We now have 3 weeks of data showing the very beginning of a trend! I am happy to report that these emerging trends are positive. Please continue sharing this good news with your clients. Right now there is a battle between the media and consumer sentiment. Unfortunately for the media, good news doesn’t sell, however, fortunately for you, it does. The bottom line of that good news is that we are seeing increased activity across all markets; people are ready to get out and find a new version of “normal.” Real estate coach Tom Ferry is calling this month “May Madness” since we missed March’s.
To measure the health of the market we look at new listing counts, which illustrate seller confidence. To measure demand we look at new pendings. Since the week of April 19th we have seen increased buyer demand and increased new listings. We’re even now seeing multiple offers in a wider range of price points, including the luxury market.
In the Phoenix metro area, from March 14th through April 18th we had a 32.4% increase in new listings hitting the market. Despite that increase, in March we had a 2.2% drop in new listings, year over year. In April we had a 23% drop in new listings, year over year. We are finding ourselves where we recently were, crazy low inventory, again.
Physical showing requests also show the increasing demand, after a 63% decrease in requests, we have already made up 44% of that loss and now are only down 19% from the peak on February 22. After 5 weeks and a 26.6% drop in new pendings, we seemed to have hit the bottom and are starting to slowly but surely inch our way back up. New pendings are up 1.2% in the last 2 weeks of April. The severely low inventory is a challenge; buyers can’t buy homes that are not on the market. Since the week of April 5th weekly new contracts are up nearly 32%. That helps counteract the 39.1% drop we had the previous six weeks.
Cromford Market Index (CMI):
On March 20th the CMI was 241 and yesterday it was a 147.2 (Balance is 100, above 100 is a seller’s market and below 100 is a buyer’s market. Prices do not drop until the CMI hits 90.) The CMI clearly has dropped drastically and in a short period of time. In the weeks since April 19, the CMI’s rate of decline has started slowing. The closer the green and red lines get to each other, the more balanced the market becomes.
New Listings & Pendings:
When new pendings outpace new listings, we have a market frenzy. Look at the week over week comparison for the southeast valley. As mentioned above, the week of April 19th was the turning point in our market.
Price & Appreciation:
April sales volume is down 27.3% year over year. But prices are up and 27% of all closings in April closed above asking. These closings were mostly for contracts written before the stay at home orders. May’s closings will tell a better story. Seller concessions have started to slightly increase. We will see a larger rise in seller concessions before we see significant price drops. The average price per square foot dropped slightly in April. This is due to an increase in sales of lower priced homes. There is little indication of price drops and values remain stable. Dr. Lawrence Yun, the chief economist of NAR is quoted saying, “More temporary interruptions to home sales should be expected in the next couple of months, though home prices will still likely rise.”
If Arizona has 0% appreciation for the rest of the year, we will still have an appreciation of 6.5% in 2020. Normal appreciation is 3% a year. The one thing that will push down prices is sustained unemployment. April’s unemployment numbers will be released today.
- iBuyers are back in the game. Opendoor starting purchasing again in Phoenix this past Monday. They will re-enter the Raleigh-Durham market this coming Monday. They plan to re-enter each market over time. They are also offering a new program called Home Reserve. There are some similarities with knock.com’s iBuyer model. It is for those looking to buy and sell at the same time, which is roughly 60% of consumers. Through this option, Opendoor will then buy and hold, or “reserve,” a family’s new home on their behalf with an all-cash purchase. The homeowners will then be allowed to move into the home, and then Opendoor will list and sell their old home once it’s empty.
- Offerpad is re-entering all of their markets today.
- And do you remember about 18 months ago when Realogy, the parent company of Coldwell Banker, Century 21, Sotheby’s, Better Homes & Garden and more partnered with Amazon? The partnership is now suspended as of yesterday. It was a program that gave consumers smart home products when Amazon referred buyers to the partnered brokerages. Between this, last week’s buyer driven cancellation of the $400,000,000 sale of Cartus, Realogy’s relocation company, and their falling stock prices I wouldn’t be surprised if we see more law suits and restructuring.
- Confusing forbearance: Any time a borrower calls their lender and asks about forbearance the borrower is automatically categorized as in forbearance, even if they never miss a payment. Depending on their loan type, once a borrower is in forbearance they cannot get a new purchase loan or do a refinance. The timelines have not been clearly defined so we do not know how long these borrowers will be unable to obtain a new loan.
What does this all mean? It means the market is delicate but recovering. In order to successfully navigate today’s market, consumers need guidance from professionals who understand the subtle nuances in each area. The agents who are winning today know their market, have pivoted to manage risk, and who can take care of their client’s needs quickly.
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.