Monday, November 26, 2018

Slowdown Is Here!!

Comparing the annual non-distressed single-family sales in Greater Phoenix between November 1, 2017 and October 31, 2018 with the previous year we find that the annual sales rate increase was 2.0% and the annual average $/SF rose by 7.3%.
The top-performing areas for appreciation were as follows:
  1. Florence & Coolidge (85128 & 851320 - up 15.6%
  2. Sky Harbor South (85040) - up 13.9%
  3. Far West Phoenix (85037) - up 12.1%
  4. I-10 and I-17 (85009, 85015, 85017, 85019, 85031, 85033, 85035) - up 11.8%
  5. Maricopa (85138 & 85139) - up 10.7%
  6. Southwest Phoenix (85043) - up 10.3%
  7. Tolleson (85353) - up 10.2%
  8. Sky Harbor North (85006, 85008, 85014, 85034) - up 10.1%
  9. El Mirage (85335) - up 10.0%
  10. South Buckeye (85326) - up 9.8%
The bottom performing areas for appreciation were as follows:
  1. Gold Canyon (85118) - up 3.1%
  2. South Tempe (85284) - up 3.5%
  3. North Goodyear (85395) - up 3.8%
  4. Downtown Phoenix (85003, 85004, 85007) - up 4.1%
  5. Northeast Phoenix (85050, 85054) - up 4.1%
  6. North Surprise (85387) - up 4.5%
  7. North Phoenix (85083, 85085, 85310) - up 5.0%
  8. North Scottsdale (85255, 85259, 85262, 85266) - up 5.1%
  9. South Scottsdale (85250, 85251, 85257) - up 5.3%
  10. Anthem (85086) - up 5.4%
For the first time in many years, the monthly dollar volume today is lower than it was this time last year. This confirms the market slowdown and indicates that the drop in monthly sales volume is now having a greater impact than the annual rise in average sales price.
The last time this crossover occurred was in December 2013. On that occasion dollar volume remained lower than the prior year for 9 months but re-crossed in September 2014 and has remained above the prior year from then until today.
If history is any guide, the dollar volume is likely to remain lower for the rest of 2018 and part of 2019. However it is unlikely to remain lower for the whole of 2019. In fact we can gauge the severity of the current downturn by how long it takes to cross back over the prior year's dollar volume. We are unable to make any specific prediction for this date, but we can see that the current downturn has so far proven to be less dramatic than the one that occurred in 2013.

Wednesday, November 14, 2018

Seller contribution to buyer closing costs...

One of the first signs of a softening market is the seller's contribution to buyers closings costs.  This can be used/justified for loan costs, repairs etc.

This is NOT reflected in the closed price so it's the first thing we start to see increasing as buyers become pickier and their expectations of homes increases.

Multiple offers go away and if your home is not on point you will sit on the market frustrated and confused.

Knowledge is power...

We leverage power into more money for you : )

Percent of seller paid closing costs.jpg


Sunday, November 11, 2018

More evidence of a 'market cooling down' (NOT a bubble burst)

Once again we are showing the table of Cromford® Market Index values for the single-family markets in the 17 largest cities:
cmi-2018-11-08.GIF
If you thought last week's average 8.4% decline was impressive, then you will be even more impressed with the 9.3% fall we have this week.
Glendale managed a very small increase but the other 16 cities saw declines, most of them over 10%.
The common story is that listings are going under contract slower than usual which makes active listings start to build up. We are NOT seeing an increase in the number of new listings arriving.
Despite the declines, all the cities (even Buckeye) are still in the seller's market zone over 110. Remember that 100 represents normality. We expect Buckeye will drop below 110 by next week, but the overall market is still much stronger than it was for most of 2014. We are approaching a more balanced market at some speed, but given the continued weak supply, we are very unlikely to overshoot. We would need a large increase in supply to create a buyer's market. It is not at all obvious where this extra supply would come from. The situation is very different from 2005 when tens of thousands of empty homes had been purchased by speculators with ill-advised and reckless loans. Anyone who thinks the current situation is a bubble bursting is very much mistaken. It is merely the normal process of an over-heated market cooling down, something we expect to see several times a decade. True bubbles in housing tend to occur once or twice a century.
_____________________
Once again, I find myself essentially highlighting the entire Daily Observation. It's so important to be able to counter sensational headlines and exaggerated points of view.
For those who fear another bubble burst I would reinforce and add to what has been quoted above:
  • The crash of 2005 - 2007 was driven by lier loans
  • By contrast, today it's an 'equity' market
  • 'True bubbles in housing tend to occur once or twice a century' - we had the 'great depression' and we had the crash of the last decade
  • The next generation (millenials) are about 5 years behind their predecessors because of economic factors
    • A Sothebys International Realty research add-on is that the millenials are about to be the beneficiaries of the larges transfer of wealth in the history of the world (Boston Consulting Group's piece for SIR called The New Affluent
  • That being said there is a housing shortage, particularly in affordable housing
Again, as a talking point, I like the verbiage 'it is merely the normal process of an over-heated market cooling down'.

The evidence that we are still more in a sellers market is evidenced by the above Cromford Market Index. 
For the uninitiated, a 'balanced' market, in terms of supply and demand, is a CMI of around 100.
The degree over 100 represents more demand than supply - sellers market
The degree under 100 represents more supply than demand - buyers market

The CMI tends to be a good short term market predictor, hence a sellers market that's cooling down. 


Thursday, November 8, 2018

Avg Price Will Jump...that doesn't mean anyone went up....

Cromford Daily Observation - There was a significant decline in the number of MLS listings going under contract in October. The total of accepted offers was 8,133 which was down 2% from September (a much shorter month with 17% fewer working days) and it was down 8% from October 2017.
However the decline was not universal across all price ranges. Almost all the decline occurred in the price range up to $225,000. This saw just 2,630 accepted contracts, down 28% from 3,651. Between $225,000 and $350,000 accepted contracts rose 5% to 3,226 while between $350,000 and $800,000 they grew 10% to 2,003. Between $800,000 and $2 million there was a slight decline of 1% to 240 while over $2 million we saw a 31% increase to 34.
Seeing the huge drop-off in contracts under $225,000 we expect to see a strong upward trend in average price per sq. ft. over the coming months, since the mix of homes closing will be skewed towards the higher end.
This is why having a solid real estate agent who understands trends and can read the market will save you time and money.  If you think because the overall average price went up without looking at the above you may be inclined to list your house to high.  This will cause you to become "market worn" and statistics show you will actually net less then had you priced it right to begin with.  This doesn't count the time, energy and expenses you lost by being on the market longer.
Imagine you sat on the market 2 months longer than you should have.  You've netted less money and you're frustrated with the process and your agent.  This is minor in comparison to the cost you incurred over the long term in a market with rising interest rates.  Let's say over that time you saw a modest increase in interest rates.  This will be an expense you have to live with for years!!  Simply because you didn't understand the stats.
Yes, data matters.  But understanding and interpretation of that data are even more important.