Market Summary for the Beginning of December from The Cromford Report
Here are the basic ARMLS numbers for December 1, 2012 relative to December 1, 2011 for all areas & types:
- Active Listings (excluding AWC): 18,122 versus 19,377 last year – down 6.5% – but up 7.0% from 16,939 last month
- Active Listings (including AWC): 23,012 versus 26,655 last year – down 14% – but up 2.7% from 22,399 last month
- Pending Listings: 9,170 versus 10,171 last year – down 9.8% – and down 6.3% from 9,785 last month
- Monthly Sales: 6,718 versus 7,127 last year – down 5.7% – and down 7.4% from 7,255 last month
- Monthly Average Sales Price per Sq. Ft.: $105.92 versus $83.50 last year – up 27% – and up 2.0% from last month
- Monthly Median Sales Price: $155,000 versus $115,000 last year – up 35% – and up 3.3% from last month
The advance in pricing is strong, but is accompanied by a rise in supply and a weakening in demand. Both of these are working together to lessen the upward pricing pressure. That pressure still exists for the market as a whole but each month that goes by is releasing some of that pressure. This means we stand a reasonable chance of going back to a normal balanced overall market with fairly stable pricing in the not too distant future. The speed will depend on how sentiment develops. Between November 1 and December 1, 2011 we saw the number of active listings fall by 1.5%. This year they grew by 2.7% during November instead. This confirms what we would expect – that higher pricing is bringing out more sellers, particularly those who are no longer underwater and investors who want to lock in some profits. This has a little added urgency if those investors are concerned that they may pay higher taxes on those profits in 2013 than 2012.
The gradual change in the overall market is reflected in the Cromford Market Index™ which has eased from 164.8 to to 161.3 over the past month. The Cromford Supply Index™ adjusts for seasonal effect and its move from 68.5 to 70.8 tells us that supply is getting significantly stronger, while the Cromford Demand Index™ is edging higher from 112.8 to 114.1, telling us that demand is weakening but not quite as fast as usual for the season of the year.
As usual, there are some locations where things are not behaving like the rest of the market. All real estate is local, right? We are seeing significant pockets of weakness at the edges of the Greater Phoenix area.
As a specific and extreme example let us take a closer look at the City of Maricopa in Pinal County, where the supply situation has changed dramatically over the last few months.
Here we had 145 active and 230 AWC single family listings in May 1. Now we have 513 active and only 108 AWC. The total lender owned active and AWC single family listings have jumped from 21 to 70 with asking prices falling from $80.37 per sq. ft. to $65.65 since May 1. Short sales have declined in number from 240 to 157, but average list pricing has gone in the opposite direction from $46.37 to $55.94 per sq. ft. Active and AWC normal listings have sky-rocketed from 114 to 395 but asking pricing has moved only slightly from $72.24 to $73.20 per sq. ft. Because normal listings dominate, the overall average asking price has increased from $56.47 to $68.02, but this hides a complex and ominous situation. 70 active REO’s is the highest number we have seen in Maricopa since July 2011 and average days on market for active REOs has jumped from 33 as recently as September 2012 to 80 yesterday. The Cromford Market Index™ for the City of Maricopa is down to 69.3 having fallen below the balanced figure of 100 in September. Here we have a buyer’s market developing and it would not be surprising to see sales prices weaken as a result. Lenders are the ones who have the most urgent need to sell and they are now starting to drop their asking prices. Others may need to follow suit. (Though probably not the short sellers who are still priced well under the market average at the moment).
The only other major or secondary city location where the Cromford Market Index™ has dropped below the 100 mark is Gold Canyon (96.0). Not such a big deal because volumes are low and volatility high. Queen Creek, including San Tan Valley is holding above 100, but only just (at 108.0). The Town of Queen Creek is looking stronger than the San Tan Valley areas and is if we extracted the 85142 ZIP code leaving behind 85140 and 85143, the index that resulted would almost certainly fall below 100. This is a big deal because the San Tan Valley has the largest population of any area in Pinal County, despite it still being an unincorporated county area. However, unlike Maricopa, for the last 5 weeks the market index for Queen Creek has stabilized. Florence is too small for us to calculate an accurate Market Index but, if it had one, it would be well below 100 and falling. Active listings excluding AWC have jumped from 79 in May to 159 in December while demand has declined. Arizona City is down to 123.1, well above 100, but has suffered a huge fall from the 266.9 we saw in April this year. Apache Junction is still looking strong at over 200.
Outside of Pinal County, Buckeye has declined to 114.9, well down from the 149.4 it reached in June. This is noticeably weaker than the areas closer to Phoenix like Avondale (162.6) or Goodyear (137.5). Surprise’s market index has dropped from 159.5 to 133.0 in just 11 weeks so this is another area to watch closely.
We recommend that you keep monitoring the Cromford Market Index by City chart to detect which areas remain strong and which may be developing weakness or recovering. The chart for the City of Maricopa shows how quickly an area can turn from a seller’s market to a buyer’s market. It only takes a couple of months.
Short sales are declining in number – we had the lowest number close in Greater Phoenix since February 2011.
November was another short month for working days with only 19 like September. October had 23 so had the capacity for a lot more sales, foreclosures, in fact, everything. In that context in was October where we saw a significant fall in foreclosure activity. November merely maintained similar levels to the previous month.
With over 1,000 new home sales in the Greater Phoenix area, most of which did not get listed on ARMLS, we are seeing the new home market gain in market share. ARMLS is no longer measuring more than 90% of sales as it was during the REO boom, and with private sales, trustee sales and pocket listings all happening outside of its realm, ARMLS is now down to some 70 to 80% of the transactions we see recorded at the county level each month.
Looking ahead, we expect to see overall prices continue to rise until mid December. At that point we expect little further movement during the final 2 weeks of the year. The future beyond that is rather murky while we wait to see if the country jumps off or avoids the “fiscal cliff”. The housing market will be influenced by how well or badly the stock market and economy reacts to this. Public sentiment may also move sharply lower or higher depending on the outcome.
