March 22 Update- In the first few days of last week there was little sign of the pandemic having an effect of the housing market. However, Thursday, Friday and especially, Saturday, has given us much more to chew on. There are a number of effects happening at the same time, all of which combine to create a sharp slow down in demand an increase in supply. The effects differ by geography and price range.
Active listings without a contract across all areas & types stood at 12,086 on Saturday - up 9% from a week earlier. This is a sudden change from the previous week when counts were close to flat week on week. This is due to a couple of large effects and one small one:
- a significant increase in new listings arriving
- a significant decrease in buyer activity, so listings are not going under contract as quickly
- a few more listings have been taken temporarily off market, but this is a minor effect compared with the 2 above
Since we are all supposed to be avoiding physical human contact, it is not surprising that showing activity has dropped dramatically. Few normal buyers are willing to make an offer without viewing a property, though some investors may be tempted. Since real estate activity has been declared a non-essential business, buying and selling, as well as construction are likely to drop sharply, especially if a close-down is ordered by government, as it has in several states. In fact I am surprised that showings remain as high as they do. Some people are clearly not taking the pandemic seriously enough, which is a big mistake that will cause the virus to spread more quickly and incur a higher mortality rate.
The increase in listings is heavily skewed towards the mid price end of the market. Between Sunday 15 and Sunday 22, we see an over all increase of 11% in active listings without a contract. However there is NO increase in active listings over $800,000. between $150,000 and $300,000 we have an increase of 19% in a single week.
Of course we were starting from an excruciatingly low inventory of active listings between $150,000 and $300,000, so it is not hard to see a high percentage increase from such an abnormally low base.
Why are we seeing more active listings so quickly?
- Short term and vacation rental operators have seen their business evaporate overnight. Airbnb bookings are at their lowest in memory and smart owners realize they now have an asset that is expensive to own and run with little to no income to support it. They are placing these properties up for sale or for long term rental, or both.
- Opendoor is the largest iBuyer and it has stopped its buying operation completely. We normally see a few hundred homes purchased each month by Opendoor. These do not hit the MLS until many week later after the residents have moved out and they have been readied for sale. Sellers now need to place these listings with agents or with one of the iBuyers that is still providing online offers. It is quite possible that these other iBuyers will do the same thing shortly. This will increase the number of MLS listings temporarily.
- A huge amount of wealth has been destroyed on the stock market in the last month as the indexes return to 2016 levels. This leaves cash in short supply and some owners may need to turn fixed assets in liquid assets at short notice.
- A large number of snowbirds have returned to their winter homes, in Canada or the northern US states. This is especially true of elderly and retired visitors. Being on vacation during a pandemic was not their plan.
We see the following increases for single-family homes in the 17 largest cities:
- Avondale 46%
- Gilbert 20%
- Chandler 19%
- Mesa 19%
- Buckeye 15%
- Queen Creek 15%
- Tempe 14%
- Phoenix 14%
- Glendale 14%
- Peoria 13%
- Surprise 11%
- Goodyear 11%
- Maricopa 9%
- Scottsdale 6%
- Cave Creek 4%
- Paradise Valley 3%
- Fountain Hills -5%
The Southeast Valley is seeing the largest percentages, as well as Avondale, which had an extremely low number of listings to start with
By dwelling type, condos and townhomes are being added most quickly, consistent with the liquidation of Airbnb assets:
- Condo / townhouse 15%
- Single-family detached 10%
- Mobile or manufactured 6%
The speed of change is as high as we have ever seen and underscores why it is important to monitor the housing market on a daily basis, not once a month as most people do.