Market Summary for the Beginning of November 2014
Active listing counts grew much faster in October (5.7%) than in September (0.9%), but nowhere near as fast as they did last year during October (15.4%). This growth occurred despite the flow of new listings remaining very low. We saw 8.9% fewer new listings added during October than last year during the same month. In fact it was even slightly (0.3%) lower than October 2012 which held the previous low record for October since 2000.
Yet again we see no significant sign of an improvement in demand, although comparisons with 2013 are much easier now because demand was also in a slump during October 2013. As a result the annual sales count has stabilized and the monthly sales counts are close to the same level as last year. Whether they exceed last year or not depends on exactly when and how you take the measurement. Comparing the full month is not exactly fair because October 2013 had fewer working days than October 2014. So the fact that sales in October 2013 exceeded sales in October 2013 by 0.9% is more a fluke of the calendar than a sign of improving demand. Listings under contract are down another 9.4% from last year’s depressed number. More of these listings under contract are UCB than they used to be – 34% compared with 32% last year. The remaining 66% are in pending status, which continues to go out of fashion as agents spend more time maximizing their under contract listings’ visibility on Zillow and elsewhere.
Here are the basic ARMLS numbers for November 1, 2014 relative to November 1, 2013 for all areas & types:
- Active Listings (excluding UCB): 24,846 versus 23,330 last year – up 6.5% – and up 5.7% from 23,514 last month
- Active Listings (including UCB): 27,561 versus 26,123 last year – up 5.5% – and up 4.7% compared with 26,336 last month
- Pending Listings: 5,293 versus 6,047 last year – down 12.5% – and down 3.4% from 5,481 last month
- Under Contract Listings (including Pending & UCB): 8,008 versus 8,840 last year – down 9.4% – and down 3.6% from 8,303 last month
- Monthly Sales: 6,161 versus 6,109 last year – up 0.9% – and down 1.8% from 6,273 last month
- Monthly Average Sales Price per Sq. Ft.: $127.98 versus $124.69 last year – up 2.6% – and up 1.0% from $126.69 last month
- Monthly Median Sales Price: $192,500 versus $185,000 last year – up 4.1% – but down 0.8% from $194,000 last month
We can see that pricing momentum is negligible by comparing the annual and monthly medians. For normal listings across Greater Phoenix both stand at $200,000. In a rising market the monthly median will almost always be higher than the annual median, with the opposite true in a falling market. Here we are in dead calm. This is about as far from a bubble situation as it is possible to be.
Predictions of a bubble growing and bursting in Phoenix were rife in 2013 but have proven very wide of the mark. Several other “expert” predictions have proven equally incorrect:
- Institutional investors have not disposed of their rental properties except in tiny numbers relative to their holdings
- Rental vacancies have remained at low levels (although the rental market is now showing a few signs of coming off the boil)
- Mortgage interest rates have trended down to 4% instead of up to 5% or 6%
In most areas the market continues to gently deteriorate for sellers with the ultra-high end luxury market for custom homes still retaining the best demand relative to historic levels.
The rest of the market remains subdued, awaiting more jobs, better wages and an economic recovery that benefits the huge number of people who depend primarily on earned income rather than capital gains.
Affordability is good, interest rates remain close to record lows and population continues to grow, but home buying remains very low key.
Easing lending guidelines may help, but stagnant or declining real-term earnings is probably one of the root causes of the current low level of demand for the housing market under $500,000. When more people fail to qualify for loans, you can try to patch the system by changing the qualification rules, but a more attractive solution for the long term would be one that increases the net earnings of the applicants. The US economy has expanded at a modest but positive pace since 2009, and faster than most of the developed world. However, very few of the benefits of expansion have so far reached the average potential home buyer. Investors have done very well as have most corporations and Wall Street. Now that investors are no longer buying homes in large numbers, we are left with a hole in demand that the average home buyer is financially unable to fill.