Tuesday, December 30, 2014

Arizona Housing Forecast 2015

What will affect us directly…


Interest rates – the big one. Everyone has been expecting rates to rise as the Feds slow the printing presses – printing money has been floating mortgage rates on a sea of cash keeping interest rates ‘artificially’ low. Yet the latest rumors suggest rates will stay low until at least next summer.
Supply – new construction in Arizona is lagging. Well-respected local private economist Elliot Pollack blames much of the slow housing recovery in Arizona on the lack of rebound in construction saying we’ve only gained ‘about 8 percent of the construction jobs we lost – normally by this time we’d have gotten back about half…’
Demand – new construction may be lagging, but resale listings have kept pace with what has been lack luster demand. However, over the fourth quarter we’ve seen improvement. Local housing guru Mike Orr recently observed that the dollar volume in sales is now out pacing 2013 and ‘is currently outranking 6 of the last 10 years…only beaten by 2005, 2006 and 2012.’  (Cromford Report) See chart below:
DollarVolumeCompare2
More help on the way: The recent loosening of lending standards should help those younger, first-time ‘millennial’ buyers who would like to buy, but have delayed a home purchase, in part, because of stringent loan criteria.
At the other end of the buying spectrum it’s been a banner year in the luxury market sector, as high net worth folks diversify.

5-Year Forecast

Forecasting by the smart guys…

I don't claim to know everything.  Through this humility I've been able to predict very accurately by following those individuals that ARE that smart.

Institutional buyers of mortgage-backed securities have sophisticated forecasting tools at their disposal for risk management e.g. ‘bank grade’ automated valuation models, or AVM’s.
Their best in class algorithms not only closely approximate individual property values, but also provide 5-year forecasting, based on a host of factors.
The price forecasts below be are based on models developed by Collateral Analytics (CA), a leading company in the risk management business. Forecasts are driven primarily by employment growth and home price affordability, which are the two most important factors in housing markets (Collateral Analytics).
Collateral Analytics (CA) AVM has consistently had the highest ranking for accuracy in the industry.
Russ Lyon Sotheby’s International Realty (my broker) currently has an exclusive on the use of CA’s ‘bank grade’ tools tailored for the residential market in Arizona.
Below is an Arizona cross-sampling of CA’s 5-year forecast charts for select zip codes and cities within Core Based Statistical Areas (CBSA) – a geographic area defined by the U.S. Office of Management and Budget (OMB) based around an urban center of at least 10,000 people and adjacent areas that are socioeconomically tied to the urban center by commuting (Wikipedia).
By the way, we can generate these ‘bank grade’ AVM’s and 5-year CBSA-Zip Forecast charts for your property of interest anywhere in Arizona where MLS data has been integrated into Collateral Analytics database. Note some locations are still in process.
In the Forecast Charts below, the CBSA, city and respective zip code 85248 are indicated along the top. Dates track along the bottom horizontal axis. In this 15-year look-back and 5-year look ahead, the median price trend is shown on the vertical axis.
























Chris Tiller, MBA
Russ Lyon Sotheby's
7135 East Camelback Road , Suite 360
Scottsdale, AZ 85251

Office: 480.287.5200
Cell: 602.561.1346
Free Home Estimate

Monday, December 29, 2014

December 28 - Looking at the monthly dollar volume chart for all areas & types (measured weekly / shown below) we see that 2014 lagged behind 2013 from January through early September, but since then it has gained ground. The monthly dollar volume currently stands at $1.4 billion versus $1.282 billon last year. The trend is looking increasingly positive as we progress through the fourth quarter.
Thanks to the strong performance of the luxury sector, for week 52, 2014 is currently outranking 6 of the last 10 years and is only beaten by 2005, 2006 and 2012.
December 27 - The single family monthly sales rate is higher than last year at this time in the following cities:
  • Apache Junction
  • Avondale
  • Buckeye
  • El Mirage
  • Fountain Hills
  • Gilbert
  • Glendale
  • Goodyear
  • Mesa
  • Paradise Valley
  • Peoria
  • Phoenix
  • Queen Creek
  • Scottsdale
  • Sun City
  • Sun Lakes
  • Surprise
  • Tolleson
This is a much more imposing list than the cities where the monthly sales rate is lower than 2013 at this time:
  • Anthem
  • Arizona City
  • Casa Grande
  • Cave Creek
  • Chandler
  • Gold Canyon
  • Laveen
  • Litchfield Park
  • Maricopa
  • Sun City West
  • Tempe
In many cases, the 2014 number is only a small amount above the 2013 number, but a win is a win. The best advantages are seen in:
  • Paradise Valley (39 versus 26)
  • Fountain Hills (46 versus 36)
  • Avondale (106 versus 71)
  • Gilbert (370 versus 304)
The weakest situations are in:
  • Anthem (27 versus 41)
  • Maricopa (80 versus 112)
Overall the demand situation is showing some improvement though it is still far below what we would consider normal for the Greater Phoenix market.

Thursday, December 18, 2014

30 Day Luxury Jump - Russ Lyon Dominating Once Again.

My Cromford Report Observation ~
December 17 - 
The last 30 days have seen a lot of expensive homes closed. We have seen 28 sales for $2,000,000 or more, of which 8 were for more than $3,000,000.
In the same period in 2013 we only saw 15 such sales. Only 4 were for more than $3,000,000.
Clearly the super luxury market is continuing to do very well compared with the last several years. This is powered by lenders' desires to write jumbo loans and an economy that is returning excellent profits for companies and investors.
______________________________
Chris T Comment: Todays the 18th and I get 29 closed over $2M from November 17 to today. Of those 58 sides, RLSIR had 23 (40%) - 10 of the sales and 13 of the listings. GO TEAM!!!
Closed Since Nov 17
Sold PriceCityZip
$9,750,000Scottsdale85255
$5,700,000Scottsdale85262
$4,700,000Scottsdale85255
$3,750,000Paradise Valley85253
$3,550,000Scottsdale85255
$3,275,000Flagstaff86001
$3,200,000Phoenix85018
$3,200,000Scottsdale85251
$2,775,000Scottsdale85255
$2,738,250Paradise Valley85253
$2,724,700Paradise Valley85253
$2,675,000Scottsdale85266
$2,600,000Paradise Valley85253
$2,600,000Scottsdale85254
$2,550,000Scottsdale85266
$2,502,730Paradise Valley85253
$2,500,000Scottsdale85260
$2,500,000Scottsdale85266
$2,450,000Paradise Valley85253
$2,400,000Scottsdale85262
$2,300,000Scottsdale85255
$2,300,000Scottsdale85255
$2,300,000Scottsdale85262
$2,300,000Scottsdale85254
$2,300,000Paradise Valley85253
$2,265,000Paradise Valley85253
$2,050,000Phoenix85016
$2,000,000Scottsdale85262

Hey Millennials'....Buy a House. Here's Why.

Does anyone remember the days when 5% annual appreciation was considered really good?  These days it appears that some consumers now perceive anything under 10% as horrible, and reason enough to keep renting.  As our market returns to normal it may be beneficial to help future homeowners, specifically the millennial generation, visualize where they could be in 5 years with a “horrendous” 4% appreciation rate.  For the following example, we chose a $175,000 purchase with 3% down since it falls in line with where a first-time home buyer might start. 
Date1/1/20151/1/20161/1/20171/1/20181/1/20191/1/2020
Purchase Price $175,000 Future Value @ 4% Annual Appreciation$182,000$189,280$196,851$204,725$212,914
3.5% Down Payment $    6,125 Beginning Loan Balance @ 4% Interest$166,153$163,069$159,858$156,517$153,039
Loan Amount $168,875 Net Equity$15,847$26,211$36,993$48,208$59,875
Home ownership in these circumstances gives the borrower a net equity of almost $60,000 after 5 years. Not bad compared with renting a property for the same 5 years. We assumed that the seller paid all the closing costs (which is quite a reasonable assumption these days).
The secret ingredient is leverage. The borrower puts only 3% down but gets to keep 100% of the appreciation. With interest rates as low as they are today, the millennial generation will probably want to kick itself in ten years time for the missed opportunity today.
Even with no appreciation the borrower gets net equity of $22,000 after 5 years, because a chunk of the monthly check goes to pay down the outstanding loan balance. However property taxes and maintenance will eat into that.
Realistically, 4% appreciation is over twice as high as inflation and a very satisfactory rate for the realistic homeowner.

Friday, December 12, 2014

Market Leveling Off & Price Per Sq/Ft

Arizonans pay attention to price per square foot: Total price divided by the total square feet of living space.  And yes, it’s both – useful & annoying. Among its many uses, it’s a popular way to track pricing trends for any given market segment (see select city and zip codes below).
It’s ‘annoying’ as a gross measurement, particularly in larger sample sizes, as it doesn't account for the many components that affect market value – location, lot size, condition, vintage, etc. to name a few.
In spite of the qualifiers it is a useful barometer of value, not only for showing pricing trends, but also establishing relative boundaries for what is obtainable in any given market segment.
For example, a home can be ‘over-improved’ so that while a ‘cost basis’ might suggest one value, the price per square foot of otherwise comparable properties will set limits on what a buyer will pay (‘market basis’)…or what a bank appraisal based on sold comparable properties will support.
With that backdrop we can now look at the price per square foot trends by select cities across the State of Arizona. Again, being mindful that the city view perspective is necessarily broad brush.
Also note that the more jagged trend lines will be typical of smaller market samples, where one sale can skew the data for that month.
You can come to your own conclusion looking at the area data of interest. What is generally apparent is the price improvements over the last 2 years. At the same time we currently see a leveling off in most markets as demand has moderated with increased prices. There are notable exceptions – Prescott, Cottonwood, Sedona & Flagstaff where the high country continues to roll.
Price per square foot trends, while a bit ‘annoying’ do help us visualize general pricing in the ebb and flow of supply and demand.
For the specific trend in your area of interest contact me and I'll get to work and shoot it over.
Chandler2