Market Summary for the Beginning of December
Let us start with the basic ARMLS numbers for December 1, 2016 relative to December 1, 2015 for all areas & types:
- Active Listings (excluding UCB): 20,928 versus 21,493 last year – down 2.6% – and down 0.5% from 21,028 last month
- Active Listings (including UCB): 24,514 versus 24,898 last year – down 1.5% – and down 1.4% compared with 24,862 last month
- Pending Listings: 5,782 versus 6,147 last year – down 5.9% – and down 4.4% from 6,050 last month
- Under Contract Listings (including Pending, CCBS & UCB): 9,368 versus 9,552 last year – down 1.9% – and down 5.2% from 9,884 last month
- Monthly Sales: 6,910 versus 5,273 last year – up 31.0% – but down 2.7% from 7,100 last month
- Monthly Average Sales Price per Sq. Ft.: $144.48 versus $135.49 last year – up 6.6% – and down 0.2% from $144.74 last month
- Monthly Median Sales Price: $225,000 versus $210,000 last year – up 7.1% – but down 1.7% from $229,000 last month
Just as for October, the sales count for November was very impressive, but the 31% gain over last year is an exaggeration of the real situation. We refer you to the daily observation for December 1 for the full details behind it, but the underlying real sales growth is a little less impressive at 16%, about half the headline number. The true underlying number of 16% is still pretty good however and there is no doubt that demand is stronger than it was a year ago. It is possible that some of the recent demand is a result of buyers trying to close quickly, now that interest rates have climbed sharply. They may have been able to lock in the lower rates that prevailed in October. Right now at over 4% for a 30 year fixed conforming loan, they are at the highest they have been all year and we suspect this may dampen buyers’ enthusiasm slightly in the weeks ahead. Certainly the listings under contract are down from last year, as are the pending listings count. We suspect the December sales numbers may not look quite as impressive as the October and November ones. December was a bumper month in 2015 while October and November were weak.
Pricing action will have slightly disappointed sellers, down 0.2% in average $/SF and down 1.7% in median sales price since October. I would not get too concerned about that however, as the mix trended in favor of smaller homes, with the average size of homes sold dropping by 1.2% from 1,968 in October to 1,944 in November.
Optimists will no doubt grab the headline sales number and proclaim that we are in boom times. This would be foolish. The market is in a healthy state, as it has been for the whole of 2016, but one look at the Cromford® Market Index tells us that there is no breakout going on in the fourth quarter. We need to remember that 4Q 2015 makes for very easy comparisons thanks to the introduction of TRID at this time last year.
There are a few signs of a cooling trend in parts of the West Valley and a warming trend in parts of the Southeast Valley. Some western and central ZIP codes have seen jumps in active listings while some southeastern ZIP codes are unusually under-supplied. Compared with a year ago, we see big jumps of over 50% in supply in 85006, 85008, 85031, 85033, 85307, 85363 and 85378. Falls of over 20% can be found in 85007, 85012, 85023, 85045, 85048, 85054, 85085, 85213, 85225, 85249, 85295 and 85390. The supply situation in Ahwatukee, Chandler and Tempe has become noticeably more difficult for buyers recently.
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.