Monday, January 28, 2013

New Market Updated - January :)


For your quick read I've made highlights, but all of this is worth digesting--especially understanding that the Cromford Index (defined below) is without a doubt our best local resource as a future local housing market indicator, as it is based on specific supply-demand trends by community.
Today's Cromford Daily Observation:
January 27 - Robert J. Shiller (yes he of the famous Case-Shiller Index) wrote an article for the New York Times yesterday. There are several parts of this article that seem off the mark to me.
One is: "Yet the unfortunate truth is that the tea leaves don’t clearly suggest any particular path for prices, either up or down."
This is a misleading observation because different parts of the country are experiencing great differences between their local markets, and some of them don't need the reading of tea leaves to tell which way prices are headed. At the national level, the picture is mixed, so some areas may fall in price while others increase. Locally it is possible to be much more confident in the likely direction.
Robert Shiller focuses on examining the trends in the price index, but past price tends are a poor guide to future price trends. Momentum can be a dangerous signal, just as in the stock market. My advice is to ignore recent price trends if you wish to know where prices are moving in the future. Instead, future price trends depend on the balance between local supply and local demand, and we must study what is happening to these and watch changes in that balance very carefully. The S&P/Case-Shiller® Home Price Index® tells us almost nothing about either of these. For supply we need to look at:
·  the number of active listings
·  the rate at which new listings are being added
·  the number of unlisted lender owned properties
·  the number of pending foreclosures
·  the percentage of delinquent loans not yet in foreclosure
In some areas of the country, especially in New Jersey and New York, the last of these is an abnormally large and growing number and creates an overhang of supply that threatens to being additional distressed supply onto the market. In other areas, such as Arizona and California, this percentage is dropping very fast from previous heights and represents no such threat.
For demand we need to measure:
·  recent sales rate (allowing for seasonality)
·  the number of pending listings and how this is changing
·  the number of AWC/UCB listings and how this is changing
To combine measures of supply and demand and adjust for seasonality, we use the Cromford Market Index™. When this is above 100 then it indicates that demand exceeds supply and pricing pressure is upward. When it is below 100 it indicates that supply exceeds demand and pricing pressure is downward..
Right now across the ARMLS territory we see the Cromford Market Index™ at 172.8. That message is not vague. Long term pricing pressure is still strongly upward. There are areas where the Cromford Market Index™ is much lower, but most of the local housing markets have a strong excess of supply over demand. Here are some of the local Cromford Market Index™ values for the single family detached market:
·  Glendale - 228.8
·  Gilbert - 215.8
·  Tolleson - 214.0
·  Apache Junction - 209.5
·  Peoria - 208.5
·  Mesa - 206.5
·  Chandler - 204.3
·  Avondale - 197.6
·  Anthem - 197.0
·  Tempe - 194.9
·  Phoenix - 190.1
·  Paradise Valley - 171.6
·  Scottsdale - 170.3
·  El Mirage - 169.3
·  Cave Creek - 165.4
·  Laveen - 165.1
·  Fountain Hills - 163.1
·  Sun City -149.4
·  Sun Lakes - 140.8
·  Goodyear - 139.5
·  Sun City West - 134.1
·  Surprise - 129.3
·  Litchfield Park - 129.1
·  Casa Grande - 112.6
·  Arizona City - 110.8
·  Buckeye - 107.6
·  Queen Creek - 105.7 (dominated by San Tan Valley, the Town of Queen Creek is much stronger)
·  Gold Canyon - 91.5
·  Maricopa - 73.3
There is typically a 12-18 month delay between changes in the Cromford Market Index™ and a corresponding change in average sales price per sq. ft.. Note that Queen Creek (especially the San Tan Valley area) and Maricopa (city) have already seen huge increases in average price per sq. ft. and this has already done much to lessen demand and bring out more supply. Maricopa's CMI is now moving higher having hit a low point of 65.5 in December.
Last Comment~That 12-18 month delay is the 'predicting' part. Put another way, if everyone had been paying attention to this index in 2005 (see demand plummeting even as prices kept rising in my compilation graph below) many buyers would have avoided disaster. So now today's index would suggest prospective buyers could be making a serious mistake not jumping in if they can find the right property. Add to this that Lawrence Yun, chief economist for NAR is going around the country talking about the inevitability of higher interest rates. Kind of a no-brainer! Still, remember, for every point rates go up on a 80% loan is the rough equivalent of paying 10% more for the house (because of what the difference in payment would amortize).



Thursday, January 17, 2013

Not a great start....unless you want to list your home : ) !!!


The supply problem is not completely obvious when we look at the active listing counts, but examining the new listing counts shows us the unusual lack of homes coming onto the market. Now that we have 2 full weeks of data for the new year we can accurately compare new listings for Jan 1 to Jan 14 for each of the last 13 years. Here are the surprising statistics:
  • At 4,004 we have the lowest number of new listings in the last 13 years
  • The previous record low was in 2005 with 4,649
  • The previous record high was in 2006 with 7,527
  • We have dropped 14% compared with 2012, which was also a low supply year
  • We have dropped 31% compared with 2011
  • We have dropped 68% in new short sale listings compared with 2012 - lowest number of new short sales since 2007
  • We have dropped 55% in new REO listings compared with 2012
  • We have increased 27% in new normal listings since 2012 - the highest number of new normal listings since 2008
  • We have increased 33% in new HUD listings since 2012 - the second highest after 2010
Despite the increases in normal and HUD listings, the dramatic decline in REO and short sale listings means we are not building up much inventory ready for the peak buying season that will start next month. Cromford Daily Observation
MikeB Comment: The percentage drop in Scottsdale year-over-year is 16%; 9% in PV. Closed sales so far this year are up in both cities. Pendings up in PV, but down slightly in Scottsdale. How much of that is attributable to lack of supply, or cold weather? Who knows. But if there's is one take-away from this it would be thatpotential sellers will have less competition and theoretically drive a better price today than they have in years.
Also, good to be a strong listing company--not only because we have the 'Lyons' share of inventory, but buyers often come to us through our inventory. Call me today to list or with any questions.  

Thursday, January 3, 2013

Local January Update


January 1 - A large number of listings expire on December 31 each year so it is normal to see the active listing counts drop suddenly on January 1. This year we see the active listing count excluding AWC/UCB across all areas and types drop 3.0% from 17,651 to 17,121. If we include AWC/UCB we saw a fall of 3.8%. These are larger falls than last year when we saw 2.3% and 2.1% respectively. This is to be expected as we have a higher proportion of normal listings and these more frequently expire on December 31 compared with short sales and REOs..
Some areas have seen a much larger fall in active listings than others over the last few weeks, and some have seen an increase. The areas with a steep decline in active single family listings (excluding AWC/UCB) from December 1 to January 1 include:
  • Phoenix 85003
  • Phoenix 85006
  • Phoenix 85008
  • Phoenix 85014
  • Phoenix 85015
  • Phoenix 85016
  • Phoenix 85018
  • Phoenix 85020
  • Phoenix 85022
  • Phoenix 85024
  • Phoenix 85027
  • Phoenix 85028
  • Phoenix 85032
  • Phoenix 85044
  • Phoenix 85045
  • Phoenix 85048
  • Phoenix 85050
  • Phoenix 85085
  • Apache Junction 85119
  • Casa Grande 85122
  • Mesa 85203
  • Mesa 85207
  • Mesa 85208
  • Chandler 85224
  • Gilbert 85233
  • Gilbert 85234
  • Scottsdale 85254
  • Scottsdale 85255
  • Scottsdale 85260
  • Gilbert 85297
  • Glendale 85302
  • Glendale 85308
  • Peoria 85345
  • Surprise 85388
  • Avondale 85392
We can assume that the market is improving in these areas.
Those ZIP codes where the number of active single family listings (excluding AWC/UCB) has increased significantly from December 1 to January 1 include:
  • Phoenix 85009
  • Phoenix 85017
  • Phoenix 85019
  • Phoenix 85029
  • Phoenix 85033
  • Phoenix 85035
  • Phoenix 85037
  • Phoenix 85040
  • Gold Canyon 85118
  • Arizona City 85123
  • Eloy 85131
  • Casa Grande 85194
  • Tempe 86282
  • Tempe 85284
  • Waddell 85355
  • Sun City 85373
  • Wickenburg 85390
The market is looking weaker in these areas.
More supply has been released in West Phoenix while supply in North and East Phoenix is getting tighter.
The Cromford Report Daily Observations