Greater Phoenix Real Estate Update 4/9/2021

Now, this is a headline that says it all, “Who’s Lying About The Housing Market? The housing market is heating and cooling at the same time, depending on the data in question. Who’s telling the truth?  Actually, maybe everyone…” Author, Matthew Graham explains that prices are appreciating faster than they have in 15 years, homes are selling in minutes, and bidding wars are commonplace all while demand is actually falling. Demand was THAT high and remains above normal.

National Real Estate:

• 36% of newly pending sales were immediate, meaning they went pending either before they hit the market or within 24 hours of going active.
• 64% of newly pending sales were on the market for one week or less.

• Nationwide there are only 309,883 active single-family listings available. The decline in inventory has slowed over the past 4 weeks.
• As the market moves towards typical seasonality, it is likely that inventory will increase towards the end of April. Anything moving towards “normal” is good.
• The supply/demand imbalance drove the 15% year over year appreciation leading to 58% of all households, or about 71.1 million, could not afford to buy the median-priced new home.
• The median sales price last week increased to $374,000, a new all-time high. As typical seasonal cycles emerge, prices are expected to keep rising through June. More sales usually happen in the first half of the year which is why October through December 2020 had record-breaking sales.
• The newly listed cohort asking price is flattening at $350,000 and will continue to flatten as more listings come to market and there is more competition. This is also normal for this time of year, again seasonality is good.

The AZ Market:

For one week only – from April 10 through April 17 – local home builder, Fulton Homes, is allowing buyers under contract to cancel and receive a full refund. They did this because of the 1 to 6+ month building delays due to supply chain shortages, lumber costs, labor shortages, etc. While yes, this benefits buyers with specific timelines but the builder is also benefitting. This will lead to more spec homes to sell allowing the builder to capitalize on the 1-3% of monthly appreciation our market is experiencing.

The Greater Phoenix housing market and the overall economy have been a top performer throughout the pandemic. The affordable housing we have enjoyed for many years has brought much business to Arizona from more expensive cities. However, now after many months of having the highest rental appreciation in the country and among the highest sale appreciation, we are not so affordable anymore.

On Monday, Elliott Pollack & Company wrote, “So while the local economy is performing better than any other in the country at the current time, demand for housing is pushing costs beyond the reach of some, even with low-interest rates. Housing cost is something to watch over the next couple of years with the hopes it does not detract from our competitive advantages.”

With 5 buyers for every available listing and 18-20% year over year appreciation, this concern is very real. While demand is declining – we no longer have 8 buyers for every listing – prices continue to increase and will continue increasing for the foreseeable future.

Lending:

• The Data has yet to show that rising interest rates are hurting buyer demand. The current closings are with buyers who locked in at a lower rate; we may see the impact in the coming weeks. The segment to watch is the second home market because those loans just got a lot more expensive.
• Purchase applications decreased by 4% last week from the week before. They are up 51% year over year; keep in mind that one year ago we were in the middle of the 8-week downturn in the market.
• Sam Khater, Freddie Mac Chief Economist said, “After moving up for seven consecutive weeks, mortgage rates have dropped due to the recent, modest decline of U.S. Treasury yields. As the economy recovers, it should experience a strong rebound in the labor market. Combined, these positive signals will continue to bolster purchase demand.”

The Economy & Employment:

• Yesterday, economist Elliot Eisenberg wrote, “The economy continues to roar back to life. The Institute for Supply Management’s services index rose to a record high of 63.7 in March, and in the process blew away the previous high of 60.9 of 10/18. This is great news as the recovery in services has, for obvious reasons, lagged well behind the manufacturing renaissance, and that index hit 64.7 in March, its best reading in nearly 40 years!”
• The Fannie Mae Home Price Sentiment Index reached 81.7 in March, nearly exceeding pre-pandemic numbers for the first time in a year. It is up 0.9 points year over year and up 5.2 points from February.
• Between decreasing unemployment, increased vaccine distribution, and the latest round of stimulus checks consumers are optimistic about the economy. Doug Duncan, Fannie Mae senior vice president, and chief economist said. “Home-selling sentiment experienced positive momentum across most consumer segments – nearly reaching pre-pandemic levels and generally indicative of a strong seller’s market.”
• About 62% of jobs lost last year have been recovered. Today, there are still about 4 million more people unemployed than in February 2020.
• The real estate industry added 10,000 jobs in March which was a huge improvement after losing 4,500 jobs in February.

“There’s a seismic shift going on in the U.S. economy. Fear is subsiding, and American households are sitting on a lot of cash from saved stimulus checks and other money people would normally spend on travel or going out. That’s going to support spending, especially in the services sector.”

Beth Ann Bovino, a Ph.D. economist at S&P Global, told the Wall Street Journal.

CFPB Proposal:

On Monday, the CFPB proposed a ban on foreclosure starts through the end of 2021. This means that lenders and servicers could not even start the foreclosure process until January 1, 2022. Different states have different timelines for the foreclosure process. Here in AZ, the process takes 90 days so we would not see any properties go to auction until about April 2022.

The CFPB’s foreclosure rules state that a borrower needs to be at least 120 days delinquent before the foreclosure process can start. They extended timelines because they are concerned that borrowers in forbearance will exit forbearance and then immediately go into foreclosure.

Of the roughly 2.5 million borrowers in a forbearance plan, about 2.1 million are on a plan extension, meaning they have been in forbearance for at least three months (timelines depend on loan type and/or servicer). The CFPB’s proposal does not take into consideration that about 41% of forbearance plan exits are current on their payments at the time of exiting. For more forbearance data, check out my AZ Forbearance Update from Wednesday.

A number of industry leaders are questioning the proposal stating that the CFPB is violating legal contracts and agreements that are currently in place.

“I was surprised we went all the way to the end game. Candidly, I’m not sure the CFPB has the legal standing to disrupt a contract law across the country, especially as some of these are private loans and there is a contract made between the borrower and lender. This is the first time the CFPB has really tried to interject itself in this dramatic manner. So I do suspect if they come out with this ruling, we might see legal challenges to it by somebody in the industry.”

-Rick Sharga, RealtyTrac

The proposal is open for public comments through May 11. To comment, email: 2021-NPRM-COVID-Mortgage-Servicing@cfpb.gov. Include Docket No. CFPB-2021-0006 in the subject line of the message.

Real Estate News:

• For 1.5% of the sales price, Offerpad will allow sellers to stay in the property up to 60 days after close of escrow.
• Announced Monday, Redfin finalized its $608 million acquisition of RentPath, the parent company of ApartmentGuide.com, Rent.com, and Rentals.com. Rental listings will be available on Redfin by 2022.
• Eight new real estate executives joined the ranks of the roughly 200 real estate executives on this year’s Forbes Billionaire List. Zillow co-founders Rich Barton and Lloyd Frink and eXp founder Glenn Sanford are now among the 2,755 richest people in the world.
• Last summer New York City reached its highest vacancy rate in 14 years. Sales in Q1 2021 in New York City increased by 58% year over year and reached the highest total first-quarter sales in 14 years.
• According to a Zillow survey released on Tuesday, 11% of Americans moved during the pandemic accelerating the trend which began in 2018 of people moving to smaller, less expensive cities in the Sun Belt. From January through November 2020 Phoenix, Charlotte, and Austin had the highest inbound moves from expensive, high-tax cities.

Final Thoughts:

Residential real estate is indeed heating and cooling at the same time. Homeowners have gained serious equity, savings rates are high, and economists are optimistic. 2020 created more billionaire real estate executives while 9.7 million people remain unemployed.

Copywrite 2021 Sarah Perkins