Days on Market - How long will you take to sell?

Probably the simplest and most useful indicator for the housing market is the Days of Inventory. This is the total number of active listings divided by the annual sales rate and multiplied by 365 to convert from years to days. This is not to be confused with the Average Days of Market which is one of the least useful indicators that is widely quoted but imparts little sense of market direction since it is a trailing indicator. Days of Inventory works in reverse (the lower the number the hotter the market) but is a leading indicator that is very useful for those wanting to know the direction of prices over the short term future.

Right now the Days of Inventory for the entire ARMLS database stands at 86. It was lower than this between April 2004 and November 2005 and between March 2012 and September 2012 and also between May and August 2013. However it is currently the lowest since August 2013 and well down from July 2016 when we saw 105.

The long term average is 149 and a figure of 86 confirms we are in a strong seller`s market but not at extreme levels. Between July 2004 and September 2005 we were below 60 which corresponded to the top of the bubble. The sharp increase from 31 in March 2005 to 67 in October was a reliable indication of the bubble popping.

Our favorite chart for Days of Inventory across the entire market is the weekly one (static chart shown below).

But don't forget the one relevant to your situation which will be more accurate by price range.  Chart just below as well.

Zillow...why is it still Active if its already sold?

Zillow is in the advertisement business.  Make no mistake.  Their income is generated from ad placement.  Ever wonder how agents get their photos on as "Premier Agents"?  They pay for it.

The cost of these online ads, like most, is priced based on activity from users.  The activity is easily tracked and typically ranks the most popular zip codes.  In Zillow's case they sell the more popular zip codes for more money.

The most frustrating and consistent conversation we have with Zillow is "Why is this house still showing Active".  Couple of reasons.  Remember, Zillow makes money from charging based on activity.  The longer you stay online searching the more they can charge.  They are in no hurry to take the house off their website.

The second reason is our Arizona MLS has a code titled UCB. When your listing gets an accepted offer, a large number of agents use Active - Under Contract Accepting Backup Offers (UCB) instead of the traditional Pending status these days. Today we have 8,048 listings in pending status and 5,177 in UCB (or CCBS) status.

Zillow does not recognize this UCB status as Pending and will show it Active even though its under contract.  

One of the other side effects of this is much higher days on market counts than we used to see. When a listing goes pending it stops accumulating days on market, but when it is in UCB status it is still on the market and continues to accumulate days on market. Today we see that pending listings have an average of 59 days on market while UCB (and CCBS) listings have an average of 80.

This increase in days on market is then reflected in the statistics for closed listings. Today we have an average of 71 cumulative days on market for listings closed in the last month. If it were back before the days of Zillow, this reading would be under 60.

This is another reason why do not recommend average days on market as an accurate way of measuring the state of the market.

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This is something we probably don't think about but should be mindful of - that when we advise the 'insurance policy' of the UCB status, we're inadvertently compromising our performance stats - both for the listing and our own.

Certainly if I feel it's in the seller's best interest to have the Under Contract Accepting Backup Offers we're going to do that. But maybe the above info should give us pause if it the deal looks solid. Judgement call.

May 2017 Annual Change in Price Per Sq/Ft

Here is a table showing the annual change in annual average price per sq. ft. for single family homes for various cities. 

The cities are ranked by the most recent annual rate of change.

City	Annual Change in Annual Average $/SF May 2015	Annual Change in Annual Average $/SF May 2016	Annual Change in Annual Average $/SF May 2017	Current Trend in Appreciation Rate
Arizona City	6.9%	8.2%	17.2%	strengthening
El Mirage	7.3%	10.1%	13.9%	flat
Avondale	5.8%	8.4%	10.0%	strengthening
Laveen	6.0%	8.6%	9.6%	weakening
Maricopa	5.5%	6.9%	9.5%	weakening
Tolleson	10.9%	5.8%	9.2%	weakening
Buckeye	5.5%	8.3%	8.8%	weakening
Apache Junction	10.4%	6.4%	8.1%	strengthening
Sun City	4.7%	10.9%	7.9%	weakening
Sun City West	4.5%	6.6%	7.9%	weakening
Casa Grande	8.3%	1.1%	7.8%	weakening
Goodyear	5.6%	4.5%	7.5%	strengthening
Mesa	4.2%	6.2%	7.0%	strengthening
Surprise	4.9%	5.9%	6.9%	flat
Queen Creek	5.7%	6.8%	6.7%	flat
Peoria	3.5%	5.6%	6.4%	strengthening
Glendale	5.8%	9.1%	6.1%	weakening
Phoenix	6.8%	7.8%	5.9%	weakening
Gilbert	2.3%	4.7%	5.5%	flat
Litchfield Park	6.5%	4.8%	5.3%	weakening
Paradise Valley	3.6%	-1.5%	5.2%	strengthening
Chandler	2.8%	5.6%	5.0%	weakening
Cave Creek	3.5%	1.5%	4.7%	flat
Tempe	4.7%	8.2%	4.2%	weakening
Gold Canyon	12.8%	-4.1%	3.6%	strengthening
Sun Lakes	4.2%	3.1%	3.6%	flat
Scottsdale	3.6%	1.2%	2.9%	strengthening
Anthem	1.8%	5.5%	2.3%	strengthening
Fountain Hills	2.3%	2.0%	0.4%	weakening

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Always quick to point out the fairly obvious inverse relationship between average price (not shown above) and appreciation. For example, Arizona city (in Pinal County) has an monthly average price of $118K, while Fountain Hills is $502K. 

Another takeaway is how you have to make the distinction between locations to have an sense of accuracy when talking about market sectors. The average annual change in Av $/SF of the 29 cities is 5.46%. This is consistent with the average long term appreciation in the Valley of about 5% per year. But look how different it is from city to city. This would be true down to the subdivision level.

I keep bringing up this point because the media reports and general laymen thinking tends to use the broad brush. Where we bring value is parsing those distinctions, or as I'm fond of saying: Mastery is the art of creating distinctions. This is one of the key ways we bring value as Realtors®.

Stop with the bubble talk....it may flatten in some areas but this is NOT a 2005

As of April 8, days of inventory for Greater Phoenix (excluding UCB and CCBS listings) stood at 74.8, the lowest level since September 2013. 

However this one number fails to explain the huge disparity between the bottom and top ends of the market. Here are the days of inventory for various price ranges:

• under $100K - 49.9 days
• $100K - $200K - 33.4 days
• $200K - $300K - 54.6 days
• $300K - $400K - 86.9 days
• $400K - $500K - 128. 2 days
• $500K - $1M - 218.6 days
• $1M - $2M - 437.7 days
• over $2M - 882.4 days

It is the $100K to $200K price range that is most stressed by the lack of supply, and within that range the $125K to $150K price range has only 28.3 days of inventory. This is the lowest level since 2005.

The range between $500K and $600K has dropped from 230.8 to168.8 days over the last 12 months, making this sector much more favorable to sellers.

Meanwhile the range over $3M has 1230.5 days of supply, up from 1129.8 this time last year, so sellers outnumber buyers to a huge extent at this rarified price point.

In some parts of the valley, the market is so hot that a few people have been drawing parallels with 2005 and expressing fear of a bubble. While I agree that the Southeast Valley, Pinal County and parts of the Northwest Valley are much hotter than they have been for a while, the market is more akin to 2013 than 2005.

I think some people forget quite how ridiculous 2005 was. It was exactly 12 years ago that:

• Days of Inventory stood at 28 (currently 85)
• Months of supply was 0.9 (currently 2.8)
• Annual appreciation rate was 27.9% (currently 6.8%)
• Dollar volume was up 43.9% annually (currently up 14.6%)
• Listing success rate was 84.3% (currently 81.9%)
• Cromford® Supply Index was 41.4 (now 72.6)
• Cromford® Demand Index was 129.5 (now 106.1)
• Cromford® Market Index was 312.7 (now 146.1)
• Average percent of list for closed listings was 99.16% (currently 97.69%)
• New homes sales were 42,724 a year just in Maricopa County (currently 13,958)

The Greater Phoenix market has a long way to go before conditions get bubbly, and we should remember how few skeptics there were in 2005 that the market could ever go down. 

Now there are skeptics everywhere, which is a very good reason that another bubble is unlikely to develop. 

The next housing bubble is likely once everyone who experienced the last one has retired or passed away.

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To that last point regarding when the next bubble will occur. I would only add what Mike Orr has said before - 

• That there has never been more than one housing market crash in a generation; 
• That today, unlike 2005 (liar loans) is an equity market - the pendulum has swung to much more conservative banking regulations for getting a mortgage and most of the distressed properties from the crash were purchased by investors for cash; 
• And that there is essentially a housing shortage, as builders have not kept up with the population growth (because of the down turn).

These are good point to keep in mind, as these concerns will come up as the economy heats up.

To me the biggest heads-up is for millennials in particular to be aware that time is not on their side if home-ownership is something they desire. 

Interest rates pretty much have to rise (the end of 'artificially low' interest rates) and the consequence of that is that for every 1% interest rates go up on an 80% loan, buyers lose 10% borrowing power. Or put another way, homes essentially become 10% more expensive.

Here it is....Year over Year Apprciation.

Here are the significant ZIP codes with the highest rise in average sale price per square foot between Q1 of 2016 and Q1 of 2017. All dwelling types are included:

1. Phoenix 85012 - up 26.5% to $222.87
2. Phoenix 85051 - up 19.0% to $106.40
3. Casa Grande 85194 - up 18.8% to $117.90
4. Phoenix 85040 - up 18.7% to $101.88
5. Phoenix 85009 - up 18.2% to $105.29
6. Phoenix 85016 - up 16.5% to $231.50
7. Arizona City 85123 - up 16.1% to $80.24
8. Phoenix 85035 - up 16.0% to $104.58
9. Wickenburg 85390 - up 15.8% to $152.69
10. Mesa 85201 - up 15.1% to $126.69
11. Glendale 85307 - up 15.1% to $113.39
12. Mesa 85213 - up 14.6% to $138.77
13. Surprise 85387 - up 14.6% to $150.95
14. Avondale 85323 - up 13.7% to $105.13
15. Peoria 85345 - up 13.6% to $120.04
16. Glendale 85306 - up 13.5% to $128.80
17. Mesa 85202 - up 13.5% to $134.10
18. Phoenix 85028 - up 13.1% to $190.71
19. Florence 85132 - up 12.3% to $89.35
20. El Mirage 85335 - up 11.5% to $106.42

We see entrants from the central valley, the west, the southeast and Pinal County in this list.

The bottom ranked ZIP codes for price appreciation between Q1 2016 and Q1 2017 are:

1. Carefree 85377 - down 9.7% to $217.25
2. Scottsdale 85262 - down 7.9% to $252.85
3. New River 85087 - down 4.1% to $134.78
4. Tonopah 85354 - down 3.6% to $77.11
5. Phoenix 85004 - down 2.6% to $278.54
6. Waddell 85355 - down 0.5% to $110.44
7. Scottsdale 85259 - down 0.2% to $223.69
8. Phoenix 85042 - up 0.1% to $119.81
9. Phoenix 85085 - up 0.2% to $139.82
10. Scottsdale 85258 - up 0.6% to $222.94

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It's becoming an old saw, but you can't look at this information without seeing the fairly direct correlation (based on location and generally speaking) between the high demand / relatively low supply of lower-end properties versus the lower demand and relatively high supply of upper-end properties. 

And then the caveat that all of you who search for that perfect property know - the truly great properties (competitively positioned) are hard to find and therefore sell at all price points, as there is always competition for 'the best'.

BTW, if you don't see the zip code you're interested in (e.g. 85018 Arcadia shown below) above you can easily and quickly email me and I can provide that to you.

Sales Growth Q1 2016 - Q1 2017

Let us try and get a picture of the sales growth that occurred in Q1 of 2017 by comparing it with Q1 of 2016.

For all property types within Greater Phoenix, we saw an overall 13.6% growth in closed listings from 13,214 in 2016 to 15,008 in 2017. Looking at dollar volumes, these grew by 21.3% from $3.6 billion to $4.4 billion.

The significant ZIP codes with the most growth in dollar volume were:

1. Wittmann 85361 - up 199%
2. Eloy 85131 - up 104%
3. Youngtown 85363 - up 93%
4. Surprise 85378 - up 88%
5. Phoenix 85031 - up 84%
6. Phoenix 85012 - up 76%
7. Glendale 85302 - up 74%
8. New River 85087 - up 71%
9. Glendale 85307 - up 66%
10. Avondale 85392 - up 65%
11. Phoenix 85085 - up 60%
12. Mesa 85201 - up 58%
13. Peoria 85383 - up 55%
14. Avondale 85323 - up 54%
15. Mesa 85202 - up 53%
16. Phoenix 85040 - up 52%
17. Waddell 85355 - up 52%
18. Mesa 85215 - up 51%
19. Phoenix 85028 - up 47%
20. Phoenix 85033 - up 47%

This list is dominated by the West Valley, particularly the Northwest Valley.

The following significant ZIP codes failed to participate in the overall trend in dollar volumes:

1. Mesa 85203 - down 19%
2. Chandler 85226 - down 9%
3. Phoenix 85053 - down 7%
4. Phoenix 85013 - down 6%
5. Phoenix 85042 - down 5%
6. Fountain Hills 85268 - down 4%
7. Cave Creek 85331 - down 4%
8. Queen Creek 85142 - down 2%
9. Phoenix 85004 - down 2%
10. Phoenix 85029 - flat

By "significant" we mean ZIP codes with at least 20 sales a year or an annual dollar volume of over $10 million.

For the Northeast Valley, we see growth in dollar volume as follows:

1. Scottsdale 85257 - up 36%
2. Scottsdale 85251 - up 33%
3. Scottsdale 85260 - up 29%
4. Rio Verde 85263 - up 29%
5. Carefree 85377 - up 28%
6. Scottsdale 85258 - up 27%
7. Scottsdale 85259 - up 25%
8. Phoenix 85016 - up 24%
9. Phoenix 85054 - up 20%
10. Scottsdale 85255 - up 20%
11. Scottsdale 85262 - up 13%
12. Scottsdale 85250 - up 11%
13. Paradise Valley - up 11%
14. Scottsdale 85266 - up 6%
15. Scottsdale 85254 - up 6%
16. Phoenix 85018 - up 5%
17. Fountain Hills 85268 - down 4%
18. Cave Creek 85331 - down 4%

Here we see the dominance of South and Old Town Scottsdale.

There are several ZIP codes that grew dollar volume but failed to grow average price per square foot. Carefree 85377, Scottsdale 85262 and Scottsdale 85259 all fall into that category. We will look at the Q1 price movements by ZIP code tomorrow.

South East Valley - Killing it!! - Market Update

Cromford Daily Observation - When we look at the market for single family homes over $500,000 we see the following changes in the quarterly average price per sq. ft.

Area	Average $/SF Dec 2015 - Feb 2017	Average $/SF Dec 2016 - Feb 2017	% Change
West Valley	$172.13	$165.02	-4.1%
Phoenix	$231.84	$230.62	-0.5%
Northeast Valley	$355.87	$352.71	-0.9%
Southeast Valley	$163.90	$173.57	+5.9%

The Southeast Valley sticks out like a sore thumb and has done for several months now. This is the only large area where homes over $500,000 have been selling for much higher average prices per sq. ft. than last year. There are certainly a few spots in the Northeast Valley and Phoenix that have done the same, such as Arcadia and Old Town Scottsdale, but when we consider the larger areas, these favorable trends are dragged down by the weak price trends in North Scottsdale, Paradise Valley, Fountain Hills, Carefree and the Biltmore District. The $/SF ratio between the northeast and the southeast has closed from 2.17:1 to 2.03 :1 over the past 12 months.

Again restricting our analysis to homes over $500,000 we can find some pretty steep rises in the quarterly average price per sq. ft. in the following southeastern ZIP codes:

• Mesa 85213 - up 26% from $131.68 to $165.85
• Gilbert 85298 - up 19% from $150.29 to $178.37
• Mesa 85207 - up 11% from $168.59 to $187.86
• Tempe 85284 - up 6% from $182.27 to $193.26
• Gilbert 85234 - up 6% from $161.58 to $171.78

All of these areas offer the buyer a good choice of large luxury style homes at relatively cheap prices, luxury homes for the budget conscious, if you like. Since this has become a visible phenomenon over the past 6 months, I wonder if there is a correlation between this favorable price trend and the creation of high-tech jobs in the Southeast Valley particularly along Rural Road. The jobs pay above-average salaries and for lower-end luxury home buyers who care about getting the maximum house for their money (and living close to a freeway so they can get to work easily), the Southeast Valley has been looking pretty inexpensive for the last several years. Of course that advantage could erode if prices continue to rise faster than the Phoenix area as a whole. As you can see in the table above, there is still a big price gap between the southeast and the northeast (and Phoenix), so the southeast still has a lot of room to run before its price advantage is gone.