Market Summary May 2021
Here are the basics - the ARMLS numbers for May 1, 2021 compared with May 1, 2020 for all areas & types:
- Active Listings (excluding UCB & CCBS): 5,080 versus 14,051 last year - down 63.8% - but up 24.2% from 4,089 last month
- Active Listings (including UCB & CCBS): 9,438 versus 17,867 last year - down 47.2% - but up 8.5% compared with 8,699 last month
- Pending Listings: 7,829 versus 5,676 last year - up 37.9% - but down 1.7% from 7,964 last month
- Under Contract Listings (including Pending, CCBS & UCB): 12,187 versus 9,512 last year - up 28.1% - but down 3.1% from 12,575 last month
- Monthly Sales: 10,172 versus 7,174 last year - up 41.8% - but down 2.2% from 10,396 last month
- Monthly Average Sales Price per Sq. Ft.: $243.50 versus $183.96 last year - up 32.41% - and up 5.1% from $231.75 last month
- Monthly Median Sales Price: $373,000 versus $299,999 last year - up 24.3% - and up 4.1% from $358,250 last month
These numbers are the most interesting we have seen for a long time. They show a very hot market with supply dramatically mismatched to demand. However they also confirm a cooling trend that has been developing over the last 7 weeks. This was first reported by the Cromford® Market Index, but is now being confirmed by a number of other metrics.
- active listings are UP significantly from the beginning of April, though admittedly from a very tiny number
- under contract counts are DOWN for the second month in a row
- sales counts are down compared with March
Markets do not get hotter indefinitely. The primary mechanism by which they cool down is through prices. In hot markets pricing goes up which causes demand to weaken, which means the supply gets a chance to recover. When prices go up, some buyers can no longer afford to buy and drop out. The faster that pricing goes up, the more buyers tend to drop out, at least in a healthy market. If this is not happening then you probably have a bubble where pure speculation has taken over and demand grows when prices rise. We are not seeing this.
12 months ago we were in the early stages of adjusting to COVID-19 so the year over year comparisons are not very meaningful. Demand dropped sharply in April 2020 only to recover quickly by June.
All changes tend to start small and then grow. The current market cooling is like that. We now have supply increasing and demand falling. This will gradually release some of the steam from the over-heating engine and the market can trend back towards normality. In a normal market prices still tend to rise, but in our current market, prices are rising at an unsustainable pace - the monthly average $/SF soared by over 5% in a single month. If the next 8 months behaved like April 2021, we would see the median sale price rise to $514,000 by the end of the year. I doubt that will happen.
Even though we have entered a cooling phase, it will probably take several quarters (if not years) to cool down to normal and prices will continue to rise at a brisk pace for quite some time.
One Year After Start of Pandemic - Luxury has Exploded
Homes Selling for 101% of List Price on Average
For Buyers:
With 54% of all sales closed over asking price so far in April, the average sale price per square foot is now higher than the list price for every price range up to $1M. In a balanced market, homes typically sell within 97% of list price; that percentage is now 101%. This means that, for the past month or so, the majority of list prices have been the starting price for where negotiations begin instead of a top price to work down from. In past extreme seller markets, $5,000 over asking was typically enough to win a contract; that was true last year as well when the market took off. However, last January the median over ask was $6,000; by February it was 10,000; in March it was $11,000; and so far in April it’s $15,000. The highest was $905,000 over list price closed in March (It was an auction for a 10-acre property in Cave Creek that sold for $2,255,000). By price range, over 62% of homes listed between $250K-$400K closed over asking price; the percentage is 54% for sales between $400K-$600K; 47% between $600K-$900K; 30% between $900K-$2.5M; 9.5% over $2.5M. Putting an offer in over asking price may cause a buyer some anxiety, especially a first-time home buyer. The median sale price is now $360K. Since January, the sales price per square foot for a home between $300K-$400K has appreciated 6%. That’s approximately 2% per month and the current sale price to list price ratio within the price range is 102.4%. If this rate of appreciation continues in the short term, a buyer who paid 4% over asking price on a $360K home ($14,400 over) would recoup their investment through appreciation in approximately 2 months.
For Sellers:
The luxury market has been exploding since last summer and continues to be at the strongest level ever seen in Greater Phoenix. The number of listings under contract over $1M is up 156% over last year; but the number under contract between $2M-$3M is up 296% and over $3M is up 212%. In a typical market, sales prices in this range would be landing around 93% of list price. However in the 2021 market, the sales price ratio is averaging 98% of list. The luxury market is also keeping up with the rest of the market in terms of marketing time. Prior to contract, half of the contracts accepted valley wide in the last week were on the market 6 days or less. Over $1M, the median was 12 days prior to contract. Over $2M, the median is 67 days. The market over $1M is outperforming in terms of annual appreciation in sales price per square foot. The median price for a 4,000-5,000 square foot home is running at $1.1M with an appreciation rate of 31%. The median price for a 5,000-10,000 square foot home is $2.3M with an appreciation rate of 35%. For perspective, the median price of a 1,500-2,000 square foot home is $365K with an appreciation rate of 25%.
Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2020 Cromford Associates LLC and Tamboer Consulting LLC
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Troy Holland
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Email: Troy@Sell4Free-AZ.com
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