Arizona Real Estate and Community News

Oct. 3, 2020

Oct 2020 Market Update!

 

October 2020 Market Update!

Here are the basics - the ARMLS numbers for October 1, 2020 compared with October 1, 2019 for all areas & types:

  • Active Listings (excluding UCB & CCBS): 8,101 versus 13,755 last year - down 41.1% - but up 0.9% from 8,028 last month
  • Active Listings (including UCB & CCBS): 13,305 versus 17,592 last year - down 24.4% - but up 1.0% compared with 13,178 last month
  • Pending Listings: 7,999 versus 6,011 last year - up 33.1% - and up 1.4% from 7,892 last month
  • Under Contract Listings (including Pending, CCBS & UCB): 13,203 versus 9,848 last year - up 34.1% - and up 1.2% from 13,042 last month
  • Monthly Sales: 9,667 versus 8,022 last year - up 20.5% - and up 4.9% from 9,213 last month
  • Monthly Average Sales Price per Sq. Ft.: $198.68 versus $169.60 last year - up 17.1% - and up 1.9% from $194.98 last month
  • Monthly Median Sales Price: $327,000 versus $279,500 last year - up 17.0% - and up 0.6% from $325,000 last month

The flow of new listings was strong throughout September, with roughly 17% more listings posted than in September 2019. However this did not result in much change to the available supply. This rose a barely perceptible 0.9% which is in line with normal seasonal trends. However, buyers must celebrate what little good news they can - 73 more active listings than last month. Yay!

With the chronic shortage of re-sale homes, many buyers are turning to new-builds. Here they will not face multiple offers, but they may well find some builders are not accepting contracts except for homes that are near completion. The reason is that prices are climbing steeply and some developers do not want to tie themselves to a fixed price until the home is almost complete. The builders are experiencing an extreme seller's market and buyers (and their agents) are likely to feel a little less appreciated than usual. Developers can also spend less on sales and marketing when they can easily sell all the homes they are able to build. Some (but certainly not all) are reducing the commission they will pay to buyer's agents.

The reason that available supply is not increasing, despite the large increase in new listings, is that demand refuses to die down. It is unusual for the number of listings under contract to be higher on October 1 than September 1, but this is what we see in 2020. Even more startling is the amount by which the number of listings under contract exceeds the 2019 level - 34%. The market was strong this time last year, but now it is on fire.

Closings were also strong during September - up over 20% from September 2019. To be fair, September had one extra working day in 2020 compared to 2019, but this does not take much away from the impressive number of closed listings.

There have been a number of articles written predicting that home prices will fall next year because of the damage to the economy by the COVID-19 pandemic. This will cause some people, those who took those article seriously, to be very surprised by the huge increase in pricing that is currently going on. The extremely high CMI reading indicates that the upward price trend will continue for the near and medium term, making any price reductions in 2021 rather unlikely.

Over the last 12 months, the average price per sq. ft. has increased over 17% and the current rate of increase in around 2% per month, meaning we are probably headed for an annual rate of over 20% fairly soon.

The economy has severely damaged the finances of a large number of people. However most of those people were unlikely to be in a position to buy a home anyway. Those who are in a position to buy a home have had their determination to do so increased dramatically by the pandemic. The gap between the haves and the have-nots is widening.

Foreclosure notices in Maricopa County numbered 99 during September. This is down 76% from September 2019. Some people are predicting that foreclosures will rise in 2021. I would agree that the record low levels of foreclosure activity in 2020 cannot last forever, but data released about delinquencies by the lending industry suggests that there is unlikely to be the sort of foreclosure flood that we saw in 2007 through 2012. Remember that the record monthly count was 10,712. That was truly a mountain of foreclosure notices and we currently have no more than a molehill.

Wow! 17% Spike in Contracts over $600K in August
34% of Homes Closed Over Asking Price

For Buyers:
The first few weeks of August saw a surprising 17% spike in listings under contract over $600K. This is highly unusual as typically contract activity declines in the 2nd half of the year, especially on the high end; but this is the year 2020 and it’s been full of surprises. What is causing this spike in buyer demand in the luxury market? Luxury sales are partially influenced by stock market performance and corporate profits. August was a good month for the stock market, but the 2nd quarter was not good for corporate profits at all. In fact, they fell to levels we haven’t seen in a decade.  The answer may lie in what’s been dubbed “wealth flight”.  Some states like California are considering increases in income taxes, corporate taxes and a new “wealth tax” in the wake of the pandemic. As a result, the threat of new taxes on already hurting balance sheets is enough for companies and their employees to make the decision to move. This, coupled with the work-from-home movement, is fueling demand in Metro Phoenix where taxes and the cost of housing are comparatively more affordable than other cities.  For buyers waiting for prices to decline, there is no indication of that happening soon despite apocalyptic predictions of another foreclosure wave; at least not while the Valley has a net increase in population moving to the area.  A reasonable expectation over the next year is that prices will continue to rise sharply in the short-term, then possibly rise slower if affordability rates begin to suffer.  The only beam of hope for buyers right now is a boost in new construction.

For Sellers:
For at least 12 years, builders have been reluctant to ramp up production of new housing supply to accommodate population growth; which is understandable considering they were burned severely when the housing market crashed in 2008. This reluctance has led the market to our current shortage of homes for sale and a frenzy of competition for existing resale homes.  However, last July saw over 3,000 single family permits filed; the largest number filed in a month since March 2007. This should provide some much needed relief for buyers and some added competition for sellers in the coming months. While exciting, this increase in new home permits is not alarming.  The biggest month recorded was July 2004 with 6,291 permits filed. 
That said, 35% of homes closed through the Arizona Regional MLS in August sold over asking price. As incredible as that sounds, this is not the first time Greater Phoenix has seen this measure spike. In fact, 2005, 2009 and 2012 all saw higher percentages; each peak was short-lived over the course of just 2-3 months before sharply dropping again.  This is because as more sellers test market limits and ask for higher and higher prices, their likelihood of selling over asking price drops significantly.

If you, or anyone you know, is looking to buy or sell, Please let me know!

 

Troy Holland

Cell:  480-773-5792

Email:  Troy@Sell4Free-AZ.com

Web:  www.FlatFee-NoFee.com 

Raving Fans: Client Reviews Here

 

 


 

 

Information provided courtesy The Cromford Report.

 



Posted in Market Updates
Sept. 20, 2020

Raving Fans!

Thank you to our past clients for trusting in us to make their dreams come true!  Check out some of the words from some of our recent clients below!

Trust is earned.... I look forward to earning yours soon!

 

Troy Holland

Cell: 480-773-5792

Realtor, HomeSmart

 

 

 

 

 

 

 

 

 

 

 

Posted in Buying a Home
Sept. 4, 2020

September 2020 Market Update

 

Market Summary for the Beginning of September

Here are the basics - the ARMLS numbers for September 1, 2020 compared with September 1, 2019 for all areas & types:

  • Active Listings (excluding UCB & CCBS): 8,028 versus 13,609 last year - down 41.0% - and down 5.3% from 8,477 last month
  • Active Listings (including UCB & CCBS): 13,178 versus 17,577 last year - down 25.0% - and down 0.6% compared with 13,259 last month
  • Pending Listings: 7,892 versus 6,350 last year - up 24.3% - and up 4.5% from 7,550 last month
  • Under Contract Listings (including Pending, CCBS & UCB): 13,042 versus 10,318 last year - up 26.4% - and up 5.8% from 12,332 last month
  • Monthly Sales: 9,225 versus 8,916 last year - up 3.5% - but down 12.5% from 10,543 last month
  • Monthly Average Sales Price per Sq. Ft.: $194.85 versus $169.18 last year - up 15.2% - and up 1.9% from $191.16 last month
  • Monthly Median Sales Price: $325,000 versus $280,000 last year - up 16.1% - and up 3.2% from $315,000 last month

The housing market remains extremely strong and continues to hit news heights. The closings in August were down from July, but this is partly due to August having fewer working days than July. The fact that pending listings and listings under contract rose between August 1 and September 1, tells us that demand is not weakening despite the lower number of closings. The balance between closed sales and contracts that have not yet closed has swung in favor of the latter.

We can see that supply remains very low indeed, but has only declined 0.6% over the past month. We anticipate that supply will start to grow over the next 30 days. This is because we are seeing far more new listings than we observed during the first half of the year. With the average price per square foot up more than 15% it is not surprising that this is tempting a few more sellers. In theory it should be tempting a few less buyers, but the low mortgage interest rates have kept buyer interest very high.

A startling figure is 26.4% - the amount by which listings under contract exceed this time last year. The level of growth is highly unusual.

Once again, supply is low and demand is high, so prices have to rise. The price increases have really started to accelerate over the past 2 months we now see appreciation over 15% measured by monthly $/SF and over 16% when measured by the monthly median sales price. This is even more shocking given that August is usually one of the weakest months of the year for pricing. By the time we get to year end, we can expect these numbers to be even higher.

The market is more stable than last month, with the Cromford® Market Index hovering near its all time high. The expected growth in supply over the coming 3 months should give some welcome relief to buyers. At least they should have a little more choice. However, there will be little to no respite from multiple offers and the ensuing stress levels. We expect price rises to eventually start negatively impacting affordability causing more buyers to drop out of the market and start a cooling cycle. But eventually could mean quite a long time in the current conditions. The market remains hard to predict, so instead will require close and timely observation.

We do that, so you don't have to. If you read our daily observations, you should not be caught by surprise.

July Breaks Records in 2020
65% of Homes Affordable in Greater Phoenix

For Buyers:
It’s a jungle out there for buyers, but despite recent appreciation rates the HOI* measure for Greater Phoenix increased to 64.8 for the 2nd Quarter 2020; the previous measure was 63.0. This means that a household making the current median family income of $72,300 per year could afford 64.8% of what sold in the 2nd Quarter of 2020.  By comparison, the HOI measure for the United States was 59.6.
Historically, a normal range for this measure is between 60-75. During the “bubble” years of excessive appreciation between 2005-2006, the HOI plummeted from 60.1 to 26.6. Typically if it falls below 60, the market should start to see a drop in demand.  With the most recent increase however, Greater Phoenix is still within normal range and experiencing demand 20% above normal for this time of year.
What makes this market significantly different from the infamous bubble and crash is the relation between resale housing growth and population growth. In the early 2000’s, housing was growing faster than the population and creating a glut. This glut went unnoticed due to excessive speculator (i.e. “false”) demand fueled by loose lending practices. When loans tightened up, the glut came roaring into focus as vacant inventory soared to over double the normal levels.  However since 2006, the population has grown faster than housing.  It has taken 14 years, but this population growth fueled by job growth has finally consumed the glut of re-sale housing created during the bubble years and now the market is facing a shortage of homes for sale.
This type of market and appreciation is not sustainable over time, however it’s here now and properties purchased today are expected to continue appreciating over the next 6-12 months.

For Sellers:
So much for the “Summer Slowdown”, July had a record number of closings go through the Arizona Regional MLS; surpassing every July as far back as 2001.  July also broke records in dollar volume with $3.9 Billion sold. The best July ever recorded prior was in 2005 at $2.9 Billion. The monthly appreciation rate finalized 12.5% higher than 2019 and was the 4th highest appreciation rate for July going back to 2001. 
One third of homes closed were over asking price and only 15% involved any sort of seller-paid closing cost assistance; down from a high of 27% last May.  Half of all sellers who accepted contracts in the first week of August did so with 7 days or less on the market.
Contracts on luxury homes over $1M are up an incredible 93% over last year at this time. Between $500K-$1M, contracts are up 64%. Between $300K-$500K, they’re up 39%. Between $250K-$300K, up 15%.  If you need to sell, this is the time to do it.

*The HOI Index stands for “Home Opportunity Index” and is published quarterly by the National Association of Home Builders and Wells Fargo. It measures the percentage of homes deemed affordable in an area based on lending guidelines, interest rates, median income levels and median price. The most recent report was released on August 8th, 2020.
Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2020 Cromford Associates LLC and Tamboer Consulting LLC

 

If you, or anyone you know, is looking to buy or sell, Please let me know!