January 2018 Newsletter

1     This Report Comes from Data that has been collected by the Arizona Real Estate  MLS:

       1st Quarter 2017
 By the end of March, the 2017 housing axiom was clear: price point, price point and price point. Ask any agent about 2017 and
their description of the market will vary greatly based on the price of the properties they marketed.The bottom third of the market, $200,000 and less, was on fire characterized by rapid appreciation fueled by extremely low supply. The lower price points were best described as a full-blown sellers’ market. By contrast, the luxury market favored the buyers. When it came to price point, 2017 filled out its dance card. It was a sellers’ market in the lower price ranges, a balanced market in the upper mid ranges and a buyers’ market at our highest price points.

2nd Quarter
By the end of June, STAT reported, “...the third highest sales volume in the 17 years we’ve been reporting
sales numbers. The 49,181 sales reported in 2017 were less than only the 2005 total of 54,142 and the 2011 total
of 53,896. We should not lose sight of the significance of the two years that surpassed this year’s total. First, 2005
went down in the history books as the year our housing bubble rapidly inflated. Second, 2011 was the year housing
prices bottomed out after the housing market collapse and cash investors began seizing the opportunity . This leaves
2017 as the very best year for valley resale homes in our history not influenced by some freakish market outlier.”
Traditional and first-time local buyers were driving our market.  When we combined the average sales prices with the average sales volume, we came up with the number most important to listing and selling agents: dollar sales volume.
The dollar sales volume for the first half of 2017 was $14,421,738,753, the second highest total ARMLS has ever reported. This compared to the record dollar volume of 2005 at $15,247,743,200.
With the first half of 2017 sales data on the books, STAT noted, “When we report our final numbers for 2017, I
suspect we’ll see the fourth best sales volume numbers in our history. We had a very strong close to 2004 and we’ll
see the second highest dollar sales volume behind only 2005. Overall, 2017 is shaping up to be an outstanding year
for ARMLS subscribers.”  2017 was the 4th highest year in volume and second highest in dollar sales volume.

3rd Quarter
In September, STAT discussed the negative nature of nationally published housing reports, how these reports
were based on NAR’s pending home sales numbers and why we thought these reports were incorrect. Like the NAR
report, we too were reporting year-over-year pending home sale declines. In fact, according to our numbers pending home sale contracts declined in year-over-year comparisons in each of the final eight months of 2017. However , while NAR interpreted these numbers as a weakening in home sales, STAT felt a new dynamic was coming into play.

The way in which agents were reporting their pending contracts had changed, and this change was responsible for the decline in pending home sale contracts. There used to be a strong relationship between the under-contract count and the monthly sales count the following month. In 2017, we saw a 1.50% decline in year-over-year pending contracts but a 5.82% increase in homes sold. When measuring demand, “pending sales” are a key metric. Until we “recalibrate” the relationship between pending contracts and the actual future sales they forecast, any year-over-year comparison between the pending numbers in prior years and the pending contracts in this year will underestimate our actual demand.  Eight out of 12 months showed a decline in “pending contracts” while 11 out of 12 months showed year-over-year gains when the actual sales numbers were reported.

Interest Rates Projection for 2018

According to Mike Fratantoni, chief economist for the Mortgage Bankers Association, “The Mortgage Bankers Association projects that 30-year mortgage rates, which averaged about 4 percent in 2017, will increase to average about 4.5 percent in 2018. In a context of economic growth, a strengthening job market, and rising inflation, we’re forecasting that the Federal Reserve will increase short-term rates four times this year.”

Looking Ahead
Low inventory numbers, particularly at the lower price points in 2017, resulted in overall price increases of
8.5% in the median, 9.5% in the average price and 8.2% in the price per square foot. So, what happens in 2018?
In early January of most years, everything is speculation. The one thing almost everyone agrees on is that with
even fewer homes for sale this year, prices must go up. As an added note, if we see a 7.6% increase in our reported December median home price of $246,125, we will match our peak median price set in June 2006 at $264,800.
I personally hope this doesn’t happen, as a 2019 return to peak pricing would make for a much healthier market.
But if it does occur, June is the most likely month. There are two prevalent notions as to sales volume in 2018, one being low inventory numbers will lead to higher prices, and the higher prices coupled with rising interest rates will restrict demand leaving 2018’s sales volume comparable or lower than 2017’s. The second line of thinking centers around millennials being one year older and an improving economy in which case the single-family housing market will make further gains this year. I’ve
always seen March as a bell weather month, at that time, we should have some indication of 2018’s trajectory.

STAT Armls Dec 2017 Report