june phoenix east valley real estate market report

June 2014 Phoenix Market Report

June 2014

Phoenix Real Estate

Market Report


Market Snapshot – All MLS

Market Summary for the Beginning of June The market balance is still weighted towards buyers, but not quite as much as in April. Demand fell back again in May after some improvement in April, but supply dropped a little faster during May than we expected and this has compensated for the weakening demand. Overall we are not seeing much change over the last few months and we are still eagerly waiting for some more significant developments, one way or the other. Boring is the worst situation if you are in the analysis and commentary business. Luckily Phoenix rarely stays boring for long. Here are the basic ARMLS numbers for June 1, 2014 relative to June 1, 2013 for all areas & types: Active Listings (excluding UCB): 25,555 versus 15,466 last year - up 65.2% - but down 2.5% from 26,205 last month Active Listings (including UCB): 28,950 versus 19,467 last year - up 48.7% - but down 2.4% compared with 29,647 last month Pending Listings: 6,965 versus 9,662 last year - down 27.9% - and down 3.3% from 7,199 last month Under Contract Listings (including Pending & UCB): 10,360 versus 13,663 last year - down 24.2% - and down 2.1% from 10,584 last month Monthly Sales: 7,497 versus 9,275 last year - down 19.2% - and down 1.7% from 7,629 last month Monthly Average Sales Price per Sq. Ft.: $127.40 versus $120.26 last year - up 5.9% - and down 2.0% from $129.94 last month Monthly Median Sales Price: $192,250 versus $176,500 last year - up 8.9% - and up 1.2% from $190,000 last month Some misguided souls are still blaming the weak demand on interest rates. Given that rates have moved lower over the last few months and are not far about historic lows, this does not hold water. The best I can say about that point of view is that it is more credible than blaming the weather, especially across the southwest where demand has fallen hardest. (Continued next page…)



Now we are seeing an increasing number of commentators adding to the discussion of what we believe are more realistic causes of the continued weak demand for homes to buy, not just in Phoenix but across much of the country:

• low participation by first time home buyers • the inhibiting effects of massive student loan debt • millennials preference for the flexibility of renting • the foreclosure wave in 2008 through 2012 which has introduced a new sensitivity to the fact that home ownership can sometimes be

financially hazardous • a large tranche of former home owners who have not yet repaired their credit enough to re-enter the market • low rates of household formation, especially among 20-30 year-olds • a growing wealth gap causing stronger demand for high end homes but leaving large numbers of people renting for the foreseeable

future

As usual, the most popular doom theories have proven false. Institutional investors are holding onto their properties, rather pleased with the strong demand from tenants and the resulting upward pressure on rents. A tiny number have been sold, fewer than the small number that have been added to their inventory. Of course we only include real institutional investors in our calculations. Just because you buy 10 rental properties in a year does not make you an institution. That criterion, used in the last year by both RealtyTrac and CoreLogic to define "institutional investors" may be convenient for the programmer who has to extract the numbers, but it is plain silly when applied to the real world and suggests a lack of understanding of the investment market. Institutions have to be carefully identified based on their corporate structure, ownership and buying patterns. I know dozens of ordinary individuals in Phoenix who buy more than 10 properties a year. It is ridiculous to call them institutions. They are just professional real estate investors and Phoenix has always had a strong contingent of these. Lumping these folks in with real institutions like Blackstone, FREO, AH4R, ARPI, Colony etc. is wrong.

In May we saw just 18 closed sales of homes priced over $2,000,000. This is a surprisingly weak showing compared with April's 39. Homes over $1,000,000 represented 10.7% of the dollars spent in May, well down from the 13.4% in April. May is usually a strong month for closings of high end homes. However the strong performance of the ultra-luxury market may not be over yet, because the pending listing counts for homes of $2,000,000 and over rose to 32 from 29 between May 1 and June 1.

The lower sales of ultra-luxury homes has hit the average price per sq. ft., which lost a full 2% over the last month. It would not be surprising if we saw a small bounce back in June if and when those 32 pending transactions close. Nevertheless the fall in annual appreciation rates over the last month has been quite dramatic and we are now back into "normal" levels of 5% to 6% instead of the 15% to 20% we saw just a few months ago. I expect this rate will bounce around but continue to trend lower over the next 6 to 9 months.



Cromford Demand Index™ is a value that provides a short term forecast for the demand for resale homes in the market. It is derived from the trends in pending and sold listings compared with historical data over the previous four years. Values above 100 indicate more demand than usual, while values below 100 indicate less demand than usual. A value of 100 indicates the demand is close to normal. Cromford Market Index™ is a value that provides a short term forecast for the balance of the market. It is derived from the trends in pending, active and sold listings compared with historical data over the previous four years. Values below 100 indicate a buyer's market, while values above 100 indicate a seller's market. A value of 100 indicates a balanced market. Cromford Supply Index™ is a value that provides a short term forecast for the supply of resale homes to the market. It is derived from the trends in active listings compared with historical data over the previous four years. Values above 100 indicate more supply than usual, while values below 100 indicate less supply than usual. A value of 100 indicates the supply is close to normal.


Active Listings – All MLS


Sales Per Month– All MLS


Average Sales Price– All MLS


Market Snapshot – Mesa


Active Listings – Mesa


Sales Per Month– Mesa


Average Sales Price– Mesa


Market Snapshot – Gilbert


Active Listings – Gilbert


Sales Per Month– Gilbert


Average Sales Price– Gilbert


Market Snapshot – Chandler


Active Listings – Chandler


Sales Per Month– Chandler


Average Sales Price– Chandler


Market Snapshot – Tempe


Active Listings – Tempe


Sales Per Month– Tempe


Average Sales Price– Tempe


Market Snapshot – Queen Creek


Active Listings – Queen Creek


Sales Per Month– Queen Creek


Average Sales Price– Queen Creek


Market Snapshot – Scottsdale


Active Listings – Scottsdale


Sales Per Month– Scottsdale


Average Sales Price– Scottsdale


Market Snapshot – Gold Canyon


Active Listings – Gold Canyon


Sales Per Month– Gold Canyon


Average Sales Price– Gold Canyon


Market Snapshot – Apache Junction


Active Listings – Apache Junction


Sales Per Month– Apache Junction


Average Sales Price– Apache Junction

june phoenix east valley real estate market report

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