2019 Market begins with a whimper

2019 began with an unremarkable start. Not surprising given that the last two weeks in December saw a large drop in listings under contract (a drop of 18.5% compared with the first two weeks of December – and down 10% for the month compared to December 2017).  To quote Michael Orr of the Cromford Report “In every respect, December was a weak month for demand, the weakest December we have seen since 2014 for sales … We have not seen listings under contract this low on January 1 since 2008. Clearly buyers are unenthusiastic about buying homes compared with just a few months ago.” In fact, for those who follow our market updates, we had reported that buyer demand first began wavering as early as July 2018.  Rising interest rates combined with higher housing prices impacted affordability, putting a gentle damper on demand.  But, before we all panic, there is counter balance on dropping demand.  The valley is blessed with positive net migration (i.e. population growth) which is still exceeding the current supply. So the real question is what will win in the spring buyer season?  Buyers diminished appetite or the inflow of new buyers?  Stay tuned, we will have that answer for you in a month or two.

Now on to the other half of the equation, supply.  The number of active and new listings coming to market – is equally unremarkable.  In fact the dearth of active listings has been the saving grace in keeping the market in favor of sellers despite dropping demand.  According to the Cromford Report’s numbers – supply is at about 2/3 of what is required for a balanced market.  Juxtapose that to the demand index which at the moment is only 12% less demand than a balanced market.  So the market remains still slightly in favor of sellers – even if weaker than 2019.

Does a weaker seller’s market mean that prices are on the edge of dropping?  No.  In fact buyers waiting for that may have a bit of a wait.  A balanced market (which again, we are not in yet, much less a buyer’s market) does not cause prices to drop but rather appreciation to slow down and keep more in line with inflation.  Admittedly affordability has taken a bit of hit – but we still are remarkably affordable when compared to other large metro areas.  The Cromford Report sums up the current market succinctly:

I have started to see a few writers claim that Phoenix is becoming a buyer’s market. I think this is a huge stretch. It is possible that we have forgotten what a buyer’s market really feels like. We have seen a noticeable downturn in demand but that alone does not constitute a buyer’s market.

In a buyer’s market, supply is higher than demand and currently we still have very low supply and little sign of a significant increase on the horizon. The weaker demand is still more than enough to match the current level of supply. Consequently sales prices still have upwards momentum, although this has eased a little since last spring.

I also hear talk of lower prices, but this talk is not referring to closed sales prices. It refers to the fact that many sellers are adjusting their expectations and bringing list prices more in line with market conditions. This is not resulting in closed prices going lower than last year, as we would expect in a true buyer’s market. In fact the average price per sq. ft. for listings under contract continues to hit new highs.

We have become used to a hot, growing market that strongly favors sellers and now that it is cooler, contracting in volume and moderately favoring sellers, we have a tendency to over-react and make more of the change than it really deserves. We have to stay calm and realistic and be guided by the numbers. These numbers look like a cooling off, not a downturn. We experienced a similar, though more severe, cooling off in 2013-2014, but the last significant downturn took place between late 2005 and 2009 and was followed by a 2 stage recovery from 2009 through 2013. There was also a mini-downturn in 2010-2011 which interrupted the recovery but had little lasting significance in hindsight…

Although the market is cooler and smaller than last year, it is not in any significant trouble.

What does this mean if you are a seller?  In 2019 you likely need to be more realistic on pricing and you may need to offer more assistance to buyers in need of help with closing costs.  If you are a buyer, you may have a bit more strength in negotiations than in years past – but don’t be fooled in to thinking that waiting will save you money.

As always, we are here to answer any questions about your particular housing concerns.  We are happy to help.

Russell & Wendy (mostly Wendy)

Arizona’s Scorpion Threat

When you live in Phoenix, you’re living in scorpion territory. That’s simply a fact that comes with living in the Arizona desert. During the winter, scorpions are less active and can be found indoors. In the summer, scorpions are actively hunting for food or a mate and can be found inside and outside. Scorpions like to shelter in dark cool places with an air flow, like cracks and crevices inside block fence walls or under palms tree bark.

Living in scorpion territory doesn’t mean you have to live WITH scorpions in your home. If you have scorpions inside your home, contact an experienced scorpion control professional to evaluate the situation and recommend an effective treatment for you.

Arizona’s Scorpion Threat

The Phoenix, Arizona area is in the Sonoran Desert, and scorpions are native to desert environments. If you live in or near Phoenix, chances are you’ll run into scorpions on your property or in your neighborhood sometime. You can refer to recent maps to see where scorpions have been reported in the Phoenix area.

Arizona is home to the Arizona Bark Scorpion, which the most lethal venomous scorpion in the United States.

It can also be found in parts of Nevada, Utah, New Mexico, and Mexico. You can find other scorpion species in Arizona as well, like the desert hairy scorpion. However, other scorpion species in the USA do not pose a medical threat like the Arizona Bark Scorpion.

You can recognize an Arizona bark scorpion by the following:

  • Length – From head to stinger, a mature Arizona bark scorpion has a slender body that measures 2.7 to 3.1 inches;
  • 2 dark eyes on top of its head, and 3 eyes on each side of the head;
  • Eight legs;
  • Color. Arizona Bark Scorpions are tan in color. However, they can be yellow or even almost orange when they molt. Though these scorpions typically do not have markings, you could find one with stripes along its body and tail;
  • The Arizona Bark Scorpions has a “subaculear tooth”, or a small bump on the tail that juts out beneath its stinger.
  • The easiest way to identify an Arizona Bark Scorpions is by watching it! These scorpions lay their tails down parallel with the surface they are on when they’re at rest. Other scorpions keep tails up over their bodies.

When you come into contact with a scorpion, and you’re not sure which species you’re facing, exercise caution and treat it like it is venomous.  Arizona bark scorpions are nocturnal and capable of climbing textured surfaces, so be aware that you can find them on walls, ceilings, in trees and high on shelves and furniture. This includes brick walls, stucco walls, wood paneling, and drywall. Scorpions can also survive underwater for hours, so it is possible to find one alive in your swimming pool, sink, bathtub, or toilet. Arizona bark scorpions tend to gather in groups (especially during cooler months) so when you see one, others may not be too far away.

Prevent Scorpion Infestations in your Home

Arizona Bark Scorpions are attracted to cooler, moist areas that have sufficient airflow. Specialized scorpion control treatments treat all cracks and crevices around your home and yard to eliminate scorpions inside and prevent further infestations. Another way you can reduce your chance of scorpion infestations around your home is to seal up any holes or cracks in your foundation, sidewalks, block wall fences, and exterior walls. You should also repair and replace old door sweeps and weather stripping around windows and doors.

Arizona Bark Scorpions eat crickets, cockroaches and other insects. You can help prevent infestations of pests to help discourage a scorpion infestation. After all, scorpions are predators that follow food sources.

A few places where you might find Arizona bark scorpions inside your home include:

  • Under Cabinets;
  • Running across the floor;
  • Between floors and baseboards;
  • Inside Sinks and Bathtubs where they get trapped;
  • In Shoes and clothing where they go for quick shelter;
  • Hanging from the wall or ceiling; and
  • Inside any cracks and crevices especially concrete cracks and crevices!

How & When to Hunt Scorpions

The Arizona bark scorpion survives 12 months out of the year. Usually, scorpion season begins when the temperature hits about 70 degrees Fahrenheit, which is usually in the early spring. This is when scorpions become most active.

You can hunt scorpions around your home. Generally, you’ll find them in the dark and just before sunrise with a black light – flashlight. New moon and cloudy nights tend to be the best for hunting scorpions because they’re the darkest.

When you’re searching for scorpions in your home, don’t forget to look up high. As we mentioned, Arizona bark scorpions climb. Shine your flashlight high on walls and ceilings, down by the concrete foundations, and on block wall fences. Instead of using a regular flashlight, use a black light.

Arizona Bark Scorpions glow under black light and look almost fluorescent. Pick scorpions off walls, ceilings, block wall fences, branches, and out of debris piles with needle nose pliers. Place them carefully in jars and screw the lids shut. Using a glass jar to collect scorpions prevent scorpions from climbing out because they can’t climb the smooth glass surface. When you are hunting scorpions, wear thick gloves to prevent stings.

If you do not feel comfortable killing the scorpions yourself or your infestation is too large for you to handle on your own, call a professional pest control company to handle the job. An experienced scorpion control professional will not just kill scorpions on contact, but they prevent scorpion infestations in the future.

Residential Pest Control for Scorpions

Scorpions aren’t like other kinds of pests. They can’t be controlled with general pest control like other types of bugs. Scorpions need to be treated with specialized products formulated to be effective specifically on scorpions.  There are several over the counter “scorpion killer” products at home improvement stores but don’t be fooled, this may be best left to the professionals. Over the counter products only kill scorpions when they are sprayed directly. They DO NOT keep killing or repelling scorpions after they dry.

Scorpion populations need to be managed with compounds specifically formulated for scorpions. Unlike other pests, which can be managed with less potent compounds, scorpion control involves potent compounds mixed with extended exposure agents. This is because scorpions tend to hide out in nooks and crannies throughout homes and yards. Effective scorpion control keeps killing scorpions even after treatments have dried and keeps working for about a month.

Work with a Scorpion Pest Control Pro

When you have scorpions in your home and property, work with a scorpion pest control professional who can eliminate the problem and prevent future infestations. Contact Responsible Pest Control today to set up your initial consultation, and start effective scorpion pest control for your home.

Kobuk

Five year old Kobuk is ruggedly handsome with an aloof independent side.  He has been with Home Fur Good since January after being discovered at county.  Kobuk is listed as an English Sheepdog mix weighing in at 68 pounds.  Kobuk is people selective, however, once you enter his circle of trust, he will be the bestest friend you could ever have.  Kobuk likes to lean on his people for their attention and affection.  He loves toys, especially those he steals away from other dogs.  Kobuk has a very playful side, but with the stress and activity of the shelter he does not let his guard down often enough to show it to everyone.  With time and a little patience Kobuk will show you his inner puppy ready to romp and goof around.  You can visit Kobuk, Thursday, Friday and Saturday at Home Fur Good, located at 10220 N 32nd Street in Phoenix.  You can contact the shelter at info@homefurgood.org or by calling 602-971-1334.

Is it like 2006 all over again?

Given the strong recovery the Phoenix housing market has posted, it is understandable that comparisons are still being drawn to 2006 (the peak of our housing market).  We have commented in the past that we are not in a “bubble”.  But a recent commentary by the Cromford Report on pricing really caught our eye.  It is not surprising to us that the press routinely shares erroneous housing market information often using statistics to make a poorly examined point.  Homeowners would be well advised to have a skeptic’s heart when accepting the media’s research.  As British Prime Minister Benjamin Disraeli so famously said (and Mark Twain popularized) “There are three kinds of lies:  lies, damned lies, and statistics.”  The latest premise is that housing prices have exceeded the prices set in the 2006 market. Uh… not exactly.  As no one says it better than our guru Michael Orr of the Cromford Report, here are his comments (with only bolding by us for emphasis) that explain the facts about the housing numbers:

“The local press has been headlining that sales prices for homes in Maricopa County have hit an all-time high. This is a very misleading statement that I take strong issue with. Although the median sales price has recovered to 2006 levels, the conclusion that sales prices in general are higher than June 2006 is completely wrong.

There are very few homes that would sell in 2018 for more than they would have sold for in 2006. The vast majority of homes in the valley have not recovered the value they had in 2006 and are still quite a long way from doing so. If home sellers believe they can sell their home for more than it was worth in June 2006, they are going to be bitterly disappointed, unless they live in the heart of Arcadia or a few isolated parts of South or Central Scottsdale. These media stories make life hard for agents trying to set reasonable asking prices when taking new listings.

The first problem is that the stories in the media are comparing the monthly median sales price for May 2018 with that for June 2006. The homes that sold in May 2018 are a very different collection from the homes that sold in June 2006, so this is an apples to oranges comparison. Let us compare the two sets of homes:

  1. June 2006
    • number of affidavits describing the property as a single-family home = 10,715
    • median sales price = $280,000
    • percentage of homes that were new builds = 28%
    • average sales price = $357,067
    • average home size = 1,840
  2. May 2018
    • number of affidavits describing the property as a single-family home = 9,987
    • median sales price = $285,000
    • percentage of homes that were new builds = 14%
    • average sales price = $354,727
    • average home size = 2,007

We can see that the sales mix is very different between June 2006 and May 2018. In June 2006 we had twice as many new homes as in May 2018 and the average homes size in 2018 is over 9% larger than in 2006. The average price per sq. ft. is much lower in 2018 than 2006.

A second problem is that affidavits of value are woefully inaccurate about property types. Hundreds of townhomes and condos are mis-classified as single-family properties every month. Therefore any numbers quoted for single-family homes in May are likely to be wrong until the affidavits have been checked and corrected, which takes several weeks.

In general, median sales prices are often misused and should NEVER be the basis for comparing the values of homes or comparing new home prices with re-sale prices.

A much more reasonable measurement is average price per sq. ft. which, though not perfect, adjusts for the difference in the average home size. In June 2006 the average price per sq. ft. of single-family homes sold in Maricopa County through the MLS was $193.65 while the average for May 2018 was $170.02.

We therefore estimate that the average single-family home in Maricopa County has a 14% rise in price to achieve before it reaches its value in June 2006. Individual homes will obviously vary quite a bit.

While the median sales price has recovered to the level of June 2006, the value of the average home has certainly not achieved this. Do not let your clients be misled.”

So we accept his missive to not let our clients be misled and hope this article helps to that end.  The 14% mentioned above is an average and every neighborhood has its own “number”.   As always, we are happy to answer any of your concerns or questions about your specific neighborhood.

Russell & Wendy Shaw

(Mostly Wendy)

The Magic Triangle: Supply, Demand, and Price

Probably the hardest thing about routinely writing on the subject of the local real estate market is that it really doesn’t change overnight – thankfully – despite erroneous comparisons to the stock market.  Short term trends in real estate are relatively predictable – largely because supply is not highly volatile. By contrast, demand has the potential to be far more volatile – anyone remember Desert Storm?  Demand went to zero overnight and then returned in two weeks once it was clear this was really not a war but a “military action”.  Despite the dearth of provocative headlines, it is still worthwhile to take a look at the market now that we have reached the half-way mark.  Especially since market activity seasonally peaks in May, and gradually declines as we approach the end of the year.

Supply

So where do we stand on supply?  The short answer is supply is very low, although not all areas and price points are affected equally.  Even though supply is the more stable of the two market factors, in May it made a rapid shift in the under 200K range.  As Tina Tamboer of the Cromford Report notes:

“Supply under $200K has continued to drop rapidly, but the $175K-$200K range has accelerated its decline over the past month far more dramatically than any other price range. After being consistently 30-35% below last year, the active supply level dropped a whopping 18% in a 3-week period putting the current count for this group 44% below last year.”

Gulp.  That is one heck of a supply shift.  Looking at Greater Phoenix, overall inventory is running at about half of what would be considered normal.  Not surprisingly, the lowest priced areas have the weakest supply – with only a few exceptions.  The Cromford Report did an interesting study of the most constricted supply mid- May:

“Here are the 10 ZIP codes with the lowest days of inventory as of May 16:

Phoenix 85035 – 17

El Mirage 85335 – 18

Mesa 85202 – 21

Phoenix 85033 – 22

Mesa 85203 – 23

Gilbert 85296 – 24

Youngtown 85363 – 24

Phoenix 85037 – 24

Phoenix 85009 – 25

Mesa 85210 – 25

25 is an extremely low reading for days of inventory. All of the above are in West Phoenix, West Mesa or the El Mirage / Youngtown area, with the exception of 85296, which is rather more expensive”…..

“For supply, it is the range below $500,000 that was most affected with months of supply down from 2.1 to just 1.5 and a 31% drop in active listings. The range between $500,000 and $1 million was down 16% in active listings pushing our months of supply lower from 5.7 to 4.1. Over $1 million there was a drop in supply, but only by 5%. There is currently just under a year of supply over $1 million.”

Although a year’s supply over the million dollar mark may sound hugely excessive (especially through the lens of the under 500K price range) we well remember years where that price point had 7 years of inventory!  So this price point has shifted dramatically.  But as mentioned in the zip code study above, not all areas are experiencing the same shortage of supply.  Anthem for example, in December was experiencing a lack of supply and seller’s held the power – only to see now, 6 months later, a fully balanced market.

Demand

Demand is up 7% overall from last year – but just like supply – different price ranges have been affected disproportionately.  Surprisingly the largest jump in demand came from the high end of the market (homes over $1 million).  Sales in that range jumped 32% – juxtapose that to the under 500K market which saw a 5% drop in the quarterly sales due simply to inadequate supply to fill demand.  When supply is low enough to constrict sales, it is very hard to see subtle shifts in demand. If the number of buyers standing in line for a home drops from 10 to 3, how does one staticize that?  The Cromford Report religiously tracks supply and demand – and noted in April that a slight weakening of demand surfaced:

“Of course, with supply remaining very low, it is difficult to detect weaker demand in the real world. Only a careful day by day study of the numbers reveal the weakening trend. The trend has not lasted long so far, but if it continues for a few months then it could become more significant. It could then show up as fewer homes under contract and lower closings. We are not sounding an alarm here, just keeping a close watch on data signals …”

Price

As long as demand exceeds supply, prices will continue to rise.  This inevitably results in alarmists saying we are in a “bubble” once again.  The best answer to fear is facts.  Take a look at the monthly average price per square foot compiled by the Cromford Report.

You will note that if you eliminate the wild swings both up and down, we are in a reasonable appreciation range – and the trend line looks nothing like the parabolic curve of the 2005 market.

At some point – rising prices (and possibly rising interest rates) will dampen demand, as it is supposed to do. Reduced demand will allow supply to climb and then the market will balance.  Does that mean prices will then drop?  No, balanced markets tend to see price rises within the range of inflation.  The inflation rate for 2017 was 2.1% and 2018 is averaging 2.5% Remember too; price is a trailing indicator – often lagging 3- 6 months behind the market.  For those readers who are understandably jittery given the pricing plummet of 2008, take heart.  While we do anticipate a balanced market on the horizon – that could be a year or two out and it will take more than a balanced market to see marked price changes.

In the meantime, we will watch the trends and keep you informed.  Slow moving ships are easy to watch.

 

Russell & Wendy (mostly Wendy)

This two-year-old, gorgeous, long haired, fluffy cat is Thelma

She has been with Home Fur Good for over a year and it is time for her to find a home of her own.  Thelma is independent, she prefers to watch humans just beyond reach until she gets to know them.  She came to the shelter with her two siblings, Tanman and Louise.  Yes, all three of them are still looking for homes.  Thelma is very cat social, she is most comfortable when she has feline buddies to pal around with.  The perfect home for Thelma will have existing cats for her to play and lounge about with.  If you are really looking to make Thelma happy, you could adopt her and her siblings.  Home Fur Good is located at 10220 N. 32nd Street in Phoenix.  The shelter is open Thursday, Friday and Saturday from 11-4.  You can call HFG at 602-971-1334.  Visit the website at www.homefurgood.org.

Is History Repeating Itself?

The other day a REALTOR® friend of ours commented “this market feels just like 2005…well not really, but almost”.  Did she have a point?  Of course, there are similarities – particularly as inventory is rapidly evaporating in the low price points just like in 2005.  But is this really “just like 2005”?  No it really isn’t.  For good or bad we have been through a number of real estate cycles (Russell entered real estate in 1978 and Wendy in 1982) so it is natural to compare the present with the past.  But memory is often faulty and I think she is forgetting the real roller coaster ride of 2005.  A couple of facts pulled from the Cromford Report archives for 2005 numbers vs. today’s number illustrate the point:

Days of Inventory stood at 28 (at this writing, currently 84)

Months of supply was 0.9 (currently 3.4)

Annual appreciation rate was 27.9% (for 2017 – 6.5%)

Dollar volume was up 43.9% annually (currently up 6.8%)

Listing success rate was 84.3% (currently 80.9%)

If we subscribe to the belief that those who don’t know their history are doomed to repeat it, then perhaps it is worth looking further at a quick synopsis of the market from 2002- 2017 from the archives of the Cromford Report:

“Changes in the annual appreciation rate (measured using the annual average $/SF) give us a good indication of whether the market has been heating up or cooling down. This is using closed sales prices so it is a trailing indicator rather than a leading indicator. By using the annual average we get a fairly non-volatile reading. The trends tend to stay in place for quite some time. By looking at the weekly chart for annual appreciation we can detect when those trends change direction. Here is what we have seen so far:

  1. Appreciation was below 2% and weakening in early 2002, but the trend turned around in the second quarter and reached 4% by the end of the year.
  2. The appreciation continued to increase slowly during 2003 reaching 5.6% by the end of the year.
  3. Appreciation started to go crazy as the market heated up during 2004 thanks to the widespread availability of easy credit. It exceeded 12% in December 2004.
  4. The bubble was in full expansion mode during 2005 with appreciation exceeding 36% at the end of 2005.
  5. Appreciation peaked at 37.2% in March 2006 and then collapsed down to 11% by the end of the year, as the bubble burst.
  6. The bubble continued to deflate reaching -5% in December 2007.
  7. The foreclosure wave took depreciation to new depths reaching -28% in December 2008.
  8. The appreciation rate hit a historic low in the summer of 2009 at -36.5% but then started rising again.
  9. During 2010, the appreciation rate climbed to slightly positive at 0.6% but this trend ran out of steam during the fourth quarter of 2010.
  10. 2011 saw appreciation slide back down to -9% by 3Q but signs of new life emerged at the end of the year.
  11. In 2012 appreciation charged from -9% all the way up to 20%.
  12. Appreciation peaked at 25% during the spring of 2013 and started to drift slowly down again.
  13. 2014 saw appreciation drop from over 20% to less than 9%.
  14. In 2015 the downward trend stopped in September at 4.1% and started rising slowly again, reaching 4.4% by the end of the year.
  15. During 2016 the appreciation rate improved to 5.4% by the end of the year, though all of that improvement occurred during the first 3 months of the year.
  16. In 2017 appreciation hit a maximum of 6.5% in September and has drifted slightly lower since then, currently at 6.3%

…We should emphasize that when the rate of appreciation falls, prices are still rising, they are just not rising with quite so much speed. Only when the rate of appreciation goes negative are prices actually falling compared with the previous year. At the current 6.3% (3rd Q 2017) we are a long way above that point.

So no, this market is not like 2005 – thankfully.  It took a market like 2005 to create a market like 2008, and we are all better off without such unhealthy market extremes.

As always we are happy to comment on your particular neighborhood or situation.  We are always here to help.

Russell & Wendy

(Mostly Wendy)

Phoenix Elks Lodge 335 Annual Parking Lot Sale

Phoenix Elks Lodge 335, Annual Parking Lot Sale

Saturday, April 28th 2012, 7:00am to 1:00pm

14424 N. 32nd St., Phoenix 85032

Do you have too much “stuff”?  Are you overwhelmed by the piles of unused things in your garage, cupboards and closets?  Here is your opportunity for relief and a chanceto help your community.

This is our “kick off” fundraiser for the new lodge year and your participation helps create the fundraising inertia that makes our lodge stand out as a leading supporter of charitable causes in our community.

You can make some money for yourself or donate some or all of your proceeds to the lodge.  Refreshments will be on sale.

Spaces are available for $15.00 for one, $10.00 for the second and $5.00 for any additional.  Tables are for rent at $5.00 each.

Reservation forms will be available at the greeter’s desk or contact Keith Christensen to obtain a form or ask questions.

Call the Lodge at 602 482 2335

Calling all crafty parents and kids!

Milestones is hosting a Craft Fair & Bazaar on Saturday, November 7, 2009arts and crafts

from 9am ~ 12pm

We are looking for vendors with all types of items:

Scrapbooking, Clothing, Accessories, Home décor, Sports Memorabilia, Jewelry or Art.

If you have an interest in being a part of MILESTONES CHARTER SCHOOL Craft Fair & Bazaar Please contact:

Jamie (Mrs. J / 4th) ord4phx@yahoo.com

  • Space in on a first come first served basis
  • Spaces will be the size of 2 parking spots

(electricity is not available)

  • Rental fee is $20 per space
  • Each vendor is responsible for set-up and break-down

(no earlier than 8am – no later than 1pm)

  • If you have an idea as a vendor, contact Jamie