Boring but INTERESTING Update : )

Predicting the market going into the New Year

**Contract  Ratio** indicates how  "hot"  a  market is. It  specifically measures the number of completed sales contracts relative to the supply of active listings. It is defined as 100 x (Pending Listings + Active Listings with Contingent Offer) / Active Listings Without a Contingent Offer. The higher the number the greater the buying activity relative to supply. If this number rises then it is a sign of growing contract activity and a positive signal for sellers. Conversely a falling number is a sign of a weakening market - either supply of active listings is increasing or contract activity is slowing, or both. In a balanced market for normal market segments, the value of the Contract Ratio is usually between 20 and 40. When it lies below 20 the market can be considered "slow" or a "cold market". Above 40 can be considered a "hot market" and when it moves above

100  we  regard this  as  evidence of  a  "buying frenzy". In  high-end luxury market segments the normal level is lower, usually lying between 15 and 25.

Now from the most recent Cromford Reports Daily  Observations:

                                                                                                   

   CITY                  CONTRACT RATIO NOW      PEAK CONTRACT RATIO          PEAK DATE   DECLINE SINCE PEAK

Paradise Valley   22.6                  33.6                  5/9/12    -33% Scottsdale         43.7                  75.9                  4/26/12     -42% Fountain Hills     41.0                  75.4                 4/24/1      -46%     Sun City West    36.1                  71.4             5/30/12    -49% Peoria               121.2                238.8                 5/16/12     -49% Sun Lakes           38.9                  75.8                  5/22/12     -49% Gold Canyon        30.8                  64.0                  7/19/12     -52% Chandler            148.5                314.4                 5/10/12      -53% Goodyear            88.5                 206.2                 5/18/12     -57% Phoenix             121.3                288.9                 5/24/12      -58% Glendale            162.7                385.4                 5/25/12     -58% Surprise              78.2                 189.0                 6/13/12    -59% Apache Junction   70.6                 172.7                 2/23/12    -59% Mesa                 118.7                296.8                  6/6/12      -60%

	Cave Creek	50.3	124.6	6/26/12	-60%
	Sun City	44.9	114.1	8/8/12	-61%
	Buckeye	95.2	241.2	6/7/12	-61%
	Gilbert	141.7	368.1	5/14/12	-62%
	Casa Grande	70.4	184.6	5/26/12	-62%
	Laveen	250.6	697.7	7/20/12	-64%
	Tempe	118.2	343.4	5/11/12	-66%
	Florence	40.6	123.0	3/29/12	-67%
	Litchfield Park	79.6	249.2	5/23/12	-68%
	Tolleson	300.0	946.4	5/17/12	-68%
	Avondale	220.3	742.4	5/13/12	-70%
	Anthem	63.9	239.0	5/28/12	-73%
	Queen Creek	80.6	320.6	4/6/12	-75%
	Arizona City	35.8	173.7	3/27/12	-79%
	El Mirage	174.7	1207.1	5/23/12	-86%
	Maricopa	58.8	414.3	3/21/12	-86%

All these contract ratios remain quite strong relative to their long term averages, but the decline over the last 6 months is very clear. We can see that the luxury market has been the most stable with Paradise Valley's contract ratio declining the least. Scottsdale and Fountain Hills are just behind. Locations which are very popular with investors have declined the most. It is normal to see some decline in the contract ratio between June and December due to seasonality, but percentages declines over 50% are much higher than normal. We also need to watch the absolute number. Anything over 100 is still pretty hot, so Laveen, Tolleson, Avondale and El Mirage are still in demand despite the large fall in contract ratio. Areas with large percentage falls and a low present reading are of most concern. These include Maricopa, Arizona City, Queen Creek, Anthem, Litchfield Park and Florence. We also note that several of these cities hit their peak earlier in the year than most other areas.

Pricing for the calendar month of December is off to an extremely strong start, but we should  not  take  too  much  notice  at  this  early  stage  with  just  over  1,000  sales recorded. Luxury home sales are looking very lively this month. One spectacular luxury home in the Pinnacle Peak area has just closed at $8,200,000 at over $1,000 per sq. ft. so this is giving an unusual boost to the $/SF averages, though it has virtually no effect on the medians. The listing for the Pinnacle Peak home states that over $25,000,000 was spent on construction, so it still looks like it might be a bargain. After 1 week we already have 18 homes sold for over $1,000,000, twice the number in the first week of November and well above the 13 we saw in December 2011. At the same time, sales volumes are dropping off sharply among the low price ranges while sales are noticeably higher in Scottsdale than they were last year. This favorable change in the mix is driving all price measures higher, including the median sales price. It is likely that these averages and medians will fall off later in December since the lower priced homes tend to record in larger volumes during the last few days of each month.