July 24 – The weakening in demand that we have been reporting for several months is now showing up in the monthly sales numbers:

The monthly sales rate is now just over 9,000, well below last year when it was over 10,000.

Although the monthly sales rate has only declined for the last 5 weeks, our Cromford® Demand Index has been anticipating this since the end of the first quarter. This is because the CDI uses data from listings under contract to compute demand, not just closed listings.

Currently demand appears to be stable and still above normal, but nowhere near as impressive as it was during the second half of 2020. If demand had stayed as strong as last year, I have little doubt that supply would not be rising as it is now. Having said that, supply is only rising at a modest rate and nothing like as fast as it did back in the summer of 2005.

The summer of 2005 looked exactly like a bubble bursting with prices continuing to rise even as demand plummeted and supply soared. In those days the bubble was primed by rampant, mindless speculation and the widespread belief that prices only ever went up. In 2021 we have a very different situation with widespread caution, largely because so many people vividly remember the lessons of 2005. This caution will keep the rate of price increases lower than 2005 and we are already seeing a significant slowdown in appreciation. This is a healthy sign and a per-requisite to avoiding a painful period of declining prices. The latter still looks unlikely based on the current market readings.

July 22 – Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

A similar table to last week with all but one city seeing their CMI drop quickly over the last month. Cave Creek is still the exception thanks to a fall in supply.

All cities are now below 500 for the first time since July 2020.

June 21 – Based on affidavits of value filed during June we have collected the following statistics on iBuyer activity:

OpendoorOfferPadZillowRedfinKnockAll iBuyers Combined
Homes Purchased in June 2021489153112100764
Homes Purchased in June 20202847180194
Annual Change in Purchases1646%226%522%N/A-100%713%
Homes Sold in June 2021145944270288
Homes Sold in June 2020136763307252
Annual Change in Sales7%24%27%N/A-100%14%
Median Purchase Price in June 2021$421,900$385,000$372,200$319,250N/A$402,600
Median Purchase Price in June 2020$264,500$250,000$280,750N/A$385,000$255,500
Median Sale Price in June 2021$377,500$371,124$416,450$446,000N/A$377,750
Median Sale Price in June 2020$270,000$305,000$290,000N/A$333,881$278,950
Homes in Inventory at the End of June 20219582501631901,390
Homes in Inventory at the End of June 2020214843109338
Annual Change in Inventory348%198%426%N/A-100%311%

All the iBuyers grew their purchases in June, clearly driving to recover from the slump in their volumes that started in 4Q 2019. In this most were very successful:

  • Opendoor made 489 purchases, easily their busiest month ever. Their previous record was 366 in September 2019.
  • OfferPad purchased 153 homes, also setting a new record for themselves. The previous high point was October 2018 when they bought 134.
  • Zillow purchased 112, not a record since they bought 132 in February 2019, but a large increase compared with any month in the last 2 years and back to the level of June 2019.
  • Redfin are a recent new-entrant, but 10 is their highest monthly total to date.

Sales were much less noteworthy, with only 14% growth compared to June 2020 for the iBuyers as a group. However, sales are now growing after many months with sales decline due to lack of inventory.

With purchases exceeding sales by a very large margin, iBuyer inventory has increased sharply during the month of June. Inventory is up 311% from a year ago with Opendoor holding the lion’s share – 69%. OfferPad is second with 18% while Zillow has 12% and Redfin just 1%.

764 purchases represent a much higher share of the market than we have seen for the last 18 months. The iBuyers have bought themselves back into the game.

July 17 – One of our favorite ways to measure the state of the market is the Contract Ratio. Please see the Definitions section if you are not familiar with it.

It compares available listings with the number of homes under contract and a high number means we have a hot market.

In every sector, the contract ratio is down from March, and in some it is now lower than this time last year.

Lower than July 2020:

  • Avondale
  • Buckeye
  • El Mirage
  • Gilbert
  • Glendale
  • Mesa
  • Phoenix
  • Queen Creek
  • Surprise
  • Tempe
  • Tolleson

Same as July 2020

  • Anthem
  • Chandler
  • Laveen
  • Litchfield Park
  • Maricopa

Higher than July 2020

  • Apache Junction
  • Arizona City
  • Casa Grande
  • Cave Creek
  • Fountain Hills
  • Gold Canyon
  • Goodyear
  • Paradise Valley
  • Peoria
  • Scottsdale
  • Sun City
  • Sun City West
  • Sun Lakes

The locations that are hotter than last year are mostly either adult-oriented or luxury home areas.

The largest cities (Phoenix, Mesa) are mostly cooler than they were 12 months ago.

July 15 – Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

Most cities are seeing their CMI drop quickly now as inventory rises. Because supply has been so low recently, the increases are large in percentage terms. For example Chandler has 150 active single-family listings (excluding UCB and CCBS) which is double the 75 it had at the beginning of April. However, the long term average count for Chandler is 940 and the maximum we have measured was 2,481. So 150 would seem very low if we had not seen 75 three months earlier.

Paradise Valley is not seeing much of an increase in supply so far, but its demand has been falling from unusually high levels.

Cave Creek is unusual in that its supply is at a similar level to April. It has been zooming up the chart and looks likely to reach the number two spot soon.

With more supply to choose from, and list prices increasing more slowly, some buyers are being attracted back into the market. We are seeing a slight rise in demand in several cities. These include Glendale, Maricopa and Queen Creek. When supply increases and demand falls, the CMI heads down very quickly, but if demand starts to rise at the same time as supply increases, the CMI’s rate of decline could well moderate.

An interesting time to be watching the market.

July 11 – A quick glance at the chart showing the average $/SF for active listings shows us that it is now declining from the peak of $361.32 reached during week 22 (early June)

This is for all dwelling types across Greater Phoenix and excludes listings in UCB or CCBS status.

However, you would be mistaken if you think most sellers are asking less for their homes. The primary reason for the decline is the unbalanced increase in the number of active listings since early June. Most of the extra listings have been in the price range between $250,000 and $1.000,000. The number of active listings over $1,000,000 has not changed much. This means the mix has moved away from luxury homes and this has caused most of the decline in the average price per square foot. Here is the chart for homes between $250,000 and $1,000,000:

and here is the chart for homes over $1,000,000

We can see signs of stabilization in the luxury market, which appears to be range-bound between $549 and $558 per square foot.

I recommend that you experiment with the filters on this chart to determine which segments remain strong and which are weakening. The Condo segment looks to be the weakest of the 3 dwelling types.

July 8 – Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

Cave Creek has taken over from Goodyear as the only city to have improved for sellers over the past month. The other 16 cities are moving in a direction that is favorable for buyers. The average change in the CMI over the past month is -14.5%, which is an acceleration of the downward trend from -13.2% last week.

We now have only 6 cities with a CMI over 400. They are all still far above normal, but the trend is clearly downwards.

June 7 – The affidavits of value have been counted for Maricopa County and although the prices have not all been double-checked, we have preliminary pricing statistics for June 2021.

For single-family and condo / townhouse properties:

  • total units closed were 12,220 which is up 19% from June 2020
  • newly built units closed were 1,661, up 2% while re-sale units were 10,559, up 23%
  • the monthly median sales price was $400,000 which is up 24.2% from June 2020
  • the new build median was $407,047 which is up only 9.3% from June 2020
  • the re-sale median was $400,000, which is up 28.2% from June 2020

The new build median is back above the re-sale median, unlike last month. However, the rate of increase of re-sale prices continues to out-perform new home prices by a wide margin.

July 5 – Although the market is starting to cool, it remains very hot and favorable to sellers, so we should be looking for indicators that help us determine how far it is below the peak and how far it has to go before it becomes normal. Today I will look at one measurement that is very poor for doing this and another that is very good. Surprisingly, the one that is very poor is widely measured and discussed while the one that is very good is hardly used at all.

The poor indicator is average days on market. This is something we have found to be a trailing indicator, often 6 months behind the current state of the market. It is also unreliable and plagued by accuracy difficulties. It is currently on a declining trend and has not yet recognized the cooling that started in mid-March. It will probably start increasing by October. My advice is to ignore it.

The useful indicator is the listing success rate. This is currently reading 91.1% for all areas & types in ARMLS. This is down from the peak of 93.3% that was reached around the end of May. We can see that it is a little slower to react than the Cromford® Market Index, but when it does react, it provides a nice reliable signal. It is now in a clear declining trend. However it has only fallen by 2.2 points. A normal reading would be around 66.5% – the long term average. So we would need to see another 24.6 point fall before it suggested we were back to a normal balanced market.

Below is the weekly chart showing the listing success rate measured weekly during 2021 and 2015, the last year where it fell below 66.5%. Go here to see the interactive version.

Clearly we have a long way to go before we get down to 66.5% and it is not within striking distance in the near term.

The chart also illustrates the one drawback of the listing success rate – it takes a dive every year in January due to the large number of listings that expire on December 31.

July 1 – Here is our latest table of Cromford® Market Index values for the single-family markets in the 17 largest cities

Goodyear stands out as the only city to have improved for sellers over the past month. However the other 16 cities are moving quickly in a direction that is favorable for buyers. The average change in the CMI over the past month is -13.2%, which is an acceleration of the downward trend from -9.7% last week.

Active listings are still at low levels but they are growing fast. Several cities, such as Avondale, El Mirage, Gilbert, Maricopa and Queen Creek, have an active count (excluding UCB and CCBS) that is at least double what it was in March. This is still a low number, but the additional choice for buyers must be welcome.

Buyers have lost some of their motivation, faced with vastly higher prices and bidding wars that make them feel under-valued. We have been saying that demand is much weaker than the second half of last year for some time and many people have questioned how we can believe that. It is just mathematics. When supply is very low, weak demand looks and feels like strong demand. It is only when the supply grows that you realize how weak the demand really was. New listings are getting fewer showings and fewer offers, but still enough to sell quickly at a nice percentage of the asking price (often more than 100%). Demand still exceeds supply by a long way, but the gap is narrowing fast.