As someone who loves to analyze real estate activity, the recent events have definitely thrown a wrench in how we analyze the data. In a day when more information is available than ever before, we keep running into one consistent truth, there still simply isn’t enough data available to give us a decent expectation for the coming weeks and months. With that said, we can only use the information that we do have. Before I dive in too much about that data, I want to encourage everyone to stop watching the news and for you to encourage your clients to do the same. There is a lot of garbage information going around full of negativity. Consumer sentiment drives our economy, there are still good things happening and activity in all markets. The amount of that activity is directly correlated with the severity of the lock down orders. New York City’s real estate market has had the greatest decrease, nationally, in new listings hitting the market and we can all understand why that is the case.
Let’s start with what we do know. Consumer intent is very hard to measure; just because people can, doesn’t mean they will. New listings hitting the market shows intent, we know these sellers want to sell and it gives us data to work with. Nationally the hardest hit cities saw a 50%-80% drop in new listings in March. Nationally, new listings are down 23% since the beginning of March. In Arizona, we didn’t see a drop in new listings until April and since the beginning of the month we have seen a 9% drop in new listings hitting. Nationally we have had low inventory for years and extremely low inventory for about a year, today we have about 3 months of inventory. In Arizona we have had super extreme low inventory for a year. Nationally and locally, demand has dropped. In Arizona our demand has dropped by nearly 16% since mid-March. However, our supply remains far below the demand as measured by the Cromford Report. As of yesterday, our supply has increased to 49% below normal and demand has dropped to nearly 8% below normal. For the last few years our supply and demand lines have been pretty far apart, to the benefit of sellers. They have started moving closer together. We do not know what will happen next but we do know that today we have low inventory and anyone listing now is up against less competition. The longer we go, the greater the potential for increased competition, not only from pent up demand to sell but for people having to sell because they can no longer afford not to.
The buyers that are out are being cautious, the more listing choices they have the more cautious they become, this is not the time to push the market. One thing I find to be very interesting is that our data is not showing any signs of price decreases however many of the local Realtors I talk with are telling me about reductions. They start usually with an increase in seller concessions. The price drops are very price specific, the higher the asking price the greater the reductions. In our lower price points we are still seeing contracts coming in at or above asking. Greg, you told me in the million dollar and up listings have seen the largest reductions.
In March, locally we had huge contract fallouts. Over the past 2 weeks we have seen that get back to normal, which is good news! More good news is that nearly 54% of American homeowners have at least 50% equity and 37% of all homes are owned free and clear. When I am asked if things will be like 2008, our equity positions point to absolutely not. More equity means more regular Realtor facilitated transactions, not REOs and short sales. We do not know what will happen with the iBuyers but with them out of the markets right now, there is opportunity for you, those sellers still need to sell. The other day Opendoor announced they are laying off 35% of their employees.
Our environment is changing faster than ever before, a week feels like a quarter. Over 20 million people have filed for unemployment. Spousal abuse is up 40%. Divorce attorneys are getting those “I cannot be with this person another minute calls.” One divorce attorney in Phoenix did a poll that showed 57% of Millennials said they are filing for divorce as soon as they can leave the house. The economic stress, unemployment, and increase in divorce filings are all likely indicators of coming inventory.
We do not know what our recovery will look like or how they will re-open the economy. We do know that real estate it a huge part of the recovery. Many experts believe that our industry will be what pulls us out of this; real estate is 16% of our GDP.
Every household on the planet is reflecting on where they are now, today, and where things will go for in the coming weeks and months and they need you for guidance. Remember good Realtors can deliver good news, but great Realtors can deliver bad news. Your clients need your guidance more than ever before. Reach out to everyone right now. They want to hear from you. Be the counsellor, be the consultant, be the info source, be the strength, they need you.
I have one last comment about our real estate industry that isn’t directly related to the virus. Remember those 3 class action lawsuits that were filed about a year ago? They are currently in the discovery phase. In one of the 3 suits the defendants filed for a 60 stay due to the virus. The courts denied the request. These cases continue to move forward and it is important to be mindful of the extreme impact they will likely bring. If the plaintiffs win, listings will become even more valuable.
copyright 2020 by Sarah Perkins
Sarah Perkins is an award winning account executive and has been in title sales since 2004. As the Director of Industry Research & Senior Account Executive, Sarah’s role is to bring real estate transactions to Navi Title. Sarah supports her clients by helping them navigate the ever-changing real estate space through thorough research and understanding of current trends impacting today’s home buyers and sellers.