We follow the Cromford Report & ARMLS statistics very closely for local real estate economics. The real estate market has been improving for sellers over the last 4 months, however the improvement is not been real great and is almost entirely due to a lower supply of homes. When buyers lack urgency, sellers usually choose to up the stakes by dropping prices. This is NOT what has happened in 2014.
Although we have seen plenty of price cuts, these were mostly from the homes that were overpriced coming down to market value. Very few sellers have been prepared to discount their homes below market as they believe the market is still a “seller’s market” as it was for the last few years. We expect active listings to grow between August and November, but the current arrival rate of new listings is the lowest in 14 years and the increase is therefore likely to be much weaker than we expected back in March. If this continues then it may prove to be beneficial to sellers with a lower supply of homes. Eventually demand will return to more normal levels, because everything in housing tends to be cyclical.
It is anybody’s guess when this return will get under way, but we expect to be the among the first to notice it happening. Here are the basic ARMLS numbers for August 1, 2014 relative to August 1, 2013 for all areas & types:
• Active Listings (excluding UCB): 26,887 versus 19,779 last year – up 35.9% – but down 2.9% compared with 27,695 last month
• Pending Listings: 6,079 versus 9,066 versus 11,078 last year – down 18.2% – and down 6.2% from 9,664 last month
• Monthly Sales: 6,805 versus 8,076 last year – down 15.7% – and down 6.4% from 7,271 last month
• Average Days on Market (for sold listings): 86 days
There are a few strong areas in Greater Phoenix where demand exceeds supply. These include Sun Lakes, Sun City West and Sun City. Clearly baby boomers are doing their bit. Paradise Valley, Scottsdale, Fountain Hills and Gold Canyon have all improved their balance because supply has declined faster than the rest of the valley. In general, the higher you go in price range the better demand has held up. Across Greater Phoenix in July we saw 16 closed sales of homes priced over $2,000,000, down from 22 in July 2013. However the first and second quarter of 2014 saw more sales over $2,000,000 than last year and it is still possible that the third quarter could repeat this feat.
We still have 39 listings under contract for homes of $2,000,000 while there were only 25 at this point last year, so the outlook remains pretty good. Based on current trends we expect that the annual appreciation rate is probably going to stick in the 3% to 7% range for a few months before declining to zero plus or minus 2% by the end of December.