It is getting more and more difficult to describe the market in simple terms because it has split into three major sectors based on price. Different price ranges have very different market conditions. We will start with the big picture numbers and then break them down.
Here are the basic ARMLS numbers for March 1, 2016 relative to March 1, 2015 for all areas & types:
Active Listings (excluding UCB): 22,587 versus 23,541 last year – down 4.1% – and up 2.2% from 22,096 last month
Active Listings (including UCB): 27,146 versus 27,315 last year – down 0.6% – and up 5.5% compared with 25,731 last month
Pending Listings: 7,214 versus 6,709 last year – up 7.5% – and up 26.8% from 5,688 last month
Under Contract Listings (including Pending & UCB): 11,773 versus 10,483 last year – up 12.3% – and up 26.3% from 9,323 last month (unnaturally high due to TRID)
Monthly Sales: 5,802 versus 5,663 last year – up 2.5% – and up 11.1% from 5,224 last month
Monthly Average Sales Price per Sq. Ft.: $141.10 versus $130.82 last year – up 7.9% – and up 1.4% from $139.11 last month
Monthly Median Sales Price: $212,000 versus $199,000 last year – up 6.5% – and up 1.2% from $209,500 last month
All of these numbers are better than March 1 last year from a seller’s perspective. Supply is down (though much less so than last month), while under contract listings are up by a significant amount. The increases in sales volume over February 2015 is weaker than we might have expected. It seems more listings are taking additional time to close. However the monthly sales rate is still up year over year. So the overall picture is of a healthy market. This is slightly deceptive, especially if you are thinking of selling a home over $500,000.
The price numbers are artificially flattering. With the average price per sq. ft. up almost 8% and the median sales price up 6.5%, this suggest increases in home values that are not actually occurring in real life in the majority of locations. As usual the distortion is caused by significant changes in the sales mix between last year and this year.
Now we must divide the market into price ranges to analyze it realistically.
Homes priced under $250,000
Homes priced between $250,000 and $500,000
Homes priced over $500,000
We will focus exclusively on single family detached homes within Greater Phoenix to avoid distortion by the condo / townhouse sector which is heavily skewed towards the lower price ranges.
SFR Under $250,000 March 1, 2016 February 1, 2016 March 1, 2015 Annual Change %
Active Listings Excluding UCB 5,215 5,436 6,562 -20.5%
Active Listings Including UCB 7,129 6,952 8,373 -14.9%
Pending Listings 3,376 2,626 3,383 -0.2%
Under Contract Listings 5,290 4,142 5,194 +1.8%
Monthly Sales 2,620 2,418 2,921 -10.3%
Monthly Average Sales Price per Sq. Ft. $107.69 $106.01 $99.44 +8.3%
At the lowest end of the market, supply was already very low last year and it gone down another 20%. Under contract listings are barely higher and closed sales are down more than 10%. This is a market crippled by far too little supply and consequently average appreciation is over 8%. This market cannot be described as healthy because of the chronic supply problem, but it is a great market for sellers as long as they are not over-ambitious with their pricing.
SFR $250,000 – $500,000 March 1, 2016 February 1, 2016 March 1, 2015 Annual Change %
Active Listings Excluding UCB 6,865 6,721 6,624 +3.6%
Active Listings Including UCB 8,258 7,824 7,628 +8.3%
Pending Listings 2,011 1,543 1,683 +19.5%
Under Contract Listings 3,404 2,646 2,687 +26.7%
Monthly Sales 1,575 1,402 1,387 +13.6%
Monthly Average Sales Price per Sq. Ft. $140.15 $139.85 $136.54 +2.6%
In the mid range, supply is modestly higher than last year while demand is sharply higher. Despite the stronger demand it is not enough to eat into the supply, but it is good enough to give us moderate appreciation of 2.6%. This is the picture of a very healthy and expanding market, good for sellers and buyers.
SFR Over $500,000 March 1, 2016 February 1, 2016 March 1, 2015 Annual Change %
Active Listings Excluding UCB 5,164 4,772 4,494 +14.9%
Active Listings Including UCB 5,610 5,139 4,836 +16.0%
Pending Listings 492 405 432 +13.9%
Under Contract Listings 938 772 774 +21.2%
Monthly Sales 403 357 310 +30.0%
Monthly Average Sales Price per Sq. Ft. $240.03 $240.98 $252.00 -4.8%
In total contrast to the low end, the market above $500,000 is wallowing in too much supply. Note that we have almost as many active listings above $500,000 as we have below $250,000. Yet we see almost 7 times as many homes sold below $250,000 than we see over $500,000. Supply was already high last year and has increased by another 15%. The contract writing and closing activity is good and we can conclude that demand is stronger than last year. But despite February sales being up 30% and a strong 21% rise in listings under contract, new listings keep flooding into the market and there is still well over a year of supply. Competing among themselves, most sellers have the weaker hand in negotiations and so pricing is suffering. Based on the monthly average $/SF, the current annual average appreciation rate for homes over $500,000 is a negative 5%.
With sales down 10% below $250,000 and up 30% above $500,000, the overall market price statistics are all being skewed much higher. The true pricing environment for the luxury market is far worse than most sellers appreciate. Even for mid range sellers, appreciation is more modest than many of them realize. Only for homes below $250,000 are the overall market’s price appreciation numbers a realistic guide.
It is still fair to describe the bulk of the market as healthy, because only 8% of the homes that sell are over $500,000. That means 92% of sales are coming from appreciating markets. However 30% of sellers are trying sell homes over $500,000 and for them, the market is not looking so great right now.