Inventory levels are up but not enough. Home price appreciation is starting to slow but not by very much. Mortgage rates remain low, but did everyone refinance last year? Conditions are improving but the market isn’t healthy, yet, but it is on its way. Remember when 8% appreciation was a lot? 2018 and 2019 each had 8% appreciation. That feels like a lifetime ago.
Slow and steady wins the race. Gradual shifts are manageable, they sometimes even go unnoticed. Slow and steady does not create a bubble. Slow and steady does not lead to a crash. Slow and steady is boring and sometimes boring is good.
National Real Estate:
For the second month in a row, NAR’s Pending Home Sales Report declined. In July it dropped 1.8% from June and is down 8.5% year over year. The west was the only region to see a month over month increase but remained 5.7% below July 2020. Expect all year over year data to be negative through the end of the year as our market normalizes, 2020 was an anomaly.
The median single family home sales price declined slightly since July when it reached $399,900, the year over year appreciation rate is declining. At $389,000; single family homes are up 10% year over year.
The Case-Shiller National Home Price Index was released this week stating that home prices are up 18.6% year over year; that is true but the report is looking at June’s sales, not last week’s. Case-Shiller is used by Wall Street analysts and the federal government. It is very accurate and useful for industries and businesses that do not need to focus on the most timely data. For the 25th month in a row, Phoenix took the top spot for year over year appreciation at 29.3%. I expect that in the coming months this figure will decline some but will remain ahead of the rest of the country.
The FHFA also released its report showing that in Q2 2021 home sales prices increased 17.4% year over year. Q2 ended in June and today’s market is healthier than the June market.
The top 10 markets for investors in 2020 (not in order) were Corpus Christi TX, Boise ID, Kansas City MO, Atlanta GA, Memphis TN, Salt Lake City UT, Wichita KS, Provo UT, Phoenix AZ, Springfield MO.
For every accepted offer in July, there were 3.5 more offers written. In March it was not usual for sellers to receive 40, 50, 60+ offers on one listing.
29% of new home inventory has yet to break ground.
Last week was the first week in 16 weeks that single family inventory did not increase. It remained flat week over week at about 431,000 which is a 40% increase from the bottom we hit on April 30 at 307,000. Despite the significant increase, inventory remains tight. Experts are not sure if this is a blip or if inventory is leveling out far lower than expected. This is also the case for Greater Phoenix, since April 30 our inventory is up 52%, and in the past three weeks our inventory if up by just over 2%.
The AZ Market:
Despite all of the new apartment buildings coming, experts say that we are not at risk of overbuilding. Vacancy rates are down to 4.1%, a year ago they were at 5.7%. Lack of supply has driven apartment prices up 18% year over year. Between the completed projects and forecasted ones, it is expected that Greater Phoenix will have an apartment increase of 17,563 units in 2021. That is more than the annual amount each of the past three years.
New home sales are down 31% from May and 37% year over year. They are also down 15% from August 2019 to August 2021. Low inventory, high prices due to labor and material shortages are to blame. The median new home sales price is up 29% year over year in August to $440,000.
The Federal Reserve:
While the Fed has stated that it will likely begin tapering its bond and mortgage backed security purchases as early as this year, a few things have to happen first. 1.) inflation stabilization and decline 2.) low unemployment 3.) declining COVID rates. Once those happen and the Fed will announce the start of the tapering, expect rates to jump as much as half to one percent. Rates are being artificially held down by the MBS purchases.
Prior to 2008, the Fed’s balance sheet was less than $1 trillion. With the quantitative easing during the Great Recession, the balance sheet jumped to $4.5 trillion. Now, after 18 months of bond and MBS purchasing the balance sheet is around $8.3 trillion.
Real Estate News:
- The Biden Administration plans to help non-profits and owner-occupied buyers purchase GSE backed foreclosures before corporate investors have the opportunity to come in and purchase the properties.
- Opendoor is now offering a self-guided, virtual home inspection for sellers. Owners who sell to Opendoor will have the option to do a 30 minute virtual walk through with an Opendoor representative or have the more formal two to four hour home inspection. Opendoor will still do an in-person exterior inspection.
- In 2019, 53% of Americans wanted a bigger home, today that number has risen to 60%. This is true regardless of age, race, and education.
- According to a report Zillow released on Wednesday, the average 2021 homebuyer is 45 years old, has a significant other, graduated from college, and will likely purchase a home in the south. Some other fun facts from the report:
- The biggest group of buyers at 26% are aged 30-39.
- 40% of buyers have kids under 18 living with them.
- 44% bought in the suburbs, 38% in cities, and 19% in rural areas.
- 50% have at least one dog and 39% have at least one cat.
- 37% were first time home buyers, down from 43% in 2020.
There was not a lot of exciting news this week and that is ok. Slow and steady wins the race.
Copyright 2021 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.