In June,the Valley's median home price soared past the previous record to reach $268,000 according to the Arizona Regional Multiple Listing Service. The previous record of $265,000 was set in June of 2006.
Comparing the Valley's housing market prior to the 2006 rise in home prices to today's market is like comparing night and day. Easy loans with outrageous costs led to foreclosures in metro phoenix, which by 2011 were about 4,500 per month.At the time, some national housing analysts said it would take 20 to 25 years for recovery.
Here are reasons why I feel good about this market:
The Valley draws bargain hunting homebuyers from other major cities.
Here are some comparable Median home costs from other Western cities:
New homes are being built in the Phoenix area at the fastest pace in 10 years, and prices are climbing faster than they have in five years.
All signs indicate that the Phoenix metro homebuilding market is in recovery.
More than 1,950 new homes were sold valley wide in May, and the pace of sales for the year is 18 percent ahead of last year as reported by Belfore Real Estate Consulting and R.L. Brown's Phoenix Housing Market Letter reports that May was the best month for new home sales since March, 2008.
Brown also reports that the median new home price is up almost 3 percent from last year to $330,000. That's about $70,000 more than the median price of existing home sales.
Forecasts call for homebuilding to steadily climb valley wide to more than 26,000 annually by 2020.
However,, homebuilders and analysts see a few big obstacles in the way of this recovery: rising labor, land and construction material costs. All three will add to the cost of a new Valley home.
Source: Arizona Republic.
Starting with the basic ARMLS numbers for June 1, 2018 and comparing them with June 1, 2017 for all areas & types:
May was a weaker month for new listings , down about 1% compared to last year. This was a contrast to April which had seen a stronger rate than 2017. We normally see total supply drop between and June and we still expect this downward trend to continue until September.
The sales count for May was very strong, topping 10,000 for the first time since 2011. However, the number of listings under contract at the beginning of June is much lower than last year - down 6%. Even with this possible sign of wavering demand, supply is so weak that sellers still have advantage in negotiations. This situation inevitably leads to price increases and the annual rate of change has reached 9% for average $/SF and 9.5% for median sales price.
The rise in interest rates does not tend to lower demand, in the current circumstances it can lower supply too. Home owners with an existing mortgage will be less inclined to move if their next mortgage is going to be at a much higher rate than their existing one. This is more likely to be the case with every passing month. As a result, we do not see prices as likely to fall because of interest rates, but we do anticipate limited growth in sales volume.
Source: The Cromford Report by Michael Orr
Recent report from Think Realty suggests that home prices are likely to surge in areas of the South and Southwest.
Census data, for certain cities in the South and Southwest will likely see surging home prices to accompany surging population numbers. The nations fastest growing cities are mostly far from the pricey tech hubs and the skyscrapers on the East Coast.
Phoenix is rated as the second fastest growing city, and Maricopa County (includes Phoenix) is the fastest growing county in the US.
Comparing the first quarter 2018 to 2017, there were 16,227 sales in 2018, which was 4% higher than the 16,602 sales in 2017. The median sale price in first quarter 2018 was $277,000 a 5% increase compared to $255,000 in 2017.
There is a lot of news positively affects the Maricopa County real estate market. Population, job and wage growth should continue to increase. These increases will keep the competition among buyers of single family homes fierce.
MLS Sales Over $1M up 36%
Inventory Under $150K Down 62%
Buyers continue to have a tough time finding inventory on the low end of the market. New listings overall are down 9% year-to-date thus far, which doesn’t help matters. Compared to February last year, inventory under $150K is down 62% and down 43% between $150K and $200K. Mid-priced inventory between $200K and $500K is down 11% and down 7% between $500K and $1M. Only inventory over $1M is up nearly 2% over last year. Seller concessions are also down so far this year. After hovering around 27% for the past 2.5 years, closings with seller concessions dropped down to 23% as the seller market has strengthened in the new year. Homes sold between $150K and $200K had the highest percentage of seller concessions at 34%.
Buyer season is ramping up as expected during this time of year. So far listings under contract are nearly dead even with 2017 levels at this time and are expected to continue rising through May. 2018 year-to-date sales are within 2% of the first 6 weeks of last year. Not surprisingly, MLS sales under $200K are down 21% due to low inventory. However, sales between $200K and $300K are up 14%, $300K and $500K are up 21%, $500K and $1M are up 20% and sales over $1M are up 36%.
Commentary written by Tina Tamboer, Senior Real Estate Analyst with The Cromford Report ©2018 Cromford Associates LLC and Tamboer Consulting LLC