January 2012 Positive News for The Luxury Home Market
Paradise Valley Real Estate Market Update | January 2012
The Two Charts below show Average Sales Price per Sq. Ft. from 2002 – 2012 in all of Maricopa County (Graph 1) and Paradise Valley (Graph 2).
Although we were at the Top of the Market in 2005, there were NEGATIVE SIGNALS of the Leading Indicators (i.e. Inventory) that forecasted a drop in the market in 2006.
The Paradise Valley Market was not hit as hard as the whole of Maricopa County and according to the Leading Indicators (as outlined below), Paradise Valley is in recovery.
Good News!
LEADING MARKET INDICATORS THAT SHOW REAL ESTATE PRICES WILL RISE:
# 1 - 6 have to be in a favorable position for Prices to Rise.
1. Cromford Report Index - this shows Supply & Demand.
2. Days Inventory – 365 x (Active Listing Count) / Sales Per Year - This is the Average Number of Days it takes to sell the current inventory (based on Annual Sales)
3. Pending Listing Count - This is the number of Homes on the Market that have Offers and are due to close escrow. It is the best indicator of increased sales
4. Contract Ratio - 100 x (Pending Listings + AWC Listings (Home that has an offer but has a Contingency)/Active Listings - Contract Ratio of above 50% is a "HOT" market
5. Monthly Sales Volume – Level of Sales/Month
6. Listing Success Rate - # of properties listed vs. # of properties that are actually sold
Numbers 1 - 6 need to be FAVORABLE before prices rise (#7 & #8)
7. Pending $/SF
8. Sales $/SF
#1. LEADING INDICATOR: CROMFORD REPORT FOR ALL OF ARIZONA
**Michael Orr created the Cromford Index which measures Supply & Demand. It is adjusted seasonally and yearly.
An index of 100 = a balanced market
Above 100 = a Seller’s Market (More Buyers than Homes on the Market)
Below 100= Buyer’s Market (More homes on the market than Buyers)
Maricopa County has been in a Seller’s Market since January 2011 with a Cromford Index of 154…the highest it has been since 2005!
CROMFORD REPORT FOR PARADISE VALLEY:
In late June 2010, Paradise Valley became a Seller’s Market, just above the 100 index mark.
Generally it takes 12 - 18 months for prices to Rise after a Change in Supply & Demand, however, since prices went up so steeply and the Real Estate Market was so crazy, it may take a little longer.
The good news, prices in Paradise Valley have remained somewhat stable throughout 2011. And, the Average Annual Sales Price for Paradise Valley is at 2004 levels (with the Price/Sq. ft. at 2003 levels).
As of January 12, 2012, Supply (Inventory) has dropped to an extremely low level (81.6) and Demand has shot up to 125.6, giving Paradise Valley a Current Market Index of 153.9.
Low Supply, High Demand = Prices Increase.
AGAIN, GOOD NEWS!
#2. LEADING INDICATOR: DAYS INVENTORY MARICOPA COUNTY
Calculation: 365 x (Active Listing Count/Sales Per Year)
The graph below shows that the Number of Days it will take to sell all of the homes on the market has been decreasing since March 2011.
DAYS INVENTORY is at the same level it was in July 2006.
In Paradise Valley, Days Inventory was at it's lowest in August 2005....and prices hit their peak in February 2007.
So, we are moving in the right direction.
#3. LEADING INDICATOR: PENDING LISTING COUNT - PARADISE VALLEY
Below we are comparing Pending Listings from 2004 to 2011.
Currently, in Paradise Valley, 2010 and 2011 Pending Listings are at a higher level than in 2008 and 2009 and moving toward 2004 & 2005 levels.
#4. LEADING INDICATOR: CONTRACT RATIO – MARICOPA COUNTY
The Contract Ratio compares how many homes on the market receive offers VS. how many homes remain active.
The higher the number...the HOTTER the market.
A Normal Ratio is 30 - 40. Currently, the Arizona Market is at 95 and has been in a HOT MARKET since April 2011.
FYI - A group of approximately 200 Luxury Agents in Paradise Valley meet every two weeks to discuss the Real Estate Market and Tour Homes. It is apparent in the last year that sales in Paradise Valley and picked up considerably!
More good news!
5. LEADING INDICATOR: MONTHLY SALES VOLUME – PARADISE VALLEY
In May/June 2011, Sales Volume in Paradise Valley almost reached the same level as 2004/2005.
2006 to 2009 Sales were way below 2010, with 2009 dipping down to 6 Sales/month
It looks like 2012 is mirroring 2005 to date.
Because indicators #1 - #4 are favorable…we expect the Monthly Sales Volume to continue to rise.
#6. LEADING INDICATOR: LISTING SUCCESS RATE – MARICOPA COUNTY
This is the number of homes that are listed in the MLS that SELL.
For Maricopa County, at the beginning of 2008, only 1 in 4 homes sold that were listed. TODAY, 3 in 4 homes (approx. 75%) are selling. YIPPEE!
The historic norm is 65%!
For homes between $400,000 and $800,000, the Listing Success Rate is at approx. 55% rising from 12% in 2009.
For homes over $800,000, Listing Success Rate is currently at 44%, and continues to rise.
The Market is definitely on the mend!
CONCLUSION
The previous 6 Leading Indicators all point to a recovery in the Real Estate Market.
As indicated earlier, when there is a change in Supply and Demand…it takes approximately 12 – 18 months before prices start to rise.
The Chart below shows that List Price/ Sq. Ft. of Pending Listings has held steady in 2011. The Paradise Valley Market changed from a Buyers Market in June 2010...18 months ago.
All of the 6 Leading Indicators are FAVORABLE and we should start seeing prices rise in Paradise Valley in 2012.
So, if you are BUYING, BUY NOW.
Although we were at the Top of the Market in 2005, there were NEGATIVE SIGNALS of the Leading Indicators (i.e. Inventory) that forecasted a drop in the market in 2006.
The Paradise Valley Market was not hit as hard as the whole of Maricopa County and according to the Leading Indicators (as outlined below), Paradise Valley is in recovery.
Good News!
LEADING MARKET INDICATORS THAT SHOW REAL ESTATE PRICES WILL RISE:
# 1 - 6 have to be in a favorable position for Prices to Rise.
1. Cromford Report Index - this shows Supply & Demand.
2. Days Inventory – 365 x (Active Listing Count) / Sales Per Year - This is the Average Number of Days it takes to sell the current inventory (based on Annual Sales)
3. Pending Listing Count - This is the number of Homes on the Market that have Offers and are due to close escrow. It is the best indicator of increased sales
4. Contract Ratio - 100 x (Pending Listings + AWC Listings (Home that has an offer but has a Contingency)/Active Listings - Contract Ratio of above 50% is a "HOT" market
5. Monthly Sales Volume – Level of Sales/Month
6. Listing Success Rate - # of properties listed vs. # of properties that are actually sold
Numbers 1 - 6 need to be FAVORABLE before prices rise (#7 & #8)
7. Pending $/SF
8. Sales $/SF
#1. LEADING INDICATOR: CROMFORD REPORT FOR ALL OF ARIZONA
**Michael Orr created the Cromford Index which measures Supply & Demand. It is adjusted seasonally and yearly.
An index of 100 = a balanced market
Above 100 = a Seller’s Market (More Buyers than Homes on the Market)
Below 100= Buyer’s Market (More homes on the market than Buyers)
Maricopa County has been in a Seller’s Market since January 2011 with a Cromford Index of 154…the highest it has been since 2005!
CROMFORD REPORT FOR PARADISE VALLEY:
In late June 2010, Paradise Valley became a Seller’s Market, just above the 100 index mark.
Generally it takes 12 - 18 months for prices to Rise after a Change in Supply & Demand, however, since prices went up so steeply and the Real Estate Market was so crazy, it may take a little longer.
The good news, prices in Paradise Valley have remained somewhat stable throughout 2011. And, the Average Annual Sales Price for Paradise Valley is at 2004 levels (with the Price/Sq. ft. at 2003 levels).
As of January 12, 2012, Supply (Inventory) has dropped to an extremely low level (81.6) and Demand has shot up to 125.6, giving Paradise Valley a Current Market Index of 153.9.
Low Supply, High Demand = Prices Increase.
AGAIN, GOOD NEWS!
#2. LEADING INDICATOR: DAYS INVENTORY MARICOPA COUNTY
Calculation: 365 x (Active Listing Count/Sales Per Year)
The graph below shows that the Number of Days it will take to sell all of the homes on the market has been decreasing since March 2011.
DAYS INVENTORY is at the same level it was in July 2006.
In Paradise Valley, Days Inventory was at it's lowest in August 2005....and prices hit their peak in February 2007.
So, we are moving in the right direction.
#3. LEADING INDICATOR: PENDING LISTING COUNT - PARADISE VALLEY
Below we are comparing Pending Listings from 2004 to 2011.
Currently, in Paradise Valley, 2010 and 2011 Pending Listings are at a higher level than in 2008 and 2009 and moving toward 2004 & 2005 levels.
#4. LEADING INDICATOR: CONTRACT RATIO – MARICOPA COUNTY
The Contract Ratio compares how many homes on the market receive offers VS. how many homes remain active.
The higher the number...the HOTTER the market.
A Normal Ratio is 30 - 40. Currently, the Arizona Market is at 95 and has been in a HOT MARKET since April 2011.
FYI - A group of approximately 200 Luxury Agents in Paradise Valley meet every two weeks to discuss the Real Estate Market and Tour Homes. It is apparent in the last year that sales in Paradise Valley and picked up considerably!
More good news!
5. LEADING INDICATOR: MONTHLY SALES VOLUME – PARADISE VALLEY
In May/June 2011, Sales Volume in Paradise Valley almost reached the same level as 2004/2005.
2006 to 2009 Sales were way below 2010, with 2009 dipping down to 6 Sales/month
It looks like 2012 is mirroring 2005 to date.
Because indicators #1 - #4 are favorable…we expect the Monthly Sales Volume to continue to rise.
#6. LEADING INDICATOR: LISTING SUCCESS RATE – MARICOPA COUNTY
This is the number of homes that are listed in the MLS that SELL.
For Maricopa County, at the beginning of 2008, only 1 in 4 homes sold that were listed. TODAY, 3 in 4 homes (approx. 75%) are selling. YIPPEE!
The historic norm is 65%!
For homes between $400,000 and $800,000, the Listing Success Rate is at approx. 55% rising from 12% in 2009.
For homes over $800,000, Listing Success Rate is currently at 44%, and continues to rise.
The Market is definitely on the mend!
CONCLUSION
The previous 6 Leading Indicators all point to a recovery in the Real Estate Market.
As indicated earlier, when there is a change in Supply and Demand…it takes approximately 12 – 18 months before prices start to rise.
The Chart below shows that List Price/ Sq. Ft. of Pending Listings has held steady in 2011. The Paradise Valley Market changed from a Buyers Market in June 2010...18 months ago.
All of the 6 Leading Indicators are FAVORABLE and we should start seeing prices rise in Paradise Valley in 2012.
So, if you are BUYING, BUY NOW.
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