The other day I was talking with a national real estate analyst and he has evidence that new listings hitting the market in March in the hardest hit areas in the country like Seattle, NYC, and some metro areas in California decreased anywhere between 50-80%. The rest of the country is feeling the decrease to a lesser extent. Fortunately, Arizona didn’t see a drop in new listings in March. We had an increase of 27% of new listings hitting the market from March 1st through 30th. Given our low inventory, it still put us at 28% below where we were at the end of March 2019. In the first 10 days of April, we saw a 9% drop in new listings hitting the market.
We continue to have a decent market in most of the Phoenix metro area and in some small pockets there remains even stronger. Price point is a main driver in this as we have had very low inventory in the lower price points. It is finally creeping up for the first time in many months as we are now seeing vacation rentals and properties that would have been purchased by iBuyers hitting the market. Most of these properties are under $350,000.
The past 3 weeks have been chaos. Initially we saw a spike in contract cancellations. The week of March 16th our cancellations doubled week over week to 927. Since then our cancellations have decreased quickly and we are getting closer to typical escrow fallout. The number of new contracts written has decreased significantly since the first week of March. The week of March 2nd there were 2584 new contracts and the week of March 30th there were 1508.
We do not know how long this will last but we do know it will be months and not years. This will end and there will be pent up demand. There will also be many sellers who waited to list. It is easy to believe that when the economy opens back up we will see a lot of listings flooding the market. If you are a seller and need to sell now, it is a good time to list in just about every part of the country. Today’s sellers are up against a lot less competition. Each week there will be more and more people out of work which will reduce the total number of buyers. The unemployment will push more people to list their properties who otherwise were not planning on selling.
There is no reason to believe that we will have large price depreciation in all price points. Price is a lagging indicator that often takes years to show up. For example, home sales started dipping at the end of 2005 but prices didn’t start dropping until late 2007. There will likely be an increase in seller concessions though. We have already seen early price depreciation in the upper end markets. Between the stock market shifts and jumbo loan liquidity challenges which Ryan has mentioned on the past couple of calls, that market has had an extreme slow down. We are optimistic that the loan challenges will be worked out soon! Nationally in the past 4 of 5 recessions we saw modest price increases in overall the real estate market.
One thing that is important to point out in all of this is that consumer sentiment is the leading market indicator. When there is fear, people don’t buy houses. These massive unemployment numbers are very upsetting. We have to remember though, this is the first time ever that unemployment benefits have been offered to 1099 independent contractors. You cannot compare today’s numbers with the past numbers. We also have to keep in mind that the National Association of Home builders put Phoenix in the affordable range and we are one of the cheapest big cities in the country. People were making more money today than ever before. Wages were up year over year. Homeowners across the country have, on average, more than 50% equity. Before the virus consumer sentiment was very positive. I am very optimistic that we will bounce back as soon as everyone is out of the house and back to work.
copyright 2020 by Sarah Perkins
Sarah has been in title & escrow sales since 2004. As an award-winning sales executive and now the Director of Strategic Accounts, Sarah’s role is to bring real estate transactions to Clear Title. To do this, she focuses on supporting her clients and helping them navigate the ever-changing real estate space through thorough research and understanding of current trends impacting today’s home buyers and sellers.