Wednesday, April 12, 2017

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.

Thursday, April 6, 2017

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
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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.


Wednesday, April 5, 2017

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.