Over the past 2 weeks the CEO’s of Realogy, Zillow, Redfin, RE/MAX, Keller Williams, and eXp all stated their confidence in the real estate market and expect continued increases in demand. Sellers are selling and buyers are buying. We are still not out of the woods yet and we do not know what will happen tomorrow, but there is a lot to be optimistic about today. Another week of data continues to support these early trends. Please continue sharing the good news. Steve Harney founder of Keeping Current Matters (KCM) said, “It will be real estate that pulls us out of this.” Given that our industry is 16% of the GDP, I think he is right.
The Phoenix metro area real estate market it hot. It was so hot coming into this pandemic that despite the cooling, it is nowhere close to cold. Prices are stable. Today’s buyers and sellers have a whole new set of requirements and standards. Market share is up for grabs.
Cromford Market Index (CMI):
The CMI is the best leading indicator available. On March 20 the CMI was 241 and yesterday it was a 145.2 (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) In the weeks since April 19, the CMI’s rate of decline started slowing. The week ending on May 9 we had a significant slowing of the CMI drop. The CMI has dropped nearly 100 points since the March 20.
This week was the first week since mid-March we saw declining new listing counts; which were low to begin with. Active listings as of May 10th are down nearly 20% year over year. And we are running about 45% below normal inventory levels. The extremely low inventory is keeping house prices stable. On May 11 we had a true market frenzy with 53 new listings with 163 new pendings in the southeast valley. NAR’s chief economist Dr. Lawrence Yun is quoted saying, “Supply is extremely limited, and there are simply not as many homes for sale to meet the demand among potential buyers. More supply and more listings are needed to provide a faster recovery for the economy.” This couldn’t be truer for our market.
Physical showing requests also show the increasing buyer demand. After a 63% decrease in requests, we have already made up 48% of that loss and now are only down, as of yesterday, 15% from the peak on February 22. Pending listings are down nearly 21% year over year. One reason they are down so much is due to the low inventory. Buyers can’t buy houses that are not for sale. Over the past 4 weeks the $500,000+ market has seen a 65% increase in new pendings. Despite the increase, pendings are still down 30% from early March. Today super low mortgage interest rates are keeping housing affordable and are bringing out the once side-lined buyers.
New Listings & New Pendings:
To measure seller confidence we look at new listing counts. To measure buyer demand we look at new pending counts. In the past 4 weeks we have had a 40% increase in new pendings. When new pendings outpace new listings, we have a market frenzy. Look at the week over week comparison for the southeast valley since March 15. It is clear the week of April 19 was the turning point in our market. (the drop in new inventory mentioned above took place after 5/9)
Price & Appreciation:
The April monthly median sales price is up 8.9% year over year. Sales prices have remained stable due to the extremely low inventory. It is very unlikely buyers will see much, if any depreciation. Since price is a lagging indicator, May’s closings will tell a more complete story. Over the past 4 weeks seller concessions have increased from 18% to 25% of all closings. This will likely increase before we see significant price drops. Dr. Lawrence Yun 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.”
The 55+ market is suffering a lot. Given that these buyers are the most at-risk group and they mostly come from out of state, this will likely be the last market segment to recover. Once travel restrictions are lifted and people are comfortable traveling, expect recovery to start immediately.
This week 2.9 million people filed for unemployment benefits, the lowest number of new weekly applicants, continuing the 6-week downward trend. Over 33 million have filed. Keep in mind this is the first time 1099 independent consultants have been able to file for unemployment benefits, making it an impossible comparison from previous reports. There are some silver linings to these giant numbers. Of the new unemployment filings in April 88% defined themselves at temporarily laid off. We hope they are able to return soon! Of the 33 million that filed for unemployment only 26 million people are receiving it. This means that people went back to work within weeks if not days of being laid off. Dr. Yun pointed out that household savings is increasing, home improvement spending is up, and people are already going back to work; all positive. He also acknowledges that inflation is likely to rise in the next 5 or 6 years. These are his projections:
Mortgage loans in forbearance increased from 7.54% the last week of April to 7.91% during the first week of May. Only 0.25% of loans were in forbearance at the beginning of March. That is interesting and all BUT simply inquiring about forbearance puts a borrower into forbearance. The borrower will not be able to obtain a new loan (refi or purchase) until they have 12 months of consecutive payments after being placed in forbearance. Look for this to change as this is very detrimental for those who never meant to be considered in forbearance.
In April 76% of Americans paid their rent/mortgage in full. In May the number decreased to 69% for full payment.
A new website was launched yesterday outlining mortgage/rent payment relief options created in the CARES Act. It is a joint effort by the Consumer Finance Protection Bureau (CFPB), Federal Housing Finance Agency (FHFA) and U.S. Department Housing and Urban Development (HUD). https://www.consumerfinance.gov/coronavirus/mortgage-and-housing-assistance/
Other Real Estate News:
Working remotely continues to push people to reevaluate their housing situation. Based on search patterns the major platforms, Realtor.com, Zillow and Redfin, we should expect a mass migration away from the large expensive, primarily coastal, cities to smaller, more affordable cities. Zillow senior principal economist, Skylar Olsen said, “Buyers, who just a few months ago were looking for walkability, are now looking for extra land to go along with more square footage.”
iBuyers Opendoor, Offerpad and Redfin (not in AZ) are purchasing again. Zillow plans to restart very soon. This model continues to baffle many as it has yet to be profitable. During the first quarter of 2020 Zillow lost, on average, $4,478 per listing sold. (revenue grew elsewhere)
Redfin rehired 14% of its furloughed employees.
Economists from ASU expect a full recovery by early 2021. We are fortunate to be in Arizona; I hope our urban sprawl continues to keep us healthy as we reopen the rest of our economy.
Steve Harney believes we are at the halfway point right now. Which means it is time to push the petal to the metal and gain a giant lead over the competition.
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.