Phoenix Real Estate June Annual Comparison

Dated: 06/05/2018

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Phoenix Real Estate - June Annual Comparison

Posted by Riley Bishop on Tuesday, June 5th, 2018 at 1:14pm.

Market Summary for the Start of June

Using the basic ARMLS counts for June 1, 2018 and comparing against June 1, 2017 for all areas & types. We will take a look at the hard numbers, then talk about what they mean.

  • Active Listings (excluding listings under contract): 16,018 vs. 18,476 from last year - a 13.3% decrease - a 1.9% decrease from last month's 16,329.

  • Active Listings (including listings under contract): 20,809 v.s 23,281 from last year - a 10.6% decrease - a 2.9% decrease from last month's 21,440.

  • Pending Listings: 6,608 vs. 7,324 from last year - a 9.8% decrease - and down 10.6% from 7,393 last month

  • Under Contract Listings (including all non-active types): 11,399 vs. 12,129 last year - a 6.0% decrease - an 8.8% decrease from 12,504 last month

 

  • Monthly Sales: 10,081 vs. 9,858 last year - up 2.3% - and up 9.8% from 9,178 last month

  • Monthly Average Sales $/Sq.Ft.: $164.03 vs. $150.51 last year - an appreciation of 9.0%- and a 0.7% gain from $162.81 last month

    Monthly Median Sales Price: $262,900 vs. $240,000 last year - up 9.5% - and up 3.9% from $253,000 last month

 

Sellers Leverage Supply

Without a doubt, we see that the supply of active listings without a contract dropped again during the month of May. However, the supply deficit compared with 2017 narrowed slightly to 13.3% (down from 15.2%). May proved to be a weaker month for listings coming on the market, a 1% decrease compared to last year. A contrast to April which saw a stronger new listing rate than 2017. We annually see a drop in overall supply between May and June, and we expect supply to continue trending downward until September.

Home sales counts for May were very strong, topping 10,000 for the first time since 2011. Even with strong sales counts, the number of listings under contract at the beginning of June is much lower than last year - down 6% from the same time. Even with this possible sign of wavering demand, supply remains weak enough that sellers still have a major advantage in negotiations. This inevitably leads to an increase in prices and the annual rate of change has reached 9% for average $/SF and 9.5% for the median sales price. At 9%, this growth is almost 4 times inflation (~2.5%), and with interest rates rising, homes are getting less affordable and quickly.

This trend will impact demand, that is unavoidable. This is why we are keeping a close eye on the annual sales rate and the number of listings under contract. We are not, however, at all in the sort of situation we faced in 2005.

 

Rates & Inventory

The rise in interest rates does not just damper home buyer demand, in the current circumstances, it can lower supply too. Borrowing homeowners who have purchased in the last 5 years will be less inclined to sell if their next mortgage is going to be at a much higher rate than their existing one; for some nearly 50% higher. As the Federal Reserve continues with their plans to "comfortably" raise rates, this is likely to be the case with every passing month. Consequently, we do not see prices as likely to fall because of interest rate rises, but we do anticipate home sales volumes to have limited growth. 

Year over year comparisons of sales numbers are important, but it is worth mentioning that the new-ish presence of iBuyers means that there are more transactions than there would be without. In situations where a seller accepts an iBuyer offer, the home is typically resold again in a matter of months, so we see 2 transactions instead of 1. While the first sale is generally not shown within the MLS numbers, the second almost always is; both sales always appear in the sale counts when we look at recorded deeds. With iBuyers representing 4% of the resale market, we consider counts of recorded sales to be about 2% higher than they otherwise would be.

References to "chronic" low inventory began over 5 years ago, and we are now at the lowest inventory levels we have seen since the bemoaning. Fluctuations in demand are unlikely to have much impact on the market, at least not until we see the start of an upward trend in listing counts. This was the first sign of a slowdown in April 2005 and will likely be the first sign of a slowdown should we get one in the future.

April 2015 came suddenly and unexpectedly, and it may do the same at any time. However, nobody paid any attention in 2005 and we hope we are all older and wiser now. 

 

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