RESIDENTIAL MARKET UPDATE
January 1, 2018
Founder, Wilcox Report
The next time the U.S. Census Bureau releases population data, I predict Maricopa County will be the number one county in the United States for overall population increase for a second year in a row – and number one in the sub category of net domestic migration. In the two other sub categories: number of births over deaths and international migration, the county should finish third and sixth. I also predict for the first time in its history, Maricopa County will reach the milestone of having 2,000,000 non-farm jobs a month by the end of the third quarter of 2018. More people with more jobs than ever before will only increase demand for housing in 2018.
Both FHFA and FHA will raise their loan ceilings in 2018. In Maricopa County, the FHFA conforming loan limit increases $39,000 from $424,100 to $453,100 while the maximum FHA loan increases $15,065 from $279,450 to $294,515. Both these moves will increase competition for homes priced under $470,000.
Most likely, mortgage rates will continue to rise in 2018. Each time the mortgage rate raises a quarter of a percent, a certain number of potential buyers no longer qualify for a loan. The monthly principal and interest on a $300,000 loan for 30 years at 4.25 percent is $43.57 higher than for a loan at 4.0 percent. However, interest rate increases should have a minimal effect on potential buyers for two reasons: increases in weekly earnings and the number of potential buyers with limited inventory. In the first quarter of 2017, average weekly earnings in Maricopa County increased 7 percent or $63.71 over the first quarter of 2016 – this trend should continue in 2018. Furthermore, the sheer number of potential buyers looking for homes in the most popular price ranges will cut down the inventory available.
The charts display November 2017 single-family home performance by price and year-over year comparisons by city. Looking at this data and projections for the new year, Maricopa County can expect 2018 to be a good, but a very competitive year for residential real estate.
The first chart shows November sales and how buyers purchased: by cash, conventional loan, FHA and VA loan. It also shows the estimated months of supply by price range. In November 2017, 57 percent of buyers purchased with a conventional loan, 19 percent cash, 16 percent FHA and 8 percent went VA. There were 19 VA loans with a purchase price of $500,000 or higher. Two of these VA purchases were over a million dollars. However, 80 percent of all sales were under $500,000. The estimated months of supply for current inventory under $500,000 ranges from less than a month to 2.9 months. This is a seller’s market.
Sales, Estimated Months of Supply, How Purchased Previously Owned Single-Family Homes in Maricopa County
The next chart displays the 32 cities in Maricopa county and compares 2016 to 2017 sales, median sales price, number of leases and median lease price. Almost every city had a year-over-year increase in the median sales price and the median lease price. This is another sign that points to increasing competition for housing in 2018.
Year-Over-Year Comparison: November 2016 to November 2017
Sales and Leases for Previously Owned Single-Family Homes by City
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.