Phoenix Area Real Estate Update 5/29/2020

The other day I was talking with Tina Tamboer with the Cromford Report and she said, “Real estate is going gangbusters, I don’t think that it got the memo about the world-wide pandemic.” There continues to be increased optimism and momentum in real estate. Even the national economists are talking about the positive movement in real estate, and they are never positive! Demand is up. The major platforms and Realtors across the country are seeing the buyer demand move away from large, expensive cities to places with larger houses, bigger lots, and lower prices.

Arizona Market:

Cromford Market Index (CMI): The CMI is the best leading indicator available (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). On March 20, the CMI peaked at 241 and yesterday it was a 152.9, up from the bottom of 145.2 we hit on May 15. On May 16, the CMI increased for the first time in over two months. It has continued to increase each day since with May 28 having the largest single day increase yet at 1.2 points. Demand is increasing and inventory is decreasing.

Supply: Our local inventory started dropping on May 12 and has continued to decrease every day since. The new listing counts the for the first half of May are down 26% year over year. We are running over 46% below normal inventory levels. To keep prices under control, we need more listings, desperately. Dr. Lawrence Yun, the chief economist of NAR said, “The economic lockdowns – occurring from mid-March through April in most states – have temporarily disrupted home sales, but the listings that are on the market are still attracting buyers and boosting home prices,” he continued, “Still, more listings and increased home construction will be needed to tame price growth.”

Demand: Showing Time shares their physical showing request data. The requests peaked on February 22 and then immediately dropped by 63% through mid-April. By May 22 we surpassed our previous peak by 0.6%. The days following the holiday weekend did see a drop of 5.8% and the coming week’s data will be very interesting. My theory is that it has something to do with the decreasing inventory. Not only can buyers not buy houses that are not for sale, they cannot go look at them either.

New Listings, New Pendings and Closings: 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 growing. 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. Based on this graph, now closings are increasing as we are now about a month out from our lowest levels in new pendings.

Other Arizona News:

  • Nationally prices increased 6% year over year through April.
  • Phoenix continues to be number one in appreciation with the largest gains 10 months straight at 8.2% year over year. Seattle was number two and Charlotte number three.
  • According to the U.S. Census Bureau in 2019 Phoenix lead the country in population growth for the fourth year in a row.
  • Mid-April was the bottom, for not only real estate, but for consumer spending. According to economist Elliot D. Pollack, on April 16 consumer spending was down 32.8% since the beginning of January. On May 10 it was down only 19.4%.
  • Since restaurants re-opened on May 11, business is still down 76.1% year over year as of May 23 in the Phoenix metro area for dine-in only. Nationally that number is 90.8% year over year. (source Elliot D. Pollack & Company)
  • Disclaimer: I am not a health professional, but I do love graphs that illustrate clear trends and this is definitely clear:

Employment:

Arizona is number two, year to date, for employment. Year to date, Utah’s employment increased by 0.2%. Arizona had the smallest decline of 0.2%. In comparison to the rest of the country, Arizona is doing well; especially so in the Phoenix metro area. According to Elliot D. Pollack & Company, “The Valley is now the second-best employment market in the U.S. for the first four months of the year.  It did manage to lose a lot of jobs in April.  But, it has lost only one-third of the jobs gained from the trough in September 2010 to the peak in February 2020.  That’s way better than the country as a whole.” Nationally, the US lost nearly all of the jobs created since 2010. The Phoenix metro area has “only” lost 43% of the jobs created since 2010.

Projections:

Real estate consulting group T360 polled Dr. Lawrence Yun of NAR, Skylar Olsen Zillow’s senior principal economist, Michael Fratantoni the Mortgage Bankers Association chief economist, and Danielle Hale Realtor.com’s chief economist asking for their projections for the rest of this year. They all agreed that we will have many fewer sales this year but to what extent varies greatly. Here are their projections:

Emerging Trends:

  • Virtual showings, 3D tours, and video are providing buyers with enough confidence to purchase without ever seeing the property, many experts believe this trend will continue after everything is fully reopened.
  • People are getting to the point where they can’t stand to be in their houses any longer. Robert Reffkin, the CEO of Compass said, “Buyers have never been so intimately aware of the inadequacies of their home.”
  • Renters are moving away from the sharing economy and are now looking for property amenities over community amenities. Or as my husband says, “They want their own stuff.”
  • Vacation rentals in places like the Hamptons, Malibu, and Tahoe are fully booked for top dollar for the entire summer; people want to get out of their houses.
  • Peloton rooms are the newest must have amenity
  • In the past when we had economic challenges people sold their second homes, today people are keeping them and renting them for top dollar or using the property for themselves; everyone wants to get out.
  • Many new lawsuits are emerging as both buyers and sellers are suing anyone and everyone for anything and using COVID as the reason.

Other Real Estate News:

  • As a title company we look at the mix of business, unsurprisingly for the past several months we have had a significantly high amount of refis and over the past few weeks, Lawyers Title of Arizona, has seen a shift of slightly fewer refis and increased purchase activity.
  • Redfin rehired 35% of its furloughed staff.
  • Mortgage applications from first time buyers is up 9% year over year and only 6 weeks ago we were down 35% year over year, nationally.
  • 8.36% of mortgages are in forbearance, up from 8.16% last week. This continues the trend of smaller and smaller weekly increases.
  • Josh Team, CEO of Keller Williams, does not expect many Realtors to get out of the business. Many of the jobs Realtors gravitate towards when leaving real estate are not available so there is no place to go. He does expect a large portion of licensees to do less and less business.

Final Thoughts:

My new favorite quote is from Gino Blefari the CEO of HomeServices of America. He said, “Data without analysis is just noise.” As you digest this information, what does it mean to you? It means that you have less competition. It means buyers are out looking and competing for a small pool of listings. This is the time to push hard, communicate with your clients, provide the best customer service out there and you will win.

Copyright 2020 by Sarah Perkins

Published by Sarah Perkins

Sarah has been with Lawyers Title of Arizona since 2004. As an award-winning sales executive, Sarah's role is to bring transactions to Lawyers 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.

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