2018 Projections for the Single-Family Homes Market

 Published November 1, 2017 | Arizona Journal of Real Estate & Business

Fletcher Wilcox
Founder, The Wilcox Report                                                         

Previously-owned single-family homes comprise the majority of residential sales — approximately 80 percent of all residential real estate sales in the Arizona Regional Multiple Listings Services, Inc. (ARMLS). On an annual basis, the volume of previously-owned single-family homes are three to four times greater than new single-family home sales.

With year-over-year increases in sales and rising prices, 2017 should end as the best year for dollar sales volume since the record year of 2005. Dollar sales volume can be defined as the total sales price based upon the number of sales.

Dollar sales volume for past years show $26 billion in 2005, $13 billion in 2010 and $20 billion in 2016. The year 2017 will end around $21 to $22 billion, making it the second-best year for dollar sales volume.

Are Housing Prices Close to a Correction?    

Are we approaching another price correction since housing prices continue to increase? The chart below shows the annual median sale price since 2004.  In 2006, the sale price peaked at $279,000, then bottomed out at $125,000 in 2011. Looking at 2017, for the first nine months the median sale price is showing $264,000. Sometime in the second quarter of 2018, the median sale price may hit $280,000.

These are not inflation adjusted numbers. Starting with the year 2006 through the summer of 2017, inflation has been about 18 percent.

If we reach a median sale price of $280,000 in 2018, is it a sign of another price correction? My answer is no. Since 2013, the annual median sale price has increased between seven percent and eight percent each year, which reflects a healthy increase. At the same time, borrowers have been able to qualify for these higher prices, even in light of today’s strict lending standards when compared to 2004–2006.

The chart below compares the monthly median sale price from 2004 to 2005, as well as from 2016 to 2017.

As illustrated, the total sale price increase when comparing 2016 to 2017 on a month-to-month basis, shows a minimum increase of four percent (or $12,230) and a maximum increase of eight percent (or $19,000). Whereas, when comparing 2004 to 2005 on a month-to-month basis, the minimum increase was 27 percent (or $43,000) with a maximum increase hitting as high as 53 percent (or $96,000). Such a tremendous one year run-up in prices was not healthy or sustainable.

One explanation for the run-up in prices during 2004 to 2005 was a result of artificial demand caused by spec investors purchasing with 100 percent financing. Today, spec investors are required to put down 20 percent, which is one reason that I don’t believe we are headed for a price correction.

Let’s look at another reason.

2018 Predictions: Plenty of Demand to Own

2018 will experience fierce competition in many locations for available homes that are priced right, especially those in the mid-to-lower price ranges. The reason for the increased competition is more people, more jobs and tight inventory.

Maricopa County ranks number one for population growth compared to 3,142 counties in the United States — with 81,360 more people added. This number is based on the U.S. Census Bureau’s most recent 2017 numbers. Over half of this increase, or 43,189, comes from domestic migration. Compare Maricopa County to Cook County, where Chicago is located, which has the largest declining population for a county in the United States. Their domestic migration was a minus 66,244. The average daily increase in the population of Maricopa County was 222 people per day. I expect the same numbers or higher for next year.

During the real estate recession, Maricopa County lost approximately 235,000 jobs. Not only have those jobs come back, but an additional 75,000 jobs have been added since then. This job trend translates to more home buyers. Based on U.S. Department of Labor data, I estimate about 165 jobs are created each day in Maricopa County.

There are now more buyers in the Maricopa County market than ever before. Prices and demand will go up. In fact, I know of a lender that has prequalified a number of potential buyers who are ready to buy, but are unable to buy because of our tight inventory.

More buyers, tighter inventory and higher prices will make some homes on the market that don’t meet the expectation of an HGTV reality show look a bit better.

Stay tuned for a positive, single-family home market in 2018.

Fletcher R. Wilcox is the author of TheWilcoxReport.com and Vice President of Business Development for Grand  Canyon Title. His market analysis has been referenced in the Wall Street Journal, Bloomberg News, HousingWire.com and National Mortgage News. Fletcher can be reached at FWilcox@GCTA.com and 602.648.1230.

 

A Class on Social Influence & the Psychology of Persuasion when Working with Sellers & Buyers

A Class on Social Influence & the Psychology of Persuasion  Create influence with buyers & sellers Turn numbers into knowledge Turn knowledge into authority Review social psychology and persuasion How to get your happy clients to spread … [Continue reading]

West Valley Real Estate Event: Predictions for 2018 & How to Use Market Data With Your Clients & Appraisal Q & A!

          West Valley Real Estate Event                                                                                                                             Wednesday, November 1, 2017 from 10:30 a.m. to 12:00 p.m. Predictions for … [Continue reading]

Home Prices Keep Going Up in Greater Phoenix!

It has been a long time since the median sale price for a previously owned single family home was this high. May 2017 Results   The median sale price for a previously owned single family home in May was $269,000. The last time the sale price was … [Continue reading]

Grand Canyon Title Agency conveniently located in the heart of Scottsdale!

Our Scottsdale office is located just west of the 101 at 8520 E. Shea Blvd, suite 115, 85260. If you already work with a Grand Canyon Title escrow officer thank you! Keep on working with them.  If not, stop in and see us! Meet our escrow … [Continue reading]

Real Estate Agents: Contract law class in beautiful new construction luxury home in Heart of Scottsdale!

 June 22, 9:30 a.m. to 1:00 p.m. Contract to Closing: Contingencies, Clauses and Cures for three hours of contract law. Enjoy the class in a brand new luxury home in the Heart of Scottsdale. The home is approximately 4,341 square feet priced at … [Continue reading]

Scottsdale Report: Residential Real Estate Trends for April 2017. Estimated months of supply for single family homes and more!

This report is on Scottsdale sales and new listing trends for single family, apartment style, townhouse and patio homes. The data was compiled from the Arizona Regional Multiple Listing Services, Inc. (ARMLS). In April, of the four residential … [Continue reading]

First Quarter 2017: Residential Sales Volume Highest in Eleven Years!

First Quarter 2017 Results Previously Owned Single Family Homes Maricopa County   Data compiled from the Arizona Regional Multiple Listing Services, Inc. Sales volume in the first quarter of 2017 was the highest since 2006, which was before the … [Continue reading]

Which buyer costs can a seller concession now pay?

Sixty Days Later: The New AAR Purchase Contract Published May 2, 2017 in the Arizona Journal of Real Estate & Business http://www.asreb.com/2017/05/sixty-days-later-the-new-aar-purchase-contract/  By Fletcher R. Wilcox The Wilcox … [Continue reading]

Who will be the top real agent, broker and more!

https://www.facebook.com/gctatitleinsurance/posts/1523914220952047 Old Town Scottsdale 2017 Friday Night Industry Party Awards will be for Residential real estate agent of the year Residential real estate broker of the year … [Continue reading]