Some cities are pulling back...

Cromford Daily Observation - Ranking the major & secondary cities by their annual percentage change in annual median sales price (single family only) we find the following:

1. Arizona City - up 17.3% to $100,000
2. Apache Junction - up 13.3% to $169,900
3. Tolleson - up 12.4% to $179,900
4. Sun City - up 12.2% to $165,000
5. Glendale - up 11.9% to $210,000
6. Avondale - up 11.8% to 190,000
7. Sun City West - up 11.7% to $210,000
8. Surprise - up 11.4% to $215,000
9. Buckeye - up 11.3% to $182.500
10. El Mirage - up 10.9% to $152,000
11. Laveen - up 10.8% to $195,000
12. Anthem - up 10.4% to $289,900
13. Phoenix - up 9.7% to $224,900
14. Maricopa - up 9.3% to $165,000
15. Mesa - up 9.0% to $223,000
16. Queen Creek - up 8.8% to $199,900
17. Tempe - up 7.9% to $263,250
18. Litchfield Park - up 7.8% to $275,000
19. Goodyear - up 7.0% to $245,995
20. Casa Grande - up 6.7% to $159,000
21. Cave Creek - up 6.3% to $425,000
22. Peoria - up 5.7% to $255,000
23. Scottsdale - up 4.8% to $492.500
24. Gilbert - up 4.6% to $275,000
25. Chandler - up 4.6% to $277,250
26. Fountain Hills - up 3.3% to $428,500
27. Gold Canyon - up 2.4% to $255,950
28. Sun Lakes - up 1.4% to $255,400
29. Paradise Valley - up 0.9% to $1,437,500

The Cromford® Market Indexes for the single family markets in the largest 17 cities confirm we are still in a favorable situation for sellers:

Only 4 of the 17 cities showed any deterioration and the major decline was in Avondale, which could stand some cooling down after what seems like an eternity at the top of our table.

Perhaps the biggest surprise is the strengthening of Paradise Valley which is no longer at the bottom of the table thanks to an expected big decline in supply and an unexpected improvement in demand.

Tempe is probably another surprise, now at the bottom of our table thanks to its supply index rising to its highest level since 2014.

Overall this is a positive picture for sellers with 15 cities in a seller's market and 2 in the balanced zone between 90 and 110.

AZ Real Estate Demographic Shift - Crucial Developments

Cromford Daily Observation(s) - The demographic situation in the 15 Arizona counties is as follows:

County	Median Age July 2010	Median Age July 2015	5 Year Change in Population Under 5	5 Year Change in Population of 65 and Over
Apache	32.5	34.2	-9.2%	+19.7%
Cochise	39.6	40.8	-5.1%	+14.6%
Coconino	30.9	30.9	-8.0%	+32.1%
Gila	47.9	49.7	-2.7%	+17.4%
Graham	31.7	32.6	-7.3%	+12.4%
Greenlee	34.9	33.6	+4.6%	+10.7%
La Paz	54.0	55.4	-9.6%	+11.7%
Maricopa	34.7	36.1	-3.0%	+27.0%
Mohave	47.8	50.4	-15.7%	+20.6%
Navajo	34.7	36.5	-10.9%	+24.2%
Pima	37.7	38.4	-4.7%	+21.8%
Pinal	35.4	38.7	-21.1%	+46.9%
Santa Cruz	35.6	37.1	-11.8%	+22.2%
Yavapai	49.4	52.6	-12.2%	+26.0%
Yuma	33.7	34.6	+0.9%	+19.3%

The 21% decline in under 5s in Pinal County is very ominous for the elementary schools in that county, representing a 6,297 reduction from 29,882 in 2010 to 23,585 in 2015. At the same time the growth in retirees is phenomenal, with 47% more people at 65 plus and 60% more at 85 plus. Pinal county has shown a huge swing from young to old with a 3.3 year increase in the median age over just 5 years. This is due to a combination of growing 55+ active adult communities attracting people from far afield and a low fertility rate for the existing population.

Retirees are already dominant in Gila, Yavapai and especially La Paz counties.

A third of the counties lost population overall, which is a negative sign for their housing markets. These are:

1. Cochise -4.1%
2. Santa Cruz -2.0%
3. La Paz -1.4%
4. Gila -0.7%
5. Apache -0.1%

This shift towards an aging population is not a small, insignificant change. It is a dramatic change compared with Arizona's experience prior to 2007. A lot of this change is probably caused by the unusually low immigration rates we have seen since 2007. In the distant past immigrant parents have tended to have larger families than native born parents and so contributed disproportionately to growing Arizona's economy. Retirees contribute relatively little to growing the local economy as they are usually not fertile and not working.

...we humans seem to have largely ignored the potential deceleration in our economy that low fertility rates are likely to create.

The fraction of the United States population age 60 or over will increase by 21 percent between 2010 and 2020, according to an academic study published in 2014 by the Rand Corporation. Between 2010 and 2050 the fraction will grow by 39%. Coupled with the historically large reduction in fertility rates that is currently underway, we are witnessing huge changes in the demography of the nation. These demographic changes are likely to have detrimental effects on the economy and sectors of the housing market may be significantly affected going forward.

We already see explosive growth in Arizona population counts for people over 60 while the population under 18 is barely growing (and under 5 is in decline). This is unexpected given that we have a relatively large number of women of child bearing age. It is generally accepted that people tend to consume more than they earn during their later years, but consume less than they earn while they are in their working years. It is very possible that the shift towards an older population is the primary cause of the relatively slow growth in GDP in the USA. It follows that similar effects are likely to be at work in other developed countries. We have not experienced an era like this before, so there is little experience to draw on just yet. However, I believe the rapidly changing demographics are likely to become the most significant factor driving housing demand over the next ten to fifteen years.

How far is your house from the top?

Are we in a bubble? Should I sell?  Should I buy?  All valid questions.  The frustrating response that usually has to be given is..."it depends".  If you'd like more specific information please reach out.

The below information is how far off specific zip codes are from their peak pricing before the crash.

Cromford Daily Observation - For the Southeast Valley, the percentage below the peak in $/SF pricing for single family homes is as follows:

1. Tempe 85282 -15%
2. Chandler 85286 -15%
3. Tempe 85281 -16%
4. Tempe 85283 -16%
5. Chandler 85224 -18%
6. Mesa 85210 -18%
7. Mesa 85202 -18%
8. Chandler 85226 -19%
9. Tempe 85284 -20%
10. Chandler 85225 -21%
11. Mesa 85204 -21%
12. Mesa 85203 -21%
13. Mesa 85205 -21%
14. Mesa 85206 -22%
15. Gilbert 85233 -22%
16. Phoenix 85044 -22%
17. Gilbert 85234 -23%
18. Gilbert 85297 -23%
19. Chandler 85249 -23%
20. Sun Lakes 85248 -24%
21. Mesa 85209 -24%
22. Mesa 85208 -24%
23. Phoenix 85048 -25%
24. Mesa 85212 -25%
25. Mesa 85207 -25%
26. Gilbert 85296 -25%
27. Mesa 85201 -26%
28. Mesa 85213 -27%
29. Gilbert 85295 -27%
30. Gilbert 85298 -27%
31. Mesa 85215 -29%
32. Phoenix 85045 -32%

Generally we can see that Tempe has recovered closest to its peak while Ahwatukee has the furthest to go, especially as we travel west..

Northeast Valley, here is how far single family pricing is below the peak of 8-10 years ago:

1. Scottsdale 85251 -2%
2. Scottsdale 85257 -8%
3. Scottsdale 85250 -15%
4. Scottsdale 85255 -15%
5. Scottsdale 85258 -20%
6. Scottsdale 85254 -21%
7. Scottsdale 85260 -24%
8. Fountain Hills 85268 -26%
9. Carefree 85377 -26%
10. Cave Creek 85331 -27%
11. Scottsdale 85259 -27%
12. Scottsdale 85262 -28%
13. Paradise Valley -29%
14. Scottsdale 85266 -31%
15. Rio Verde 85263 -36%

South Scottsdale and Old Town Scottsdale are clearly the top performers in this group and beat any area from the West Valley or Central & North Valley that we examined over the last 2 days.

Central & North Valley, here are how far below the peak we are in the various ZIP codes (single family homes only):

1. Phoenix 85018 -12%
2. Phoenix 85013 -12%
3. Phoenix 85014 -13%
4. Phoenix 85006 -14%
5. Phoenix 85015 -18%
6. Phoenix 85003 -18%
7. Phoenix 85021 -18%
8. Phoenix 85008 -19%
9. Phoenix 85020 -20%
10. Phoenix 85007 -20%
11. Phoenix 85028 -21%
12. Phoenix 85032 -21%
13. Phoenix 85054 -21%
14. Phoenix 85024 -23%
15. Phoenix 85050 -23%
16. Phoenix 85027 -24%
17. Phoenix 85012 -24%
18. Phoenix 85022 -24%
19. Phoenix 85023 -25%
20. Phoenix 85016 -25%
21. Phoenix 85053 -26%
22. Phoenix 85085 -26%
23. Phoenix 85029 -26%
24. Phoenix 85042 -27%
25. Phoenix 85083 -29%
26. Anthem 85086 -29%
27. Phoenix 85051 -30%
28. Phoenix 85019 -32%
29. New River 85087 -33%
30. Phoenix 85031 -34%
31. Phoenix 85017 -35%
32. Phoenix 85033 -35%
33. Phoenix 85041 -35%
34. Phoenix 85043 -36%
35. Phoenix 85004 -37%
36. Phoenix 85037 -37%
37. Phoenix 85040 -37%
38. Phoenix 85035 -38%
39. Phoenix 85009 -39%
40. Phoenix 85034 -62%

Phoenix 85018 is helped by the popularity of Arcadia.

The percentage in the table below is comparing the current average $/SF for single family homes in the West Valley with the peak for that same ZIP code in the mid 2000's:

1. Sun City West -21%
2. Surprise 85374 -25%
3. Glendale 85308 -25%
4. Glendale 85306 -25%
5. Avondale 85392 -26%
6. Glendale 85304 -26%
7. Peoria 85382 -26%
8. Sun City 85373 -26%
9. Sun City 85351 -26%
10. Peoria 85381 -27%
11. Glendale 85310 -27%
12. Glendale 85302 -27%
13. Peoria 86383 -28%
14. Surprise 85378 -29%
15. Peoria 85351 -29%
16. Surprise 85387 -31%
17. Litchfield Park 85340 -31%
18. Wittmann 85361 -31%
19. Surprise 85388 - 32%
20. Surprise 85379 -32%
21. Glendale 85303 -32%
22. Glendale 85301 -32%
23. Tonopah 85354 -32%
24. Glendale 85305 -33%
25. Wickenburg 85390 -35%
26. Goodyear 85338 -35%
27. Youngtown 85363 -36%
28. Tolleson 85353 -36%
29. Laveen 85339 -36%
30. Avondale 85323 -37%
31. Glendale 85301 -37%
32. Buckeye 85396 -38%
33. El Mirage 85335 -38%
34. Buckeye 85326 -41%
35. Goodyear 85395 -45%
36. Waddell 85355 -49%

August 1st Market Update...read if you want to fall asleep : )

Market Summary for the Beginning of August

The market conditions improved a little for sellers once again during July, with the Cromford® Market Index breaking through the 145 level with some momentum as we enter August. However there is still no dramatic new trend showing up, just a continuation of those we have been seeing for several months now. Sales momentum was actually stronger than it appears from the numbers posted during July. With a weekend at either end of the month we had only 20 working days to get deeds recorded compared with 22 in July 2015. Many people are surprised that the number of working days in a month makes a big difference, but after 14 years of measuring I can assure you it definitely does. In any case it is normal for July to be much quieter for closings than June. This is a seasonal pattern that is seen every year.

Here are the basic ARMLS numbers for August 1, 2016 relative to August 1, 2015 for all areas & types:

• Active Listings (excluding UCB): 19,711 versus 19,459 last year - up 1.3% - but down 3.7% from 20,458 last month
• Active Listings (including UCB): 23,801 versus 22,837 last year - up 4.2% - but down 4.2% compared with 24,856 last month
• Pending Listings: 6,824 versus 6,327 last year - up 7.6% - but down 2.5% from 6,985 last month
• Under Contract Listings (including Pending & UCB): 10,897 versus 9,705 last year - up 12.3% - but down 4.3% from 11,383 last month
• Monthly Sales: 7,776 versus 8,046 last year - down 3.4% - and down 13.2% from 8,860 last month
• Monthly Average Sales Price per Sq. Ft.: $138.22 versus $132.79 last year - up 4.1% - and down 2.0% from $141.03 last month
• Monthly Median Sales Price: $225,000 versus $211,000 last year - up 6.6% - but down 2.2% from $230,000 last month

We can see that the shortfall in closed sales during July is compensated by strong under contract and pending numbers at the start of August, just as we would expect for a short month.

Below $175,000 we see a large drop in sales volume compared with July 2015, caused by the weak supply. Unit sales were down 29% with the biggest percentage fall for homes priced between $100,000 and $125,000 (down 52%).

Between $175,000 and $300,000, sales were up 10% with $250,0000 to $275,000 growing the most at 21%

The range from $300,000 to $350,000 was just a tad weaker than last year, but between $350,000 and $600,000 we saw a 12% increase in sales compared to July 2015.

Between $600,000 and $2 million, sales were very weak compared with July 2015, down 17% from 346 to 286.However the market over $2 million rebounded with 26 sales compared with just 19 in July 2015.

We are now at the point where inventory hits its minimum level in most years. New listings are arriving only 3% faster than last year and we have seen quite a lot of cancellations, especially at the higher price points. We will be looking to see what sort of inventory growth we get between now and the next peak at the end of November.

Demand is currently holding up, some 5% higher than we would consider normal. However the market conditions are probably going to be determined by changes in the supply. How much and at what price points will the new listings arrive?

_____________________________

The 'rebound' in the $2M plus market is a nice surprise. If you have unsold high-end listings this might be cause to objectively review with your seller where you stand relative to the competition - rationale being not only a hint at an improving market but getting ahead of the competition that will come as the inventory increases seasonally in the fall.