Mid Month JUNE 2017 Pricing Update and Forecast
Each month about this time we look back at the previous month, analyze how pricing has behaved and report on how well our forecasting techniques performed. We also give a forecast for how pricing will move over the next 30 days.
For the monthly period ending June 15, we are currently recording a sales $/SF of $151.10 averaged for all areas and types across the ARMLS database. This is up 0.4% from the $150.45 we now measure for May 15. Our forecast range midpoint was $151.94, with a 90% confidence range of $148.90 to $154.98. We were correct in forecasting a rise, but the actual rise was only about half as big as forecast.
On June 15 the pending listings for all areas & types shows an average list $/SF of $154.91, up 0.6% from the reading for May 15. Among those pending listings we have 95.0% normal, 1.8% in REOs and 3.1% in short sales and pre-foreclosures. This mix contains fewer REOs but more short sales and pre-foreclosures than last month.
Our mid-point forecast for the average monthly sales $/SF on July 15 is $152.16, which is 0.7% above the June 15 reading. We have a 90% confidence that it will fall within ± 2% of this mid point, i.e. in the range $149.12 to $155.20.
So although last month’s rise was somewhat smaller than expected, we are still forecasting a respectable 0.7% increase in prices over the next 30 days.
Supply has been falling quite sharply in the last few weeks while demand is little changed. However, we will shortly be entering the third quarter, a period famous for weaker pricing. This is because the luxury market loses a lot of sales volume during the hottest months, whereas the rest of the market slows to a lesser extent. This is a seasonal effect and does not indicate underlying weakness. We would expect the upward price trend to resume once we get to the end of September.
Market Summary for the Beginning of June 2, 2017
Starting with the basic ARMLS numbers for June 1, 2017 and comparing them with June 1, 2016 for all areas & types:
Supply is still significantly lower than last year, but not quite as much as last month, when there was a 13.3% gap in terms of active listings with no contract.
The monthly sales rate is up almost 12% compared with a year ago. This time May 2017 has a one working day advantage over May 2016, which accounts for 4.8% of that rise. In April we saw only a 3% rise, but allowing for the extra working day in April 2016, we get roughly the same result for both months. The year over year comparison adjusted for number of working days is 7.2% for May and 7.8% for April. So although the unadjusted figures suggest May was stronger than April, the truth is that sales faded just a bit on a sales rate per working day basis. We apologize for being so pedantic, but we are looking for real signs of a trend here. The trend is very slightly down.
Further sign that demand is on a weakening trend is coming from the pending and under contract numbers, both of which are down from last year, down from last month and further down from last year than they were last month. These are all consistent signals that demand, though strong, is losing a little steam. The contract ratio confirms this, dropping back from its peak at the beginning of May.
Buyers should not get too excited by these trends because they are so minor. We are still in a market where demand exceeds supply and any change in the balance is quite small. In fact we have seen the most stable readings for the Cromford® Market Index over the last 5 months that we have seen for any 5 month period since 2001.
There are a few changes going on the market nevertheless:
CRS, ABR, GRI, PMN, e-PRO
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