Econ 101 taught us about supply and demand. To measure the health of the real estate market we look at new listings AKA supply, and new pendings AKA demand. When demand out paces supply, prices go up. This has been good news for a lot of sellers over the past several weeks. However, we are moving closer and closer to running out of houses to sell.
According to NAR before the pandemic, our housing supply was short by 5-6 million units. Housing starts are still down by 20% year over year. NAR’s Chief Economist, Dr. Lawrence Yun said, “Significant growth in new home construction, however, is required in the upcoming months and possibly even stretching into the next three years. Consequently, home prices will be pushed higher thereby making ownership opportunities for first-time buyers more difficult. More homes need to be built.” This national chart illustrates our decreasing supply. In Phoenix, our situation is magnified.
The AZ 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 rise at 110 and drop at 90). On March 20, the CMI peaked at 241, and yesterday it was at 194, up from the bottom of 145.2 we hit on May 15 and up over 17 points in the past seven days.
Supply: Our local inventory started dropping on May 12 and has continued to decrease every day since. As of yesterday, our inventory is 51.6% below normal. In the past seven days we have dropped just over 2%. New listings are down nearly 33% year over year. Nationally, according to Redfin for the week ending on June 14 new listing median asking price is nearly 12% higher year over year and 2% higher than only last week.
Demand: Pending sales are up 10.7% year over year. Our demand is 6.2% below normal and increased by nearly 5% in the past seven days. According to Showing Time, in AZ, physical requests peaked on February 22 and then immediately dropped by 63% through mid-April. As of Wednesday, we are up nearly 7% from the peak in February and up 5.4% year over year. Inventory continues to struggle to keep up with demand.
Sales & Prices: As of June 10, the median sales price increased 5.7% year over year. I expect this appreciation rate to increase especially given the increase in the median asking price. In the first 10 days of June 23% of the closings, closed over asking. Total closings were down nearly 31% year over year.
Southeast Valley New Listings, Pendings, and Closings: This week over week comparison for Tempe, Mesa, Chandler, Gilbert, Apache Junction, and Queen Creek since March 15 shows this week’s increased demand and decreased supply. Only time will tell if it is pent up demand or actual demand. Based on February’s demand it is likely to be actual. Closings always increase at the end of the month.
Other AZ News:
According to Yardi Matrix, Phoenix is the top western market for multi-family commercial investment. Despite the substantial year over year decline in investment, from $4.9B to $4.2B. This table shows investments from January through April 2020. These top markets represent nearly all of the transaction activity in the region.
- Hines, Oaktree scheduled the ground-breaking for next month for their industrial project of building out nearly 1.2 million square feet. The project is located on the Loop 303 corridor.
- Many area restaurants and bars are closing again due to COVID-19 which really hurts as we are only just starting to see improvements. This week’s visits to seated diners were down 58.3%, year over year, an improvement over the 64.2% year over year drop the previous week.
- New business applications increased last week and are up 16.7% year over year.
- Despite a slowing appreciation for single-family rents, Phoenix remains at the top with 6.6% year over year appreciation.
Emerging Trends:
- According to the University of Michigan consumer sentiment index, in early June we saw our second month over month gain. May’s job gains moved the index to 78.9 in June versus 72.3 in May and 98.2 a year ago.
- Bidding wars increased month over month across the country. Last weekend one listing in Phoenix received 70 offers.
- 91.2% of economists believe the recovery has already started and real estate is leading the way. These are the same economists that 60 days ago said real estate was dead.
- Last week I mentioned the $88,000 economic impact of one new home sale and the $43,000 economic impact of a resale home sale. There are roughly 5 million real estate transactions a year, that pushes $325 billion into our economy.
- Commercial real estate continues to work to figure out how to survive. A new “hub and spoke” office model is emerging. Downtown offices will get smaller as companies allow some to work from home and they will expand into smaller spaces in the suburbs, again keeping foot traffic down.
- AirBnB, VRBO, and other vacation rental sites are all seeing an increase in traffic and bookings. AirBNB announced year over year growth in bookings from May 17 through June 6.
- “Agrihoods” are gaining in popularity and are expected to go from a niche market to a mainstay. These are agricultural-based communities, like Agritopia in Gilbert, AZ.
- The International WELL Building Institute created a new rating system that evaluates how a building protects/endangers the occupants against COVID-19. It will be used for nearly all property types including offices, retail, restaurants, schools, and hotels.
- According to Redfin, searches for single-family residences are increasing and are at the highest levels in 4 years.
- The “Resuburbanization” movement is pushing people further out and to larger homes. McMansions are once again garnering more attention as people are working from home and have multiple generations living there as well.
- According to a Realtor.com report released this week, 54% of the largest cities in the country had a 13% increase in listing views in suburban ZIP codes in May, 6% ahead of listings in urban ZIP codes.
- According to the National Association of Homebuilders, they are seeing an increase in demand for larger homes and expect this demand will continue over the coming years.
- According to a recent Harvard study, wealthier households are spending 17% less than they were in January, while lower-income households are spending only 4% less than they were in January. The study further suggests that the wealthiest 25% of Americans are responsible for 66% of the decline in spending since the beginning of the year.
Other Real Estate News:
- According to a recent Gallup poll they found, “Real estate, at 35%, remains the most favored investment for Americans, as has been the case since 2013 when the housing market was on the rebound. More than one-third of Americans have named real estate as the top investment since 2016.”
- According to CNBC the job growth in May was the largest single-month increase in jobs since 1939.
- Fed will keep interest rates where they are until we are back to full employment, which is a 5% unemployment rate.
- According to Tom Ferry, 60% of Realtors have “ghosted” themselves and believe the market is not moving. 45% of that 60% went over 9 weeks without even looking at the MLS.
- According to the Real Deal, EasyKnock raised another $20M this week. This start-up, launched in 2016, buys the property and then leases the property back to the owner-turned-tenant allowing access to the earned equity.
- The owner of the Mall of America, Canadian Triple Five, a privately owned company is in trouble. They have about $5B in debt on their properties and have missed mortgage payments, according to a Bloomberg report.
- New York City has been hit the hardest, they are still down 76% in new listings. In May new lease signings were down 62% year over year but did see an increase over April. The local real estate board is cutting pay and laying off employees due to a decrease in membership dues coming in.
- Mortgage purchase applications increased for a 9th straight week, leading to a 75% increase since mid-April, a 20% increase year over year, and putting us at an 11 year high.
- There was a slight increase in forbearance requests this week. 8.55% of all residential mortgages are currently in forbearance. According to the Mortgage Banker’s Association’s Chief Economist, Michael Fratantoni, “The level of forbearance requests is still quite low, but there was a noticeable increase in call volume over the course of the week.”
- The good news is that nearly 60% of Americans have at least 50% of equity in their homes. The average is $177,000 in equity. With that said only 9% of the homeowners currently in forbearance have 10% or less equity; meaning that it is unlikely we will see a massive wave of foreclosures based on the current level of mortgages in forbearance.
- In a joint effort the Consumer Finance Protection Bureau (CFPB), Federal Housing Finance Agency (FHFA) and U.S. Department Housing and Urban Development (HUD) created a website that outlines the housing relief options created by the CARES Act: https://www.consumerfinance.gov/coronavirus/mortgage-and-housing-assistance/
- The National Association of Home Builders and Wells Fargo’s Housing Market Index increased by 21 points in May to 58 bringing us back into a positive outlook. The recent report stated, “Inventory is tight, mortgage applications are increasing, interest rates are low and confidence is rising. And buyer traffic more than doubled in one month even as builders report growing online and phone inquiries stemming from the outbreak.”
- Housing starts in May were up 4.3% from April but were down 23.2% year over year.
Final Thoughts:
MIT did a study on how news is shared via Twitter. The study stated, “The results were stark. False information was retweeted by more people than the true stuff, and faster to boot. True stories took, on average, six times longer than falsehoods to reach at least 1,500 people. Only about 0.1% of true stories were shared by more than 1,000 people, but 1% of false stories managed between 1,000 and 100,000 shares.” Tom Ferry said, “Flight to quality has never been more important than ever before. Be the knowledge broker.” It is up to you to share accurate information.
If you have buyers and sellers on the fence, the time to act is now. With the low inventory, sellers are competing against fewer listings. With prices rising and low rates, now is a great time to buy. There is no guarantee that any of this will remain in the future.
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.
One thought on “Phoenix Area Real Estate Update 6/19/2020”