What Does the Phoenix Housing Market Look Like?

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Today, we’re talking about what happened in the Phoenix real estate market during the first quarter this year. Specifically, we’ll compare data from March 2015 to March 2016.

Interestingly enough, there wasn’t a huge difference in listings. Last year, we had 10,627 enter the market. This year, we saw 11,318 new listings at a 6.5% increase. In 2016, there were 25,496 active listings around this time. Comparatively, this number increased to 26,275 by 3% this year.

The amount of homes sold is up by 8%. A total of 8,514 sold this year compared to 7,871 last year. That’s an admirable jump.

Inventory has remained flat. Last year, we experienced around 3.24 months of inventory compared to 3.09 this year. This isn’t a significant difference.

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The amount of homes sold is up by 8%.

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Another thing is that while we didn’t have many Canadian buyers coming in, we had quite a few Canadian sellers listing their homes on the MLS. They likely took advantage of the exchange rate, but this activity didn’t impact the market overall.

Additionally, election years are excellent for the real estate market. That means this year is absolutely an opportune time to buy or sell a home. However, you’ll have to wait until my next video for more information about that!

If you’re thinking about buying or selling a home in the surrounding area, give me a call or send me an email!

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 Cromford Report:

The market conditions remain very diverse with different price ranges in dramatically different situations. We will start with the overall numbers and then break them down to try to make more sense of what is going on.

Here are the basic ARMLS numbers for April 1, 2016 relative to April 1, 2015 for all areas & types:

• Active Listings (excluding UCB): 22,493 versus 22,303 last year - up 0.9% - but down 0.4% from 22,587 last month
• Active Listings (including UCB): 27,398 versus 26,436 last year - up 3.6% - and up 0.9% compared with 27,146 last month
• Pending Listings: 7,522 versus 7,853 last year - down 4.2% - but up 4.3% from 7,214 last month
• Under Contract Listings (including Pending & UCB): 12,427 versus 11,986 last year - up 3.7% - and up 5.6% from 11,773 last month
• Monthly Sales: 8,548 versus 7,893 last year - up 8.3% - and up 46.6% from 5,829 last month
• Monthly Average Sales Price per Sq. Ft.: $138.96 versus $131.99 last year - up 5.3% - and down 1.7% from $141.09 last month
• Monthly Median Sales Price: $215,000 versus $200,000 last year - up 7.5% - and up 1.4% from $212,000 last month

Closed sales were very strong in the final week of March, which had the side-effect of dropping the under contract count sharply from the week before. However sales, pending listings and under contract counts are all up from both last month and last year. This represents a firming of demand, which has brought the Cromford® Demand Index to a level we have not seen since June 2013, almost 3 years ago. This demand increase mainly affects the price range from $175,000 up to $600,000.

Dollar volume in March was $2.291 billion. This is up 13% from last year (8% from higher volume and 5% from higher prices). The dollar volume for the first quarter was also up 13% compared with 2015.

The supply of active listings is now higher than 12 months earlier for the first time since December 2014. However the Cromford® Supply Index has stopped rising and reached a plateau of 81.3, telling us we have a continued shortage of homes for sale compared with a normal market. This is deceptive for much of the market because almost all of the missing homes for sale are at the affordable end of the market below $175,000, where they are missing in huge numbers. The absence of the normal low end supply is not just in homes for sale. Affordable homes for rent are also extremely scarce. Entry level buyers and potential tenants are facing strong rises in price with no sign of relief.

To illustrate the huge differences between the entry level price sector, the mid-range and the high-end, let us do some simple comparisons. El Mirage, a city with a population of about 33,000 has 9,429 single family homes within its ZIP code according to the Maricopa County Assessor. Litchfield Park has a much smaller population of only 5,300, but its ZIP code extends far beyond the city boundaries and includes 9,678 homes, of which 8,884 are single family. They are roughly the same size market but the average Litchfield Park home is priced much higher than the average El Mirage home. To represent the higher end of the market we selected Fountain Hills 85268 which has 8,413 single family homes, but also has 4,571 condos & townhomes (which we excluded from our comparison).

Single Family Homes at April 1, 2016	El Mirage 85335	Litchfield Park 85340	Fountain Hills 85268
Number of single family homes in ZIP Code	9.429	8,884	8,413
Active Listings (excluding UCB & CCBS)	32	177	327
Percentage of Homes for Sale	0.3%	2.0%	3.9%
Pending Listings	56	55	32
UCB & CCBS Listings	20	44	26
Average List price of Active Listings	$173,881	$468,331	$878,111
Median Sales Price Annual Sales	$145,000	$250,000	$422,000
Annual Sales	641	571	501
Turnover Rate	6.8%	6.4%	6.0%
Average Cumulative Days on Market (Annual Sales)	41	78	130
Average % of Final List Price Achieved at Closing	99.0%	97.9%	96.1%
Days of Inventory (excluding UCB & CCBS)	18	113	238
Annual Change in Annual Average $/SF	10%	2%	-1%
Contract Ratio	238	56	18

The number of sales in each of the 3 ZIP codes is similar and roughly in line with the number of homes that exist, a 6% to 7% annual turnover (much lower than in the early 2000s).

Supply is very scarce in El Mirage, adequate in Litchfield Park and excessive in Fountain Hills where 1 home in 25 is listed for sale and has no contract. Consequently, prices in El Mirage are moving up at about 10 times the rate of inflation which those in Litchfield Park are just a tad above inflation. Prices in Fountain Hills have been declining. Notice that it is the supply that is driving pricing in all 3 cases, not the demand.

So the low-end of the market has too little supply while the high end has too much. The mid-range is in the happiest "Goldilocks" state, with neither too little nor too much. Mid-range prices are stable and volumes are growing. Since the mid-range is by far the most important sector for the construction industry this is excellent news for most builders.

Despite the excessive supply, the high-end luxury market had a good first quarter from a volume perspective, with 79 closed sales for ARMLS listings priced over $2 million. This compares well with 68 in the first quarter of 2015 and we have to go all the way back to 2008 to find a first quarter with higher sales volume. The abundance of supply means there is plenty of choice for high-end luxury buyers and they are finding homes they like. For sellers it means they will need plenty of patience because of all the competition from other sellers. It also means they may have to settle for a lower contract price than they anticipated, especially if they are accustomed to looking up their home on Zillow.