Though Jonathan and I like to provide market updates each week, the most accurate data comparisons are quarter vs quarter, and having just wrapped up the first quarter, we can now compare this 2016 first quarter with the first quarter of 2015, with much thanks to Michael Orr of the Cromford Report.
For readers who would prefer the, “Just get to the bottom line Mike,” in a nutshell, the market is quite healthy except for the low end (hugely diminished inventory making it tough on entry level buyers) and the high end luxury (too much supply) which is great for our high end buyers who have lots of choices.
Now a little more detail: 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 (Arizona Regional Multiple Listing Service) numbers for April 1, 2016 relative to April 1, 2015 for all areas & types:
- Active Listings: 22,493 versus 22,303 last year – up 0.9% – but down 0.4% from 22,587 last month
- Under Contract Listings: 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 vs $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
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.
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.
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.