Almost back to normal : )

We've been closely monitoring Under Contracts (the current number of listings under contract) as the best real time indicator of the local markets recovery from the consequences of the 'lock-down'.

Looking at this past week's chart: 

Week 21 of 2020 - 11,666 transactions Under Contract

Week 22 of 2019 - 11,945 transactions Under Contract

Because this is such a positive indicator, it's like a contest, where the 'fun' is seeing if we can reach or surpass 2019 in Under Contract listings. 

Adding to the drama: Historically about this time we begin to see a seasonal decline in the Under Contract curve, as nature turns up the heat. Can we do it? Stay tuned! 

We speculate that the pandemic is doing 2 things - pushing our high season forward and increasing the inmigration numbers, as Arizona becomes an even more popular place to call home.

Monthly Drop Off But Still Positive - Annual Appreciations Still #1 - 8.2%!!

Cromford Daily Observation - We have posted the latest Case-Shiller® numbers to our long term chart shown below:

The latest series relates to sales between January and March 2020. For most of the 20 metropolitan areas prices accelerated compared with the previous month.

Comparing with the previous month's series we see the following changes:

1. Seattle +2.54%
2. San Francisco +1.78%
3. San Diego +1.56%
4. Boston +1.53%
5. Chicago +1.46%
6. Cleveland +1.40%
7. Tampa +1.32%
8. Denver +1.30%
9. Minneapolis +1.26%
10. Charlotte +1.23%
11. Washington +1.19%
12. Los Angeles +1.15%
13. Phoenix +1.08%
14. Las Vegas +1.02%
15. Atlanta +1.00%
16. Portland +0.71%
17. Miami +0.67%
18. Dallas +0.56%
19. New York +0.20%
20. Detroit - data not available

The national average was +0.84% so Phoenix increased at higher than the national average, despite slipping from 5th to 13th place compared with last month..

The year over year comparisons are below:

1. Phoenix 8.2%
2. Seattle 6.9%
3. Tampa 5.8%
4. Charlotte 5.8%
5. Minneapolis 5.3%
6. San Diego 5.2%
7. Cleveland 5.0%
8. Portland 4.9%
9. Atlanta 4.9%
10. Boston 4.8%
11. Los Angeles 4.4%
12. Las Vegas 4.4%
13. Washington 3.9%
14. Denver 3.7%
15. San Francisco 3.5%
16. Miami 3.4%
17. Dallas 2.8%
18. New York 2.1%
19. Chicago 1.6%
20. Detroit - data not available

The national average was 4.35 %. Phoenix remained in the top spot and now has a gap of 1.3% over the number 2 city - Seattle.

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MikeB Commentary: The benefit of the above is, of course, the national context and perspective. 

I always have to bring up that this data is a 3 month look back. So it's not reflecting the pandemic. Looking forward, my guess is we'll see month-over-month spikes, as the popularity of 'less dense' Phoenix is rising.

Also, interesting how closely we track with Seattle long term, albeit our market is much more affordable. I happen to be one of those who've traded 320 days of overcast for 320 days of sun...and haven't looked back:)

Ps. Just what Is the S&P CoreLogic Case-Shiller National Home Price Index you ask?

The S&P CoreLogic Case-Shiller National Home Price Index measures the change in the value of the U.S. residential housing market by tracking the purchase price and resale value of single-family homes that have undergone a minimum of two arm's-length transactions. The index, widely viewed as a barometer of the U.S. housing market and broader economy, is named after two of its creators: Karl Case and Robert Shiller.

The Covid Turn Around

Another good historical 'lesson' we can take from the statistical market 'Extremes' we saw yesterday is how the Active Listings in Chart 1 exploded from a low in April of 2005 (8,342 active listings) to over 58,000 in October of 2007 - the consequence of the rise and fall in Demand from 2004 through 2007, shown in Chart 2. 

Chart 1: Active Listings Long Term

Charts 2 and 3 below are also instructive, showing in Chart 2 how even as Sales per Month were plummeting, reaching their low point in January of 2008 of 2,517, Chart 3 shows Sales Prices continuing to rise for 18 months (that red line in Chart 3 shows prices continuing rising for 18 months, even as sales numbers were falling, just before the dramatic, but inevitable collapse of prices). 

Historical 'lesson': Sales Prices are a lagging indicator. 

Chart 2: Sales per Month Long Term:

Chart 3: Average Sales Price Long Term:

To this day we continue to measure current market prices against 'the peak' back in 2007 as a barometer of recovery.

You can see in Chart 3 how we've exceeded 'the peak' Valley-wide in 2020. 

Actionable: It's an interesting exercise to see how your clients area of interest compares with the peak e.g. areas like Arcadia have far exceeded the peak, while other areas like North Scottsdale and Gilbert are riding at or just under the peak.

You can easily generate that data Statewide with your Collateral Analytics account - using the 5-year Forecast that not only shows today as compared with the historical trend, but gives us a 'bank grade' look ahead.

Discussion Point: These Long Term trend charts anchor us in the reality that in spite of the real estate crash in 2008, the consistent Demand evidenced in Sales relative to Supply of Actives continues to inform us of why we have AND WILL LIKELY CONTINUE TO HAVE steady, nation-leading appreciation.

This big picture helps provide a context for the current 'artificially induced pandemic pause' that ironically may produce an even greater surge of activity, as population preferences shift from density to our more horizontal spaces.

Money  Point: As has been focused on multiple occasions recently, the Under Contract stat is our best near term predictor. We see it as not only a welcome sign of recovery and market resilience, which, btw, is today off only 10% year-over-year.

What we've been living through these past 8 weeks may amount to a blip in the long term radar - to the extent the Long Term trend of Demand exceeding Supply in Arizona continues.

Price per sq/ft is good...sometimes.

Q: What do Paradise Valley, Rio Verde and Eloy have in common?

A: Not much, except for a 13% plus year-over-year increase in average Price per Square Foot ($/sq ft)!

Year-over-year Annual $/SF by 41 Valley cities: 

Historically, we see increases in Annual $/Sq Ft correlate more with price range - the lower price range cities, where so much of the competition is, rising more quickly. So the above chart is interesting in not following suit.

What's 'annoying' about $/sq ft generally is how frequently it's referenced, while being a very 'broad brush' in property evaluations - not parsing important distinctions in variables like, condition, age, style and location. This, of course, explains why AVM's (automated valuation models like Zillow) so often miss the mark, to the extent they put too much weight on $/Sq Ft.

Yet, $/Sq Ft is an important benchmark. For example, properties can be 'over-improved', taking them far above the justifiable average $/Sq Ft for that market segment.

RLSIR proprietary tool: Our Collateral Analytics account can give you a 'bank grade' AVM - a great differentiator for you and counter to the Zillow Zestimate you're confronted with online.

My advice: When you as a seller pulls out their Zillow Zestimate, rather than get on the defensive (since Zestimate tends to too high, setting a false expectation), a great strategy (and forgive me if you've heard this before - it's such a great strategy I bring it up often) is to say 'congratulations on doing your homework...you're using a consumer-grade tool, known to have accuracy issues. I have a 'bank-grade' tool that I'd love to share with you.' And that being said, always remember that no AVM can trump the street-level knowledge derived from a carefully crafted CMA. 

The power in a 'bank-grade' AVM is that when it agrees with your CMA assessment, it gives you more gravitas, so you can better influence a buyer when making offers on your home.

Covid Impact & the Turnaround

Although sales counts are still way below normal, we are seeing a strong recovery in the number of listings under contract this week.

Demand established a bottom over the past 4 weeks and is now rising again. A break of the 10,000 listing count is a clear positive signal that buyers are still very interested in Greater Phoenix housing.

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Properties going 'Under Contract' is our best indication of the strength / pace of recovery. As the State 're-opens' it will be most interesting to monitor this metric. 

What we might expect is that pent-up demand will cause that 2020 trend line to bypass 2019 going into the summer months. In other words, hopefully we'll see the strongest sales in the upcoming summer months ever. 

For reference, the chart below shows ARMLS sales by month over the last 10 years. Keep in mind closings represent properties that went under contract 30-45 days earlier. 

We see historically how the Phoenix Metro isn't as 'seasonal' as some might expect. For example, November closings (written in the heat of September / October) are off about 30% from the height of closing in May (written in the Valley 'high season' of March / April). Yet, it's very much a year-round market.

The point is this year, assuming pent-up demand, we might speculate this differential could be all but erased. 

We'll see.