Show Appeal Realty - October 2015 - Market Update

Here are Show Appeal Monthly meeting notes and slides.

Cromford Index shows a decline now so we are waiting to see if it follows 2013 or 2014 trend-line. 

Market Update (Brandon Hunt)

• Active Listings
  • Current: 23,816
  • Last year: 26,917
  • Down 13% from last year
  • Up 1.9% from last month (23,001)
    • Not a flood by any means, but new listings are still hitting the market
• Pending Listings
  • Current: 5,931
  • Last year: 5,584
  • Up 5.9% from last year
  • Down 5% from last month (6,230)
    • Significant drop month-over-month. Signifies a big drop in demand, and I'm worried about the negative trend line it might be creating going forward.
• Monthly Sales
  • Current: 6,603
  • Last year: 5,964
  • Up 9.7% from last year
  • Down 12.9% from last month (7,425)
  • Nothing new, but look at the drop in sales between November & December! This graph is a good one to show your buyers and sellers. (See the slide deck download link)
• Sales Price per SqFt
  • Current: $132.87
    • Right where it should be
    • Show your buyers how this compares to 2005 when it was $180+/sqft so they can see exactly how affordable it is right now. (See the slide deck download link)
  • Last year: $126.23
  • Up 5% from last year
    • Another great point for your buyers & sellers to show not only that the Phoenix market has appreciated 5% since last year, but for your buyers to show that Phoenix real estate is a good investment.
  • Even from last month ($132.81)
• Months Supply
  • Current: 3.5
  • Last year: 4.3
  • Drop of 23% fromt last year
  • Up 11% since last month (3.1)
• Days on the Market
  • Current: 115
  • Last year: 123
  • Drop of 6.9% from last year
  • Drop of 1.7% since last month (117)
    • Overall the average DOM is staying steady
• Cromford Index (CI)
  • Current: 141.9
  • Last year: 107.6
  • Up 24% from last year
  • Down 4.5% since last month (148.3)
  • The CI is the best forecaster of where the market is headed, and doesn't factor in seasonality, which gives us a truer feel of the market
  • The issue that we are seeing right now is a negative CI trend line, which means we could be heading into a soft market in Q1-2016, and possibly all of 2016. This is reminiscent of the negative trend line we saw in late 2013 that led to a very stagnant/flat market in 2014.  So I'm pushing on the brakes in regards to purchasing, and waiting to see what the CI shows over the next 30 days.  If the trend line continues in the negative direction, then it makes the most sense to really pull back on purchasing, and at the very least reduce expectations for Q1-2016.
• Summary and Q&A
  • Overall demand is weakening
  • Top end of the market ($800K+) is cooling
  • Question on elections
    • It definitely creates uncertainty which means buyers & sellers are more inclined to sit on the fence, but doesn't expect it to be a major impact.
  • Question on buy & hold strategies
    • Never a bad idea, especially if you can count on a 5% annual appreciation in the home's value. But it really comes down to the CAP rate, 7% is the minimum worth considering.
  • VRBOs = great cash flow, and worth looking into for specific markets:
    • Sun City (rented out most of the year, and usually slightly longer terms like weeks and full months)
    • East Mesa (furnished condos run $1800+ per month and are rented out 100% from November through April)
    • Page (3-million visitors a year during the high season)
    • VRBOs have their downsides including transient renters, but the cash flow can be great, and in certain areas you can have the property rented out for a longer portion of the year.