Contracts up 19% in this Price Range!

Contracts up 19% in this Price Range!
Flip Sales Rebounding Strong after Weak First Quarter

For Buyers:
New listings activated in June were down 10.0% compared to last June and overall supply has dropped 9.5% in 4 weeks, putting it below last year’s count for the first time all year.  Buyers have gotten used to very little supply under $200K but now they’re feeling it hard between $200K-$250K, where new listings were down a whopping 15.1%.  Trying to fill the gap, brand new town home/condo sales have been strongest between $200K-$250K with a median size of 1,362sf.  The top two builders that have sold the highest number of condos in this price range this year are Lennar in Gilbert and DR Horton in Mesa.  Other competing developers building multi-family between $200K-$250K include Bela Flor in Mesa and Maracay in Goodyear.  In Mesa, new condos in this price range have been extremely competitive with resale with an average price per square foot of $155.70 versus $157.47 for resale.

For Sellers:
Listings in escrow are up 7.4% and have soared nearly 19% over last year between $250K and $600K.  Homeowners with property valued under $250K are inundated with offers from investors as flip sales* have rebounded strongly over the past few months.  Making up for lost time after being down 4.2% in the first quarter, successful flip sales have now outperformed 2018 by 4.8%. The median sale price for a flipped home in May was $245K, up 8.4%, and the average size sold was 1,710sf.  The median gross gain for a traditional flip investor was $53K between their acquisition and sale price.  iBuyer companies such as OpenDoor, OfferPad and Zillow showed a median gross gain of just $9,900, however that doesn’t account for significant service charges to the sellers during escrow.

*A flip sale is defined in this case as the sale of property within 6 months of acquiring it.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2019 Cromford Associates LLC and Tamboer Consulting LLC

Posted on July 31, 2019 at 8:51 pm
Eric Karlene | Category: Market Updates - Cromford Reports | Tagged , , , , ,

Sellers: Stop Trying to Time the Market

List Price Reductions up 24% in Greater Phoenix, Up 42% in Some Areas
Sellers: Stop Trying to Time the Market

For Buyers:
A weak 4th quarter for sales in 2018 has resulted in 11,874 price reductions in the first 5 weeks of 2019.  That’s 24% higher than this same time last year.  Price reductions on listings between $200K-$500K specifically are up 40%.  The most notable price range with a 42% increase is $200K-$250K. This may come as a surprise to some because this price range is below the median sales price of $263K.  However this area is currently a battleground of competition between traditional sellers, flip investors and new construction as inventory is up 26% and contracts are down 10%.  Flip investors acquire and sell over 50% of their inventory in this price range.  New home builders increased their sales by 22% in this range last year. Traditional sellers are now under more pressure to improve the condition of their home and provide incentives for buyers in order to compete.

For Sellers:
This is not a good time for sellers to get caught up in timing the market so as to sell their home at the ideal “peak of price”.  While it’s understandable for sellers not to want to leave any money on the table, the reality is that price peaks don’t happen in seller markets.  They occur in balanced markets.  Balanced markets are fine to sell in, but they’re not as fun or profitable for sellers as they expect; especially if their property is hard to sell due to condition or location.  As the seller market continues to weaken, it’s more important than ever for sellers to list their property while they still have the advantage of low competition, price it competitively and don’t spit on the first contract.  Buyer activity, while lower, will continue to accelerate through May.  This is go time.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2019 Cromford Associates LLC and Tamboer Consulting LLC

Posted on February 13, 2019 at 7:26 pm
Eric Karlene | Category: Uncategorized | Tagged

Nov 2018 – The 4th Quarter is Seasonally the Best Time to be a Buyer

New Listings Up 18% in October between $250K-$400K
The 4th Quarter is Seasonally the Best Time to be a Buyer

For Buyers:
Seasonally the 4th Quarter is the best time to be a buyer and this year is no exception.  Typically buyer contract activity is at its strongest from March through May and weakest between November and January.  Buyers who were out-bid by competing offers last Spring will have a different experience now.  October saw 18% more new listings hit the market between $250K-$400K compared to last October while buyer contracts are about the same within the same price range.  There was only a 1% increase in new listings in the lower price range between $200K-$250K but a 12% drop in buyer contracts which caused overall supply to rise another 11%.  The market is still a seller’s market, but more seller competition for fewer buyers translates into more price reductions and seller concessions until the Spring “Buyer Season” is upon us once again.

For Sellers:
The market may be softening between $200K-$400K (which accounts for over 56% of MLS sales), but that doesn’t mean sellers are getting a raw deal.  Monthly average sale prices per square foot in this price range have appreciated 5% since October last year and nearly 19% in last 5 years.  Under $200K, the appreciation rate is 9.5% in the past year and 44% in 5 years.    $400K-$800K has appreciated 6% in the last year and 14% in 5 years and the annual average sale price per square foot* over $800K has appreciated 3% in the last year and 10.5% in 5 years.  What’s happening underneath that contract price, however, is an increased cost to sell at “top dollar”.  That cost can take the shape of longer days on market with multiple price reductions, repairs, needed upgrades to the home prior to list and closing cost assistance.

*Annual averages are used in the higher price ranges to mitigate the sharp price fluctuations that affect this market.
Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2018 Cromford Associates LLC and Tamboer Consulting LLC

Posted on November 14, 2018 at 4:53 pm
Eric Karlene | Category: Uncategorized | Tagged , , , , , , , , , , ,

Price Reductions up 27% on Active Listings Between $250K-$400K

Seller Concessions Spike on Listings Sold Between $200K-$250K
Price Reductions up 27% on Active Listings Between $250K-$400K

For Buyers:
October marks the 4th month in a row that supply has continued to rise between $200K – $400K, which is good news for many buyers as it provides them with more choice and fewer competing offers.  However, for those buyers with budgets under $200K, this trend in supply doesn’t apply to them and their choices are still extremely limited.  Last January, inventory under $200K made up 18% of all active listings.  Within that price range, single family homes made up 50%, condos and townhomes 30%, and mobile homes 20%.  As of this month, inventory under $200K only makes up 12% of actives and has declined 36% since January.  Single family homes make up 45%, condos and townhomes 36%, and mobile homes 19%.  This drop in supply equates to 591 fewer single family homes, 198 fewer condos and townhomes, and 229 fewer mobile homes available for sale under $200K since the beginning of 2018.

For Sellers:
When supply rises, sellers react in a number of ways to compete with one another for the existing buyer pool.  One option is a price reduction on their active listing prior to contract. This does not necessarily result in a decline in sale price, only a decline in sellers’ expectations for appreciation.  Sales price trends may still continue to rise, but perhaps only at 5% instead of 8%, for example.  Another option is to agree to a concession, such as paying a portion of closing costs or a home warranty; and finally to agree to a much lower sale price than what they were asking. Typically sellers agree to the first two options before submitting to a “low ball” contract, which is why sales price trends are the last measures to respond to a shift in supply and demand.  With that being said, weekly price reductions this month between $250K-$400K are up 27% compared to last year, while price reductions between $200K-$250K are only up 1.7%.  However, seller concessions on sales between $200K-$250K reached 41% so far this month compared to last quarter’s measure of 36%.  Only 21% of sales between $250K-$400K recorded a seller concession.  Which leads us to conclude that sellers below $250K are agreeing to more concessions than price reductions; while sellers over $250K are submitting to more price reductions.  Despite this slight weakening in sellers’ advantage, Greater Phoenix is not close to a balanced or buyer’s market so expect overall prices to continue rising over the next 3-6 months.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2018 Cromford Associates LLC and Tamboer Consulting LLC

Posted on October 9, 2018 at 6:55 pm
Eric Karlene | Category: Market Updates - Cromford Reports | Tagged , , , , ,

August 2018 Market Update – Supply between $200K-$250K has Risen 8.1% since May

Supply between $200K-$250K has Risen 8.1% since May
Seller Price Reductions Up 7% in Popular Price Range

For Buyers:
If your budget lies somewhere between $200,000 and $400,000 for a home, there’s good news for you.  Supply between $200,000 and $250,000 has been rising gradually over the past 12 weeks.  After dropping 15% from 2,300 listings in January to 1,944 in May, it has since risen 8.1% to 2,101 listings in August, placing it only 6.7% below last year’s count instead of 18% below like it was 3-4 months ago. Listings between $250,000 and $400,000 have also risen sharply 5.3% from 4,791 to 5,044 over the past 4 weeks, placing them only 0.2% below last year’s count of 5,053 listings. The increase in competition has resulted in a notable 7.3% increase in weekly seller price reductions from an average of 778 per week in June to 835 in July.  56% of year-to-date sales in Greater Phoenix have been between $200K-$400K so this increase in supply should come as a little bit of relief for the majority of buyers.

For Sellers:
If you have a home listed between $200,000 and $400,000, then you make up 48% of everything that’s listed in the MLS.  Listings under contract in this price range have averaged 7.4% higher in volume than 2017 all year, until now.  Over the last two weeks, including the end of July through the first week in August, listings in escrow have dropped to 2.2% below last year’s level.  Buyer activity is expected to slow seasonally from the peak in April through the end of the year; however open contracts have dropped 26% since the 2018 April peak compared to a lower 20% drop in 2017 over the same time frame; all while corresponding supply has been rising.  Sellers haven’t seemed to notice this sharper decline as their average asking price per square foot has soared from just 3% higher than last year in March to as high as 7% higher in July.  The average sales price per square foot was up 5.9% in July, compared to 4.6% in June.  However, price is a lagging responder to shifts in supply and demand. We will have to wait and see if buyers accommodate sellers’ price expectations given that they have more to choose from in the marketplace right now.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2018 Cromford Associates LLC and Tamboer Consulting LLC

Posted on August 12, 2018 at 11:21 pm
Eric Karlene | Category: Uncategorized | Tagged , , , , , , , , , ,

Is Greater Phoenix “Overvalued”?

Is Greater Phoenix “Overvalued”?
Mortgage Payments Are Lower Than They Were 13 Years Ago

For Buyers:
Interest rates have been increasing along with the inflation rate as of late, which has spawned a string of headlines about affordability. While the rate hike has knocked some buyers out of the market without a doubt, general affordability hasn’t taken a big hit yet.  According to the National Association of Home Builders and Wells Fargo, buyers making the median family income could still afford 65% of what sold in the Valley last quarter.  A measure between 60-75% is considered normal.

Let’s look at the historical cost of a 1,900sf home in Greater Phoenix, for example.  In March 2005, a home that size would run $281K on average.  Today that same home would be $309K, $28,000 more (+10%).  However, the interest rate back then was 5.9% compared to 4.5% today, meaning that the principal and interest payment has dropped nearly $100 from where it was 13 years ago for the same home.  At the same time, the median family income rose from $58K to $69K according to HUD (+19%).  Which is why despite recent increases in interest rates, the affordability of real estate in the Valley is still considered very good.

For Sellers:
Last April CoreLogic released a report ranking the Greater Phoenix area as “overvalued”. In fact, they placed 37% of our nation’s top 100 metropolitan areas in that category.  As of May, after 6 years of higher-than-normal appreciation rates, the monthly average sales price per square foot has finally reached its place along the long-term 3% appreciation line established between 2000-2003 before the 2005 bubble and 2008 crash.  Meaning that if we had fallen asleep in 2003, and the last 15 years were just a long horrible dream, we would have woken up today and not known anything had happened.  Prices are where they would have been had the market followed the average long-term rate of inflation.  That brings to light that current appreciation rates of 6% or more are no longer sustainable in the long term.  However that doesn’t mean that prices will “peak” or “crash” anytime soon.  Most likely as demand slowly wanes, prices will go flat and hang out until they once again fall in line with the rate of inflation, but don’t expect that to happen in 2018.  Supply and demand measures today indicate another 3-6 months of positive appreciation for the majority of homes priced below $400K.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2018 Cromford Associates LLC and Tamboer Consulting LLC

Posted on June 14, 2018 at 4:49 am
Eric Karlene | Category: Market Updates - Cromford Reports | Tagged , , , , , , ,

When is the Phoenix Housing Market Going to Slow Down?

 

  • Even though median prices are within 98% of the peak, the fact that interest rates are so much lower today means that homes are still affordable.
  • The median family income has risen $11,000 since 2005, indication there is room for families to bear the increase in price.
  • Despite appreciation rates higher than the rate of inflation over the past 7 years, families making the median income could afford 65% of what sold in Greater Phoenix last quarter.
  • Overall Greater Phoenix home prices have finally reached where they are supposed to be historically and it’s expected to continue rising through the end of 2018.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2018 Cromford Associates LLC and Tamboer Consulting LLC

 

Posted on June 8, 2018 at 4:07 am
Eric Karlene | Category: Uncategorized | Tagged , , , , , , , , , , ,

May 2018 Market Report – Good time to List Luxury Properties

Supply between $175K-$200K dropped 18% in 3 Weeks
Summer is a good time to List Luxury Properties over $500K

For Buyers:
Supply under $200K has continued to drop rapidly, but the $175K-$200K range has accelerated its decline over the past month far more dramatically than any other price range. After being consistently 30-35% below last year, the active supply level dropped a whopping 18% in a 3-week period putting the current count for this group 44% below last year. Single family homes only make up 41% of active listings under $200K, but they account for 69% of actives between $175K-$200K. As more buyers are looking to condos and townhouses for affordable housing, supply for attached homes under $200K has dropped 33% over the last year. However, condo supply between $200K-$300K has actually risen 10% while single family homes in the same price point have dropped 15%.

For Sellers:
We are officially at the peak of the market seasonally for listings in escrow. Over the next few weeks, especially as temperatures reach over 100 degrees in the Valley, expect to see a gradual decline in buyer contracts that will continue through the end of the year. This is a seasonal trend that consistently happens every year and in every price point, even the frenzy market under $200K. The one exception is the luxury market over $500K. While it’s typical to see a decline at the beginning of Summer like everyone else, escrow counts tend to drop for a couple months and then go flat until the end of the year. In fact, luxury supply drops more than buyer activity does in the Summer making it a great time to list luxury property for those willing to brave the heat between June and September.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2018 Cromford Associates LLC and Tamboer Consulting LLC

Posted on May 15, 2018 at 10:11 pm
Eric Karlene | Category: Market Updates - Cromford Reports | Tagged , , , , , , , , , , , ,

April 2018 – Market Update – MLS Sales Outperform non-MLS Sales in Frenzy Market

MLS Sales Outperform non-MLS Sales in Frenzy Market
Supply Under $200K Down 36% Over Last Year

For Buyers:
Greater Phoenix ended the 1st Quarter 13% lower in supply, which was not helped by a 2% decline in new listings entering the market. All price ranges are below last year’s level of supply with the exception of the $1M+ market, which is up 1.5%. On the opposite end of the spectrum, supply under $200K is down 36% from last year and all prices in between are down 10%. Buyer competition is typically at it’s strongest at this time of year and is expected to begin tapering off seasonally in May or June.

For Sellers:
Despite the highly competitive, fast appreciating environment in the $100K-$200K market, more sellers decided not to list their home on the MLS and many chose to sell to an investor instead. This is ironic considering MLS sales in that price range sell for 12% more per square foot on average compared to normal non-MLS sales, which could equate to a $12,000-$22,000 gap. Additionally, the annual average sales price per square foot rose faster for MLS sales in this range at 7.9% while non-MLS sales rose only 6.0% over the last year.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2018 Cromford Associates LLC and Tamboer Consulting LLC

Posted on April 15, 2018 at 10:18 pm
Eric Karlene | Category: Market Updates - Cromford Reports | Tagged , , , , , ,

March 2018 Market Update – Median Sale Price up $20,000 over March 2017

 

Median Sale Price up $20,000 over March 2017
17% of Sales are Closing Over Asking Price

For Buyers:
The percentage of seller concessions awarded to buyers has dropped down to 24% in the first quarter of 2018 after 2.5 years of consistently landing between 26%-28%, yet another indicator of dwindling buyer negotiating power in a prolonged supply shortage. The highest percentage of closings with seller concessions in the last 30 days were sale prices between $150K-$250K at 30-36%. Buyers were most likely to get closing costs in Youngtown at 54%, followed by Buckeye at 52%. Cities with the smallest percentage of closing costs were in affluent and retirement areas such as Paradise Valley, Sun City West and Sun Lakes at 2-3%.

For Sellers:
The percentage of successful sales over asking price is increasing. So far in March, 17% of sales closed over list price, last March it was 14%. Properties sold between $100K-$200K had the highest percentage at 24%, followed by the $200K-$300K range at 18%. The market between $300K-$1M is the most improved with 12% sold over list compared to only 7% last March. There were zero sales over list in the market over $1M. Areas with the highest percentage are El Mirage and Youngtown, both at 50%, followed by Tolleson with 45.5% of sales closing over asking price.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2018 Cromford Associates LLC and Tamboer Consulting LLC

Posted on March 16, 2018 at 4:41 pm
Eric Karlene | Category: Market Updates - Cromford Reports | Tagged , , , , , , , , ,