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CROMFORD REPORT

The Cromford Report™, courtesy of Michael Orr, Director Center for Real Estate Theory and Practice at

WP Carey School of Business/Arizona State University, provides detailed information to track the history and current status of the Greater Phoenix residential resale market and offers unique insight into its future direction. 

 

February Mid Month Pricing Update and Forecast

Each month about this time we look back at the previous month, analyze how pricing has behaved and report on how well our forecasting techniques performed. We also give a forecast for how pricing will move over the next 30 days.

For the monthly period ending February 15, we are currently recording a sales $/SF of $130.82 averaged for all areas and types across the ARMLS database. This is 0.5% above the $130.11 we now measure for January 15 and represents a small increase in average pricing, as forecast. In fact our forecast range was $129.13 to $134.41 with a mid-point of $131.77. Last month's forecast was 95 cents above the actual price per square foot measured, but well within the forecast range. 

On February 15, REO sales across Greater Phoenix (all types) averaged $83.12 per sq. ft. (down 1.5%). Pre-foreclosures and short sales averaged $98.43 (down 11.3%) while normal sales averaged $135.44 (up 1.3%). The market share of normal sales dropped from 89.6% to 89.1% over the last 31 days. REOs gained market share from 6.2% to 6.5%. Short sales and pre-foreclosures also rose from 4.2% to 4.4%. Despite the increase in distressed home share, the 1.3% rise in the average price per sq. ft. of normal sales carried the day.

On February 15 the pending listings for all areas & types showed an average list $/SF of $130.80, 0.4% above the reading for January 15. Among those pending listings we have 84.4% normal, 6.7% in REOs and 8.9% in short sales and pre-foreclosures. This is a large decline in the share for distressed homes, which will be positive for pricing as we move into March. The average pricing for pending listings within Greater Phoenix on February 15 in each category was: $137.77 for normal, $92.31 for short sales & pre-foreclosures and $86.03 for REOs. The figure for REO sales is higher than last month, but those for short sales & pre-foreclosures and normal sales are lower. 

Our mid-point forecast for the average monthly sales $/SF on March 15 is $132.18, which is 1.0% higher than the February 15 reading. We have a 90% confidence that it will fall within ± 2% of this mid point, i.e. in the range $129.54 to $134.82. Our forecast this month is therefore for a slight move higher in sales pricing over the next month. This also happens to follow a pattern which is common in most years where pricing moves higher during the spring season.

We are seeing much stronger upward movement in pending listing counts and under contract counts than we did last month or last year. We therefore expect good demand during the spring selling season and no significant downward pressure in pricing.

Supply numbers are still weaker than last year at this time, so the market is shaping up quite nicely for sellers as long as they are patient. If the current trends continue and spread through more market segments then we could see prices regain a little upward momentum later in the year.

Market Summary for the Beginning of February

January was a mixed bag. 

Supporting the pessimists we saw weaker sales counts than last year (down 1.7%) and lower prices than in December (median down 1.0%, $/SF down 0.8%). We also witnessed the pending listing count failing to beat last year, though it did rise 27.7% during January.

Supporting the optimists, the active listing count (excluding UCB) rose only 6% during January and remains 6.2% below the same point in 2014. More importantly, the under contract count rose 30.5% during January and finally overtook last year, beating it by 2.1%.

Overall it looks like a reasonable but not at all spectacular start to the year. Supply remains weak, especially at the affordable end of the market. At the top end supply is starting to pack on weight and sellers of luxury homes are going to be facing more competition.

Contract activity is definitely looking up, although this is strongly weighted towards UCB status and away from pending status compared to earlier years. As long as we assume that most agents are using UCB "incorrectly" and that most of the UCB listings would have been designated as pending six years ago (pre Zillow's dominance), then the picture looks consistent with a very modest recovery in demand. 34% of normal listings under contract are now coded as UCB. Six years ago this was just 7% (when it was called AWC). The shift towards UCB has been strong and relentless and is still moving in the same direction.

Sellers at the low and medium price ranges have some valid reasons to feel hopeful as we head into the prime selling season. Buyers are certainly not in trouble yet, but they need to keep an eye on supply. If that starts falling early this year we could see the re-emergence of multiple bids over the next 21 months.

Here are the basic ARMLS numbers for February 1, 2015 relative to February 1, 2014 for all areas & types:

  • Active Listings (excluding UCB): 23,950 versus 25,541 last year - down 6.2% - but up 6.0% from 22,604 last month
  • Active Listings (including UCB): 27,095 versus 28,413 last year - down 4.6% - but up 8.7% compared with 24,918 last month
  • Pending Listings: 5,631 versus 5,723 last year - down 1.6% - but up 27.7% from 4,410 last month
  • Under Contract Listings (including Pending & UCB): 8,776 versus 8,595 last year - up 2.1% - and up 30.5% from 6,724 last month
  • Monthly Sales: 4,781 versus 4,862 last year - down 1.7% - and down 26.1% from 6,466 last month
  • Monthly Average Sales Price per Sq. Ft.: $130.87 versus $125.54 last year - up 4.2% - but down 0.8% from $131.87 last month
  • Monthly Median Sales Price: $195,000 versus $183,000 last year - up 6.6% - but down 1.0% from $197,000 last month
The first time home buyer is critical to the next stage of the recovery. Some writers point to signs of the Millennial generation becoming home owners in normal numbers at last. I am not seeing convincing evidence of that yet, though that could be because it is still too early to detect. Those involved in credit repair appear to be busy, so I suspect improvement in demand may be more connected to former home owners coming back onto the market after their long time-out in the penalty box.
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Annual Appreciation by List Price Range 

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Click on tabs to right for Paradise Valley and Scottsdale reports.   Contact me if you would like this The Cromford Report™ information emailed directly to you each week or if you would like information on other metro cities.

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