According to the media, the sky is still falling. According to the facts, real estate is gaining momentum and picking up speed. Mid-April was the clear bottom for the housing market, and we have been in recovery mode since. Purchase mortgage applications are down only 1.6% year over year. The new challenge we face today is that demand is increasing faster than supply is. Over 480,000 properties have gone under contract since the onset of the pandemic and that is roughly 86,000 more properties than have hit the market during the same time period. This not only keeps prices stable; it pushes them up. We entered March with low inventory and despite the slight increase the market remains tight; forcing prices to rise.
Cromford Market Index (CMI):
The CMI is the best leading indicator available. On March 20, the CMI was 241 and yesterday it was a 147.3 (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 recent weeks the CMI’s rate of decline not only slowed but flattened and even curved back up and saw an increase. On May 16, the CMI increased for the first time in over two months. It has continued to increase each day since. Demand increased and inventory decreased.
Last week was the first week since mid-March we saw declines in new listing counts, which were low to begin with. The total active listing count as of May 10 was down nearly 20% year over year and new listing counts the first week of May are down 26% year over year. We are running about 45% below normal inventory levels.
Physical showing requests illustrate the increasing buyer demand. After a 63% decrease in requests, as of yesterday, we surpassed the peak on February 22 by 0.2%. Pending listings are down 25% year over year. This is because of the low inventory. Buyers cannot buy houses that are not for sale.
New Listings & 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. The drop in new listing counts this early into our recovery is concerning. Demand is only likely to grow. There are simply not enough homes for sale to satisfy the current demand. If this continues, prices will rise rapidly which will prevent first time home buyers from entering the market.
The top portals continue seeing an increase in listing views in smaller towns versus large urban metros. Redfin had an increase of 105% for small towns over the 16% increase in listing views in large metro areas. Over 50% of residents in some of the largest, most expensive cities in the country said they would move away if they could work from home full time.
Check this info-graphic out! While it is not an emerging trend as it represents a familiar trend in the Phoenix metro area. Unsurprisingly, Los Angeles makes up over 25% of the out of state relocations coming to Phoenix. All of this is consistent with the past many years of incoming out of state relocation. It is also consistent with the information above. With 51.7% of people wanting to leave Seattle and 10.9% of them coming here, Seattle is a good place to advertise your listings!
This week 2.4 million people filed for unemployment benefits. That is 500,000 fewer than last week continuing the weekly downward trend since the peak in late March. A staggering 38.6 million have filed BUT only 25 million are collecting benefits, 1 million fewer than last week. Meaning many have already gone back to work. Of the new unemployment filings in April 88% defined themselves at temporarily laid off.
As of May 10, 8.16% of all mortgage loans were in forbearance, increase from 7.91% the first week of May and the smallest week over week increase. Simply inquiring about forbearance puts a borrower into forbearance. Fannie and Freddie updated their guidance and now borrowers can obtain a new loan (refi or purchase) after they have 3 consecutive months of full payments after their forbearance ends.
Other Real Estate News:
- Zoom plans to open research and development locations in Phoenix and Pittsburgh. “Both Phoenix and Pittsburgh have incredibly well-educated, skilled, and diverse talent pools that are well-positioned to help support Zoom’s ongoing growth and continued success,” said Eric S. Yuan, CEO of Zoom.
- Last week Top Agent Network (TAN) became the latest organization to sue NAR stating that the Clear Cooperation Policy violates antitrust and unfair competition laws.
- The Softbank Vision Fund, which funded 88 tech startups like Opendoor, Compass, Uber and WeWork, with $81 billion, predicts that up to 15 of their investments will go out of business due to COVID. The fund posted a loss of $800 million last quarter, with Uber losing $450 million. A total of 47 of their investments lost money.
- Taiwan Firm, TSMC, is planning the development of a $12 billion chip factory in Arizona.
- On Monday Zillow’s iBuyer segment re-entered the Phoenix market along with 3 others.
- There is new speculation that we will see an increase in second home purchases by the wealthy, as this could be considered a safer option than hotels or short term rentals. We do not have enough data to see a clear trend, so we are watching this closely.
- Government loan purchase applications are up 5% year over year indicating this is not necessarily pent up demand but a positive trend.
- For any clients you have struggling to make their rent or mortgage payment, be sure to share this new website: https://www.consumerfinance.gov/coronavirus/mortgage-and-housing-assistance/ 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) that outlines the housing relief options created by the CARES Act.
With only about 20-25% of Realtors out there are working to crush it right now, you have a huge opportunity. The rest are behind the times and not working to pivot their business to function in today’s environment. We desperately need new listings and your competition is not getting the word out, so it is up to you to do so. As Tom Ferry says, you must control the narrative and Adam Contos, the CEO of RE/MAX, is telling all agents to step up, be clear and present, update your business model, and be confident. We will see new leaders emerge out of this.
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.