Thursday, May 30, 2024

Market Update 5/2024

 The latest S&P / Case-Shiller® Home Price Index® numbers were published this Tuesday.

The new report covers home sales during the period January to March 2024. This means the typical home sale closed in mid February, more than 3 months ago. Please remember that Case-Shiller data is fairly old, even on the day it is released.

A big turn-around has taken place in the last 2 months. We have all 20 cities showing rising prices for last month. The Pacific coast had another remarkably strong month.

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

  1. Seattle +2.70%
  2. San Francisco +2.59%
  3. Cleveland +2.40%
  4. San Diego +2.23%
  5. Boston +1.88%
  6. Los Angeles +1.70%
  7. Chicago +1.66%
  8. New York +1.50%
  9. Portland +1.47%
  10. Minneapolis +1.34%
  11. Denver +1.33%
  12. Washington +1.27%
  13. Dallas +1.19%
  14. Atlanta +1.15%
  15. Detroit +1.14%
  16. Miami +0.96%
  17. Charlotte +0.96%
  18. Las Vegas +0.92%
  19. Phoenix +0.53%
  20. Tampa +0.50%

Phoenix has fallen from 14th to 19th place since last month. The national average increase month to month was 1.29%, so Phoenix under-performed significantly against that benchmark.

Comparing year over year, we see the following changes:

  1. San Diego +11.1%
  2. New York +9.2%
  3. Cleveland +8.8%
  4. Los Angeles +8.8%
  5. Boston +8.7%
  6. Chicago +8.7%
  7. Miami +8.2%
  8. Seattle +7.8%
  9. Detroit +7.7%
  10. Las Vegas +7.7%
  11. Charlotte +7.5%
  12. Washington +7.0%
  13. Atlanta +6.1%
  14. Phoenix +4.9%
  15. San Francisco +4.9%
  16. Tampa +3.8%
  17. Dallas +3.6%
  18. Minneapolis +3.3%
  19. Portland +2.2%
  20. Denver +2.1%

Phoenix stayed at 14th place, and is therefore still in the bottom half on a year over year basis. 

All 20 of the cities are again showing positive price movement from one year ago with Denver and Portland at the bottom. Southern California and the North are in the lead.

The national average is +6.5% year over year. Phoenix is below that percentage, and in a similar situation to last month.

Cromford Daily Observation ~ 

The typical 30-year fixed mortgage rate has been varying between 7% and 7.25% since May 6, which is better for buyers than the 7.25% to 7.5% range that we saw between April 11 and May 6.

Despite the better rates, demand has stayed weak and even weakened a little further. The number of listings under contract across all types and areas within the ARMLS database is 8,779. This is down 7% from the 9,441 we saw on April 27. It is also down almost 10% from this time last year.

As we approach the hottest months of the year, when demand tends to fall anyway, this weakness is not encouraging. 

Supply continues to rise, although slowly and the current trends are suggesting continued deterioration for sellers. It would not be a surprise if demand were to fall enough to match the supply of active listings over the next several weeks.

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I can offer a more positive assessment with a simple bifurcation of the market over vs. under $800K:

Up to $800K Listings Under Contract - our best barometer of sales - activity is off 12.5% Year-over-Year ~

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$800K plus Listings Under Contract are up 2.2% Year-over-Year ~

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Further, as you go up in price range there is a year-over-year increase in demand.
In fact, the $1.5 plus market is up 11% year-over-year ~

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In sum, there's an inverse relationship between price and demand - as you go up in price range, demand increases.

Takeaways ~
  • That last line is a good market summation - 'as you go up in price range, demand increases'.
  • This bifurcation has been with us for some time as the rise in interest rates have impacted affordability.
  • Since inventory is increasing, this spells opportunity for those who can manage the rates e.g. knowing they can always refinance if rates moderate (in an election year).
  • And for the more resilient luxury sector, well, money continues to move to Arizona!

Monday, May 27, 2024

AZ Real Estate Market Update - Holding On!!

 Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities ~

cmi-2024-05-23.gif

The average change in CMI over the past month is +0.1%, down from +0.8 last week and continuing the downward trend that started last week.

We have only 5 cities showing an increase in their Cromford® Market Index over the past month, while 12 have declined. This is also less positive than last week.

Paradise Valley, Fountain Hills and Goodyear are the biggest movers in favor of sellers. Tempe, Glendale, Gilbert and Maricopa are the primary locations moving in favor of buyers.

Now that Chandler is losing steam, Fountain Hills has a chance to replace it at the top of the table.

11 out of 17 cities are seller's markets. We have 2 cities (Goodyear and Surprise) that are balanced, while 4 are buyer's markets.

Thursday, May 16, 2024

AZ Market Actually Balanced In Total BUT.......location matters.

 The Cromford® Market Index for all areas and types has declined a little further over the last week and dropped below the 110 mark, meaning we officially classify the market as balanced.

The decline has been very slow so there is no likelihood of anyone feeling the difference from one week to the next. However supply keeps creeping higher and demand remains very weak.

There is also a big difference between areas like Chandler and Gilbert which remain under firm control by sellers and areas like Maricopa and Buckeye where buyers have a strong advantage due to the plentiful supply, which includes a large number of newly built homes.

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The 'official' classification of a balanced market (Cromford Market Index +/- 100) is the product of your primary year-to-date taking point:

 'YTD we're experiencing a steady and largely disproportionate increase in inventory relative to demand.' 

Presently general demand is off 10% (without parsing price range).

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Here is the CMI graph so you can see the aforementioned trend ~

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Bifurcation ~

Looking at the market below $1M we have Demand off 11% year-over-year...

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.Demand in the $1M plus market is up just over 7%

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So, while bifurcation continues it's less pronounced in the luxury sector because 'money is moving to the valley' together with an inherently more resilient higher end sector e.g. 53% of transactions over $1.5M are cash.

Takeaways ~

Beyond the basic one line summary characterizing the market - 
  • 'The broad increase in inventory relative to demand is giving us a relatively balanced market (supply vs. demand).'
As usual, price point and location matter mightily.
  • The above graphs show the 18% spread between the down 11% market under $1M vs. the plus 7 market over $1M

Mastery is the art of creating distinctions,