Monday, September 17, 2018

Shifting sands...the rise of modestly priced inventory

We are still examining the changes that took place in the single-family market between August 1 and September 1, but this time we will segment the market by price rather than location.
The first thing that strikes us is that supply increased for homes at or under $400,000, but decreased for homes over $400,000. It is a very long time since we have said anything like that, so something different seems to be going on.
  • active listings at or under $400,000 without a contract grew 9% from 6,610 to 7,187
  • active listings over $400,000 without a contract fell 0.3% from 5,304 to 5,288
The big drop in supply was for homes between $1.5M and $2M which fell by 11%. This has been a heavily over-supplied sector in the recent past.
  • monthly sale for homes at or under $400,000 fell 7% from 5,391 to 5,038
  • monthly sales for homes over $400,000 grew 2% from 1,505 to 1,536
This analysis confirms our observations on September 12. The low to mid-range market is seeing rising supply and falling sales while the higher mid-range and luxury market is doing the opposite. This is the reason why the West Valley, with a large share of the most affordable homes, was the weakest areas during August.
About 78% of single-family sales in Greater Phoenix are priced at or below $400,000, so if this market loses steam, it will not be fully compensated by strength at the higher end.
One month does not make a trend, but we should keep our eyes on the low-to-mid-range market over the next few months.
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The one sentence from above that needs to be emphasized more is, 'The low to mid-range market is seeing rising supply and falling sales while the higher mid-range and luxury market is doing the opposite.' Or to spell it out, the higher mid-range and luxury market is seeing a falling supply and rise in sales (demand).
While the implications of this observation (the potential for a new trend) is yet to be realized, to be sure the seasonal variable plays significantly i.e. more mid-and upper range sellers take their homes off the market in the summer and back on in the fall / high season.
The positive immediate take-away / talking point is an improving market for the 22% of the market over $400K (our wheelhouse at RLSIR), particularly the luxury sector, evidence the improving Cromford Market Index in PV, Cave Creek and Chandler, with only a slight decline in Scottsdale:
The quick read for the chart below is that a CMI over 100 indicates demand outpacing supply (sellers market). So the overall takeaway is that it is and has been a sellers market across the board. However, the monthly change (green = good for sellers; red = good for buyers) tends to be a good short term predictor of where the market is going.
cmi-2018-09-13.GIF
We'll be most interested in how this plays out moving into our high season. 
Meanwhile, for sellers you can talk an improving mid-range and luxury sector and a great time to list with you!
For buyers $400K and below their choices may be improving.