A major Valley real estate tracker is reporting its data show 13 of 17 cities in the Phoenix Metro area – including Phoenix itself – “moving in favor of buyers.”
But homebuyers likely won’t find much to cheer about in the Cromford Report’s latest findings.
That’s because prices are so high and inventory so little changed that it will seem like same-old, same-old in the market: prices are red-hot and pickings are slim.
“We must remember that these are declines from extreme heights and the situation is not going to feel much different in the real world,” Cromford said.
“It is only the mathematics that detects the slight cooling in the market,” it said. “This does NOT look like a bubble bursting and it is actually a healthy sign that the market cools a little while prices rise.”
Cromford has developed what it calls the Cromford Market Index that uses a variety of data to indicate whether the housing market in various Valley communities is tilting toward buyers or sellers.
Anything over 100 is considered tipping toward sellers and anything below 100 favoring buyers.
For more than a year, the index rating for individual cities has been well over 200 and in recent months has been as high as 900 in some communities. Last week, Tempe had the lowest index at 328 while Avondale’s 838 was the highest.
“If all indicators begin to drop like dominos, then we need to worry. At the moment, this is not the case. Nobody should be expecting prices to reverse direction just because the CMI takes a breather. In fact, we are expecting price rises to remain very strong for a long time yet.”
Indeed, it said that in any community showing 200 or more on the Cromford index, bidding wars for homes can be expected. Over the weekend Cromford said that while the market is cooling, “this is still a market in a buying frenzy.”
Meanwhile, it also noted that homebuilders are approaching the low inventory with a vengeance and that March “was a monster month for single-family building permits.”
Pinal and Maricopa counties issued a combined total of 3,536 permits in March, the highest monthly total since June 2006, Cromford said, noting that also “was the month in which prices last hit their peak before tumbling.”
Permits issued in March 2021 were up by 39 percent over March 2020, prompting Cromford to observed:
“Clearly developers are doing what they can to compensate for the derisory amount of re-sale single-family homes available to buyers. It is fair to assume that we will see a 30 percent to 40 percent increase in the supply of new homes across Greater Phoenix over the next 12 months.
“This could alleviate some of the pressure on re-sale listings and allow them to start to grow again. We certainly would not expect to stay at the current low level of re-sale forever. If they did, prices will reach levels that are unaffordable to the majority of buyers, which would eventually slacken demand and cause supply to rise anyway.”
The surge in permits – which is expected to continue – has Cromford predicting a “slow and steady effect, rather than a sudden flooding of the market.”
He noted that for every new home sold, it generally means a re-sale goes on the market.
Of course, that assumes the seller will be giving up the old home for a new home and not joining the equally hot rental market either as a landlord for long-term tenants or vacation renters.
Years of under-building has caught up with the U.S. Now, the country has a serious shortage of homes—as many as 4 million, according to Freddie Mac—to meet the demand from buyers.
Realtor.com noted, “Millennials hit the point in life where buying a home becomes very attractive, and the pandemic has caused people to rethink their living situations. All of which is to say that demand in this market is organic, according to economists and not fueled by risky lending practices.”
It said builders are having enough trouble keeping up with demand – partly because of disruption in supply lines for crucial supplies, such as lumber and appliances – which also is driving up prices.
Realtor.com also foresees “some headwinds for the market.”
“While mortgage rates have fallen in April thus far, if they begin to rise again in the future that could constrain buyers’ interest in pricier new homes,” it said.
“Supply is the biggest limiting factor in home sales. There is a 2.1 month’s supply of existing homes at the current sales rate, which is up from an all-time low of 1.9 months last December,” Chris Low, chief economist at FHN Financial. “But the rise from the low is not because there are more homes for sale, it is because the sales pace slowed.”
Meanwhile, the S&P CoreLogic Case-Shiller Indices, the leading measure of U.S. home prices, last week released national and regional data showing prices in February were 12 percent higher nationwide than they were in February 2020.
“Phoenix, San Diego, and Seattle reported the highest year-over-year gains among the 20 cities in February,” it said. “Phoenix led the way with a 17.4 percent year-over-year price increase.”