The market picked up a lot over the last month and our spring season is showing strong signs of life! Here's what you need to know!
- Sales Up 7% Over 2015
- Median Sales Price Up 6.4%
- Active Listings Up 1%
For the first time since November 2014, supply is higher than it was the previous year. This is generally good news for buyers, as it means there are more listings competing for their attention. However, buyers looking for homes under $200,000 will find this is not true. The Phoenix Metropolitan area is still nearly 19% below normal in supply, with the lower price ranges in the shortest supply. Sales under $200,000 have made up 45.5% of all sales in the last 12 months, so this is a significant market to be in short supply. Buyers looking over $300,000 are experiencing an 11% increase in supply valley wide. The increased competition is resulting in a 19% increase in weekly price reductions compared to this time last year, especially among listings over $500,000.
The good news for sellers is that contracts in escrow are up 5% and sales are also up 7% over last year. Demand has been rising over the past month and seasonally is close to its highest level for buyer activity. Sellers who wish to list their home at the “peak” of buyer activity should not wait too much longer. April and May are typically the highest months for buyer activity before slowing down in the summer months. This is especially true in the luxury market over $500,000. It’s not uncommon for buyer contract activity to drop anywhere from 25%-40% between May and August as seasonal buyers head towards cooler climates.
–Written by Tina Tamboer-Glatfelter, The Cromford Report
At face value, this sounds great. However, "The Core" where I spend the bulk of my time, is not quite seeing the same picture. The supply for homes over $500K is way up, which is throwing a bit of a wrench into things. This "Daily Observation" from 4/16/16 sums it up well:
April 16 - While the low end of the market labors under weak supply conditions and the mid range continues to look strong, the upper end of the market has got a fair assortment of trouble spots. If we segment by price among the primary luxury areas of the valley, we see the following:
A. $500K to $1M
Supply is up 19% compared to April 2015 while sales during the first quarter were up a strong 16%. Despite the increase in sales the additional inventory is forcing sellers to agree to weaker pricing. The average price per square foot for first quarter sales was down 2.4% from $198 to $194 per sq. ft. compared with 1Q 2015.
B. $1M to $2M
Supply is up 18% while sales during the first quarter were up 9%. Despite this imbalance sellers seem to have more backbone in this price range and have eked out a 2.1% gain from $283 to $288 per sq. ft. between 1Q 2015 and 1Q 2016.
C. Over $2M
Supply is 7% higher than last year while first quarter sales were up 15%. This is the best of the three segments for sellers and they achieved a 2.5% gain from $426 to $437 per sq. ft. between 1Q 2015 and 1Q 2016.
Since segment A is by far the largest in terms of unit sales, the overall appreciation for homes over $500,000 was an insipid -0.5% between 1Q 2015 and 1Q 2016.
Note that all of the above numbers are for single family homes only.
Based on 1Q 2015 to 1Q 2016 comparisons, the weakest ZIP codes for luxury price trends are currently 85016, 85048, 85142, 85207, 85213, 85262, 85266, 85286 and 85383.
The strongest ZIP codes for luxury price trends are currently 85018, 85020, 85248, 85251, 85254, 86255, 85258, 85259, 85268, 85284 and 85377.
Ouch! In a nutshell, oversupply still outweighs the seasonal increase in sales, especially within the $500-1M price range where appreciation is negative. Homes over $2M are performing the best of the over $500K crowd. The Biltmore, Ahwatukee and North Scottsdale (Troon North, Desert Highlands, Desert Mountain, Legend Trail, Teravita, etc.) are not looking so hot. Conversely, Arcadia, North Central Phoenix, Old Town Scottsdale, Central Scottsdale (McCormick Ranch/Scottsdale Ranch, DC Ranch/McDowell Mountain Ranch/Grayhawk, the East Shea Corridor & Carefree are looking more stable.
**Sellers over $500K** Take note and really start making good use of the next 2 months or be prepared to settle in for the summer slow-down.
**Buyers over $500K** Do you sense any opportunities? Patience is a virtue here. Be diligent and it'll pay off.