Fall 2015 Phoenix Valley Market Update

Cromford SlidedeckAt the quarterly meeting of the Arizona Relocation Alliance we were privileged to hear the
latest market update from Tina Tamboer-Glatfelter of The Cromford Report. As she is known to do, Tina helped simplify our understanding of the many variables affecting the market by segmenting them into Supply and Demand categories. Her talk covered business relocations, demographics, financing and interest rates, and even the impact of ‘feelings’ on the market.

Here is a link to her slides – Relocation Alliance Market Update – September 2015 TP.

Thanks to Chicago Title, who along with Toma Partners, sponsored her talk.

Don’t forget. You may access The Cromford Report data directly through the Toma Partners website with this link. 



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Real Estate Market News

Here’s a periodic update from Toma Partners co-founder Mihai Toma:

OPINION SEGMENT: There are strong signs that modest depreciation in home values are just around the corner, such as the fact that demand has been consistently lower than supply for nearly a year. There is one positive development that could translate into increased demand. Buyers with a short sale or foreclosure will no longer have to wait 7 years to obtain a conventional loan; the wait time will soon be 4 years.


  • Annual Appreciation: 4.0%, 8.2%
  • Recent Appreciation Trend (Rate of Change): -3.8%, 3.8%

Paradise Valley/Cave Creek/Fountain Hills

  • Annual Appreciation: -3.6%, -1.1%, 9.6%
  • Recent Appreciation Trend (Rate of Change): -9.0%, -3.7%, 5.6%


  • Annual Appreciation: 4.1%, 04.6%, 6.9%
  • Recent Appreciation Trend (Rate of Change): 0.2%, 3.1%, -0.1%

Overall Market

  • Annual Appreciation: 7.2%
  • Recent Appreciation Trend (Rate of Change): 1.7%

More Data & Other Cities : Click here to SEE MORE RAW DATA




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The Market is Flat but Don’t Blame the Millennials Entirely

Millennials and Residential Real Estate in the Phoenix Valley

Cromford July 2014 per sq ft v1
Let’s face it. The Phoenix Valley single family home market is nearly flat. For the last year list prices of single family homes (as measured per square foot) seemed to be steady, though you may note that there has been a slight decline since March 2014.

In conjunction with the flat pricing there is a reduction in the number of overall sales and a corresponding increase in inventory.  The recent Cromford Report data for annual sales on a rolling basis is shown in the chart to the right. 

Depending on the source of your information, the causes for these market conditions include:

  • a still weak economy
  • fewer people able to qualify for financing due to student loans and stricter financing guidelines
  • a mismatch in inventory vs. the desired home design – the trend is toward smaller homes with smaller yards.
  • fewer people desiring home ownership because of their lifestyle or life stage  – in particular, the Millennials. Millennials are generally defined as  those born from the early 1980s to the early 2000s.

The Millennials

The Millennial demographic group hasMillenial Guy been a hot topic in the Toma Partners lunchroom and in the national headlines as a powerful force in the residential market. Among the many articles on the subject, I find one by Jed Kolko, Chief Economist of Trulia, to be the most comprehensive. Last week he posted this report  on trends in both millennial and middle-aged home owner groups. To me, the take away is that the economy overall is still a main driver to help in both the short haul and the long run.

The implications for people currently considering a move?

Listing a home

Be prepared to have your home on the market longer as the average days on market (DOM) is up to 118 days. That is an increase from a low of 101 days last October. If your home has a popular floor plan, is in good condition and has great marketing, you may expect to get offers sooner.

Buying a home

Right now inventory, the amount of homes listed,  is significantly higher than a year ago. Inventory is measured by days or months of supply available if people purchased homes at a steady rate. The current inventory is 132 days vs 83 days a year ago. Yet even with the increase in inventory, finding your dream home may still be difficult. Older styles of homes may not meet today’s buyers requirements, for example. However, when you do find the right home and it has been on the market for a while, you may have more options to negotiate. An experienced Realtor can be very valuable in those negotiations.

Investing in multi-family housingMultifamily housing starts 2014

Many people who are not buying homes are either living with other family members or they are renting. There is an expectation for tremendous growth in multi-family construction, for example, as shown in this chart.

Need more data?

If you’d like to access market data in real time, take advantage of Toma Partners’ access to the Cromford Report with this link: Raw Market Data.



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Arizona Cools

By now it should be no secret that the Arizona residential market has cooled to be a buyers’ market in all but a few areas. Our recovery from ‘the big one’ of 2008-2011 can now be considered over. Forecasts for the future tend to envision a year of relative stability although a number of factors, including the economy and tax changes, could in fact aggravate the current slight downturn.

The Wall Street Journal’s article – America’s Hottest Housing Market Has Suddenly Cooled Down gives you all the statistics as of January 2014. Of course, you can feel free to check the more recent Cromford Report through our special arrangement.

What does this mean to home owners and buyers? For home owners looking to sell, expect to market more aggressively and expect that you home may stay on the market longer that the few days or weeks that has been the norm for much of 2012 and 2013. This is the time to use a competent REALTOR® and make sure he or she knows how to maximize the appeal and value of your home.

For buyers, you can expect a more reasonable buying process and more inventory from which to choose. Absent the dramatic appreciation we saw in the last few years, the pricing should be more predictable. That said, your concern should also be in getting the best financing. Here’s why.

In typical extreme fashion, the mortgage industry tightened lending requirements excessively in the post-2008 crash. That tightening has eased and more mortgage companies are offering options for those with less than perfect credit situations. New products are being developed as this blog is written, however. So check with in-the-know lenders who can offer the latest and best fit mortgages.




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Big investors buy up homes in key markets

Julie Schmit, USA TODAY6:46 p.m. EDT October 28, 2013

Home prices

Big investors continue to expand into more cities for single-family homes as they pull back in others.

Last month, institutional investors, who largely buy single-family homes to turn into rentals, accounted for about one in four home sales in Atlanta, Las Vegas, St. Louis and Jacksonville, data from RealtyTrac show.

They also accounted for a big chunk of sales in Charlotte and Memphis.

Price gains will likely follow the investor buyers, says John Burns, CEO of John Burns Real Estate Consulting, as they did in earlier hot investor markets such as Phoenix and Sacramento.

HOUSING MARKET: Pending home sales slip: Flat sales next year?

He speculates that investor buyers — including institutional Wall Street buyers, individuals who flip homes for quick profits and mom and pop investors — have driven much of this year’s home price appreciation.

CoreLogic data show prices up 12.4% in August year over year, but faster in areas favored by investors, like Phoenix and Sacramento, which were up 18% and 26% respectively.

“Investors were just smart. They saw that homes were undervalued. They jumped in and pushed prices back up to normal,” Burns says.

Big investors still account for a small part of the overall housing market. As a result, their impact on overall prices isn’t that great, said Richard Smith, CEO of real estate firm Realogy Holdings, at a Zillow housing forum Thursday.

Prices have also risen in areas that have had little investor activity, says Mike Orr, real estate expert at the W.P. Carey School of Business at Arizona State University.

Orr tracks the Phoenix market, which was one of the first targeted by investors.

In mid-2012, investor activity peaked in Phoenix, Orr says. Then, they accounted for almost 40% of home sales. Those investors would include small investors.

LENDERS: Home loans become a little easier to get

For this September, Orr says investors accounted for about 23% of sales. Historically, they’d be 15% to 20% of the market, he says.

While Phoenix home prices in August were up more than the national average, home price gains have been slowing this year, show seasonally adjusted price data from Standard & Poor’s Case-Shiller index.

A “cooling wave” in terms of demand has now settled in after a frantic spring, Orr says. Falling investor interest is playing a role, but lack of enthusiasm from regular buyers is more important because they’re more numerous, Orr says.




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Where have the investors gone? They are still here!

Yesterday’s USA Today article  by Julie Schmit  –Big investors buy up homes in key market  reminds us that, in spite of the large appreciation in recent years, there is still an appetite for investment in single family residential homes. According to Michael Orr, quoted in the article, investors still make up close to 1/4 of Phoenix Valley home sales as of this September.

At Toma Partners we see investor activity coming from two types of investors. One is the buyer who has a mandate to invest several million dollars developing a large portfolio of homes, and the other is the smaller investor who may buy a few to fix and flip.

Individual owner occupants are becoming a larger part of the market as investors back down slowly, and as short sellers of a few years ago regain their ability to finance. And through it all, prices continue to climb as shown by the graph below.

For your free access to the Cromford Report data,  click here.




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‘Tea Leaves’ Say Real Estate on Path to Sustainable Recovery

Realogy Franchise Group President & CEO Alex Perriello kicked off RISMedia’s 2013 Real Estate CEO Exchange with a State of the Industry Address: “The Road to Recovery: How Far We’ve Come, What Has Changed, and What Lies Ahead.”

As Perriello explained to the audience of approximately 150 of the industry’s top brokers and visionaries, telling market indicators, from decreasing unemployment and fewer underwater homeowners, to rising home values and increasing consumer confidence, serve as important “tea leaves” for determining the path of the nascent real estate recovery.

According to Perriello, in 2009, 6 million jobs were lost; in 2010, 8 million jobs were lost. “We’ve added back close to 6 million,” he explained. “By the end of 2014, we should be back to where we were before the recession.”

“From a national level, I believe that we are in the second year of a long-term, sustainable recovery,” he said. “If you told me we’d be dealing with multiple offers and people over-bidding on properties, I never would’ve believed it. But this is demonstrating a tremendous amount of pent-up demand. If you look at the tea leaves long term, this demand will sustain the recovery.”
Read more at http://www.mlslistings.com/NewsRoom/Headlines#6DPIKlkZLP8RxgWk.99

We see specifically in the Phoenix Valley that prices continue to climb and supply is still tight. There are a few signs that growth is slowing from its frantic pace of 18.8% appreciation, but it is still strong. See the updated chart from the Cromford Report below.



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Arizona is no longer a buyers market… For some of you that may be a shock, but if you have been home searching already, you have come to that realization very quickly.  Trying to get a home has become very difficult for most buyers because of cash investors and limited inventory.  There has been speculation that banks are holding on to homes, but so far that does not seem to be the case. Don’t hold out for a rush of homes to hit the market. Foreclosure rates have slowed down, short sales are harder to find, and there simply isn’t a large supply of homes on the market. However, it is still a good time to buy because home prices are climbing at a steady rate and interest rates are low.  Here are 8 key points that will help you be successful in your home search.

#1-Make sure you are prequalified before you start looking for a home. Sellers want to see that prequalification letter with all offers (if you don’t know where to begin, ask your realtor).

#2 –Find a good realtor who is willing to work hard for you and who is ready at a moments notice to help you look at a property (your realtor is the key in your home search process).

#3- Ask your realtor for a Portal of your desired criteria/search area and make sure you check that portal twice a day for new properties that may interest you.

#4- The minute something comes up that you would like to see, make sure you make time that day or within 24 hours to view the property because chances are if you like it so will others.

#5 –Be ready to make an offer the day you see the property or chances are it may not be there a few hours later (keep in mind you still have a 10 day inspection period).

#6 –Be ready to pay asking or over asking in order to purchase a home. Now is not the time to try and get a better deal or you may very well loose out.

#7–Prepare yourself for being outbid a few times before finally having your offer accepted (keep in mind that most homes will receive multiple offers).  This could be very discouraging for most buyers. However, keep your chin up… try, try, again. Your home is out there!

#8 –Even in a limited market your home search should be fun and exciting. After all, you are looking for your new home.  Enjoy it!



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Builders getting confident – finally?

We’ve all waited and waited for the economy to pick up and the new home market to begin to recover. We are still waiting – uncertainty about mortgage rates and the slow pace of recovery have kept new home builders cautious. Today’s Business Journal article about the resurgence of new home growth –  Home builder confidence turns positive for first time in 7 years – shows that builders have confidence in the future, finally. It also tells of the questionable faith in the demand  or traffic from new buyers:

“What’s interesting is that while builders felt “good” about both current and future sales conditions — which posted readings of 56 and 61, respectively, in June — they feel poorly about prospective buyer traffic due to that index’s 40-point reading.”

In the Phoenix Valley we see continued upward price movement (10.3%)across most sectors. Michael Orr of ASU opines, “Given the balance between supply and population growth in Phoenix, home prices are unlikely to fall below today’s level and are more likely to continue to climb for a long time, though at a more gentle pace.”

Click here to view Orr’s full report.




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Ouch – New Home Starts Decreasing?

At the end of 2012 we started to experience the much awaited resurgence of the new home market in the Phoenix Valley. Investors had bumped up the prices of single family homes to a level to where builders could once again produce the Valley’s most famous commodity – new homes. New communities in either corner of the Valley are beginning to once again develop.

St. Louis FED chart showing reduced privately owned housing starts

Yet recent data as reported by the National Association of Home Builders and the Fed of  St. Louis (FRED) show a clear decrease in new home starts and permits. Indeed, this recent Phoenix Business Journal article by  reports both a decrease in home starts and some of the reasons why.

The engine of new home construction that was redlining in 2006-2007 has lost power in several of its cylinders. Skilled labor shortages, limited availability of ready to build lots and much tighter lender practices have created a new, much more constrained ‘normal’. Hopefully, if the economy can continue to plug ahead, builders will be able to adapt and fill the need for new housing. Stay tuned.



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