The market in 2016 has continued to follow predictable patterns, following the usual seasonal trends and largely mirroring the market of 2015. However, 2016 is having a stronger second half for sellers than 2015: we see higher sales and an increasing appreciation rate. We nearly always see a rise in active inventory between September and the beginning of December and this year is no exception. The rise is slightly below normal in most areas, with just a few exceptions, notable the city of Surprise, where it is bigger than usual, and Chandler where inventory has fallen.
Buyers are probably feeling disappointed by the sub-par influx of new listings and the fact that much of the existing re-sale inventory is a little stale, especially in the higher price ranges. To compensate, new homes are being constructed at a faster rate than we have seen since 2007.
The top end of the luxury market, over $2 million, had a much better October than last year, with more sales volume and higher pricing. However, the market between $500,000 and $2 million is still not firing on all cylinders and must be considered the weakest price range. Some major areas that used to be popular are now going out of fashion; impacted by excessive inventory and lack-luster buyer demand. At the same time, there are also areas which are in fashion and generating strong demand (looking at you Arcadia). Location is crucial for this price range.
Below $500,000, the market is looking healthy across the board with supply getting tighter and tighter as we drop down in price. Consequently, appreciation is strongest in the lowest price sectors of the market.
Overall the market is looking healthy with no significant signs of dysfunction. Provided that lenders continue to slowly improve availability of loans, modest increases in interest rates should not disrupt the market. However, the possibility of a sudden, unexpected and large rise in mortgage rates could take the wind out of certain buyers’ sails.
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Commentary by Michael Orr with the Cromford Report