Curious about Opendoor & OfferPad?

There is considerable interest in the so-called iBuyers of homes. Opendoor and OfferPad are the main operators in Greater Phoenix. With the data gathered from public records we provide Tableau charts about Opendoor and OfferPad purchases and sales within the Cromford Public section of our web-site.

Here is a summary of what we know about Opendoor`s Greater Phoenix operations so far.

• first purchase was in August 2014
• first sale was in November 2014
• there were 1,602 purchases during the last 12 months (Nov 2016 - Oct 2017)
• annual average purchase price was $213,636
• annual median purchase price was $204,550
• there were 1,512 sales during the last 12 month
• annual average sales price was $223,119
• annual median sales price was $214,000
• median gross margin was $13,000 for homes sold in the last 12 months
• average gross margin was $11,779
• average time from purchase to sale = 105 days

Typically an iBuyer will charge the seller 9% of the agreed purchase price. This percentage can vary however, based on the iBuyer`s business objectives. The fee is not disclosed in public records since the price stated on the affidavit of value is the gross figure prior to the fees. The seller will receive the gross figure less the fees and less any other close of escrow costs.

Thus the iBuyer typically receives 9% of the purchase price plus the gross margin on sale as top line revenue. From this they will have to cover refurbishment costs, selling costs and two sets of closing costs, including the commission for the buyer`s agent, if there there is one.

For a typical home this looks like $31,500 in top line revenue, consisting of $18,500 in fees and $13,000 in gross margin.

Opendoor's operation grew quickly in 2015 and 2016 but the acceleration has slowed down in 2017 as they face more competition from OfferPad. They are also operating very much at the low end of the market, which is rapidly contracting in size due to diminishing supply. Annual purchases grew by 15% between October 2016 and October 2017.

During the last 12 months, 1,512 sales represents 1.1% of the market in Maricopa and Pinal Counties. The total transaction count over that time was 133,476. Of course you could argue that Opendoor was involved in 2 transactions for every home they sold, the first as buyer and the second as seller. However every one of the 133,476 transactions we monitored had both a buyer and a seller, so there were 266,952 transactions sides of which Opendoor represented 1.2%.

Annual sales were running at $337 million at the beginning of November. OpenDoor has never paid more than $550,000 for a home. Because of this focus on the low end, OpenDoor has a smaller share of the dollar value, just over 0.87%.

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Sounds like the seller is paying dearly for the convenience of the quick sale. 9% fees. And if I understand this model correctly the seller must be getting less than market value to allow for a 'gross margin' on the resale. 

To be fair and as mentioned above, the 'ibuyer' does have 'refurbishment costs and two sets of closing costs, including the commission for the buyer's agent' (on the resale). 

But again, what price convenience!!!

Broadening the scope of this to discounters in general: Whether it's the traditional discount brokerage models or now this, I've personally researched these models and have seen them pick away at the fringes (mostly lower end) of the market for 40 years. While these brokerage models can and do make money for themselves, I would say sellers who fall prey to the pitch that 'we'll do it fast and do it for less' are mostly misinformed and mostly not very well served. 

However, the real 'crime' is falling for the 'we'll do it fast, do it for less and net you more'. 

The counter to this flawed way of thinking we would say 'it's not how much you save in commissions it's how much you net'. 

It's understandable. Without a value proposition for their services, discounters use the only lever they have, their commission. But is it truly benefiting the seller (netting them more). I would say not.

How the discounter actually costs the seller more: To make matters worse for the seller, the discounter will often overprice or bid the property up to get the listing (either out of ignorance or greed) - bottom line: sellers are being lied to twice i.e. 1. we'll get you more and 2. we'll do it for less', creating an unrealistic and unachievable expectation. 

In the end this only costs the seller time and money.  

The reality that needs to be communicated and understood: The so-called benefit to the seller of the 'discounted commission' most often pales in comparison to what is subject to negotiation (the typical list-to-sales-price ratio of 2-5%). This is because 'it's competition for the next best home in any given market segment that drives the price and shortens the market time.'  Much easier to hold the line on price when your in the competition from the beginning of the listing period. So again, that 1% discount pales in comparison to the 2-5% that's the typical negotiation range for properties that sell.

More: Overpriced listings are essentially invisible to motivated buyers. And when they do 'see' an overpriced listing (or any listing for that matter), what's the first question the buyer asks? Of course, how long has it been on the market. More time equating to perceived distress, begging for low offers, assuming there's any interest at all.

One of the greatest benefits of the our brand is that the value proposition is so strong. 

To best leverage that value proposition we do well to lead with the marketing. If you do it well the commissionekomy discussion doesn't come up; or if it does you may be able to marginalize with a little humor - this is Neiman's not WallMart! 

But the real benefit is to the seller (in net proceeds and a happier outcome) is when they not only buy into the power of our marketing, but competitive positioning. 

Keep in mind that the most effective way when we transition to a competitive positioning discussion is to lead with our marketing and then use the transitional phrase 'while our marketing truly is world class, all the marketing in the world can't compensate for overpricing.

Forget 'time is of the essence'. Time is the enemy!

Regardless of market conditions - Sellers net the most and sell in the shortest amount of time when they are competitively positioned. That's a statistical fact. Unfortunately, just not well understand...even within much of the industry.

For your success,

C. Tiller

Market Appreciation Update...long story short, we've leveled off.

As a follow up to our observation about appreciation rates on October 13 (see below), we are taking a look at the trends for the cities.

Cities showing a declining trend in appreciation rate:

• Arizona City peaked at 17.9% in May but has retreated to 12.0% now.
• Avondale peaked at 10.7% in July but has retreated to 9.2% now
• Buckeye peaked at 9.9% in February but has retreated to 7.4% now
• Fountain Hills was at 3.3% in January but has fallen to 0.7% now
• Laveen has dropped from 10.4% in January to 7.4% now
• Maricopa has declined steadily all year from 11.6% in January to 6.4% now
• Phoenix has dropped from 7.4% in January to 5.2% now
• Sun City West has dropped from 9.2% in January to 6.0% now
• Tempe has dropped from 6.2% in January to 4.8% now
• Tolleson has dropped from 11.2% in January to 7.3% now

Cities on an improving appreciation trend:

• Anthem, relatively slow, has started to catch up, increasing from 1.6% in January to 3.9% now
• Apache Junction has increased from 5.7% in January to 8.9% now
• Casa Grande has increased from 6.1% in January to 9.7% now
• Gold Canyon was at -0.7% in January and has increased dramatically to 7.1% now
• Litchfield Park was at a low of 5.5% in May and has improved to 8.8% now
• Mesa was at 5.8% in January and has advanced to 7.3% now
• Paradise Valley has improved from -1.4% in January to 4.6% now
• Peoria has increased from 5.2% in January to 7.1% now
• Queen Creek has increased steadily from 7.0% in January to 8.2% now
• Scottsdale has seen modest improvement from 2.7% in January to 3.6% now
• Sun Lakes has increased from 3.7% to 5.9% now
• Surprise has increased slowly but steadily from 6.7% in January to 7.7% now

Cities with little change in appreciation rates:

• Cave Creek was at 4.6% in January and is at 5.2% now
• Chandler was at 6.2% in January and is at 5.6% now
• El Mirage was at 13.8% in January and is at 12.8% now
• Gilbert was at 5.3% in January and is at 5.6% now
• Glendale was at 6.9% in January and is at 7.0% now
• Goodyear was at 6.3% in January and is at 6.9% now
• Sun City was at 10.1% in January and is at 9.7% now

This is a pretty mixed picture with fortunes changing in many different directions. All the appreciation rates are now positive (two were negative in January) which is a good sign. However the slowdown in our largest city of Phoenix (about 25% of the total market) means the overall trend is very slightly lower at the moment.

October 13 - Changes in the annual appreciation rate (measured using the annual average $/SF) give us a good indication of whether the market has been heating up or cooling down. This is using closed sales prices so it is a trailing indicator rather than a leading indicator. By using the annual average we get a fairly non-volatile reading. The trends tend to stay in place for quite some time. By looking at the weekly chart for annual appreciation we can detect when those trends change direction. 

**Here is what we have seen so far: 

1. Appreciation was below 2% and weakening in early 2002, but the trend turned around in the second quarter and reached 4% by the end of the year.
2. The appreciation continued to increase slowly during 2003 reaching 5.6% by the end of the year.
3. Appreciation started to go crazy as the market heated up during 2004 thanks to the widespread availability of easy credit. It exceeded 12% in December 2004.
4. The bubble was in full expansion mode during 2005 with appreciation exceeding 36% at the end of 2005.
5. Appreciation peaked at 37.2% in March 2006 and then collapsed down to 11% by the end of the year, as the bubble burst.
6. The bubble continued to deflate reaching -5% in December 2007.
7. The foreclosure wave took depreciation to new depths reaching -28% in December 2008.
8. The appreciation rate hit a historic low in the summer of 2009 at -36.5% but then started rising again.
9. During 2010, the appreciation rate climbed by to slightly positive at 0.6% but this trend ran out of steam during the fourth quarter of 2010.
10. 2011 saw appreciation slide back down to -9% by 3Q but signs of new life emerged at the end of the year.
11. In 2012 appreciation charged from -9% all the way up to 20%
12. Appreciation peaked at 25% during the spring of 2013 and started to drift slowly down again.
13. 2014 saw appreciation drop from over 20% to less than 9%.
14. In 2015 the downward trend stopped in September at 4.1% and started rising slowly again, reaching 4.4% by the end of the year.
15. During 2016 the appreciation rate improved to 5.4% by the end of the year, though all of that improvement occurred during the first 3 months of the year.
16. In 2017 appreciation hit a maximum of 6.5% in September and has drifted slightly lower since then, currently at 6.3%

The second and third quarters of 2017 gave us a fairly strong positive direction but so far the fourth quarter has seen a change of trend to a slight downward drift. Since this is a trailing indicator it suggests the market has cooled a little since the spring. By examining the appreciation chart by city (select cities charts shown below) we can see where the cooling trend has occurred, and where it has not.

We should emphasize that when the rate of appreciation falls, prices are still rising, they are just not rising with quite so much speed. Only when the rate of appreciation goes negative are prices actually falling compared with the previous year. At the current 6.3% we are a long way above that point.

We're....Average?!? We can stop saying bubble in Phoenix....for now : )

Cromford Daily Observation - The S&P / Case-Shiller® Home Price Index® report for the period April through June was published today and based on the month to month changes here is a ranking of the 20 cities covered in detail:

1. Detroit 1.45%
2. Seattle 1.45%
3. Las Vegas 1.00%
4. Minneapolis 0.98%
5. Portland 0.88%
6. Chicago 0.87%
7. San Diego 0.85%
8. Charlotte 0.82%
9. Denver 0.79%
10. Phoenix 0.77%
11. Dallas 0.76%
12. Boston- 0.74%
13. Los Angeles 0.70%
14. San Francisco 0.68%
15. Washington DC 0.66%
16. New York 0.61%
17. Cleveland 0.58%
18. Atlanta 0.57%
19. Tampa 0.48%
20. Miami 0.44%

Phoenix is right there in the middle of the pack, but well below the national average of 0.95%.

Looking at the year over year changes, here is the ranking:

1. Seattle 13.39%
2. Portland 8.16%
3. Dallas 7.66%
4. Denver 7.59%
5. Detroit 7.56%
6. Las Vegas 7.25%
7. San Diego 7.08%
8. Tampa 6.88%
9. Boston 6.24%
10. San Francisco 6.06%
11. Charlotte 6.03%
12. Phoenix 5.79%
13. Minneapolis 5.70%
14. Los Angeles 5.61%
15. Atlanta 5.23%
16. Miami 4.96%
17. New York 3.88%
18. Chicago 3.25%
19. Washington DC 3.07%
20. Cleveland 2.86%

Phoenix is close to the middle again and almost exactly at the national average of 5.77%.

So in the longer term view Phoenix is performing very close to the national average, and slightly below average over the short term. Nothing very exciting there. Seattle is now the runaway spot for high appreciation.

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The long term average appreciation in Maricopa County and I suspect in much of the State has been 5% per year. What's nice about that figure is that you can quote it without pretending to have a crystal ball; beats inflation; but doesn't smack of a over-heating market.

And it's a 'sustainable' figure - enough appreciation that the average purchaser who needs financing can expect to recover buying and selling expenses in most cases within 3 years. Real estate should be a 3 to 5 year decision to make sense for most.

We can live with 5%.

Days on Market - How long will you take to sell?

Probably the simplest and most useful indicator for the housing market is the Days of Inventory. This is the total number of active listings divided by the annual sales rate and multiplied by 365 to convert from years to days. This is not to be confused with the Average Days of Market which is one of the least useful indicators that is widely quoted but imparts little sense of market direction since it is a trailing indicator. Days of Inventory works in reverse (the lower the number the hotter the market) but is a leading indicator that is very useful for those wanting to know the direction of prices over the short term future.

Right now the Days of Inventory for the entire ARMLS database stands at 86. It was lower than this between April 2004 and November 2005 and between March 2012 and September 2012 and also between May and August 2013. However it is currently the lowest since August 2013 and well down from July 2016 when we saw 105.

The long term average is 149 and a figure of 86 confirms we are in a strong seller`s market but not at extreme levels. Between July 2004 and September 2005 we were below 60 which corresponded to the top of the bubble. The sharp increase from 31 in March 2005 to 67 in October was a reliable indication of the bubble popping.

Our favorite chart for Days of Inventory across the entire market is the weekly one (static chart shown below).

But don't forget the one relevant to your situation which will be more accurate by price range.  Chart just below as well.

Zillow...why is it still Active if its already sold?

Zillow is in the advertisement business.  Make no mistake.  Their income is generated from ad placement.  Ever wonder how agents get their photos on as "Premier Agents"?  They pay for it.

The cost of these online ads, like most, is priced based on activity from users.  The activity is easily tracked and typically ranks the most popular zip codes.  In Zillow's case they sell the more popular zip codes for more money.

The most frustrating and consistent conversation we have with Zillow is "Why is this house still showing Active".  Couple of reasons.  Remember, Zillow makes money from charging based on activity.  The longer you stay online searching the more they can charge.  They are in no hurry to take the house off their website.

The second reason is our Arizona MLS has a code titled UCB. When your listing gets an accepted offer, a large number of agents use Active - Under Contract Accepting Backup Offers (UCB) instead of the traditional Pending status these days. Today we have 8,048 listings in pending status and 5,177 in UCB (or CCBS) status.

Zillow does not recognize this UCB status as Pending and will show it Active even though its under contract.  

One of the other side effects of this is much higher days on market counts than we used to see. When a listing goes pending it stops accumulating days on market, but when it is in UCB status it is still on the market and continues to accumulate days on market. Today we see that pending listings have an average of 59 days on market while UCB (and CCBS) listings have an average of 80.

This increase in days on market is then reflected in the statistics for closed listings. Today we have an average of 71 cumulative days on market for listings closed in the last month. If it were back before the days of Zillow, this reading would be under 60.

This is another reason why do not recommend average days on market as an accurate way of measuring the state of the market.

___________________

This is something we probably don't think about but should be mindful of - that when we advise the 'insurance policy' of the UCB status, we're inadvertently compromising our performance stats - both for the listing and our own.

Certainly if I feel it's in the seller's best interest to have the Under Contract Accepting Backup Offers we're going to do that. But maybe the above info should give us pause if it the deal looks solid. Judgement call.

May 2017 Annual Change in Price Per Sq/Ft

Here is a table showing the annual change in annual average price per sq. ft. for single family homes for various cities. 

The cities are ranked by the most recent annual rate of change.

City	Annual Change in Annual Average $/SF May 2015	Annual Change in Annual Average $/SF May 2016	Annual Change in Annual Average $/SF May 2017	Current Trend in Appreciation Rate
Arizona City	6.9%	8.2%	17.2%	strengthening
El Mirage	7.3%	10.1%	13.9%	flat
Avondale	5.8%	8.4%	10.0%	strengthening
Laveen	6.0%	8.6%	9.6%	weakening
Maricopa	5.5%	6.9%	9.5%	weakening
Tolleson	10.9%	5.8%	9.2%	weakening
Buckeye	5.5%	8.3%	8.8%	weakening
Apache Junction	10.4%	6.4%	8.1%	strengthening
Sun City	4.7%	10.9%	7.9%	weakening
Sun City West	4.5%	6.6%	7.9%	weakening
Casa Grande	8.3%	1.1%	7.8%	weakening
Goodyear	5.6%	4.5%	7.5%	strengthening
Mesa	4.2%	6.2%	7.0%	strengthening
Surprise	4.9%	5.9%	6.9%	flat
Queen Creek	5.7%	6.8%	6.7%	flat
Peoria	3.5%	5.6%	6.4%	strengthening
Glendale	5.8%	9.1%	6.1%	weakening
Phoenix	6.8%	7.8%	5.9%	weakening
Gilbert	2.3%	4.7%	5.5%	flat
Litchfield Park	6.5%	4.8%	5.3%	weakening
Paradise Valley	3.6%	-1.5%	5.2%	strengthening
Chandler	2.8%	5.6%	5.0%	weakening
Cave Creek	3.5%	1.5%	4.7%	flat
Tempe	4.7%	8.2%	4.2%	weakening
Gold Canyon	12.8%	-4.1%	3.6%	strengthening
Sun Lakes	4.2%	3.1%	3.6%	flat
Scottsdale	3.6%	1.2%	2.9%	strengthening
Anthem	1.8%	5.5%	2.3%	strengthening
Fountain Hills	2.3%	2.0%	0.4%	weakening

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Always quick to point out the fairly obvious inverse relationship between average price (not shown above) and appreciation. For example, Arizona city (in Pinal County) has an monthly average price of $118K, while Fountain Hills is $502K. 

Another takeaway is how you have to make the distinction between locations to have an sense of accuracy when talking about market sectors. The average annual change in Av $/SF of the 29 cities is 5.46%. This is consistent with the average long term appreciation in the Valley of about 5% per year. But look how different it is from city to city. This would be true down to the subdivision level.

I keep bringing up this point because the media reports and general laymen thinking tends to use the broad brush. Where we bring value is parsing those distinctions, or as I'm fond of saying: Mastery is the art of creating distinctions. This is one of the key ways we bring value as Realtors®.

Stop with the bubble talk....it may flatten in some areas but this is NOT a 2005

As of April 8, days of inventory for Greater Phoenix (excluding UCB and CCBS listings) stood at 74.8, the lowest level since September 2013. 

However this one number fails to explain the huge disparity between the bottom and top ends of the market. Here are the days of inventory for various price ranges:

• under $100K - 49.9 days
• $100K - $200K - 33.4 days
• $200K - $300K - 54.6 days
• $300K - $400K - 86.9 days
• $400K - $500K - 128. 2 days
• $500K - $1M - 218.6 days
• $1M - $2M - 437.7 days
• over $2M - 882.4 days

It is the $100K to $200K price range that is most stressed by the lack of supply, and within that range the $125K to $150K price range has only 28.3 days of inventory. This is the lowest level since 2005.

The range between $500K and $600K has dropped from 230.8 to168.8 days over the last 12 months, making this sector much more favorable to sellers.

Meanwhile the range over $3M has 1230.5 days of supply, up from 1129.8 this time last year, so sellers outnumber buyers to a huge extent at this rarified price point.

In some parts of the valley, the market is so hot that a few people have been drawing parallels with 2005 and expressing fear of a bubble. While I agree that the Southeast Valley, Pinal County and parts of the Northwest Valley are much hotter than they have been for a while, the market is more akin to 2013 than 2005.

I think some people forget quite how ridiculous 2005 was. It was exactly 12 years ago that:

• Days of Inventory stood at 28 (currently 85)
• Months of supply was 0.9 (currently 2.8)
• Annual appreciation rate was 27.9% (currently 6.8%)
• Dollar volume was up 43.9% annually (currently up 14.6%)
• Listing success rate was 84.3% (currently 81.9%)
• Cromford® Supply Index was 41.4 (now 72.6)
• Cromford® Demand Index was 129.5 (now 106.1)
• Cromford® Market Index was 312.7 (now 146.1)
• Average percent of list for closed listings was 99.16% (currently 97.69%)
• New homes sales were 42,724 a year just in Maricopa County (currently 13,958)

The Greater Phoenix market has a long way to go before conditions get bubbly, and we should remember how few skeptics there were in 2005 that the market could ever go down. 

Now there are skeptics everywhere, which is a very good reason that another bubble is unlikely to develop. 

The next housing bubble is likely once everyone who experienced the last one has retired or passed away.

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To that last point regarding when the next bubble will occur. I would only add what Mike Orr has said before - 

• That there has never been more than one housing market crash in a generation; 
• That today, unlike 2005 (liar loans) is an equity market - the pendulum has swung to much more conservative banking regulations for getting a mortgage and most of the distressed properties from the crash were purchased by investors for cash; 
• And that there is essentially a housing shortage, as builders have not kept up with the population growth (because of the down turn).

These are good point to keep in mind, as these concerns will come up as the economy heats up.

To me the biggest heads-up is for millennials in particular to be aware that time is not on their side if home-ownership is something they desire. 

Interest rates pretty much have to rise (the end of 'artificially low' interest rates) and the consequence of that is that for every 1% interest rates go up on an 80% loan, buyers lose 10% borrowing power. Or put another way, homes essentially become 10% more expensive.

Here it is....Year over Year Apprciation.

Here are the significant ZIP codes with the highest rise in average sale price per square foot between Q1 of 2016 and Q1 of 2017. All dwelling types are included:

1. Phoenix 85012 - up 26.5% to $222.87
2. Phoenix 85051 - up 19.0% to $106.40
3. Casa Grande 85194 - up 18.8% to $117.90
4. Phoenix 85040 - up 18.7% to $101.88
5. Phoenix 85009 - up 18.2% to $105.29
6. Phoenix 85016 - up 16.5% to $231.50
7. Arizona City 85123 - up 16.1% to $80.24
8. Phoenix 85035 - up 16.0% to $104.58
9. Wickenburg 85390 - up 15.8% to $152.69
10. Mesa 85201 - up 15.1% to $126.69
11. Glendale 85307 - up 15.1% to $113.39
12. Mesa 85213 - up 14.6% to $138.77
13. Surprise 85387 - up 14.6% to $150.95
14. Avondale 85323 - up 13.7% to $105.13
15. Peoria 85345 - up 13.6% to $120.04
16. Glendale 85306 - up 13.5% to $128.80
17. Mesa 85202 - up 13.5% to $134.10
18. Phoenix 85028 - up 13.1% to $190.71
19. Florence 85132 - up 12.3% to $89.35
20. El Mirage 85335 - up 11.5% to $106.42

We see entrants from the central valley, the west, the southeast and Pinal County in this list.

The bottom ranked ZIP codes for price appreciation between Q1 2016 and Q1 2017 are:

1. Carefree 85377 - down 9.7% to $217.25
2. Scottsdale 85262 - down 7.9% to $252.85
3. New River 85087 - down 4.1% to $134.78
4. Tonopah 85354 - down 3.6% to $77.11
5. Phoenix 85004 - down 2.6% to $278.54
6. Waddell 85355 - down 0.5% to $110.44
7. Scottsdale 85259 - down 0.2% to $223.69
8. Phoenix 85042 - up 0.1% to $119.81
9. Phoenix 85085 - up 0.2% to $139.82
10. Scottsdale 85258 - up 0.6% to $222.94

______________________________________

It's becoming an old saw, but you can't look at this information without seeing the fairly direct correlation (based on location and generally speaking) between the high demand / relatively low supply of lower-end properties versus the lower demand and relatively high supply of upper-end properties. 

And then the caveat that all of you who search for that perfect property know - the truly great properties (competitively positioned) are hard to find and therefore sell at all price points, as there is always competition for 'the best'.

BTW, if you don't see the zip code you're interested in (e.g. 85018 Arcadia shown below) above you can easily and quickly email me and I can provide that to you.

Sales Growth Q1 2016 - Q1 2017

Let us try and get a picture of the sales growth that occurred in Q1 of 2017 by comparing it with Q1 of 2016.

For all property types within Greater Phoenix, we saw an overall 13.6% growth in closed listings from 13,214 in 2016 to 15,008 in 2017. Looking at dollar volumes, these grew by 21.3% from $3.6 billion to $4.4 billion.

The significant ZIP codes with the most growth in dollar volume were:

1. Wittmann 85361 - up 199%
2. Eloy 85131 - up 104%
3. Youngtown 85363 - up 93%
4. Surprise 85378 - up 88%
5. Phoenix 85031 - up 84%
6. Phoenix 85012 - up 76%
7. Glendale 85302 - up 74%
8. New River 85087 - up 71%
9. Glendale 85307 - up 66%
10. Avondale 85392 - up 65%
11. Phoenix 85085 - up 60%
12. Mesa 85201 - up 58%
13. Peoria 85383 - up 55%
14. Avondale 85323 - up 54%
15. Mesa 85202 - up 53%
16. Phoenix 85040 - up 52%
17. Waddell 85355 - up 52%
18. Mesa 85215 - up 51%
19. Phoenix 85028 - up 47%
20. Phoenix 85033 - up 47%

This list is dominated by the West Valley, particularly the Northwest Valley.

The following significant ZIP codes failed to participate in the overall trend in dollar volumes:

1. Mesa 85203 - down 19%
2. Chandler 85226 - down 9%
3. Phoenix 85053 - down 7%
4. Phoenix 85013 - down 6%
5. Phoenix 85042 - down 5%
6. Fountain Hills 85268 - down 4%
7. Cave Creek 85331 - down 4%
8. Queen Creek 85142 - down 2%
9. Phoenix 85004 - down 2%
10. Phoenix 85029 - flat

By "significant" we mean ZIP codes with at least 20 sales a year or an annual dollar volume of over $10 million.

For the Northeast Valley, we see growth in dollar volume as follows:

1. Scottsdale 85257 - up 36%
2. Scottsdale 85251 - up 33%
3. Scottsdale 85260 - up 29%
4. Rio Verde 85263 - up 29%
5. Carefree 85377 - up 28%
6. Scottsdale 85258 - up 27%
7. Scottsdale 85259 - up 25%
8. Phoenix 85016 - up 24%
9. Phoenix 85054 - up 20%
10. Scottsdale 85255 - up 20%
11. Scottsdale 85262 - up 13%
12. Scottsdale 85250 - up 11%
13. Paradise Valley - up 11%
14. Scottsdale 85266 - up 6%
15. Scottsdale 85254 - up 6%
16. Phoenix 85018 - up 5%
17. Fountain Hills 85268 - down 4%
18. Cave Creek 85331 - down 4%

Here we see the dominance of South and Old Town Scottsdale.

There are several ZIP codes that grew dollar volume but failed to grow average price per square foot. Carefree 85377, Scottsdale 85262 and Scottsdale 85259 all fall into that category. We will look at the Q1 price movements by ZIP code tomorrow.

South East Valley - Killing it!! - Market Update

Cromford Daily Observation - When we look at the market for single family homes over $500,000 we see the following changes in the quarterly average price per sq. ft.

Area	Average $/SF Dec 2015 - Feb 2017	Average $/SF Dec 2016 - Feb 2017	% Change
West Valley	$172.13	$165.02	-4.1%
Phoenix	$231.84	$230.62	-0.5%
Northeast Valley	$355.87	$352.71	-0.9%
Southeast Valley	$163.90	$173.57	+5.9%

The Southeast Valley sticks out like a sore thumb and has done for several months now. This is the only large area where homes over $500,000 have been selling for much higher average prices per sq. ft. than last year. There are certainly a few spots in the Northeast Valley and Phoenix that have done the same, such as Arcadia and Old Town Scottsdale, but when we consider the larger areas, these favorable trends are dragged down by the weak price trends in North Scottsdale, Paradise Valley, Fountain Hills, Carefree and the Biltmore District. The $/SF ratio between the northeast and the southeast has closed from 2.17:1 to 2.03 :1 over the past 12 months.

Again restricting our analysis to homes over $500,000 we can find some pretty steep rises in the quarterly average price per sq. ft. in the following southeastern ZIP codes:

• Mesa 85213 - up 26% from $131.68 to $165.85
• Gilbert 85298 - up 19% from $150.29 to $178.37
• Mesa 85207 - up 11% from $168.59 to $187.86
• Tempe 85284 - up 6% from $182.27 to $193.26
• Gilbert 85234 - up 6% from $161.58 to $171.78

All of these areas offer the buyer a good choice of large luxury style homes at relatively cheap prices, luxury homes for the budget conscious, if you like. Since this has become a visible phenomenon over the past 6 months, I wonder if there is a correlation between this favorable price trend and the creation of high-tech jobs in the Southeast Valley particularly along Rural Road. The jobs pay above-average salaries and for lower-end luxury home buyers who care about getting the maximum house for their money (and living close to a freeway so they can get to work easily), the Southeast Valley has been looking pretty inexpensive for the last several years. Of course that advantage could erode if prices continue to rise faster than the Phoenix area as a whole. As you can see in the table above, there is still a big price gap between the southeast and the northeast (and Phoenix), so the southeast still has a lot of room to run before its price advantage is gone.

Increasing supply...does this mean price slowing?

Today we  look at the ZIP codes with the highest growth in supply since Jan 1.  We still have consistent months of increases before these areas start to see price increases level off but as we all know.  When Supply increases....Price slowing comes next.

1. Phoenix 85009 - up 73%
2. Phoenix 85004 - up 45%
3. Scottsdale 85250 - up 32%
4. Phoenix 85035 - up 32%
5. Fountain Hills - up 30%
6. Phoenix 85007 - up 27%
7. Mesa 85212 - up 25%
8. Scottsdale 85266 - up 23%
9. Wittmann 85361 - up 22%
10. Phoenix 85045 - up 21%
11. Sun City West 85375 - up 21%
12. Phoenix 85048 - up 21%
13. Rio Verde 85263 - up 20%
14. Phoenix 85053 - up 20%
15. Gilbert 85297 - up 19%
16. Tempe 85284 - up 19%
17. Phoenix 85006 - up 19%
18. Phoenix 85003 - up 18%
19. Phoenix 85050 - up 18%
20. Phoenix 85018 - up 18%

Generally we are seeing the largest growth in supply in the more expensive parts of town. Geographically, Central Phoenix, Ahwatukee and the Northeast are getting plenty of new supply.

Interesting that 85035 is up while neighboring 85031 is down. The same applies to 85297 and 85296 and also 85284 and 5283.

The highest growth in Pinal County is for Maricopa 85139 (16%) and San Tan Valley 85140 (10%).

What about inventory's impact on the market?

We have been seeing drops in inventory for the low end for a very long time and active counts were again down by 26% at the end of December. This shortage of supply has made it hard to keep sales volume growing and indeed quarterly sales slipped by 2%. In the mid-range, supply was down slightly but sales volume grew by 35% so there was still upward pressure on pricing. At the high end over $500,000 we saw increased supply, but sales volume jumped by 48% so here too we saw much stronger appreciation than we were experiencing 12 months ago.

Overall we saw a very healthy increase of 7% across the entire market. However we now see all price ranges participating, not just the low end. In fact the high end slightly out-performed the mid-range.

The top ZIP codes for appreciation in average $/SF between 4Q 2015 and 4Q 2016 were:

1. Mesa 85201 +16.9%
2. Mesa 85204 +13.4%
3. Mesa 85213 +11.6%
4. Mesa 85210 +10.4%
5. Chandler 85249 +9.5%
6. Gilbert 85233 +9.0%
7. Gilbert 85298 +8.6%
8. Queen Creek 85142 +8.3%
9. Sun Lakes 85248 +7.8%
10. Mesa 85208 +7.7%

The weakest appreciation was seen in:

1. Phoenix 85044 -0.4%
2. Mesa 85202 +1.3%
3. Mesa 85205 +1.9%
4. Gilbert 85297 +2.0%
5. Phoenix 85045 +2.3%
6. Phoenix 85048 +2.8%
7. Mesa 85206 +3.1%
8. Gilbert 85296 +3.4%
9. Tempe 85283 +3.5%
10. Tempe 85281 +3.6%

ACTIVE LISTING COUNT LONG TERM GRAPH BELOW

Is Arizona in a Bubble? 1.11.2017

As clients start their search in the new year everyone seems to be surprised at the prices and interest rates they will be facing.  The natural first question is...

"Are we in a bubble?!?"

This is a fair assessment but as always I follow up this question and the "how's the market?" question with..."It Depends".

Which city makes a huge difference in appreciation.  Even within each city specific communities and subdivisions have much different year over year changes.  Couple this with price range, amenities, upgrades, stories etc. and you'll get a very different answer from me.

The broad brush is that today's median prices are about 20 to 25% below the peak of the market (2006). There are notable exceptions e.g. PV remains 30% below the peak, while 'next door' Arcadia has cruised past the peak by 10%! But if live in these markets this is not news. As always, location and price range are the major variables.

Sample Median Price trends from select communities:

Glendale

Chandler

North Scottsdale

Paradise Valley

Scottsdale (Downtown)

Arcadia

You will come to your own conclusions based on the market segments you work. We can definitely see that in the lower price ranges prices are trending up at a modest pace; then you have the sizzling hot fashionable locations of downtown Scottsdale and Arcadia where price almost doesn't seem to matter; and then the mid-upper range north Scottsdale / Carefree / Fountain Hills that seem relatively flat, but stable.

With inventories relatively balanced against supply we would expect more of same going into 2017 and our high season. But we shall see.