Afternoon Bite 8/24/2020 (Video)

Every Monday afternoon Amber Kovarik and I talk about what happened this week in our local and national real estate market in 15 minutes or less.

Today’s Takeaways:

Many economists are calling this a K shaped recovery. That means that some are having a positive recovery or are fully recovered while for others the struggle continues to worsen. Economist and real estate consultant, Elliott Pollack calls it the “have and have not economy.” Those with jobs have saved money and are in good financial standing. Those who have lost their jobs, who are usually not homeowners, are finding themselves with fewer job prospects and, with the expiration of the CARES Act, significantly smaller unemployment checks.

Economy:

• Retail spending is up. National retail spending increased by 1.2% from June to July, increased 1.7% from February to July, and increased by 2.7% from July 2019. (Elliott Pollack & Company)
• AZ retail spending increased by 4% in June and was up 13.7% over June 2019. (Elliott Pollack & Company)
• People are buying stuff though, not services. Many young couples who had $30,000 saved for their weddings are now canceling their weddings and using that money for a down payment.
• Small businesses are struggling. 97% of businesses in AZ are considered small businesses.

Unemployment:

• Initial unemployment claims in the US increased last week by 1.1 million, 135,000 more than the previous week. Continuing unemployment claims dropped by 636,000 to just over 14.8 million. (US Department of Labor)
• Phoenix has the best performing job market in the country. It is not that more jobs were added, it is that fewer jobs were lost. (Elliott Pollack & Company)
• Amazon announced it is bringing 3,500 new jobs to the valley, including a 500 employee tech hub in Tempe and a 150,000 square foot fulfillment center at Falcon Field in Mesa. (Arizona Republic)

Mortgage:

• For the ninth week in a row mortgages in forbearance decreased. It dropped from 7.44% to 7.21% or to roughly 3.6 million loans. Yes, we have a long way to go but an improvement is still an improvement. (MBA)
• Mortgage loan applications declined 3.3% week over week. (MBA)

Schools:

Buyer trends are shifting, they want home offices, Zoom rooms, and home-schooling rooms. This week there was an article in Inman that said, “buyers are much less interested in things that used to be important: proximity to offices, shopping and urban centers, high-quality public schools, and even the prestige of neighborhoods.”

Real Estate:

• Commercial real estate is struggling. The biggest thing we have to watch is what happens with rentals given the unemployment challenges.
• About 22% of single-family homes in the Phoenix metro area are rentals. (Elliott Pollack & Company)
• 96% of rental owners are small Mom and Pop businesses.
• Residential real estate is the shining star and what is pulling us in the right direction. Without the good things happening in real estate the entire country would be in far worse shape.
  • Supply: The available inventory continues to stabilize. Inventory remains low but is not dropping at incredible rates.
  • Demand: Pending sales up 16% year over year. This is significant given the low inventory. Our demand is over 21% above normal. The demand continues to rise but at a slowing rate.
  • Sales & Prices: Phoenix metro area closed sales are up 5% month over month and up 15% year over year. The median sales price is $320,000, up over 14% year over year. Healthy appreciation is 3% annually.
• The National Association of Homebuilders/Wells Fargo Housing Market Index, which shows builder confidence, increased to 78, the highest reading since 1998.
• Appraisals are getting trickier. They are taking longer to come in. Waiving the appraisal contingency is not working as well as it used to. Many appraisals are not coming in at value.