On Tuesday November 10, 2015 our guest speaker, Michael Orr of the Cromford Report was at our HomeSmart Elite meeting with a November 2015 real estate market update for the greater Phoenix Arizona area.
According to Michael, rents are up an average of 8% over the last year.
The top four zip cods that have the highest price per sq ft to rent are.
85257 in Scottsdale had the most expensive zip code to rent.
Home prices are up a normal 3% to 6% depending on the area over the last year. Of course each individual neighborhood is different.
If you are currently renting a home, you definitely should consider buying to avoid more increases.
Interest rates for the 30 year fixed mortgage according to the Freddie Mac Mortgage Market Survey 1971 to 2015 shows interest rates are 3.8% which is below the normal line of around 5%.
Popular beliefs are “home prices fall when interest rates rise”. This is an urban myth. In the last 50 years this has never, ever happened. The few times house prices have fallen are coincided with a drop in interest rates. The truth is home prices fall when there is large excess of supply relative to demand (supply vs. demand).
Michael stated, The IMF Commodity Price Index is down 35% since October 2014. (pigs, cows, chickens, rice, metals etc…). Almost everything is more affordable than a year ago. The exceptions are tea, olive oil, barley, maize, cocoa, bananas, sunflower oil, poultry and sugar due to lower demand. Items that have decreased include crude oil, natural gas, shrimp, iron ore, coffee, beef, pork, lamb and platinum. APS is offering a 3% reduction due to “well managed fuel costs”.
Back to housing… Let’s look at home prices over the last year.
The average sales price per square foot for single family homes is up 11% in the last 2 years for the $100,000 to $200,000 price range. Buyers should be submitting offers above list price if they expect to have a chance to have their offer accepted.
In the $200,000 to $300,000 prices are up 7% in the last 2 years with the majority of the price increase in the previous 6 months.
In the $300,000 to $5000,000 prices are up 5% in the last 2 years.
In the $500,000 to $1,000,000 prices re up 3% in the last 2 years.
In the $1,000,000 to the $2,000,000 home prices are up 5% in the last 2 years.
Over $2,000,000 home prices are down 3% in the last 5 months although price are up 5% in the last 2 years because of supply vs. demand.
The front page of the Cromford Report shows the market index at 132.4 that still favors sellers. The supply is low for homes under $300,000. For the last 8 weeks, the market has been cooling down with less demand and more supply. October is one of the biggest months for new listings. This is probably because people watched home prices creep up over the summer and their home seems to be worth more money.
The top 17 cities show that Avondale is at the top of the chart. There have been very few new homes built there in the last 10 years. The top cities are below.
The biggest issue is that Supply is mismatched to Demand. Overall supply is low but growing (74% of normal). There is too little supply under $250,000. There is strong demand for new and re-modeled homes. At the high end of the price range thee is too much supply. Neglected or unfashionable homes are very hard to sell. Nw high end custom homes are still very popular. There are a lot of unrealistic sellers.
Statement “Funny that everyone in the room knows they can’t trust Zillow, but everyone outside the room trusts Zillow”. Michael was referring to the inaccurate information the public often sees on the website. When is the last time Zillow worked 5 to 7 days a week, meet with a customer and SOLD a home?
In summary, supply is low but growing. Demand is normal and stable at 98%. New homes are constrained by labor shortages. Foreclosures are below the long term average. Lending rules are starting to loosen a little, but buyers still need to be qualified. The entry level or first time home buyer market is very under supplied. The mid range market is doing ok. The luxury market is week especially at the high end. The final question is will optimism survive global economic downturn?
If you or anyone you know is looking to make a move and buy or sell a home, contact me, Donald Keys, Professional full-time REALTOR since 2006. Put my experience, knowledge and professionalism to work for you.
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