By: Michael Orr, founder and owner of the Cromford® Report
The market in 2016 has behaved very predictably following all the usual seasonal trends and largely mirroring the market of 2015. However, 2015 lost some momentum in August and we are seeing no evidence of any similar weakness in 2016. In fact, demand has shown a slight improvement during September and the first half of October. At the same time, supply is now growing, as it does every year between September and December. This gives buyers a little more choice and keeps sellers from getting over-confident.
The top end of the luxury market, over $2 million, had a better third quarter than last year, with more sales and higher pricing. However, the market between $500,000 and $2 million is now the weakest price range with some important areas impacted by excessive inventory and lack-luster buyer demand. Below $500,000 the market is looking very healthy with supply getting tighter and tighter as we drop down in price. Consequently, appreciation is strongest in the lowest price sectors of the market.
The biggest difference between 2015 and 2016 has been the market share gains made by new homes over resales. Based on year to date sales at the end of August, overall dollar volume is up by 13.6 percent for single family and townhouse/condo properties across Maricopa and Pinal Counties. However, new home dollar volume is up by 34.6 percent while resales are up by only 10.3 percent. In market share terms new homes have grown from a 13.6 percent share to 16.1 percent.
New home developers have done more in 2016 to address the lower price ranges and unit counts are up 33 percent year-to-date. Analyzing by city we see the following unit sales growth as depicted on the chart at right.
Note that additional new homes are being sold in the town of Wickenburg, but almost all of these are in Yavapai County – outside of our data collection area.
We can anticipate new home sales in 2017 by looking at single family permit counts for 2016 year-to-date as illustrated below.
