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Market Summary for the Beginning of July

Starting with the basic ARMLS numbers for July 1, 2018 and comparing them with July 1, 2017 for all areas & types:

  • Active Listings (excluding UCB): 16,101 versus 18,087 last year - down 11.0% - but up 0.5% from 16,018 last month

  • Active Listings (including UCB): 20,464 versus 22,301 last year - down 8.2% - and down 1.7% compared with 20,809 last month

  • Pending Listings: 6,092 versus 6,486 last year - down 6.1% - and down 7.8% from 6,608 last month

  • Under Contract Listings (including Pending, CCBS & UCB): 10,455 versus 10,700 last year - down 2.3% - and down 8.3% from 11,399 last month

  • Monthly Sales: 9,171 versus 9,608 last year - down 4.5% - and down 9.1% from 10,093 last month

  • Monthly Average Sales Price per Sq. Ft.: $163.59 versus $151.67 last year - up 7.9% - but down 0.5% from $164.35 last month

  • Monthly Median Sales Price: $267,329 versus $245,000 last year - up 9.1% - and up 1.7% from $262,900 last month

The supply of active listings without a contract rose slightly during the month of June, even though total active listings dropped 1.7%. June was a slightly weaker month for new listings, down just over 1% compared to last year. We normally see total supply drop between June and July, but it is a surprise to see active listings without a contract move a little higher. A very slim ray of sunshine for buyers, perhaps.

The sales count for June looks weak, down significantly from May and the first month to show a year-on-year decline for 2 years. Before we start to wring our hands, we need to check how many working days there were in June 2017 and 2018. There were 22 in 2017 and 21 in 2018, giving June 2018 a 4.5% disadvantage. This is exactly the same percentage as the shortfall in sales compared with June 2017. We conclude that the underlying sales rate is very similar to last year. This is nothing to be too concerned about but it is evidence that the sales rate peaked in May and may no longer be rising. To confirm this we look at the annual sales rate which stands at 96,965. A month ago, we saw 97,402, so we are seeing confirming evidence that sales are no longer growing. However there is also little sign of a significant decline in sales so far, as the huge declines at the bottom and are sufficiently balance by increases in the mid-range and top end.

The number of listings under contract at the beginning of July is lower than last year - down 3% - but this is nothing new, as it was down 6% last month. In conjunction with the lower monthly sales count and the weaker annual sales rate, this confirms that demand is getting slightly weaker. A combination of poor supply, higher pricing and rising interest rates makes this unsurprising. Demand is strong at the upper end but unit volumes are too small above $500,000 to have much impact on the overall market direction. The decline in demand is small and because of the weak supply, difficult to detect in the real world as it is still so much higher than supply.

Just as median sales prices dropped unusually low during the housing crash, they are now rising artificially quickly. This is predominantly caused by the lack of supply of homes at the low end, not by the increase in home prices. We caution you not to use the median sales price as a guide to how fast the market is appreciating. The average price per sq. ft. is a much better measuring tool at times like these.

Purchases by institutional investors are now led by Progress Residential with Cerberus easing up. Both are buying roughly 1 new single-family home a day to convert to a rental. This is a much lower purchase rate than we saw from Cerberus between November 2017 and March 2018 ibuyers continue to grow their penetration of the market. During June 2018 in Maricopa County, we counted 456 iBuyer purchases and 354 iBuyer sales. Market share for purchases went 73% to Opendoor, 23% to OfferPad and 4% to Zillow (trading as Signpost Homes). To capture these properties, buying prices are getter even closer to market price so the open question is not whether many sellers like to sell their homes this way, but whether these iBuyers can survive long-term on the small gross margins between the buying and selling price, plus the fees charged to the sellers. In Pinal County, we have not completed the June totals yet, but OfferPad is the bigger player, with 60% of purchased, 40% going to Opendoor and Zillow not making an appearance yet.


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