This report below, was posted to the Cromford Report website today July 7th 2022. Big news as the market has come to a complete halt and prices turned the corner in some price points.
July 7 – The affidavits from Maricopa County Recorded that were filed in June have now been counted and collated and we have the following preliminary statistics:
- There were 9,478 closed transactions in June, down 22.4% from June 2021. New homes were down 7.7% to 1,533 while re-sales were down 24.8% to 7,945.
- The median sales price was $486,824. This is down 0.65% from last month but up 21.7% from June 2021.
- The new home median was $500,454, almost unchanged from last month (down $36) but up 22.8% from June 2021
- The re-sale median was $484,000, down 0.41% from last month but up 21% from June 2021.
These are for single-family detached and condo/townhouse properties.
In summary, prices have stopped rising but are still much higher than last year while sales volumes are dramatically lower than last year.
The trends in re-sales tend to show more volatile movement than in new homes.
July 6 – As we look at different price ranges, we can see that all of them have cooled significantly in the three months since April. The least affected is the range over $3 million, where the contract ratio has declined 43% from 67 to 38. In expensive locations like Paradise Valley and Carefree, the supply of active listings remains low by long-term standards and the market is relatively resilient.
Below $3 million contract ratios have declined by at least 74%, a colossal drop in just 3 months and easily the fastest and most significant cooling that has been seen in the Greater Phoenix housing market since we started studying it in 2001.
The hardest hit is the single-family detached price range between $500,000 and $600,000 where the contract ratio has dropped 84% from 296 to below 49. This price range is no longer a seller’s market and there are plenty of listings for each buyer to choose from. Bidding wars are almost over. There were 2,434 active listings as of July 1, with 358 of these in UCB or CCBS status leaving 2,076 available for buyers. Is this a lot? It certainly is. It is up 236% from April 1 and up 341% from July 1, 2021. It is also the highest total we have recorded for this price range since June 2008. We must consider it in context. Last month 1,079 homes sold in the price range, so in this light, 2,076 does not seem so high. But most of those sales were contracted well before the latest round of interest rate rises, so we would expect sales rates to drop in July, while the active listing count looks like it is headed considerably higher.
If you have a home in the price range of $500,000 to $600,000, our advice is to accept that you have a lot of competition from other sellers and the market trend is not moving in your favor. Be realistic in your expectations and you will probably be fine. But the price is too high and you could be left chasing a falling market with price cuts that may come too late.
July 4 – Now would be a good time to take stock of where prices have been going. The chart below shows:
- In blue – the average list price per square foot of listings in active status
- In green – the average list price per square foot of listings in pending status or active with UCB or CCBS status
- In brown – the average list price per square foot for one month’s worth of closed listings
- In red – the average sale price per square foot for one month’s worth of closed listings
This chart tells us quite a few things:
- Asking prices for homes for sale have been on a downward trend since peaking at just under $365 per square foot on April 27, three days after our first red-flag warning was issued.
- The average list price per square foot for active listings is down 6.6% over the last 68 days
- The average list price per square foot for listings under contract has failed to break above $315 and has moved mostly sideways since peaking at $314.06 per square foot on May 14
- The average list price per square foot for listings under contract is down 0.7% over the last 51 days
- The average list price per square foot for closed listings has failed to break above $303 and has moved mostly sideways since peaking at $302.38 per square foot on June 14
- The average list price per square foot for closed listings is down 1.3% over the last 20 days
- The average sale price per square foot for closed listings peaked on May 13 at $305.99 and has fallen 2.8% since then (52 days)
The blue line is being driven down by 3 main factors
- more listings are piling up in the ranges from $400,000 to $600,000 than in other price ranges. This change in the mix brings the average price per square foot down.
- new listings are being added at less ambitious prices as sellers start to get more realistic in their expectations
- large numbers of existing listings have had their asking prices cut as sellers get even more realistic in their expectations
The average price per square foot for active listings remains well above its level in January when the market was still getting hotter. The trend is clearly down, however.
The green line needs to fall if the brown line is going to decline significantly. Both are currently moving sideways, but with a bias towards the downside.
The red line has moved from well above the brown line to just below the brown line. This is what we commented on yesterday. The lowering of closed sales prices has been driven down by sellers agreeing to take a lower percentage of their asking price than they were accepting 30 days ago.
The interactive version of the chart can be found here.
Overall, we see a market that is past its top and looking wobbly. To avoid a more serious downward trend in prices, we would need to see supply stop growing and demand stop shrinking. We will be examining the numbers every day for any sign of either of these events occurring. If both happen, then we would expect stabilization. If neither happens then we would expect all price measurements to move lower during the second half of 2022.
July 3 – One of the many indications of a cooling market is the average closed price as a percentage of the final list price. We measure this for closed listings with a close date in the monthly period that just ended.
On July 1 this statistic dropped below 100% for the first time since February 11. The peak reading was 101.85%, which was attained on April 27. It remained over 101% right up until June 13, but has been falling very quickly since then.
After dropping through 100% 2 days ago it has already fallen to 99.73% and looks set on a trend back towards the long-term average of 97.35%.
The lowest reading ever was 93.82%, which occurred on February 5, 2009.
This statistic is a bit like taking the temperature of the market. Around 97% to 98% is normal. When it is over 100% the market has a fever. When it is below 95% it is suffering from hypothermia.
July 1 – The Contract Ratio for all areas & types in the ARMLS database has now dropped below 60.
This is in the “Balanced Zone” between 30 and 60, confirming just how far and how fast the market has cooled in the last 3 months.
Four months ago we had the third-highest reading (262.6) we had ever recorded. In April this had moved down to 230.1, still very hot.
The collapse between April and June is unprecedented – faster and more violent than we have ever witnessed. This is due to a very rapid decline in demand coupled with an explosive rise in supply.
At 59.8, the contract ratio is the lowest we have seen since March 2019. The trend indicates that it has further to fall.
The contract ratio is a simple and immediate measure, with no averaging or smoothing effect. It is therefore very responsive to violent changes in the market. In contrast the Cromford® Market Index is based on averages over the prior 30 days and is smoothed to avoid reacting to insignificant variations from day to day. It normally gives a more reliable picture of the market than the contract ratio. However, in times of dramatic change, it can move a little slower because of the averaging and smoothing. I would take signals from the contract ratio to be more up-to-date by an average of 2 weeks compared to the CMI. At the moment the CMI is clearly telling us that the market is cooling rapidly, but it probably understates by a week or two just how far it has already cooled as of July 1.
The contract ratio is telling us that we are already in a balanced market. If it drops below 30 then it will indicate a cold market with a significant surplus of sellers over buyers. We have not experienced a market like that since April 2009.
Click here for a full list of charts for the 4th week in June 2022
Jason Bru
480-466-4917
