Permits for new homes are up 32% for January through July this year and are at their highest since 2006.  Considering the average build time for a new home is anywhere from 10-14 months due to supply chain disruptions, iBuyers and sellers in general may be seeing more competition from new construction starting in the 4th quarter 2021 and into early 2022. 

For Sellers: 
While the $400K-$800K market is seeing elevated activity, the luxury market over $1M is a different story. Make no mistake, the luxury market is still extremely hot but it’s not because buyer activity is rising. Listings in escrow over $1M have dropped 17% since June, but that’s normal for this time of year in this segment. The reason the luxury market is still hot is due to a simultaneous drop in competing supply.  It’s more prominent over $1.5M where supply has dropped 10%, also since June. So if contract activity isn’t rising, then why is supply over $1M dropping?  It’s seasonal.  Every year from May to July there’s an elevated number of cancelled and expired listings in this price point, which reduces the number of active listings. This year was no different.  Additionally, the number of new listings added monthly to supply dropped 26% between April and August, which meant there were fewer new listings to replenish those that cancelled or expired.  The result is a luxury supply count 31% lower than this time last year. This is good news for the sellers who remained active over the summer.  Even though luxury demand came down, it’s still 21% higher than it was last September with fewer competitors. If the market follows its seasonal tendencies there will be a rally of new listings coming to the party in October, possibly giving buyers more choice in the 4th quarter.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2021 Cromford Associates LLC and Tamboer Consulting LLC

If you, or anyone you know, is looking to buy or sell, Please let me know!

Troy Holland

Cell:  480-773-5792

Email:  Troy@Sell4Free-AZ.com

Web:  www.FlatFee-NoFee.com 

Raving Fans: Client Reviews Here

Information provided courtesy The Cromford Report.

Market Summary September 2021

Here are the basics - the ARMLS numbers for September 1, 2021 compared with September 1, 2020 for all areas & types:

• Active Listings (excluding UCB & CCBS): 6,873 versus 8,028 last year - down 14.4% - and down 3.3% from 7,105 last month 
• Active Listings (including UCB & CCBS): 10,988 versus 13,178 last year - down 16.6% - but up 0.7% compared with 10,913 last month
• Pending Listings: 7,917 versus 7,892 last year - up 0.3% - and up 9.4% from 7,236 last month 
• Under Contract Listings (including Pending, CCBS & UCB): 12,032 versus 13,042 last year - down 7.7% - but up 8.9% from 11,044 last month 
• Monthly Sales: 9,051 versus 9,213 last year - down 1.8% - and down 1.0% from 9,146 last month
• Monthly Average Sales Price per Sq. Ft.: $249.31 versus $194.97 last year - up 27.9% - but down 0.5% from $250.66 last month 
• Monthly Median Sales Price: $401,000 versus $325,000 last year - up 23.4% - and up 0.3% from $400,000 last month

Many surprising changes have occurred in the market over the past month.

First we see fewer active listings (excluding UCB and CCBS) at the start of September than we had at the start of August. After a rise of almost 25% during July, this is quite a turn up for the books. The effect is exaggerated by the fact that Sep 1 falls on a Wednesday and Aug on a Sunday. Wednesdays are usually the lowest day of the week for active listings while Sundays are just shy of the peak on Saturdays.

This unexpected fall is mainly caused by two factors:

• the rate of arrival of new listings has started to fall, especially over the last 2 weeks
• the demand from iBuyers and investors has intensified, taking listings under contract more quickly than usual

Another surprise is the strength of the pending and under contract counts, also confirmation of the second bullet above.

Ordinary home buyers are losing some of their motivation, thanks to prices that are vastly higher than last year. Despite low interest rates, affordability has slipped below the normal range for Greater Phoenix. 

Sales counts (closed listings) are still lower than last month and last year, but by much smaller margins than in July.

The monthly average $/SF dropped for the second straight month, but the fall was just 0.5% each month and we do not think this will be repeated in September based on the contracts that have been signed during August. However, it clear that the runaway appreciation we saw in Jan through May has been halted.

Other interesting indicators show mixed signals:

• The contract ratio jumped from to 155.4 to 175.1, indicating that the market has heated up over the last month
• The average closed $/SF was 0.68% higher than the list price, down from 1.47% last month - indicating that the market has cooled over the last month.

If it were not for the activity of investors and iBuyers, and particularly the latter, the market would have cooled during August. This would have been following the trend established since April. However iBuyers have purchased so many homes over the last month that they are significantly distorting the market dynamics. These homes are mostly going to be re-marketed shortly. So they will almost certainly increase supply over the coming weeks. To achieve these huge increases in purchase volumes, iBuyers have made offers well in excess of the pricing that we saw from them prior to 3Q 2021. Since appreciation has been much weaker during this same period, it remains to be seen how they will be priced for re-sale. It is possible that either gross margins will have to fall or time on market will have to rise. Normal buyers no longer have the appetite that we experienced during 1Q and early 2Q, so they are going to be more sensitive to pricing. Achieving sale prices well over cost could prove quite tricky.

Investors intending to rent out their properties are a different matter, and the rapid rise in rents over the past year has justified them splashing out. Indeed far more homes are going from iBuyers straight to the rental operators than we saw prior to July 2021. This takes homes off the re-sale market for a long time and reduces supply. Large scale investors with deep pockets are crowding out smaller investors.

We have seen larger buying sprees from investors before, notably between 2011 and 2013. However we have never seen iBuyers so determined to increase their top line. To put the situation into context, the iBuyers have purchased about 2,850 homes over the last 3 months. That represents almost 9% of re-sale purchases. Recorded iBuyer sales during the same time total less than 1,000, about 3% of re-sales. We can see that the iBuyers (particularly Opendoor and Zillow) have increased their inventory massively. If iBuyers had not done this, we estimate that supply would already be higher by some 1,800 listings, which would have caused the Cromford® Market Index to drop to a much lower value than today. We conclude that pricing would also be weaker without their intervention. This begs the question: what happens if they stop buying on this massive scale?

Investors, too, can decide to stop their buying spree at a moment's notice. The market is therefore more precarious than if demand were primarily growing through owner-occupiers.

Whoever wished that we live in interesting times is getting their wish granted.

Supply Up 42% Since May, Price Reductions Up 131%
Affordability Dips Below Normal to 56%

For Buyers:
There is a little relief ahead for buyers in Greater Phoenix.  Supply continues to rise in price points between $300K-$1.5M and buyer demand has settled into a normal seasonal cool down that is expected to last through the end of the year.  What this means for buyers is the 2nd half of 2021 so far has more choice and less competition. There are two things going on right now in the market.  The first is a non-seasonal increase in supply, fueled by a high number of new listings hitting the market every week. Typically, August is the low point of the summer season for supply. However, this year it is the high point and continuing to rise, up 42% since May. That’s good news for buyers as it provides more choice. The second is a seasonal decline in buyer activity.  Typically, buyer demand shoots up in the first half of the year, peaking around May, then it gradually declines in the 2nd half of the year. Last year the market saw the opposite due to the pandemic, demand dropped when it was supposed to rise and rose when it was supposed to drop.  The return to a normal seasonal rhythm in 2021 means that there may be slightly less competition from other buyers in the 3rd and 4th quarters.  This doesn’t mean the housing market has gone cold; it has simply made it a little more tolerable to navigate. To put it in numbers, on April 8th, there were 12,862 listings under contract and only 4,177 active. Today on August 9th, there are 11,743 under contract and 7,166 active.  Add a recent decline in interest rates keeping payments down and exhausted buyers have a little more room to breathe.
For Sellers: 
The Home Opportunity Index (HOI), published by the National Association of Home Builders every quarter, measures housing affordability based on the median family income per metro area.  Last quarter, the HOI for Greater Phoenix fell to 56 (we predicted it would be 57 based on preliminary MLS data).  This is below the normal range for the Phoenix metro area of 60-75. What does this mean?  This means that a household making the median family income of $79,000 per year could technically afford 56% of what sold in the 2nd Quarter of 2021. The last time the HOI dipped below 60 was in the 4th Quarter of 2018 when it hit 57. The market responded with a drop in annual appreciation from 10% to just 4% within 3 months. Since June of this year, annual appreciation of the monthly median sales price has declined from 32% to 28%.  As affordability declines, it’s reasonable to expect the market will begin to resist the prices sellers initially ask for their homes. In other words, there will be fewer buyers able to bear dramatic monthly increases in home costs like those seen over the past year. Meanwhile, exuberant sellers continue to list their homes at prices that defy comparable sales. As these homes sit for an extra day or two on the market without an accepted contract, weekly price reductions have risen 131% since May with a median price drop of $14,000. Typically, the median price reduction is $5,000. Of course, there are still properties closing over asking price. However, those contracts were accepted approximately 1-1.5 months ago when the market was hotter than it is now. The percentage of sales over asking price has declined from 60% to 55% over the past two months, with the median amount over list price declining as well from $20,000 to $15,000. We expect this trend to continue.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2021 Cromford Associates LLC and Tamboer Consulting LLC

If you, or anyone you know, is looking to buy or sell, Please let me know!

Troy Holland

Cell:  480-773-5792

Email:  Troy@Sell4Free-AZ.com

Web:  www.FlatFee-NoFee.com 

Raving Fans: Client Reviews Here

Information provided courtesy The Cromford Report.

Market Summary August 2021

Here are the basics - the ARMLS numbers for August 1, 2021 compared with August 1, 2020 for all areas & types:

• Active Listings (excluding UCB & CCBS): 7,105 versus 8,477 last year - down 16.2% - but up 24.7% from 5,699 last month 
• Active Listings (including UCB & CCBS): 10,913 versus 13,259 last year - down 17.7% - but up 11.6% compared with 9,783 last month
• Pending Listings: 7,236 versus 7,550 last year - down 4.2% - and down 0.8% from 7,294 last month 
• Under Contract Listings (including Pending, CCBS & UCB): 11,044 versus 12,332 last year - down 10.4% - and down 2.9% from 11,378 last month 
• Monthly Sales: 9,131 versus 10,544 last year - down 13.4% - and down 10.3% from 10,179 last month
• Monthly Average Sales Price per Sq. Ft.: $250.93 versus $191.21 last year - up 31.2% - but down 0.5% from $252.15 last month 
• Monthly Median Sales Price: $400,000 versus $315,000 last year - up 27.0% - and up 0.8% from $397,000 last month

Supply continues to move higher. We would usually consider a 24.7% increase in one month to be an exceptional growth rate. However, we are rising from a very low point and the number of active listings without a contract is still down 75% from what would be considered normal. We are witnessing new listings arrive at a faster rate than we usually see at this time of year, especially those priced between $400,000 and $1 million. This is helping buyers, but there are still far more buyers than homes for sale.

I still read articles describing demand as exceptionally strong. This is absurd. Demand is only slightly above normal and has been getting weaker over the last several months. This is obvious both from the pending and under contract counts (down compared with last month and last year) and from the monthly sales counts (down compared with last month and last year). If demand were strong, then all these numbers should be responding to the increase in supply. They are not.

The large majority of market commentators have not grasped that demand is not the issue. Interest rates are not the issue either. Everything today is about supply. Even after a rise of almost 25% there is nowhere near enough supply to take the stress out of the market. 

Demand has changed its make-up since the start of the year. Owner-occupiers are down, while second-home buyers are up, particularly those from out-of-state. Also more active are iBuyers and all types of investors, with fix and flip and buy-to-rent investors filling the gap left by owner occupiers. Many buy-to-rent operators are buying from each other, and a few are building neighborhoods entirely for rent. This practice started in Phoenix in 2012 and the original local company that built the first rental neighborhood in Gilbert has just sold it complete to one of the large institutions. The build-to-rent business does not affect our numbers since the entire neighborhood is owned by a single company and the homes are never listed for sale. It is similar to the multi-family apartment block market. The only difference is that the homes are physically more separated from one another, an attractive benefit during a pandemic. 

Over the last year, prices have not been rising because of strong demand or low interest rate, as often stated by the media. They have been rising because of extremely poor supply. Buyers do not pay more for a home because they can. They pay more because they have to. Multiple bids make them pay more, unless they drop out. Low interest rates merely allow them to compete. If there were more homes for sale, they would get the home for less than the asking price. During July the average buyer had to pay 1.4% over the asking price.

New home builders currently experience elevated demand because so many buyers have given up on trying to find a re-sale property. But the demand they perceive is due to the low supply of re-sale homes, not some unusual build up of buyer demand. The new and re-sale markets are not really separate because almost every buyer can switch from one to the other based on personal decisions. Buyers are spilling over to the new home market that would normally have chosen a resale home.

The market remains hot but has been cooling for 4 months now and this is reflected in a large array of measurements. For example:

• In June, buyers were paying 1.8% more than list price on average, well above the current 1.4%
• The listing success rate is down to 89.3%, having peaked at 93.1% in May
• The contract ratio is down to 155, having reached 332 in March

Prices have been leveling off over the past month. This is consistent with the seasonal trend that weakens prices during the third quarter in most years. It is caused by a slowdown in high end sales during the hottest months (May through September) We did not see that effect last year because of the lock-down, but this year we expect 3Q to be nothing like the explosive 2Q. There is still no long-term downward pressure on prices and this pressure is unlikely to emerge until supply rises much higher than current levels.

What’s Ahead for Sellers as Demand Weakens
Median Sales Price Up 29%, Fewer Contracts

For Buyers:

Buyers with budgets over $300,000 may be noticing that they have more listings to choose from compared to a few months ago. This is especially true in the price points between $400,000 and $800,000 where inventory has grown 92% since February. When a buyer has, for example, 4 or 5 homes available that meet their criteria instead of just one, they are less inclined to throw all of their ammunition into one home in order to win it. They may still offer full price or more, but may not be under as much pressure to waive contingencies and shorten inspection periods.

As this subtle change proliferates with more inventory, the buyer experience will become less stressful. As the median sale price continues to rise, affordability is something to pay attention to. Not what’s affordable to you necessarily, especially if you’re out of state, but what percentage of the local population can afford your home if you need to sell right away or sometime in the future. A family making the median income in Greater Phoenix could afford 63% of what sold in the 1st quarter of 2021. That was within the normal range of 60-75%, indicating a good time to buy or sell. While we wait until August for the 2nd quarter measures to be released, we expect the new measure to land around 57%, slightly below normal.  This does not indicate that the market will plunge into a buyer market causing prices to decline, but it does indicate a reason to expect prices to rise much slower going forward.

For Sellers:
The Greater Phoenix housing market continues to shift from an extreme seller market into a less extreme seller market. As prices continue to rise, more new sellers are motivated to put their home on the market and fewer buyers are able or willing to pay the higher price. Over the next 5 months, give or take, the market is expected to move into a weaker seller market, driven in part by dwindling affordability and buyer fatigue.

The first half of 2021 has been so insane with contingency waivers and exorbitant offers over asking price that many sellers may not know what a normal seller market looks like. Here are a few things to expect:

• Sales price appreciation will not average 3.1% per month. April 2021 saw prices appreciate 5.1% within 4 weeks. May was 2.3%. June was 1.1%. From 2015-2019, a long-term seller market but much weaker than today, prices appreciated at an average of 0.5% per month with a range between 0.3% and 0.8%.
• There will be more list price reductions. It’s important to remember that the sales price is the LAST thing to respond in a shifting market. One of the first things to respond is a list price, in the form of a price reduction. When a seller overshoots what the market can bear, they will get the silent treatment in the form of zero offers. That triggers a price reduction by the seller. Weekly price reductions have risen 112% since mid-February from 317 in a week to 672. In a weaker seller market, expect between 1,500-2,000 price reductions every week.
• Sellers will get their price, but pay more in concessions. If a seller prices their home high in anticipation of excess demand but only gets one offer instead of multiple offers, they are more likely to accept home warranties, do repairs and offer concessions. Currently the percentage of sales involving concessions is very low at 4%, up from 2.7% the week prior. In 2019, a good seller market, 25% of closed sales involved seller concessions.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2021 Cromford Associates LLC and Tamboer Consulting LLC

If you, or anyone you know, is looking to buy or sell, Please let me know!

Troy Holland

Cell:  480-773-5792

Email:  Troy@Sell4Free-AZ.com

Web:  www.FlatFee-NoFee.com 

Raving Fans: Client Reviews Here

Information provided courtesy The Cromford Report.

Market Summary July 2021

Here are the basics - the ARMLS numbers for July 1, 2021 compared with July 1, 2020 for all areas & types:

• Active Listings (excluding UCB & CCBS): 5,699 versus 8,788 last year - down 35.2% - but up 15.9% from 4,917 last month 
• Active Listings (including UCB & CCBS): 9,783 versus 14,279 last year - down 31.5% - but up 4.5% compared with 9,361 last month
• Pending Listings: 7,294 versus 7,993 last year - down 8.7% - and down 6.8% from 7,829 last month 
• Under Contract Listings (including Pending, CCBS & UCB): 11,378 versus 13,424 last year - down 15.2% - and down 7.6% from 12,317 last month 
• Monthly Sales: 10,204 versus 9,718 last year - up 5.0% - and up 5.6% from 9,665 last month
• Monthly Average Sales Price per Sq. Ft.: $252.04 versus $182.73 last year - up 37.9% - and up 1.3% from $248.83 last month 
• Monthly Median Sales Price: $397,000 versus $305,000 last year - up 30.2% - and up 1.8% from $390,000 last month

Supply is now on a clear upward trend, growing almost 16% from last month, though it is still down over 35% from this time last year and a very long way below normal. This upward trend is thanks to a strong flow of new listings and a decline in the rate of listings going under contract.

Demand looks strong when we look at the closed sales numbers, up 5% from last year and 5.6% higher than last month. However June 2021 contained 22 working days, 10% more than May 2021, so the number of closings per day was actually down 4% compared with last month. Demand looks very weak when we look at the listings under contract, which is the forward-looking element of demand. This count is down over 15% compared with this time last year and down almost 8% from last month. This is a clear signal that the rapid rise in prices is having the expected dampening effect on demand.

We expect sales rates to slow in the second half of 2021. We forecast that prices will continue to rise but at a slower pace than during the first half. These means that dollar volume will remain very high compared with historical numbers.

The CMI looks likely to fall well below 400, but the rate of decline will depend very much on the rate of arrival of new listings. The first several days of July are of little use as a guide because of Independence Day, but we should have a clearer picture of supply patterns by the middle of July.

We anticipate a growing divergence between the supply patterns of 2021 and 2005, since there were many thousands of empty homes held by speculators in 2005 which were listing for sale during the third quarter of 2005. We see very few of these speculative empty homes in 2021. In July 2005, we got 12,580 new listings across Greater Phoenix, far above the monthly rate we are seeing in 2021. There have been 58,109 new listings across Greater Phoenix during the first 6 months of the year.

Should Buyers Wait to Buy?
Median Sales Price $390K, up 32% from 2020

For Buyers:
There’s a lot of conflicting advice for buyers online these days, and there’s no shortage of headlines advising them to wait. Many authors cite the unpleasantness of multiple competing offers and rising prices as the reason to wait out the market. This is despite their acknowledgment that home values are not expected to stop rising in the near future and that interest rates are expected to eventually rise. 

It’s undeniably more pleasant to purchase a home when there’s a plethora to choose from and you’re the only game in town, however there’s a reason you may be the only buyer in that scenario.  That’s the end of a Seller Market, and signifies the top of price.

The top of price is either the beginning of a Balanced Market or a Buyer Market, which either way means the end of exciting annual appreciation rates. There’s a misconception that waiting for a Buyer Market to buy a home is a good idea.  This is not true.  Home values decline in Buyer Markets because, by definition, there are more homes than buyers to buy them. While that sounds like a magical dream land these days, the reality is that no one likes to purchase a home and watch its value decline or go flat. Ironically, if you want your home to appreciate right after you buy it, then you want to buy in a Seller Market.  Perhaps we should rename Seller Markets “Winner Markets”, because both buyers and sellers win in a sense.

Admittedly, the extreme Seller Market Greater Phoenix is experiencing doesn’t feel like “winning”, but there is some relief on the horizon.  The market has been losing strength since mid-March, but it’s not plummeting.  At its current rate of decline, the Greater Phoenix market is still projected to remain in a Seller Market for 16 months. That’s a target of October 2022 before prices stop rising. As the Seller Market weakens, appreciation rates will still be positive moving forward but there will be a little more supply to accommodate demand.  My advice to buyers frustrated with the market, don’t wait for the market to balance out.  Take a breath, take a vacation, but don’t give up. Change is subtle.

For Sellers: 
Typically this time of year we start talking about the imminent “Summer Slowdown” in contract activity as kids are out of school and people take vacations to escape the heat. Last year, the Greater Phoenix market didn’t experience this typical seasonal trend. As trips were cancelled and people stayed home, there was a large surge in purchase contract activity that continued through the end of the year. This year, as people are getting back to some form of normalcy, it looks like we will see a seasonal slowdown in buyer activity once again. If the trend continues and the market follows previous years, we should expect contract activity to slowly decline through the end of the year.

The seasonal slowdown is typically nothing to be concerned about, mainly because there tends to be a dip in new listings as well. However this year there’s an event coming up that could alter that scenario, that is the end of forbearance for many homeowners. While the vast majority of forbearances have ended with homeowners staying in their home, anywhere from 16%-20% have resorted to selling their home one way or another according to the Mortgage Bankers Association. This could result in an increase in supply over the next few months, adding extra days of marketing time to your listing and possibly a few price reductions.  Stay tuned.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report

©2021 Cromford Associates LLC and Tamboer Consulting LLCIf you, or anyone you know, is looking to buy or sell, Please let me know!

Troy Holland

Cell:  480-773-5792

Email:  Troy@Sell4Free-AZ.com

Web:  www.FlatFee-NoFee.com 

Raving Fans: Client Reviews Here

Information provided courtesy The Cromford Report.

Market Summary June 2021

Here are the basics - the ARMLS numbers for June 1, 2021 compared with June 1, 2020 for all areas & types:

• Active Listings (excluding UCB & CCBS): 4,917 versus 11,917 last year - down 68.7% - and down 3.2% from 5,080 last month 
• Active Listings (including UCB & CCBS): 9,361 versus 17,171 last year - down 45.5% - and down 0.8% compared with 9,439 last month
• Pending Listings: 7,873 versus 7,224 last year - up 9.0% - and up 0.6% from 7,829 last month 
• Under Contract Listings (including Pending, CCBS & UCB): 12,317 versus 12,478 last year - down 1.3% - but up 1.1% from 12,187 last month 
• Monthly Sales: 9,692 versus 7,045 last year - up 37.6% - but down 5.0% from 10,204 last month
• Monthly Average Sales Price per Sq. Ft.: $248.37 versus $179.79 last year - up 38.1% - and up 2.0% from $243.39 last month 
• Monthly Median Sales Price: $390,000 versus $293,000 last year - up 33.1% - and up 4.6% from $373,000 last month

We note that the number of active listings is slightly higher than last month. That is entirely because June 1 fell on a Tuesday while May 1 fell on a Saturday. Saturdays tends to have much higher counts because of all the new listings activated on Thursday and Friday. In contrast, Tuesdays and Wednesdays have the lowest counts every week. If we compare the same day of the week, the number of active listings is up from last month by about 7%. When supply is this low, the signal to noise ratio is poor, so we have to look more closely to get a correct impression. Supply is definitely rising, but not at a rate to help buyers very much, or to raise an alarm. It is rising because new listings are coming along at a faster rate than normal. However most of them are getting offers in the first week and they do not last very long. The market remains very hot even though it has cooled since March.

The demand numbers are moderating, with monthly sales down 5% compared with last month. However listings under contract are up slightly which means the downward trend in demand has stalled for now.

The rate of change in both supply and demand are both now moderate, but the rate of change for prices remains very high. We are seeing appreciation rates of 38% if you use price per sq. ft. or 33% if you use monthly medians. Both of these are flattering because part of the rise is due to high end homes taking a larger share of the market than normal for June. But however you measure them, home prices are at nose-bleed levels and will continue to rise while supply remains dramatically below normal. It is 76% below normal at the moment.

The period since June 2020 has been a painful 12 months for buyers and many are likely to be feeling bruised and beaten up. It would not be surprising if demand weakened further because of this, but withdrawing from the market is unlikely to be wise from a financial perspective. Prices still have a quite a lot of upward momentum and mortgage rates could easily move higher than today. Local buyers need to remember that to a buyer from California or Washington, Phoenix still looks like amazingly good value for money, even after another 20% price hike.

And what is your alternative - rents continue to climb at a steep rate and are unlikely to stop rising. At least if you buy a pricey home today you will benefit from the price growth tomorrow in the form of home equity. None of your rent payment will do that.

62.8% of Homes Sold Considered Affordable Last Quarter
Median Sales Price Up 27%, Incomes Up 26%

For Buyers:
Despite all the incredible news about rising real estate prices, a family making the median income of $79,000 in Greater Phoenix could still afford 62.8% of what sold in the first quarter of 2021. The National Association of Home Builders (NAHB.org) assumes that “a family can afford to spend 28% of its gross income on housing.” That means 62.8% of homes sold cost their new owners $1,843 per month or less assuming a 10% down payment and including principal, interest, taxes and insurance. According to HUD, $79,000 represents a 26% increase in the local median annual income over the past 5 years; up $16,500 from $62,500 in 2016. 

While reassuring, it doesn’t remove the frustrations of competing for homes in this marketplace. Last month, 56% of all sales closed over asking price and half of them went $15,000 over or more to win. For the last 7 weeks, half of all listings that went under contract in the MLS were active for just 6 days or less.

However, the last few months have shown a glimmer of relief for buyers as supply counts actually stopped declining; and in price ranges between $500K-$800K they have noticeably increased 40% since February. Supply is still 69% lower than last year at this time so there’s a long way to go before it’s considered normal, but it’s something. 

For Sellers:
You’re not going to notice this, but the housing market has begun to cool down.  It’s still hot however, like 400 degrees is still hot despite being cooler than 500 degrees. Sellers can still expect multiple offers and closings over asking price; however it’s important to note that supply has stopped dropping and has been rising in certain price points over $500K.  Seasonally speaking, Greater Phoenix supply should be dropping at this time of year, not going flat or rising.  When measures go against the season, it can be the beginning of a shift.  

The reason this shift will not be noticed is because supply is still much lower than demand, so any slight increase in competition is inconsequential to a seller’s ability to secure a buyer, even one willing to pay over asking price. One of the early indicators that a market is shifting, however, is the number of list price reductions. For example, supply between $600K-$800K has risen 45% since late February; in the same time frame, the number of weekly price reductions increased 223% and hit the highest count taken in nearly 6 months. That’s notable.  However in other price points where supply has flattened out, price reductions have remained low and stable.

The advantage in any market, not just housing, is being one of the first to know when things are shifting. Especially today, it’s a good idea to consult a Realtor® who can analyze your price point and area so you can make an informed decision regarding the sale of your home.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2020 Cromford Associates LLC and Tamboer Consulting LLC 

If you, or anyone you know, is looking to buy or sell, Please let me know!

Troy Holland

Cell:  480-773-5792

Email:  Troy@Sell4Free-AZ.com

Web:  www.FlatFee-NoFee.com 

Raving Fans: Client Reviews Here

Information provided courtesy The Cromford Report.

Market Summary May 2021

Here are the basics - the ARMLS numbers for May 1, 2021 compared with May 1, 2020 for all areas & types:

• Active Listings (excluding UCB & CCBS): 5,080 versus 14,051 last year - down 63.8% - but up 24.2% from 4,089 last month
• Active Listings (including UCB & CCBS): 9,438 versus 17,867 last year - down 47.2% - but up 8.5% compared with 8,699 last month
• Pending Listings: 7,829 versus 5,676 last year - up 37.9% - but down 1.7% from 7,964 last month
• Under Contract Listings (including Pending, CCBS & UCB): 12,187 versus 9,512 last year - up 28.1% - but down 3.1% from 12,575 last month
• Monthly Sales: 10,172 versus 7,174 last year - up 41.8% - but down 2.2% from 10,396 last month
• Monthly Average Sales Price per Sq. Ft.: $243.50 versus $183.96 last year - up 32.41% - and up 5.1% from $231.75 last month
• Monthly Median Sales Price: $373,000 versus $299,999 last year - up 24.3% - and up 4.1% from $358,250 last month

These numbers are the most interesting we have seen for a long time. They show a very hot market with supply dramatically mismatched to demand. However they also confirm a cooling trend that has been developing over the last 7 weeks. This was first reported by the Cromford® Market Index, but is now being confirmed by a number of other metrics.

• active listings are UP significantly from the beginning of April, though admittedly from a very tiny number
• under contract counts are DOWN for the second month in a row
• sales counts are down compared with March

Markets do not get hotter indefinitely. The primary mechanism by which they cool down is through prices. In hot markets pricing goes up which causes demand to weaken, which means the supply gets a chance to recover. When prices go up, some buyers can no longer afford to buy and drop out. The faster that pricing goes up, the more buyers tend to drop out, at least in a healthy market. If this is not happening then you probably have a bubble where pure speculation has taken over and demand grows when prices rise. We are not seeing this.

12 months ago we were in the early stages of adjusting to COVID-19 so the year over year comparisons are not very meaningful. Demand dropped sharply in April 2020 only to recover quickly by June.

All changes tend to start small and then grow. The current market cooling is like that. We now have supply increasing and demand falling. This will gradually release some of the steam from the over-heating engine and the market can trend back towards normality. In a normal market prices still tend to rise, but in our current market, prices are rising at an unsustainable pace - the monthly average $/SF soared by over 5% in a single month. If the next 8 months behaved like April 2021, we would see the median sale price rise to $514,000 by the end of the year. I doubt that will happen.

Even though we have entered a cooling phase, it will probably take several quarters (if not years) to cool down to normal and prices will continue to rise at a brisk pace for quite some time.

One Year After Start of Pandemic - Luxury has Exploded
Homes Selling for 101% of List Price on Average

For Buyers:
With 54% of all sales closed over asking price so far in April, the average sale price per square foot is now higher than the list price for every price range up to $1M.  In a balanced market, homes typically sell within 97% of list price; that percentage is now 101%. This means that, for the past month or so, the majority of list prices have been the starting price for where negotiations begin instead of a top price to work down from. In past extreme seller markets, $5,000 over asking was typically enough to win a contract; that was true last year as well when the market took off.  However, last January the median over ask was $6,000; by February it was 10,000; in March it was $11,000; and so far in April it’s $15,000.  The highest was $905,000 over list price   closed in March (It was an auction for a 10-acre property in Cave Creek that sold for $2,255,000). By price range, over 62% of homes listed between $250K-$400K closed over asking price; the percentage is 54% for sales between $400K-$600K;  47% between $600K-$900K; 30% between $900K-$2.5M;  9.5% over $2.5M. Putting an offer in over asking price may cause a buyer some anxiety, especially a first-time home buyer.  The median sale price is now $360K. Since January, the sales price per square foot for a home between $300K-$400K has appreciated 6%.  That’s approximately 2% per month and the current sale price to list price ratio within the price range is 102.4%.  If this rate of appreciation continues in the short term, a buyer who paid 4% over asking price on a $360K home ($14,400 over) would recoup their investment through appreciation in approximately 2 months.

For Sellers:
The luxury market has been exploding since last summer and continues to be at the strongest level ever seen in Greater Phoenix. The number of listings under contract over $1M is up 156% over last year; but the number under contract between $2M-$3M is up 296% and over $3M is up  212%. In a typical market, sales prices in this range would be landing around 93% of list price.  However in the 2021 market, the sales price ratio is averaging 98% of list. The luxury market is also keeping up with the rest of the market in terms of marketing time.  Prior to contract, half of the contracts accepted valley wide in the last week were on the market 6 days or less.  Over $1M, the median was 12 days prior to contract.  Over $2M, the median is 67 days. The market over $1M is outperforming in terms of annual appreciation in sales price per square foot.  The median price for a 4,000-5,000 square foot home is running at $1.1M with an appreciation rate of 31%.  The median price for a 5,000-10,000 square foot home is $2.3M with an appreciation rate of 35%.  For perspective, the median price of a 1,500-2,000 square foot home is $365K with an appreciation rate of 25%.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2020 Cromford Associates LLC and Tamboer Consulting LLC

If you, or anyone you know, is looking to buy or sell, Please let me know!

Troy Holland

Cell:  480-773-5792

Email:  Troy@Sell4Free-AZ.com

Web:  www.FlatFee-NoFee.com 

Raving Fans: Client Reviews Here

Information provided courtesy The Cromford Report.

Market Summary for the Beginning of April

Here are the basics - the ARMLS numbers for April 1, 2021 compared with April 1, 2020 for all areas & types:

• Active Listings (excluding UCB & CCBS): 4,088 versus 13,211 last year - down 69.1% - and down 9.0% from 4,491 last month
• Active Listings (including UCB & CCBS): 8,699 versus 17,238 last year - down 49.5% - and down 4.3% compared with 9,094 last month
• Pending Listings: 7,964 versus 6,125 last year - up 30.0% - but down 0.8% from 8,027 last month
• Under Contract Listings (including Pending, CCBS & UCB): 10,152 versus 11,988 last year - up 23.9% - but down 0.4% from 12,630 last month
• Monthly Sales: 10,385 versus 8,076 last year - up 28.6% - and up 29.2% from 8,039 last month
• Monthly Average Sales Price per Sq. Ft.: $231.61 versus $186.61 last year - up 24.1% - and up 1.7% from $227.68 last month
• Monthly Median Sales Price: $358,250 versus $301,000 last year - up 19.0% - and up 2.7% from $349,000 last month

The active listing counts are now so small that it makes a huge difference which day of the week you measure. Over the last week the maximum count (on Saturday) is 16% higher than the minimum (on Wednesday). In some locations there can be twice as many homes listed on Saturday as the following Wednesday. This means that comparisons of April 1 with March 1 can be misleading because it depends on the day of the week they happen to fall on.

What we can tell you for certain is that the active listing count was painfully small last month and this month it is no better. We would need to add about 24,000 active listings to get back to a normal level. Many of the younger agents working in Phoenix have never experienced a normal level of supply.

The monthly sales count for March 2020 was strong but the annual comparison with March 2020 is affected by the COVID-19 measures that started to bite in March last year. Between March and June last year the pending listing counts and under contract counts were dramatically lower than normal, which tends to obscure the fact that these counts in 2021 are also somewhat lower than we would normally expect. This is one of several signs that demand is starting to fall from the heights achieved in 4Q 2020.

Once borrowers start emerging from forbearance, we may see some degree of improvement to the abysmal supply shortage. However, indications from the lending industry suggest that any increase in supply will be tiny compared with the flood of distressed homes that hit the market between 2007 and 2013. We expect to see price rises slowing a little after June 2021, but there are currently no indications that a change in the direction of those prices is likely.

For Buyers:
44% of sales through the Arizona Regional MLS have closed over asking price in the last 30 days. The median amount over asking price for all price ranges combined is $10,000 with a range between $1 to $310,000. (I know what you’re thinking, “$1 over? What is this, ‘The Price is Right’?” In some cases, yes.)
While 56% of all homes still sell for at or below list price, if you have a budget between $250K-$400K, the percentage selling over list is highest at 52% with the median amount over asking at $10,000.  However even if your budget is over $400K, a significant percentage is closing over asking price.  Up to $800K, 42% have sold over list with a median escalation of $12,000-$15,000. From $800K-$1M, 30% sold over list with a median escalation of $17,000-$20,000.  From $1M-$2.5M, 20% sold over list with a median escalation of $30,000-$50,000. Over $2.5M, only 2 sold over asking price with a median escalation of $150,000.
Over the past 6 weeks, REALTORS® have added an average of 2,059 new listings per week to the Arizona Regional MLS.  During the same time period, an average of 2,312 contracts were accepted per week. This is what has caused the overall supply of homes to consistently drop and competition between buyers to escalate.
While just over 2,000 new listings per week may seem like a lot, it’s actually the lowest rate for this time of year in at least 20 years. A normal level would be considered around 2,500 new listings.

For Sellers:
While supply is still 77% below normal for this time of year and demand is 17% above normal, demand has been dropping faster than supply over the last 30 days.  It’s not noticeable when one is in the midst of a contract negotiation today because sellers rarely notice when they’re getting, for example, only 15 offers instead of 25.  But consider last December demand was 35% above normal; at this rate, demand could be at a normal level in a couple months and below normal by June.  This will not cause prices to decline because there are still a miniscule number of competing listings in the MLS, but it could mean that the second half of 2021 could look different from the first, especially if there’s a temporary boost in new listings after the forbearance period ends and the foreclosure moratorium is lifted.
The average mortgage rate rose to 3.02% this month according to Freddie Mac.  Even though this is still considered an excellent rate, it understandably weakens the purchasing power for some buyers and reduces the affordability measure for Greater Phoenix overall.  When a family making the median income can afford less than 60% of what’s selling, demand is typically expected to suffer.  However, buyers with median incomes coming from Los Angeles and San Francisco are used to only affording 9-11% of what’s selling in their home towns, so Greater Phoenix prices look amazing by comparison.  In fact, for some the idea of being able to own a home at all is amazing.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2020 Cromford Associates LLC and Tamboer Consulting LLC

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Troy Holland

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Email:  Troy@Sell4Free-AZ.com

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Information provided courtesy The Cromford Report.