For the month of July 91 single family homes changed ownership in the Flagstaff area. This is down from 114 in July of last year. The bulk of the sales this July were under the $500,000 price range accounting for 79 of the 91 sales. There are currently only 99 homes for sale under $400,000 in Flagstaff and the outlying areas. This shortage of inventory continues to cause a strain for buyers looking to purchase a home.
The median price for single family homes sales in July was $367,450, down from $386,991 in June. We had 22 townhome sales in July and 23 condo sales.
For an in-depth look at the current market conditions please see the graph below.
Single Family Flagstaff Home Sales – July 2016
NOTE: THE DATA REPORTED HERE ARE BASED ON HOME SALES IN THE FLAGSTAFF METRO AREA (THE CITY OF FLAGSTAFF AND IMMEDIATELY SURROUNDING COUNTY AREAS THAT HAVE FLAGSTAFF MAILING ADDRESSES) AS REPORTED IN THE MULTIPLE-LISTING-SERVICE MAINTAINED BY THE NORTHERN ARIZONA ASSOCIATION OF REALTORS.® THE DATA MAY NOT REFLECT ALL SALES (BUT IT SURELY REFLECTS MOST OF THEM).
The S&P/Case-Schiller Index of Housing Prices was released today. This composite look at prices in twenty large cities has minimal interest for followers of the Flagstaff market, but I write about it because you may hear about it in the news. The data released today is for July.
Since the March 2012 lows, the 20-city composite has climbed 35.7%, but it’s still down 12% from bubble-level highs. Roughly, that’s the pattern of prices in Flagstaff although we’ve gained a bit more toward those “bubble-level” highs. There is still a way to go and would-be home sellers are going to have to be patient if they expect to match or exceed their 2006-2007 purchase prices.
Existing-home sales increased in June to their highest pace in over eight years, while the cumulative effect of rising demand and limited supply helped push the national median sales price to an all-time high, according to the National Association of Realtors®. According to NAR’s chief economist, “”Buyers have come back in force, leading to the strongest past two months in sales since early 2007.” He attributes this development to “steady job growth,” “an improving economy,” and the springtime rise in mortgage interest rates, which impelled buyers to jump into the market fearing higher rates.
Realtors® are reporting drastic imbalances of supply in relation to demand, especially in the West. “The demand for buying has really heated up this summer, leading to multiple bidders and homes selling at or above asking price,” The president of the National Association of Realtors® said today. “Furthermore, tight inventory conditions are being exacerbated by the fact that some homeowners are hesitant to sell because they’re not optimistic they’ll have adequate time to find an affordable property to move into.”
When I switched careers in November 1998, home prices were doing about what they had done for the last 40 years. Namely, they rose pretty much in tandem with workers’ wages and general inflation. What may have seemed like extreme shifts in local markets seem mild as we look back over the perspective of the last ten years, which began with a truly extreme housing bubble followed by an extreme crash.
Credit: New York Times, THE UPSHOT|After an Era of Ups and Downs, Home Prices Return to Sanity, 6/17/15
As we came out of the crash, beginning in 2012, home prices rose precipitously in 2013 and 2014 but have now leveled out. This spring and summer, homeowners are having a bit of trouble accepting that the sharp increases of the last couple of years are not continuing. The result is that appraisers are undercutting homeowners’ expectations. The current situation could reflect a healthy return to normalcy (measured by the pre-bubble decades) as home prices are coming more in line with the fundamentals of wage increases and general inflation. We shall see how long this lasts. For the moment, factoring in exceptionally low mortgage rates, homes are historically affordable.
As has been the case for some months the latest report from S&P/Case Shiller shows a continued slowing of home price increases. November results for both the 10-City and 20-City Composite Indices were lower on a year-over-year basis than in October. The National Home Price Index (HPI) eked out a slightly higher annual increase than reported the previous month.
All 20 cities boasted year-over-year increases with the biggest changes in San Francisco with growth of 8.9 percent and Miami, up 8.6 percent. Dallas and Las Vegas each were 7.7 percent higher than in November 2013 and Denver was up 7.5 percent. Cleveland made the poorest showing at 0.6 percent while Minneapolis, New York, Phoenix, and Washington, DC all had annual gains under 2 percent.
David Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices said: “Prospects for a home run in 2015 aren’t good. Strong price gains are limited to California, Florida, the Pacific Northwest, Denver, and Dallas. Most of the rest of the country is lagging the national index gains. Moreover, these price patterns have been in place since last spring. Existing home sales were lower in 2014 than 2013, confirming these trends. Difficulties facing the housing recovery include continued low inventory levels….”
In other words, if we could only get some nice listings! Plus, a few other things like wage growth. Remember, all real estate is local. When we list your home, we talk about the market for your Flagstaff home. It’s unique. To schedule a meeting, call 928.714.0001 – The Elite Team at RE/MAX Peak Properties.
The S&P/Case Shiller Indices combine matched price pairs for thousands of houses from the available universe of arms-length sales data. The National HPI tracks the value of single-family houses within the nine U.S. Census divisions. The 10- and 20-City Indices are value-weighted averages of the 20 metropolitan area indices. The indices have a base value of 100 in January 2000 so a current index value of 150 indicates a 50 percent appreciation rate since that date for a typical home located in the subject market.
The Federal Housing Finance Agency (FHFA) earlier released its Home Price Index for November showing home prices were up 0.8 percent on a seasonally adjusted basis from October. October’s previously reported 0.6 percent gain was revised down to 0.4 percent. On a year over year basis the index rose 5.3 percent. Home prices measured by FHFA are now at the approximately level of October 2005 and are 4.5 percent below the April 2007 peak.
U.S. home prices slipped 0.1% in September, CoreLogic, a national data tracking firm, said today. The decline puts the year-on-year advance at 5.6%. “There has been a clear bifurcation in home price growth for lower-end versus upper-end properties in 2014,” said Sam Khater, deputy chief economist at CoreLogic. “As of September, lower-end prices were up 9.4 percent but upper-end prices were up only 4.5 percent.”
Of the largest metro areas, Houston led the way with 9.9% year-on-year growth, while the once-hot-growing Phoenix area had just 2.8% growth. Arizona home prices are reported at 29.6% below the August 2006 peak. Nationally, home prices are just 12.6% below that peak time. With the CoreLogic forecast for 2015, neither deficit will be made up next year.
“Home prices continue to rise compared with this time last year, but the rate of growth is clearing slowing as we exit 2014,” said the president of CoreLogic. If the positive economic trends experienced in the last few months continue, CoreLogic projects a 5% growth rate next year.
My email this Monday morning brought two reports, one Flagstaff home sales specific and the other national/regional.
I received a monthly Flagstaff home sales report from another Flagstaff real estate agent, with this comment in his cover note: “The market in Flagstaff continues to cool off from the hot rebound last year.” His newsletter reports from the Northern Arizona MLS statistics, as I reported last week in my Monthly Flagstaff Home Sales Report.
Credit Suisse gave me their monthly survey of real estate agent views on the July market (since I participate). Nationally, Credit Suisse summarized, “Increasing Price Sensitivity as Buyers Lack Confidence; Economic uncertainty and ever-higher prices deplete buyer urgency as traffic edges lower; Plenty left to be desired from a traffic standpoint;Tide is still rising for now, but less of a lift for some boats.” Bad news for Arizona: “Of the 40 markets we survey, 33 saw higher prices sequentially in July (34 in June), 2 saw flat prices (3 in June), and 5 saw lower prices (3 in June). Phoenix, Virginia Beach, and Washington DC saw lower prices in both June and July, with Phoenix on that list for the past eight months.”
This blog post from NAR also gives the short version of why the Case-Shiller indices, which Wall Street loves for economic outlooks, are not useful at all for a small market like Flagstaff. When the author says “repeat sales,” he means exactly that — sale of the very same house without major remodeling. This methodology just would not give a large enough sample in the Flagstaff real estate market.
May’s National Association of Realtors® member survey asked agents across the nation what they expected in terms of price direction for the next 12 months. Everybody thinks prices are going up. The question is how much.
Arizona agents think increases will be 3% or less:
The National Association of Realtors® released its monthly statistics on national home sales today. In sum: May was better than April in terms of volume of sales, but not better than May 2013. The May median price was over 5% higher than May 2013.
Inventory is rising and unsold inventory is 6% higher than one year ago. That’s not enough to meet projected demand, so prices are likely to continue to rise, but the price increases will moderate because of the higher available inventory. Also, interest rates are higher, though not enough to be a drag on housing yet.
I don’t like the methodology simply because it doesn’t work for smaller cities, but in this instance, it’s report is consistent with my own predictions for the 2014 Flagstaff real estate market. Flagstaff Real Estate Outlook
In another home price announcement this morning, the Federal Housing Finance Agency said home prices rose a seasonally adjusted 0.8% in December. FHFA data comes from mortgages sold to or guaranteed by Fannie Mae and Freddie Mac. Compared with last year, prices were up 7.7%.
Clear Capital, an investment advisory firm specializing in real estate, recently predicted a national real estate trend consistent with my projections for Flagstaff home sales. After the double-digit growth in home prices last year (though it was more like 8% in Flagstaff), Clear Capital economists predict that national home prices will now fall into line with inflation and follow more historical rates of growth, namely prices increases of 3%-5% per year. Clear Capital sees no real estate bubble in sight although there might have been a little bit of one in Phoenix last year, now burst.
The National Association of REALTORS® reported in its December existing-home sales report that home prices rose 11.5% in 2013 compared to 2012. That marked the strongest gain since 2005, when median prices for existing homes rose 12.4%. Flagstaff’s median price is higher than the national number and rose just about 8% over the course of 2013.
Looking at the national home price picture, Clear Capital economists note that home prices at the metro level, when adjusted for inflation, reveal 46 out of 50 metro markets have home price levels that are at pre-2003 levels. Twenty-five of 50 markets are reporting prices below 2000 levels. Phoenix and Las Vegas (two markets that have some influence over Flagstaff’s home sales due to second home buys) are showing signs of overheating and should be watched closely, according to Clear Capital. Both markets saw yearly gains around 30% in 2013, but home prices have since been cooling. Home prices in Las Vegas remain 20.8% below 2000 levels when adjusted for inflation. Prices in Phoenix are about 1.9 % above 2000 levels.
“Double-digit gains over the last year, while similar to rates of growth in the run-up to the bubble, are off a much lower price floor,” says Alex Villacorta, vice president of research and analytics at Clear Capital. “With the majority of metro markets still so far below peak prices, it’s time for conversations surrounding price trends to shift away from the 2006 peak as the point of reference, and back to current trends and forecasts,” says Villacorta. “While there are certainly investors and home owners holding real estate assets that will be underwater for seven years or more, the current housing market is positioned to behave very similar or even below historical norms, given the current economic climate.”
Clear Capital Home Data Index™ (HDI) 2014 Forecast
If Clear Capital is right, and I see reasons in our economic climate to believe they are, home prices may not return to peak levels until 2021. This means folks who bought their Flagstaff homes in 2006-2007 may be “underwater” for another seven years. Those who haven’t suffered through distressed sales yet are unlikely to sell now until they recover their investment for tax as well as financial reasons (The tax break on loan forgiveness expired at the end of 2013.) Thus, be prepared for low inventory of Flagstaff resale homes for a while although perhaps some folks who have been holding out for a comeback will throw in the towel and move-on.