By Scott Gaertner
This month we are having a guest speaker! Each month you hear my opinion on the market and
I thought it might be good to give you another view.
The thoughts below are that of the man I think of as the “Master of Math” here in the valley, and whom I am pleased to consider a good friend. Mike Orr holds a master’s degree in Mathematics from the University of Oxford and is the founder, chief analyst, and editor of the Cromford Report. It is one of my favorite sources of real estate data.
Below are Mike’s thoughts on the greater Phoenix real estate market:
“The lack of supply can only be described as shocking. A 30% decline since this time last year to reach the lowest level since August 2005. This to satisfy a population that has grown more than 20% since 2005. Anyone who thinks this severe shortage will not result in a significant rise in prices is going to have another thought coming pretty soon. The median sales price is already up 11% over the last 12 months and the average price per square foot is up almost 9% and probably heading for a double-figure appreciation rate.
We note that December 2019 contained 21 working days and December 2018 contained 20, giving 2019 a 5% advantage. However, unit sales were up more than 20% so making an allowance for the advantage still gives 2019 a win by 15%. The listings under contract count is less impressive. While it is almost 20% up from last year, it had been almost 24% up at the start of December, so gave back a little of its lead. Only a little mind you. We are clutching at straws here to find something indicating a little cooling in the market.
Demand remains higher than normal but the Cromford® Demand Index has eased from around 107 to around 103 over the past four weeks. This will not make much of a difference while supply remains under half of what is needed for a balanced market.
The big hope for buyers must be for a surge in new listings arriving over the next 12 weeks. Perhaps sellers will be tempted by the higher pricing they can achieve. However, if they are staying around Phoenix, they will have to pay more for their new home too. Phoenix is currently the strongest large-city housing market in the USA, and this is fueled by inter-state population movements. Retirees are a big part of that, but so are people moving here from California and other Western states for work and the lower cost of living. Demand is likely to remain healthy despite the rising prices.
The primary question is whether we will see any change in the meager supply of homes for sale. If this is to take place, it is likely to be visible over the next few weeks. There has been no sign of an improvement in new listing flows in the last several weeks of 2019. But 2020 is a new year, so we will be watching closely for signs of change.”
Cromford measures dollar volume on a weekly basis for all areas and types, shown in this latest weekly chart below.
On this chart, the lonely dark brown dot at the left represents the first week of 2020 and has a value of $2,742,696,250. This is the highest dollar volume we have ever measured for the beginning of the year, and it is up a massive 26% from this time last year. Coming second and third are 2018 and 2019 with 2006 in fourth place.
The 2020 real estate market shift is important enough that we have decided to have a Housing Forecast event with the top statistics person in the valley on February 27 in Scottsdale North. For details, see our ad below or give us a call at 480-634-5000.
Scott Gaertner is an Associate Broker with Keller Williams Northeast, who for the past 25+ years has helped more people to find their lifestyle niche in the Scottsdale North area than anyone else. He also contributes his thoughts on lifestyle interests in the area.