Phoenix Metropolitan Area - Residential Resale

The Cromford Report™ provides detailed information to track the history and current status of the Phoenix residential resale market and offers unique insight into its future direction.

Updated daily and usually published online within a few hours, this site is intended for anyone interested in the state of the market and how it affects their investments and livelihood. Our goal is to present data that is timely, informative and easy to understand - data not available anywhere else in this level of detail or immediacy.

Snapshot	City Ranking	Dashboard	Foreclosures	Good News!

These are based on the current millennium (2001 onwards). The figures shown are for the entire Arizona Regional MLS area and all dwelling types are included. For-sale-by-owner, auctions and other non-MLS transactions are not included. For more detailed information on record highs and lows please see the Extremes section (available to subscribers only).

Pricing Update - Prices Near Bottom of Forecast Range

On October 16 we gave a 30 day forecast that average sales $/SF would fall to the range $105.72 to $110.03 with a 93% confidence. Our midpoint prediction was $107.87. This was a further test of our technique for predicting future sales prices based on current pending $/SF.

As of November 15, the average $/SF for monthly sales across all areas and types is $105.60, down 3% from $109.11 on October 16. Note that the latter figure has been adjusted slightly since October 16 due to additions and changes to ARMLS recorded sales data since then. The actual figure of $105.60 is within 2.15% of our midpoint prediction and just below the bottom of the predicted range. This is the highest margin of error we have seen to date. We did see a much smaller price drop in the last 30 days than in the previous 30, as we predicted. But the fall was still slightly larger than we were expecting. Analyzing the reasons for this, we see that sales were dominated by bank-owned properties to a greater extent than pending listings, and that pending listings have, on average, been taking quite a bit longer to close than in recent months. We also saw an unexpected sharp reduction in the sales price percentage of list price from 96.71% on October 16 to 95.25% on November 15. This latter factor alone is more than enough to explain the entire difference between forecast and actual pricing. It is also a negative signal for the market.

Today the pending listings for all areas & types show an average list $/SF of $111.36. This is just above the average list $/SF for homes sold in the last month ($110.87). This suggests that pricing will continue to fall substantially in the next 30 days. The relationship between these measurements can be seen clearly on the list price per square foot chart.

Our mid-point forecast for December 15 is currently $100.18, and we have a 93% confidence that it will fall within ± 2% of this mid point, i.e. in the range $98.17 to $102.18. The confidence level for ±3% is 98% and for ±4% is 99.5%.

The implication is that overall average sales $/SF is expected to fall in the next month by between 4% and 6%.

Around December 15 we will check the accuracy of this projection and report back again.

Price Range Analysis

The real estate market has rarely, if ever, shown such extremes of activity at opposite ends of the price spectrum.

For single family detached homes with list prices below $100,000 there were 824 ARMLS-reported sales in October 2008, a stunning 4237% growth over the 19 sales recorded in October 2007. With 5,457 active listings there is still plenty of new supply, but this represents only 6.6 months supply at the accelerating monthly sales rate. A very large proportion of these homes are lender-owned and many (but not all) of these are in distressed condition.

At the other extreme, there were only 4 sales of single family detached homes priced above $3,000,000 in October 2008, down 50% from the 8 sales in October 2007. The really shocking statistic is that there are now 585 active listings in this price range. At 4 sales per month this is more than 12 years supply. Now October 2008 was a particularly bleak month for high end sales, but in the full year from November 2007 to October 2008 there were only 122 sales of single family detached homes listed over $3,000,000. So based on the annual sales rate there is currently 1,755 days inventory, nearly 5 years. In the current economic climate one has to wonder where the buyers of these 585 homes are going to come from.

Another stark contrast - the homes below $100,000 are priced at an average of $59 per square foot. The homes priced above $3,000,000 are priced at an average of $633 per square foot. This pricing gap has widened to its greatest extent ever this month.

For more details of these and the other price ranges, please see Months Supply by Price Range and the Price Range Snapshots.

Market Summary

The good news is that MLS activity is still strong: sales are up 60% from this time last year and pending sales also up 60%. After a particularly strong September, due to people taking advantage of down payment assistance programs before they disappeared, October sales were some 16% below September. This is still quite respectable; about the same as in October 2002.

The bad news is the fact that the selling is dominated by the banks and the market is dominated by foreclosures.

Banks are now selling almost twice as many homes as homebuilders.

Among active listings: 65% are normal, 17% are in pre-foreclosure, 18% are already owned by a lender.

Among October MLS sales:  only 48% were normal, 10% were in pre-foreclosure (mostly short sales), while 42% were lender-owned.

We have a record number of homes pending foreclosure – about 28,000 in Maricopa county alone, although this dropped a little last week because the ex-Countrywide division of Bank of America canceled about 2,000 trustee sales.

New foreclosure notices in Maricopa county are running at about 240 per day on average and we have a record number of homes being sold by the trustee & over 95% of these go back to the bank. We have a record number of bank-owned homes being sold to investors & owner occupiers and this is driving prices down sharply in areas where foreclosures are plentiful. On a $/SF basis we’re at an average of $107 across the valley based on October’s MLS sales, which is down 43% from the peak of $189 reached in May 2006. But remember this is just an average – prices have fallen much less in areas with few foreclosures and much more in some with higher than average foreclosures.

Some areas have been affected only slightly by the decline in prices – ZIP codes 85007, 85013, 85018, 85024 are particularly strong. Also, bank owned properties are relatively thin on the ground in Sun City, Sun City West & Sun Lakes.

Some areas are much worse than average – ZIP codes 85009, 85019, 85031, 85033, 85035 for example. Bank owned properties dominate in El Mirage, Avondale & Litchfield Park.

Some outlying areas were affected strongly in 2006 and 2007, much earlier than Phoenix itself, but these are showing distinct signs of recovery now, e.g. Anthem, Queen Creek, Maricopa. Here supply and demand are in reasonable balance so the downward pressure on prices has eased. However a high proportion of properties listed are bank-owned or short sales. These are still areas in distress despite the stronger demand.

We forecast the market based on simple rules of supply & demand. Right now our biggest problem is over-supply. Developers built more houses than were actually needed. Investors purchased extra homes thinking there would be buyers for them. Demand right now is about 95% of normal, within a reasonable range. But supply is at 177% of normal. The main way this gets re-adjusted is for prices to go down. When prices go down, demand increases and the supply starts to get eaten away. This has already happened in places like Queen Creek – prices are way down, but although there is still a large inventory of unsold homes, sales volumes are very high. In fact Queen Creek is the third most active city for sales right now, after Phoenix & Mesa.

It’s still a great market for buying, as long as you have capital, good credit and don’t need to borrow more than 90% of the money. Bank owned properties typically sell for 20% to 30% below the normal market price, and so as long as you don’t mind fixing up the property and the landscape, you can find some real bargains. This is even more true in places where bank-owned properties are not too numerous and normal prices are still relatively high (e.g. Scottsdale, Fountain Hills, Paradise Valley, Cave Creek). We’ve seen prices at 40% to 50% below normal in some of these places. The drop in pricing has occurred while rental rates are stable, so it is easy for a landlord to find homes that will "cash flow".

The future depends on a number of factors. Prices are still falling, but if more lenders cancel foreclosures like Countrywide did last week, then this source of supply will start to fall and the downward pressure will ease. Many people who are current in their mortgage payment resent other homeowners being helped by their lender. However preventing that foreclosure in your neighborhood is going to help stabilize your home price, so when others are helped you are getting indirect help too.

The market is in fact more healthy than it was this time last year. But the market cannot improve much further until we see the number of foreclosures drop and an easing of the over-supply situation. Home builders have cut way back on their new builds, so it is now foreclosures that constitute the most significant source of homes for sale. The financial companies therefore hold the key to the future health of the market.

Existing Home Sales Jump to 13-Month High

The above was the headline in today's story about the National Association of Realtor's statistics for September. It is instructive to compare the figures for the whole country with those for the Greater Phoenix area. Here are the national numbers:

"Boosted by foreclosures and plunging prices, sales of pre-owned homes and condos rose sharply in September to the highest level in 13 months, an industry trade group reported Friday. Existing-home sales rose 5.5% to a seasonally adjusted annual rate of 5.18 million, the National Association of Realtors estimated Friday. Economists surveyed by MarketWatch expected sales to rise to a 5 million pace. It was the largest monthly percentage increase in five years. Sales of existing homes were 1.4% higher in September than they were a year earlier; it was the first year-on-year increase in nearly three years. The median sales price fell 9% in the past year to $191,600, the lowest since April 2004. Prices plunged 18.5% in the West region, driven by high levels of distressed sales."

The Greater Phoenix situation:

Sales of condos were 14% down year on year in September but sales of single family detached homes were very brisk. The ARMLS sales volume for single family homes was 5,536 which was a 11% advance on August's 4,989 and a 108% advance on September 2007. This was the largest year-to-year increase in monthly sales we have ever recorded. The median sales price for single family homes was $174,750 in September 2008, down 31% from $252,000 one year earlier. The median sales price was last at this level in May 2004.

Average $/SF Now Rolled Back 5 Years

On Saturday October 18, 2003 the average $/SF across all areas and types of homes was $108.89.

On Saturday October 18, 2008 the average $/SF across all areas and types of homes is $108.99.

A strange coincidence that these prices should be just 10c apart. On May 31, 2006 the same statistic reached $189.66, some 74% higher than today.

Pricing Update - Modest Fall Forecast by Mid-November

On September 16 we gave a 30 day forecast that average sales $/SF would fall to the range $108.75 to $113.19 with a 92% confidence. Our midpoint prediction was $110.97. This was a further test of our technique for predicting future sales prices based on current pending $/SF.

As of October 16, the average $/SF for monthly sales across all areas and types is $109.03, down nearly 8% from $118.34 on September 16. Note that the latter figure has been adjusted slightly since September 16 due to additions and changes to ARMLS recorded sales data since then. The actual figure of $109.03 is within 1.78% of our midpoint prediction and close to the bottom of the predicted range. This again provides evidence that we can fairly accurately predict future sales pricing over the short term - looking out some 30 days for a reasonably large market.

Having been accurate for six months now, we will continue to make specific forecasts for average $/SF pricing one month into the future.

Today the pending listings for all areas & types show an average list $/SF of $117.38. This is well above the average list $/SF for homes sold in the last month ($112.84). This is therefore a very positive indicator compared with what we saw in September, suggesting that pricing will fall much less in the next 30 days than they did in the last 30 days. The relationship between these measurements can be seen clearly on the list price per square foot chart.

We forecast that average sales $/SF over the next month will fall at a slower rate than in the past month. Our mid-point forecast for November 15 is currently $107.87, and we have a 93% confidence that it will fall within ± 2% of this mid point, i.e. in the range $105.72 to $110.03. The confidence level for ±3% is 98% and for ±4% is 99.5%.

The implication is that overall average sales $/SF is expected to fall in the next month by between 0% and 2%.

Around November 15 we will check the accuracy of this projection and report back again.

Yes - Active Listings Are on the Rise Again

On September 25 we noted that the active listing count was at a higher level than the month before. At the time we were not sure if this was just a blip or a something more.

Unfortunately, we have to confirm that this is a significant trend reversal. Today, October 13, we see 54,355 active listings across all areas and types. This a major jump upwards from the low point of 52,530 reached on September 2. Active listings are now rising sharply as can be seen here. This is being fueled by the increase in bank-owned inventory, although areas with few bank-owned properties are also seeing an increase.

The active listings by major city chart shows that this rising trend is affecting many but not all of the major markets.

We see increases in Phoenix, Avondale, Glendale, Queen Creek, Scottsdale, and especially Goodyear and Surprise. Chandler, Gilbert, Mesa and Peoria are relatively unaffected. Tempe is still on a modestly declining trend.

Paradise Valley not Alone

Yesterday we posted that Paradise Valley has more than 1,000 days of inventory. However, Paradise Valley is not alone in having extreme inventory levels. It is by far the largest market with this situation, but a number of small localities are experiencing the same effect.

As of October 1, 2008:

Tonopah - 1,331 days inventory (80 active single family detached listings, annual sales rate 22)

Rio Verde - 1,176 days inventory (197 active single family detached listings, annual sales rate 28)

New River - 976 days inventory (152 active single family detached listings, annual sales rate 57)

Wittmann - 912 days inventory (147 active single family detached listings, annual sales rate 59)

Eloy - 878 days inventory (96 active single family detached listings, annual sales rate 40)

Wickenburg - 849 days inventory (188 active single family detached listings, annual sales rate 81)

Carefree - 831 days inventory (109, active single family detached listings, annual sales rate 48)

1,000 Days Inventory in Paradise Valley

Paradise Valley is different from the rest of the Phoenix area for many well-known reasons. With prices far higher than any other city or town, its market is unique. In 2008 this market has behaved very differently indeed. In most cities and ZIP codes, inventory levels peaked in the spring and have been falling back over the last four to six months. See the Days Inventory by City charts to see these changes.

In contrast, Paradise Valley single family detached home inventory has doubled from 507 days in January to 1,014 days in the first week of October. We currently see 500 active MLS listings, and an annual sales rate that has fallen steadily from 458 in August 2005 to just 180 in October 2008. At the current monthly sales rate there is almost 3 years supply of active single family detached listings.

There are currently only 15 pending listings, but the average from 2001 onwards is 44.

Jumbo loans are hard to come by and their interest rates are now much higher than conforming loans. There is also a scarcity of buyers in this price range.

Anyone with a home to sell in Paradise Valley is going to need a lot of patience or a willingness to price more aggressively to get noticed among all the competition.

Prices have held very firm in Paradise Valley over the last two years while many surrounding areas have declined. The peak annual median sales price peaked at $2,100,000 as recently as July 2008. However we are now seeing distinct signs of weakness in the $/SF and median statistics. The annual median has fallen over 10% to $1,772,000 in the last 3 months.

See the Market Snapshot for Paradise Valley for full details.

September Sales Higher Than August

At the moment we are recording 6,101 sales through ARMLS for the month of September, which is nearly 8% higher than August 2008 and nearly 59% higher than September 2008. It is unusual for September to report more sales than August, but the disappearance of down-payment assistance loans probably encouraged eligible buyers to move in September rather than wait for October.

The September sales number will probably fluctuate over the next few days, as additions and corrections are entered, but we can confidently report for the first time that year-to-date sales have now overtaken 2007.

Average $/SF Now Down 40% from Peak

As can be seen in the table above, the average price per square foot for monthly sales across all areas and types is now down 40% from the peak of $189.66 reached on May 31, 2006. It currently stands at $113.79 per sq. ft. The last time average pricing was at this level was March 1, 2004.

It took 27 months to rise from $113.79 to $189.66 and 28 months to fall all the way back again.

Note also that the average $/SF for active listings is a record 63.7% higher than the average sales $/SF.

The big question now is how much of an over-correction are we likely to see.

Active Listings on the Rise Again?

For the last few months, sales volumes have been strong and the number of active listings has fallen well below the peak level of 58,334 reached in late October 2007. However, active listings have been increasing in number in the last four weeks, and for the first time since March 2008 we are seeing active listings at a higher level than the month before. This is not due to any fall off in sales, which continue to post very strong year over year growth. However the supply of foreclosed properties also continues to grow and pump up the supply. We will watch this development closely to see if the supply starts to outstrip demand over the next month.

Where Have Prices Fallen Hardest?

If you are looking for bargain properties, you probably want to know where pricing has fallen the most. You can easily find the answers at this page:

Annual Median Sales Price by ZIP Code

We use the annual median rather than the monthly median because some ZIP codes have very low sales volume which means the monthly median can be very volatile. The annual median is slower moving, so when a significant fall is seen, you can be sure it is due to a real and widespread drop in pricing, not a freak data point.

Picking out a few extreme examples from this chart:

• Phoenix 85009 - $74,550, down from $170,000 in January 2008 - down 56% in 9 months.
• Phoenix 85031 - $109,950 - down from $200,000 in September 2007.
• Phoenix 85033 - $115,000 - down from $205,000 in July 2007.
• Phoenix 85035 - $92,000 - down from $200,000 in June 2007.
• Maricopa 85239 - $157,000 - down from $258,000 in July 2006.
• Queen Creek 85242 - $175,000 - down from $258,700 in August 2006.
• Queen Creek 85243 - $146,000 - down from $252,450 in June 2006.
• Avondale 85323 - $180,250 - down from $264,900 in September 2006.

At the other extreme, a few examples of prices holding up relatively well:

• Phoenix 85004 - $317,450 - close to its peak of $328,500 reached in November 2006.
• Phoenix 85007 - $210,000 - only down 9% from its peak of $230,000 reached in March 2008.
• Phoenix 85013 - $259,950 - only down 10% from its peak of $290,000 reached in January 2008.
• Mesa 85207 - $309,750 - only down 11% from its peak of $349,000 reached in June 2008.
• Paradise Valley 85253 - $1,800,000 - only down 10% from its peak of $2,006,000 reached in June 2008.

Pricing Update - Steep Fall Forecast by Mid-October

On August 17 we gave a 30 day forecast that average sales $/SF would fall to the range $115.59 to $120.31 with a 92% confidence. Our midpoint prediction was $117.95. This was a further test of our technique for predicting future sales prices based on current pending $/SF.

As of September 16, the average $/SF for monthly sales across all areas and types is $117.59, down 3% from $121.24 on August 17. Note that the latter figure has been adjusted slightly since August 17 due to additions and changes to ARMLS recorded sales data since then. The actual figure of $117.59 is within 0.31% of our midpoint prediction and close to the center of the predicted range. This again provides evidence that we can fairly accurately predict future sales pricing over the short term - looking out some 30 days for a reasonably large market.

Having been accurate for five months now, we will continue to make specific forecasts for average $/SF pricing one month into the future.

Today the pending listings for all areas & types show an average list $/SF of $118.64. This is well below the average list $/SF for homes sold in the last month ($122.08). This is therefore a negative indicator compared with what we saw in August, suggesting that pricing will fall further in the next 30 days than they did in the last 30 days. The relationship between these measurements can be seen clearly on the list price per square foot chart.

We forecast that average sales $/SF over the next month will fall at a faster rate than in the past month. Our mid-point forecast for October 16 is currently $110.97, and we have a 93% confidence that it will fall within ± 2% of this mid point, i.e. in the range $108.75 to $113.19. The confidence level for ±3% is 98% and for ±4% is 99.5%.

The implication is that overall average sales $/SF is expected to fall sharply in the next month by between 5% and 6%.

Around October 16 we will check the accuracy of this projection and report back again.

Pending Sales Fall Nationally - Not in Phoenix

In a sign that the U.S. housing market may weaken in coming months, an index of sales contracts on previously owned U.S. homes fell 3.2% in July from the prior month, the National Association of Realtors reported today. The index, which is considered a leading indicator of existing home sales, was down 6.8% from the prior year.

However, as we have reported for the last 3 months, the pending sales count has been very healthy in the Greater Phoenix area. At the July peak, reached on 28th, the pending listing count (for all areas and types) was at 7,441. The highest point reached in July 2007 was only 5,511. So we were UP 35% in July year on year. June 2008 was somewhat higher than July 2008 with a peak of 7,619 reached on June 25. However the historic seasonal pattern shows us that this fall was much smaller than we would normally expect. Indeed August and September have continued to strengthen further relative to seasonal trends - pending listings currently sit at a record level of 72.2% above the same date in 2007.

Note that pending listings are a leading indicator of market activity and this suggests that Phoenix is further along the road to recovery than the overall US market.

A Tale of Two Cities

The market has fractured into many separate regions, and each is behaving very differently. Here I am taking just two examples - Anthem and Arizona City, and considering the market for single family detached homes only.

Good news for Anthem - the Cromford Market Index™ just topped 100, signifying a remarkable recovery in buying activity. Monthly sales are up 117% year on year, and pending listings are up 129%. Active listings are down to 409 from 682 last year, and months supply a reasonable 5.4 months compared with 19.5 in early September 2007. This is probably due in no small part to the price level - the average $/SF is down 29.5% year on year in Anthem, and the monthly median price now stands at $227,500, having been $330,000 in September 2007. See the Anthem Snapshot for more positive signs.

In contrast, Arizona City's Cromford Market Index™ has fallen below 50. Sales are up slightly year on year and pending listings are up 26%. The bad news is that the picture has deteriorated since early August 2008, when sales and pending listings were higher than today . Active listings, days on market and months supply have all increased in the last month. This is despite considerable movement in pricing. The monthly median is $85,500, down 34% from the $129,900 in September 2007. See the Arizona City Snapshot for more details.

To be pedantic neither Anthem nor Arizona City is actually a city - they are both unincorporated and defined as "census designated places".

The Greater Phoenix metropolitan area is the largest market for homes in Arizona, which in turn is the fastest growing state in the nation. Relatively stable until 2003, the local housing market has experienced dramatic swings since then and is still changing rapidly. In addition, it continues to fragment into different sub-markets with very different characteristics. Prices can be heading strongly upwards in one ZIP code while another is experiencing price declines. Different price ranges also experience divergent supply and demand patterns. These trends can turn quickly, but armed with the Cromford Report™, you will be among the first to know and take appropriate action.

AVERAGE ANNUAL APPRECIATION BY CITY

These statistics are for single family detached homes only.

Measured values = average sales price per sq. ft. for single family detached homes in each city

This period = closed escrow between today's date last month and yesterday

Last period = closed escrow between the same dates one year ago

Charted value = difference between this period and last period, expressed as a percentage

MONTHLY CHANGE IN NUMBER OF HOMES FOR SALE

All these statistics are for single family detached homes only.

Measured values = number of active listings for single family detached homes in each city

This period = today

Last period = today's date last month

Charted value = difference between this period and last period, expressed as a percentage

Note: If today's date last month does not exist (e.g. if today is 3/30/07) then we use the 1st day of the current month instead. This situation applies to the 7 dates 3/29-31, 5/31, 7/31, 10/31, 12/31.

• How does today's market compare with the same time last year?
• Which price range appreciated the most over the last year?
• In which city are sales most active right now?
• Which is the cheapest area to buy a resale home?
• How long is it taking to sell a home in my area?
• What is the balance of supply and demand for resale homes?
• Where are prices appreciating fastest?
• What percentage of listings are finding a buyer before they are canceled or expire?
• Are today's list prices realistic compared with achieved sales prices?

All the above, and many more, are questions you can answer with the help of The Cromford Report