The story in Phoenix real estate remains consistent this year. Overall, supply is tight in the lower price ranges (under $500k) with home values increasing at a faster rate than at higher price points. The market starts to balance out for buyers and sellers above $500,000 depending on the location.
Here are the numbers from the Arizona MLS for June.
- Active Listings (excluding UCB): 18,087 versus 20,458 last year – down 11.6% – and down 2.1% from 18,476 last month
- Monthly Sales: 9,512 versus 8,996 last year – up 5.7 – but down 3.5% from 9,858 last month
- Monthly Average Sales Price per Sq. Ft.: $151.83 versus $140.97 last year – up 7.7% – and up 0.9% from $150.46 last month
- Monthly Median Sales Price: $245,000 versus $230,000 last year – up 6.5% – and up 2.1% from $240,000 last month
With prices up almost 8% (based on monthly average $/SF) it should not be surprising that demand is tailing off. If demand were increasing in the face of such a strong price increase we would be suspecting the illogical enthusiasm associated with a bubble. As it is, the market is well behaved and shows none of the symptoms we associate with a market bubble.
Two trends we are seeing in our market right now.
- High demand for remodeled, move-in ready homes. Buyers are willing to wait and pay more for a home that’s been recently updated or remodeled. Homeowners thinking of selling should seriously consider making updates to their home to increase it’s appeal and value to shorten the time spent on the market.
- Sellers overestimating the value of their homes. We are seeing a lot of price reductions daily on our MLS. Even with lower than normal inventory, buyers are not willing to pay more for a home in less than perfect condition that requires major updates and/or repairs. By chasing unrealistic prices, sellers are missing out on buyers who can realistically purchase their home. Pricing your home right is essential for a successful sale. If you’re thinking of selling, contact us today for a complimentary, no obligation home evaluation to determine the true market value of your home in today’s market.
For a detailed breakdown on the market conditions in your area and how they may impact your goals to buy or sell, contact Carmelle AZ Homes at Info@CarmelleAZHomes.com or call 480-648-9253.
*The Cromford Market Index is a value that provides a short term forecast for the balance of the market. It is derived from trends in pending, active and sold listings compared with historical data over the previous four years. Values below 100 indicate a buyers market, while values above 100 indicate a seller’s market. A value of 100 indicates a balanced market.
Scottsdale Market Commentary
July 11 – The Northeast Valley has under-performed the rest of Greater Phoenix for the last 2 years but is now showing some encouraging signs. The annual single-family sales rate has increased from 6,508 to 7,009 since July 2016, a rise of 8%, while the number of active listings (excluding UCB & CCBS) has declined by 11%. This combination means that days of inventory have fallen from an above average 201 to a below average 168. This is good for sellers.
When days of inventory readings are below average we tend to see appreciation show up. Comparing the second quarter that has just finished with last year`s second quarter, the average price per sq. ft. for single-family homes is up 6.5%, the best result for any quarter in the last 2 years. Even homes over $1 million are up by 4.9%.
The effect is not uniform by geography however. It is the south and central parts of Scottsdale that have seen the strongest price trends. Again comparing 2Q 2016 with 2Q 2016, we see:
- 85250 up 15%
- 85251 up 12%
- 85257 up 10%
- 85254 up 9%
- 85258 up 9%
- 85260 up 6%
Not so good are:
- 85268 down 2%
- 85377 down 2%
- 85255 down 2%
However parts of the far north have bounced back a bit after a dismal time in 2016.
- 85266 up 8%
- 85262 up 5%
The most positive sign is that supply is down from last year and that sales rates are now high enough to avoid the excesses of supply that we experienced in 2016. Sellers must hope that these sales rates can be maintained.
Existing owners are still down-sizing, but retiring baby boomers from out of state seem to be arriving to take their place in sufficient numbers.
Luxury Market Commentary
July 12 – The luxury market over $500,000 has been under-performing the general market across the whole of the USA. In Greater Phoenix prices have not moved upwards as much as the market below $500,000 and in some places have declined slightly over the past 2 years. However the positive trends that we reported yesterday for the Northeast Valley are also impacting the luxury market as a whole.
For single family detached homes over $500,000, the annual sales rate has increased from 6,054 to 7,259 over the past 12 months. That is an increase of almost 20%, ahead of the rest of the market which has been partly constrained by low supply. Supply is not a problem at the top end, down just 0.6% between July 1, 2016 and July 1, 2017. However a higher sales rate with no increase in available supply is still good news for sellers and the number of days of inventory has dropped from 279 to 232. Average days on market for closed homes has come down from 142 to 136, unspectacular but still moving in the right direction from a seller`s perspective.
If we compare average price per sq. ft. for the second quarter with the same period in 2016, we find the following areas performed best (homes over $500K only):
- Scottsdale 85251 – up 10%
- Scottsdale 85254 – up 9%
- Gilbert 85298 – up 9%
- Scottsdale 85258 – up 8%
Good news for buyers, listings for sale between $150K and $300K stopped declining over the past 4 weeks. This is good news because as the summer progresses, there are fewer buyers to compete with in the marketplace which offers a seasonal relief for those still willing to brave high temperatures and scalding door knobs to view homes. Supply is still extremely low, but this slight improvement gives as much relief as a hot breeze on a July afternoon. It’s not much, but it’s something.
Meanwhile, luxury buyers may notice fewer properties to look at this summer as demand was higher during the Spring season and overall inventory has been dropping due to a higher number of closings and seasonal cancellations/expirations. Expect inventory in price ranges above $500K to continue declining seasonally until settling into a stagnant level in August and early-September
There has been a lot of talk about the increased production of luxury apartments and what impact they will have on the residential real estate market. One segment that is starting to see their influence is apartment-style condominium rentals leased through the Arizona Regional MLS. While rents on single family homes and townhouses continue to rise, successful leases of apartment-style condominiums have dropped 11% in average rates from a high of $1.26/sf in January 2017 to $1.12/sf by June. The drop is consistent across all lease price ranges for this type of rental and is not seasonal. Areas that have been particularly affected are Tempe, Old Town Scottsdale and the Central Corridor including Downtown Phoenix. Considering the lack of supply for sale in affordable price ranges and the added competition from brand new apartment complexes, this may be a good time for landlords of apartment-style rentals to consider selling if they’re unwilling or unable to reduce their rental rate
Commentary written by Tina Tamboer, Senior Real Estate Analyst with The Cromford Report
Shared with permission of Cromford Associates LLC and Tamboer Consulting LLC ©2017.