Clear Title of Arizona is pleased to provide its clients with the Clear Connections Monthly Market Update. This report will provide you with the latest real estate trends.

Our business is built around the concept of educating and providing the personal service that Real Estate Agents and Lenders have come to depend upon. We want to provide accurate data to our clients, associates and friends. It is intended to keep you informed on critical market trends that affect our businesses.

SINGLE FAMILY HOME

In February 2018, single family home sales increased year over year in three sectors, with investor flips growing fastest.

  • Normal re-sales (up 10%)
  • Investor flips (up 33%)
  • New homes (up 9%)

Because of lower distress levels, single family home sales decreased year over year in the remaining sectors:

  • GSE – Fannie Mae, Freddie Mac, etc. (down 37%)
  • Bank owned homes (down 25%)
  • Third party purchases at trustee sales (down 33%)
  • Short sales / pre-foreclosures (down 64%)
  • HUD homes (down 34%)

Both February 2018 and February 2017 had 19 working days, so we can make a fair comparison between the sales counts. In that light, February 2018 was much stronger for sales than January 2018 and showed us a 9% increase over February 2017. We have become used to strong growth from investor flips and new home sales, but normal re-sales posted at a 10% increase over February 2017, which was unexpectedly high given the weak supply situation. Investor flips continued to grow at the fastest percentage rate, not only because of traditional investors but also due to growth in OfferPad and Opendoor activity.

Because of rising prices, the change in total dollars spent on homes was even more favorable than the change in the unit count.

  • Total dollars spent on single family homes rose by 19% over February 2017.
  • Total dollars spent on townhouses & condos rose by 7% over February 2017.

The swing in favor of attached homes that we saw in December, swung back again in January and was even weaker in February. This was not due to lower unit sales but lower average prices compared to a February 2017 which saw an exceptional number of very expensive attached home sales.

During February, average single-family pricing moved slightly lower than January, reading $321,782, down from $322,239 last month and up 9.0% from $295,091 in February 2017. Average new single family home prices during February were only 1.1% higher than last year at $373,263, but this was mainly because of a 3.0% drop in average new home size.

MEDIAN SALES PRICE

Median Sales Price
The median sales price rose 8.2% from $245,000 in 2017 to $265,000 in Feb 2018.

NEW HOME SALES

Newly-built single-family homes saw 1,203 closings in February, up 9% from 1,107 in February 2017. The total dollar value of single-family new homes closed in January was up 10% from $409 million in 2017 to $449 million in 2018. However, townhouse / condo homes saw an increase of 29% from $83 million to $58 million. Both average sales price and unit volume for new townhouse / condo homes were exceptionally high in February 2017, so this makes for a difficult comparison with February 2018.

The average sq. ft. of a new single family home in February was 2,362, down 3.0% from 2,434 in February 2017. The average sq. ft. of a non-distressed resale was 2,017, so new single-family homes are 17% larger on average than the existing homes that sold. For new-built townhouse / condos the average size was 19% larger than re-sales. The typical newly built condo or townhouse is far less affordable than the older stock of attached homes as a result.

The share (in dollars) for new homes in the single-family market has moved lower from 19.4% in February 2017 to 17.9% in February 2018.

DEMAND

Total single family, townhouse & condo sales were up 9.3% in February from a year earlier. Single-family sales grew 9.1% and townhouse/ condo sales rose 10.4% compared to February 2016.

Single-family homes priced over $500,000 took 26% market share in dollars, up from 23% last year. There was a 16% increase in unit sales over $500,000 while average pricing rose by 4%. Entry level single family homes under $200,000 lost market share from 16% to 12%, primarily due to low supply. The mid range between $200,000 and $500,000 has robust demand and reasonable supply and grew market share from 60% to 62%.

Townhouse/condos priced over $500,000 grew their market share from 12% to 21% while those under $200,000 dropped from 42% to a 34% share of the attached market. The mid-range took a 46% share in both December 2016 and 2017.

7,156 Each house represents 500 units
Numbers reflect single family homes only.

AVERAGE PRICE PER SQUARE FOOT

Average price per sq. ft. for single family homes

gained 8.6% from $143.02 in February 2017 to $155.29 in February 2018.

SUPPLY

The number of active single family listings without an existing contract was 12,790 for the Greater Phoenix area as of March 1, 2018. This is down 1.9% since February 1. The inventory of single family homes under $150,000 stands at 33 days, 16% lower than a year ago. Year to date on March 1, we have seen 1.4% more new listings created in 2018 than in 2017. Thi sis less favorable to buyers than it appears because of where the weekends fell. Supply is very constrained below $250,000 and inadequate to meet demand up to about $600,000. Supply is good over $600,000 but below $1,500,000, but continues to fall compared with last year and and is becoming scarce in a few more popular areas. Supply is very plentiful over $1,500,000 except for new homes which are usually snapped up quickly.

CHANGES IN TRANSACTION MIX

We saw a big increase in non-distressed transactions (up 12% over this time last year), with investor flips growing by a very strong 33%. New home sales were up 9% compared with February 2017. Distressed transactions fell another 33%. We saw a 34% decrease in third party purchases at trustee sales and new notices of foreclosure remain at very low levels. Reversions to lenders decreased by 41%. Townhomes and condos took a slightly larger share of the market in February based on unit counts, but lost market share based on dollar volume. This is because the high-end market for attached homes was less active in February 2018 than February 2017.

2018 has remained similar to 2016 and 2017, but with the following notable differences:

  • The year-to-date closed transaction rate is up 14% over last year
  • New homes have increased their market share over existing homes
  • Attached homes are gaining market share over single-family homes
  • Homes under $200,000 are getting ever scarcer
  • 2017 numbers favor the Southeast Valley and Pinal County

The increase in transactions is mainly due to buyers qualifying more easily for loans. This is not because lending standards have fallen, although underwriting rules have eased a little. Instead it is because buyers have higher credit scores and are finding down payments more easily. It is now several years since the end of the foreclosure wave and those former home owners affected are coming out of the penalty box and returning to the market with much better credit ratings than they had a couple years ago. We are also seeing loans close more swiftly than last year, which means listings spend less time in pending or UCB status and close more quickly after getting an acceptable offer. In 2016 it was the West Valley that had the most favorable conditions for sellers. In 2017 this has shifted in favor of Pinal County and the Southeast Valley. Here supply is well below last year and is causing major problems for buyers on a constrained budget. The high end of the market has picked up volume compared to last year, but the change in pricing is modest. Most of the appreciation is being driven by the market under $300,000. There are several fashionable areas where the luxury market remains strong, for example Arcadia and Old Town Scottsdale. In addition luxury condominiums are in short supply and high demand. In common with the rest of the USA, we are seeing ongoing challenges for large luxury single family home sellers in the more remote areas, especially those with homes over $2 million. This is caused by demographic trends as baby boomers retire and/or downsize and millennials enter the housing market. The mid range from $200,000 to $500,000 is currently very healthy and the lower end of the luxury market, from $500,000 to $1 million, is also looking significantly stronger than last year. The low end of the market looks as though it will never get relief for its chronic supply problem, and it may not be too long before homes under $200,000 are as rare as they were in 2006.

 

Data provided by: Michael Orr