April Market Summary And Mid Month Pricing Update Forecast
April Market Summary And Mid Month Pricing Update Forecast
April Market Summary
The 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 numbers for April 1, 2016 relative to April 1, 2015 forall areas & types:
Active Listings (excluding UCB): 22,493 versus 22,303 last year - up 0.9% - but down 0.4% from 22,587 last month
Active Listings (including UCB): 27,398 versus 26,436 last year - up 3.6% - and up 0.9% compared with 27,146 last month
Pending Listings: 7,522 versus 7,853 last year - down 4.2% - but up 4.3% from 7,214 last month
Under Contract Listings (including Pending & UCB): 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 versus $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
Closed sales werevery strongin the final week of March, which had the side-effect of dropping the under contract count sharply from the week before. However sales, pending listings and under contract counts are all up from both last month and last year. This represents afirming of demand, which has brought the Cromford® Demand Index to 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.
Dollar volume in March was $2.291 billion. This is up 13% from last year (8% from higher volume and 5% from higher prices). The dollar volume for the first quarter was also up 13% compared with 2015.
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.
To illustrate the huge differences between the entry level price sector, the mid-range and the high-end, let us do some simple comparisons. El Mirage, a city with a population of about 33,000 has 9,429 single family homes within its ZIP code according to the Maricopa County Assessor. Litchfield Park has a much smaller population of only 5,300, but its ZIP code extends far beyond the city boundaries and includes 9,678 homes, of which 8,884 are single family. They are roughly the same size market but the average Litchfield Park home is priced much higher than the average El Mirage home. To represent the higher end of the market we selected Fountain Hills 85268 which has 8,413 single family homes, but also has 4,571 condos & townhomes (which we excluded from our comparison).
The number of sales in each of the 3 ZIP codes is similar and roughly in line with the number of homes that exist, a 6% to 7% annual turnover (much lower than in the early 2000s).
Supply is very scarce in El Mirage, adequate in Litchfield Park and excessive in Fountain Hills where 1 home in 25 is listed for sale and has no contract. Consequently, prices in El Mirage are moving up at about 10 times the rate of inflation which those in Litchfield Park are just a tad above inflation. Prices in Fountain Hills have been declining. Notice that it is the supply that is driving pricing in all 3 cases, not the demand.
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.
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 April 15, we are currently recording a sales $/SF of $140.06 averaged for all areas and types across the ARMLS database. This is virtually unchanged (up just 7c) from the $139.99 we now measure for March 15. Our forecast range midpoint was $142.59, with a 90% confidence range of $139.74 to $145.44. Sales pricing over the last 31 days has been considerably weaker than expected but stayed within the lower bound of our 90% confidence range.
On April 15 the pending listings for all areas & types shows an average list $/SF of $143.63,0.4% above the reading for March 15. Among those pending listings we have 92.4% normal, 2.9% in REOs and 4.7% in short sales and pre-foreclosures. The percentage of short sale and pre-foreclosure transactions continues to fall but REOs were the same percentage as last month.
Our mid-point forecast for the average monthly sales $/SF on May 15 is $141.77,which is 1.2% higher than the April 15 reading. We have a 90% confidence that it will fall within ± 2% of this mid point, i.e. in the range $138.93 to $144.61.
In most years, prices make strong progress between March and June so we felt confident that last month's forecast was reasonable. Only adding 7c to the average price per sq. ft. between March 15 and April 15 is pretty underwhelming. We are forecasting a more impressive advance for May 15, but we could again be confounded by a negative change in the sales mix.
Normally prices decline between June and September each year, so sellers will be hoping for a stronger pricing trend during the next 2 months than we saw during the last 2 months.
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