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Metro Realty- Arizona Real Estate Market Report

Here are the basics – the ARMLS numbers for SEPTEMBER 2021


September 2021 Arizona Real Estate Market

Summary for the Beginning of SEPTEMBER 2021

Arizona Real Estate Market Report 

Market Summary for the Beginning of September 2021

Dennis Kolodin, CCIM- Metro Realty Snapshot

  • For the monthly period ending September 15, we are currently recording sales of $/SF of $252.70 averaged for all areas and types across the ARMLS database.
  • This is up 0.8% from the $250.61 we now measure for August 15.
  • Our forecast range midpoint was $253.65, so we were expecting a 1.5% rise and saw only about half that. However, the result was well within our 90% confidence window.


  • On September 15 the pending listings for all areas & types show an average list $/SF of $256.75, up 1.5% from the reading for August 15.
  • Among those pending listings, we have 99.6% normal, 0.1% in REOs and 0.3% in short sales and pre-foreclosures. The short sale and pre-foreclosure percentage is higher than last month but still extremely low by normal standards.


  • Our mid-point forecast for the average monthly sales $/SF on October 15 is $256.27, which is 1.4% above the September 15 reading. We have a 90% confidence that it will fall within ± 2% of this mid point, i.e. in the range of $251.14 to $261.40.
  • Prices have been pretty flat for the past 3 months, but are likely to rise once more during the fourth quarter.

A More In-depth Analysis

Here are the basics – the ARMLS numbers for September 1, 2021 compared with September 1, 2020 for all areas & types:

  • Active Listings (excluding UCB & CCBS): 6,873 versus 8,028 last year – down 14.4% – and down 3.3% from 7,105 last month
  • Monthly Sales: 9,051 versus 9,213 last year – down 1.8% – and down 1.0% from 9,146 last month
  • Monthly Average Sales Price per Sq. Ft.: $249.31 versus $194.97 last year – up 27.9% – but down 0.5% from $250.66 last month
  • Monthly Median Sales Price: $401,000 versus $325,000 last year – up 23.4% – and up 0.3% from $400,000 last month

The Many Surprising Changes This Month

“First we see fewer active listings (excluding UCB and CCBS) at the start of September than we had at the start of August. After a rise of almost 25% during July, this is quite a turn up for the books.”

Dennis Kolodin, CCIM- Metro Realty

This unexpected fall is mainly caused by two factors:

  • The rate of arrival of new listings has started to fall, especially over the last 2 weeks
  • The demands from iBuyers and investors has intensified, taking listings under contract more quickly than usual

“Ordinary home buyers are losing some of their motivation, thanks to prices that are vastly higher than last year. It is usually the local buyers that have a difficult time with the new prices, the out of state buyers feel that the prices are not that bad”.

Dennis Kolodin, CCIM- Designated Broker ® – Metro Realty

Despite low-interest rates, affordability has slipped below the normal range for Greater Phoenix.

Sales counts (closed listings) are still lower than last month and last year, but by much smaller margins than in July.

The monthly average $/SF dropped for the second straight month, but the fall was just 0.5% each month and we do not think this will be repeated in September based on the contracts that have been signed during August. However, it is clear that the runaway appreciation we saw in January through May has been halted.

Interesting Indicators that Show Mixed Signals

  • The contract ratio jumped from 155.4 to 175.1, indicating that the market has heated up over the last month
  • The average closed $/SF was 0.68% higher than the list price, down from 1.47% last month – indicating that the market has cooled over the last month.

If it were not for the activity of investors and iBuyers, and particularly the latter, the market would have cooled during August. This would have been following the trend established since April. However, iBuyers have purchased so many homes over the last month that they are significantly distorting the market dynamics.

These homes are mostly going to be re-marketed shortly. so they will almost certainly increase supply over the coming weeks.To achieve these huge increases in purchase volumes, iBuyers have made offers well in excess of the pricing that we saw from them prior to 3Q 2021.

Since appreciation has been much weaker during this same period, it remains to be seen how they will be priced for resale.

It is possible that either gross margins will have to fall or time on market will have to rise. Normal buyers no longer have the appetite that we experienced during 1Q and early 2Q, so they are going to be more sensitive to pricing. Achieving sale prices well over cost could prove quite tricky.

Investors intending to rent out their properties are a different matter, and the rapid rise in rents over the past year has justified them splashing out. Indeed far more homes are going from iBuyers straight to the rental operators than we saw prior to July 2021.

This takes homes off the resale market for a long time and reduces supply. Large-scale investors with deep pockets are crowding out smaller investors.

We have seen larger buying sprees from investors before, notably between 2011 and 2013. However, we have never seen iBuyers so determined to increase their top line.

To put the situation into context, the iBuyers have purchased about 2,850 homes over the last 3 months. That represents almost 9% of re-sale purchases.

Recorded iBuyer sales during the same time total less than 1,000, about 3% of re-sales. We can see that the iBuyers (particularly Opendoor and Zillow) have increased their inventory massively.

If iBuyers had not done this, we estimate that supply would already be higher by some 1,800 listings, which would have caused the Cromford® Market Index to drop to a much lower value than today.

We conclude that pricing would also be weaker without their intervention. This begs the question: what happens if they stop buying on this massive scale?

Investors, too, can decide to stop their buying spree at a moment’s notice. The market is, therefore, more precarious than if demand were primarily growing through owner-occupiers.


September 2021 Market Index

For Buyers:

Contract Activity Spiked 20%

In This Price Range, Luxury Sellers Over $1M are Enjoying a Hot Summer

Buyer demand has rallied sharply over the past 4 weeks, which is unusual for this time of year. The rally is exclusively between $400K-$800K, spiking nearly 20% in contract activity since the end of July.

We have to wait until the transactions close and record to identify the buyers, but judging from July’s closing analysis we expect to find a surge in iBuyer purchases (aka “Internet Buyers”).

The most notable iBuyers active in Greater Phoenix are OpenDoor, OfferPad, Zillow, and now RedFin. At least one of these organizations has increased their approved acquisition price to a $750,000 limit, which could explain the sudden spike in sales.

These companies buy properties below market value to either desperate or unknowledgeable sellers. iBuyers do not buy and hold property, they primarily engage in a short-term flip strategy and their activity does not constitute true demand.

True demand is found in someone who will live in the home or rent it to someone who will live in the home. Flip investors are strictly the middlemen between the seller and the final buyer, which adds one extra closing to the books and makes true demand appear larger than reality by increasing the total number of sales without increasing the level of supply.

The existence of institutional flip investors in the marketplace can be frustrating for buyers from a competition standpoint, but in the end, these buyers still need to re-sell the home to someone. As prices have reached levels beyond the affordability threshold for a larger percentage of residents, the question is whether or not iBuyers will be able to flip their acquisitions with the same profit margins going forward.

Permits for new homes are up 32% for January through July this year and are at their highest since 2006.

Considering the average build time for a new home is anywhere from 10-14 months due to supply chain disruptions, iBuyers and sellers, in general, will see more competition from new construction starting in the 4th quarter 2021 and into early 2022.

For Sellers

While the $400K-$800K market is seeing elevated activity, the luxury market over $1M is a different story.

Make no mistake, the luxury market is still extremely hot but it’s not because buyer activity is rising. Listings in escrow over $1M have dropped 17% since June, but that’s normal for this time of year in this segment.

The reason the luxury market is still hot is due to a simultaneous drop in competing supply. It’s more prominent over $1.5M where supply has dropped 10%, also since June.

So if contract activity isn’t rising, then why is supply over $1M dropping? It’s seasonal. Every year from May to July there’s an elevated number of canceled and expired listings in this price point, which reduces the number of active listings. This year was no different.

Additionally, the number of new listings added monthly to supply dropped 26% between April and August, which meant there were fewer new listings to replenish those that canceled or expired.

“The result is a luxury supply count 31% lower than this time last year. This is good news for the sellers who remained active over the summer.”

Dennis Kolodin, CCIM

Even though luxury demand came down, it’s still 21% higher than it was last September with fewer competitors. If the market follows its seasonal tendencies there will be a rally of new listings coming to the party in October, possibly giving buyers more choice in the 4th quarter.

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Metro Phoenix Real Estate Market Report - This Month 2021
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Metro Phoenix Real Estate Market Report - This Month 2021
We are witnessing new listings arrive at a faster rate than we usually see at this time of year, especially those priced between $400,000 and $1 million. This is helping buyers, but there are still far more buyers than homes for sale. Read more about the quickly changing Metro Phoenix Real Estate Market here.
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Metro Realty AZ
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