Monday, August 31, 2020

Year Over Year Appreciation

 ranking.gif

This table ranks the cities by their annual average sales price per square foot. Only single-family detached homes are included in these numbers. Information for the 12 major and 17 secondary cities is current as of the date shown. Data for the 14 small cities is updated on a monthly basis and is measured on the 13th of each month.

The primary function of this table is to show the least and most affordable areas in the Phoenix metropolitan area together with longer-term pricing trends.

Annual averages are based on a relatively large number of sales. Therefore they are not as subject to rapid change as monthly averages. The downside is that they do not necessarily represent the current market very accurately, since they include sales from up to a year ago. Pricing may have moved a great deal since then.

Note that Higley has been included in Gilbert and Ahwatukee included in Phoenix. Desert Hills is still counted separately though it is increasingly being incorporated into Phoenix.

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The Cromford table above is simply a good perspective and reference. It can help reinforce the reality that city markets and really all submarket sectors can vary substantially.

Also, you might expect there'd be a correlation between price range and appreciation. However, presently not so much. And we see some surprises. For example, Rio Verde is the 5th most expensive (by average price per square foot) with among the highest year-over-year appreciation. Interesting.

One practical use for this chart is understanding broad-brush appreciation figures are just that, not reflecting the relative strength or supply/demand characteristics of submarket locations and price points.

Yet another good argument for specialization.

Wednesday, August 19, 2020

We usually focus most of our attention on the ARMLS home territory - what we refer to as Greater Phoenix. This comprises all of Maricopa County, most of Pinal County (except a few small villages near Tucson), and a few small communities in Yavapai. However, the listings on ARMLS do include out-of-area properties and in 2020 they have been doing some interesting things from a statistical perspective.

In July there were 602 out of area listings that closed. This is up a colossal 125% from July 2019 and by far the highest number of closings we have ever seen in a single month for out of area listings. It also surpassed June 2020 which had set the record of 494 a month earlier. June was up 105% from the year before.

This appears that this new trend represents an "Escape to the Country" where people crave locations far away from the big cities of Arizona and California. Many have a desire for larger lots that are more affordable in rural locations. A similar effect is taking place in the UK, where London is falling in popularity and the far-flung areas of the country are seeing a surge of demand for homes. A highly infectious pandemic can have such effects. Certainly there was no sign of this trend before March.

The most popular locations for these closings in July are as follows:

  1. Sierra Vista 145 (2)
  2. Prescott 56 (40)
  3. Flagstaff 56 (31)
  4. Payson 49 (45)
  5. Overgaard 25 (22)
  6. Show Low 23 (11)
  7. Hereford 23 (0)
  8. Prescott Valley 19 (20)
  9. Douglas 16 (10)
  10. Pinetop 14 (6)

The numbers in parentheses are the closings in July 2019. We can immediately see that Sierra Vista is responsible for the largest part of the increase. Until March 2020, Sierra Vista closed listings rarely exceeded 1 or 2 per month on ARMLS. We have already seen 45 so far in August and there are plenty more to come. Neighboring Hereford has also burst onto the 2020 ARMLS scene from nowhere.

Among the more traditional out of area spots for second homes, Flagstaff, Pinetop and Show Low have increased the most in popularity.

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You know Mike Orr (founder of the Cromford Report) is a Brit when he uses the phrase 'escape to the country' - Apparently in the UK they might say countryside, where Stateside we might  say 'rural'. You Brits can correct me on that if I'm missing it. But there's evidence in doing a Google search, as I just did, looking for more support for what Mike Orr's just published in the above Daily Observation. 

What I found was an abundance of British articles speaking to what appears to be an international trend, at least in the West - the desire for more space, as working from home with high-speed connections makes feasible. Here's an excerpt from one of those articles that might amuse you: 


EEveryone’s moving out of town and into the countryside, and no wonder. I did it myself five years ago. We were going away at weekends a lot, and whereas in the past I’d always come back to London and think ‘That was lovely and now hurrah, we’re home,’ I was now thinking, ‘Ugh, London,’ and immediately trying to work out how soon we could get away again. If lockdown has shown you an alternative way of living and you have that feeling too, listen to it. It doesn’t abate. All that happens is that you get older. Read on, and if you still fancy it — do it. (Hurry up — prices are rising by the week.)

Being a statewide company, locally we see some evidence of this in our internal email system, as more Valley agents have outbound clients seeking representation 'out-of-area'

In that regard, keep in mind our RELO department will help you find the right out-of-area; out-of-state; or even out-of-country agent for your buyer and / or seller referral. You can participate in the agent selection process and they'll keep you in the loop all the way, including managing all the details... with no charge to you!

RLSIR's RELO department is among the best in the nation and as such a phenomenal resource for you. In our Orientation classes (next one this Friday) I always love pointing out our V.P. and Director of Relocation, Connie Swenson, has won about every award there is in the relocation sector...more than once. Truth.

As our client's lifestyle preferences shift no other company is better suited to help those transitions than Russ Lyon Sotheby's International Realty. 

No small part of our job representing our clients is knowing about brand resources and metering out that knowledge as appropriate. Get to know Connie, her team and what they have to offer. They'll be thrilled to help and you and your client will be rewarded accordingly.

Btw, on the flip side, Zillow has recently reported that they DO NOT see a spike in suburban searches. They report both suburban and urban homes are selling fast. And we would also point out that for committed city-dwellers the Phoenix Metro has long been an attractive alternative to Chicago, New York and Los Angeles. One does need to keep perspective here.

It will be fascinating to continue to monitor buyer preferences in this so-called 'new reality'.

Monday, August 17, 2020

Are we slowing down? Ummm NO!

 That's a question I got over the weekend - in particular, for the high-end, where there's typically a seasonal slowdown.


The short answer is we continue to buck the seasonal historical trend across all price points.

The chart below shows the year-over-year market for mid-August is up 20%:
Mid august.jpg
The chart below shows the Listing Under Contract Activity, color coded by price range:

Listings UC by price range.jpg
The chart below is UC $2M plus:
Listings UC by price range over 2M.jpg
UC over $3M:
Listings UC by price range over 3M.jpg
While this is a bit hard to read, the clear take-away is that we see a very robust market continuing, in spite of the very robust triple-digit temperatures!

Wednesday, August 12, 2020

Appreciation Numbers AZ

 The affidavit data for Maricopa County is now available and shows us the following:

The total number of closed transactions was 11,205. This is up 4.7% from July 2019 and the highest monthly total since May 2018. The median sales price was $325,000, up 13.6% from $286,000 a year ago.

For new homes, the transaction count was 1,662. This is up 22.9% from July 2019. The median sales price was $363,511, up 2.1% from $356,001 a year ago.

For resale transactions, the count was 9,543. This is up 2.1% from July 2019. The median sales price was $317,000, up 14.4% from $277,000 a year ago.

The sales volume went some way towards compensating for the lack of sales during April and May.

Sales prices look very strong, partly because the luxury market came roaring back after taking a big break during April and May.

All these numbers are for Maricopa County only, and include single-family and condo / townhouse properties.

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That highlighted statement above 'Sales prices look very strong, partly because the luxury market came roaring back after taking a big break during April and May' - begs the question as to how the annual appreciation breaks out by price range.

This is what it looks like today:

appreciation by price range.jpg
One of my pet subjects to rail against is the mis-use of the statistical broad brush e.g. when my client may have heard that appreciation is 'x', making you a little crazy, as their particular area of interest e.g. their home's subdivision, is probably quite different. 

While it's a problem when client's conflate stats, it's also an opportunity for us to offer the expertise, our resources to help them make more intelligent decisions.

An example of a resource I can use - is the proprietary Intelligence Report from the Collateral Analytics subscription that will nail the last 2 year-over-year summary stats down to the subdivision.

For example, here's the Intelligence Report for Grayhawk (master planned community in N. Scottsdale):
Intelligence Report Grayhawk.jpg

Tuesday, August 4, 2020

Breaking Records Post 1

We are at a point in the Greater Phoenix housing market where many all-time records are being broken. These are significant enough that we will devote an observation to each one rather than group them all together.
First let us look at the monthly average sale price per square foot for all areas & types. This stands at $190.87 today, This is significant because it breaks the record of $190.61 set as long ago as May 5, 2006. The difference is that May 2006 represented the dying peak of a bubble which would see prices fall dramatically from June 2006 through March 2009.
The current reading does not look like a peak at all:
20200801-spsf.gif
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Modest appreciation, at long term historical norms of around 5% per year is very palpable. 

The kind of accelerated appreciation we're experiencing now however, born of demand far outstripping supply makes us nervous. Our minds quite naturally harken back to the run up to the crash. Today there are significant differences we cited yesterday - those 5 (let's make it 6) rock solid talking points to manage people's fear. I repeat here for direct relevance to the chart above that suggest continued upward pressure on prices:
  1. Demand exceeds supply: While we don't have a crystal ball, we can say with confidence that as long as a long term sustained demand outstrips a finite supply there will be more of same.
  2. Low Interest rates: This is really a very different cycle from the liar loans that drove the hyper appreciation that preceded the crash. To the extent rates remain in the + /- 3% range it's almost like free money - potential buyers can't save fast enough to overcome the one-two punch of the future inevitability of higher rates and current appreciation.
  3. Equity market: Unlike 2006 - 2009 (when there was a point half of Arizonans were under water) liar loans are gone and home equity has been restored. 
  4. Housing shortage: The housing shortage that isn't going away any time soon, as millennials come of age.
  5. Inmigration from coastal cities is a trend that has been accelerating, with no end in sight.
  6. Shifting home priorities e.g. as more people will continue to work from home post pandemic.  As we've reported locally, a resurgence in the desire for more space.