This week we
have attended classes dealing with current market conditions in the Phoenix
metro area and would like to share what we have learned. Our source, as always,
is Michael Orr and “The Cromford Report” which only studies Maricopa and Pima
counties. We do not march to the same beat as the rest of the nation, so beware
what you read in national publications! This information is as of May 17, 2015.
Phoenix is
considered a recovering market and this is based on contract activity and
pending/closed sales. The “hot” areas of the Valley are the west side (west of
the 51) and the south-east. Many of these zip codes have more contracts than
listings so demand is high and inventory is low. Homes under $200,000 are
almost gone and now it is creeping up to under $300,000. The biggest feeding
frenzy is anything under $300,000 at this point in time. This is single family
homes and does not include condos, patio homes, or townhomes.
The zip codes
in Scottsdale that are also hot are 85250 and 85257 where 80 to 100% of the
listings have contracts. Paradise Valley is warm with 414 active listings and
only 22% of the listings under contract. Luxury sellers were holding back but
when they heard the market was good this Spring, many listed and that pushed
inventory to a new high. Now they either have to lower their price or pull the
homes off the market once again.
Overall demand
has returned to just above normal with little to no sign of further momentum
beyond this point. Currently the supply situation is the most important thing
to watch and this is what determines how much competition buyers will
experience. Demand usually drops once the temperature reaches 100, so we have
about 5-6 weeks of buying left for this cycle. The market slows in the summer,
bumps up a bit in the fall, and then drops again until January when our busiest
season runs until June/July. And then repeat!
Here are the
basic ARMLS numbers for May 1, 2015 relative to May 1, 2014 for all areas
& types:
- · Active Listings: 21,512 versus 26,205 last year - down 17.9% - and down 3.5% from 22,303 last month
- · Pending Listings: 7,951 versus 7,199 last year - up 10.4% - and up 1.2% from 7,853 last month
- · Under Contract Listings (including Pending & UCB): 12,276 versus 10,584 last year - up 15.8% - and up 2.4% from 11,988 last month
- · Monthly Sales: 8,363 versus 7,572 last year - up 10.4% - and up 6.0% from 7,887 last month
- · Monthly Average Sales Price per Sq. Ft.: $135.88 versus $130.27 last year - up 4.3% - and up 2.9% from $131.99 last month
- · Monthly Median Sales Price: $202,000 versus $190,000 last year - up 6.3% - and up 1.0% from $200,000 last month
From a seller's perspective there is a lot of encouragement in
this batch of numbers, though buyers might be dismayed to see price per sq. ft.
rise by almost 3% in a single month.
For the market as a whole we
currently see 3.1 months of supply, which is significantly below normal, but
not excessively so. However, when we look at the single-family market by price
range we see certain price bands with much lower supply:
- · $100K-$125K - 0.8 months (versus 1.8 on May 1, 2014)
- · $125K-$150K - 0.9 months (versus 1.9)
- · $150K-$175K - 1.1 months (versus 2.3)
- · $175K-$200K - 1.3 months (versus 2.6)
As we move upmarket from $250K,
things become a little easier for buyers because supply is less scarce. Once we
get above $400K there are more active listings than last year and most buyers
are having a much easier time with less competition from other buyers. In other
words, demand is good but supply is plentiful at these higher price points.
Although many are feeling more
optimistic about the market, and justifiably so, the lack of supply of
entry-level homes is a very troubling sign. The most obvious source of new
supply would be the large number of homes that are currently owned by landlords
and used as rentals. However vacancy rates are low, rents are rising and these
landlords would probably buy more properties if they could rather than sell
them off. There are remarkably few new homes being built below $200K and if
this situation persists, it is going to remain a very competitive struggle for
buyers. Prices are likely to rise faster than earnings. This is good for
current homeowners but bad for those currently renting and wanting to get started
in home ownership.
As always, call or email us if
you want specific information on your zip code and neighborhood. These trends
may not be applicable to your neighborhood so it is always best to run comps
rather than make assumptions!
We are here to help you!
