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The Gainey Ranch Gurus

The Gainey Ranch Gurus

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Realty Executives Phoenix

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STAT Market Update

(Published on - 5/2/2016 5:41:44 PM)

Each month Tom Ruff of The Information Market gives his stellar commentary on the housing market. Tom is armed with Pending data of which others do not have access. His insights are below. Read the full issue of STAT for the accompanying graphs.

The first quarter officially ended with a sales volume increase of 3.14% over last year. We have averaged nearly 311 sales per day compared to 306 last year so far in 2016, taking into consideration that there were 62 business days in the first quarter of 2016 compared to 61 in 2015. The increase in sales volume was accompanied by annual increases in both the median sales price as well as total inventory. The median sales price saw a 7.87% increase with total inventory numbers up 4.5%. The increase in total inventory broke the pattern of steady declines seen since last year. Even with the increase, total inventory is below normal levels with serious shortages at the lower end of the market. Our rising but lower than normal inventory levels are best explained by the handsome and articulate Mike Orr of the Cromford Report:

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.

I thought it might be interesting to look at quarterly Maricopa County real estate activity as an average business day. Think of it as a day in the life of the real estate market via public records. I’ve attempted to group the data by areas of focus. When reviewing the numbers you’ll see just how consistent and stable our market has been year-over-year with just a few exceptions. The data is a compilation of Maricopa County public records data enhanced with MLS data. Side note – all of the data is accessible in Monsoon.

Foreclosures
2016-04-28_12-11-16
Anyone hoping to buy a property on the court house steps has limited opportunity and can expect professional competition as only 8 properties per day are successfully purchased, just over 6 properties per day are returning to the banks.

Bank Sales
2016-04-28_12-11-40
If no one bids on a property after going to auction it reverts to the beneficiary, in most cases a bank. The bank will then sell the property or deed it to a guaranteeing government entity such as HUD, VA, Freddie Mac or Fannie Mae. GSE stands for a Government Sponsored Enterprise and consists of Fannie/Freddie sales. Simply put, 6 properties per day are returning to the banks via foreclosures and 8 bank sales are occurring for a net reduction in REO inventory of 2 each business day. 8 ARMLS STAT MARCH 2016

Distressed Sales
2016-04-28_12-11-56
Active notices refer to homes that were sold while in foreclosure. By definition, a notice of trustee sale had been filed against the homeowner and the property has a scheduled auction date. An active notice gives a home owner additional motivation to sell. Active notices are being used as a lead source by agents for perspective sellers. Most of the properties that have an active notice sell as short sales. The active notice tag just stresses an added urgency to sell. Agents specializing in this arena are selling about 9 homes combined per business day.

Flips
2016-04-28_12-12-21
Flips are defined as any home that was purchased and then resold in a 6 month period. There are two basic types of flips, wholesale and retail. The wholesale market takes place primarily between investors and these flips can be identified by a very short period of time between the purchase and sale with smaller mark ups. Most flips are retail and this is where it gets interesting as they tell us quite a bit about our market. Flips are normally purchased at below market prices, renovated and then sold for prices that fall into the upper range of what the market will bear. Flips account for 23 home sales per business day.

Traditional Sales & New Construction
2016-04-28_12-12-41
Our market is now dominated by traditional sales. New construction is up approximately 36% year-over-year and is one of the exceptions I mentioned earlier. This is good news for our economy as it means not only an increase in construction jobs but also an increase in business for the trades that market to the buyers of newly built homes.

Financing Activity
2016-04-28_12-13-04
The two tables above compare year-over-year financing activity by daily averages and the ratio between the mortgage amount displayed on the deed of trust and the sales price reported on the affidavit of value. These tables compare March 2015 data and March 2016 compiled from Maricopa County public records. When we look at the yearover-year percentage change of these we see the second notable change in our housing market, an increase in conventional financing. The tables above and chart on the next page clearly reflect this change. What’s the significance of this change? I don’t believe it’s an 9 ARMLS STAT MARCH 2016 indication of buyers having more cash for down payments, but rather an indication of buyers either trading up or trading down and using the equity in the home they are selling to make their new purchase. This is an emerging trend and definitely good news.

ARMLS Pending Price Index (PPI)
2016-04-28_12-13-16
Our last Pending Price Index projected a March median price of $215,000 with the actual median coming in at $215,800, off by 0.37%. Sales volume in March as reported by ARMLS was 8,412 which was 412 sales more than our projected volume of 8,000. Looking ahead to April, the ARMLS Pending Price Index projects a median sales price of $220,000. We begin March with 7,476 pending and 4,538 UCB listings giving us a total of 12,014 residential listings practically under contract. This compares to 11,997 of the same type of listings at this time last year. We expect sales volume in April to be very similar to the numbers last year with an increase in the median sales price. Our projected sales volume for April is 8,400. March was a great month over all as it increased in year-over-year sales volume by 6.5% and the median sales price increased by 7.9% over last year’s numbers. In closing I’d like to share a quotation from Sean Becketti, Chief Economist at Freddie Mac, referring to his outlook for the national housing market in 2016:

Housing markets are poised for their best year in a decade. In our latest forecast, total home sales, housing starts, and house prices will reach their highest levels since 2006. Low mortgage rates, robust job growth and a gradual increase in housing supply will help drive housing markets forward. Low levels of inventory for-sale and for-rent and declining housing affordability will be major challenges, but on balance the nation’s housing markets should sustain their momentum from 2015 into 2016 and 2017.

The post STAT Market Update: March 2016 appeared first on ARMLS Blog.


Market Summary

(Published on - 4/1/2016 10:08:29 PM)

 

Michael Orr

Journal Columnist

Founder and Owner, Cromford® Report 

 

During 2015 the Greater Phoenix housing market gained strength from February through July with tight supply below $250,000 and healthy demand for the mid ranges between $250,000 and $500,000. The high-end luxury market also had an excellent first half, but lost a lot of momentum in its upper ranges from August onwards. The rest of the market hesitated for a few months during the late summer and early fall but at the end of the year was regaining momentum again. This was particularly true for new homes which had their best month since 2008.

 

As 2016 starts, the market is in much better shape than it was at the start of 2015. Every measure is looking better for sellers than it was in January 2015, except for the appreciation rate. This has eased slightly but remains about ten times higher than the overall economy’s official rate of inflation, the Consumer Price Index.

 

The one serious problem that remains is that supply continues to be very poorly matched to demand.

 

In the ranges below $250,000 prices are still being driven higher by chronic weak supply and continuing demand from investors, boomerang buyers and millennials entering the market for the first time. Annual appreciation tends to be in the 6 percent to 12 percent range for this price segment. Lending standards remain stubbornly high, but if this were to change, as we keep being told it will, we could see increased demand in this price range. Unfortunately for buyers, this would further exacerbate the supply problems and lead to more price rises. A few builders, notably D R Horton & LGI Homes, have started to offer more homes in this price range but so far it has not made a big contribution to expanding the supply. To keep the price competitive many of these homes are a long way from the center of the valley. Not every buyer is willing to drive until they qualify.

 

From $250,000 to $500,000 we see much healthier levels of supply that are largely keeping up with robust, though not exceptional, demand. We have seen price increases for homes in the move-up price segments at the relatively modest level of 2 percent to 6 percent per year. The supply of new homes is increasing which helps to moderate upward pricing pressure, especially as overall demand remains constrained by financing issues. Buyers are increasingly being selective given their wider choice. Less attractive or competitively priced listings risk being left behind. This is generating more frequent price cuts.

 

Above $500,000 there is plentiful supply in most areas, with prices showing little upward movement except in the most fashionable locations. Those fashionable locations include Central Scottsdale (especially 85251 and 85250), Arcadia and a few of the newer communities in 85255. Jumbo financing to buyers with excellent credit is still very attractively priced and this helps to keep the market moving. However, we are just not seeing enough buyers to keep the supply from growing now that out-of-state demand is weakening. This is especially true of homes that are more than 20 years old and those in far flung areas of the valley.

 

New home closings were surprisingly strong in December and reinforce the theme that buyers are especially attracted to modern designs these days. The huge increase in permits that we saw in 2015 suggests that developers expect to grab market share away from re-sales.

 

Urban living is gaining popularity, but there are precious, few opportunities to buy new townhomes and condos in the most fashionable locations. New construction is still focused on providing apartments for rent. In time, we will see that wave receding and more construction of urban homes for purchase.

 

The West Valley had a stand-out year in 2015 but we anticipate that the Southeast Valley may be the area to watch in 2016. This especially applies to those areas close to the 101, 202 and 60 freeways and the major shopping areas like Tempe Marketplace and Mesa Riverview. South Scottsdale is also a promising spot, as is both Downtown and Uptown Phoenix.

 

We anticipate only small increases in pricing during the first quarter of 2016 with increases at the low end being offset by weakness at the high end. The mid-range is likely to see little movement unless there is a surge in demand.

 

Population and job growth are still moving in positive directions for Central Arizona, but there are ominous developments in the global economy that have the potential to disrupt the U.S. housing market to a limited extent. Luckily Arizona (unlike many of the central states) is no longer very dependent on energy products or commodities like cotton, citrus, copper and cattle. As long as the climate and economy continues to attract people from all over the country, the consequent increases in population are likely to keep the local housing market in a healthy state.

 

 


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