Change is scary and a balanced market still seems light years away. We got used to operating under extreme pressure due to high demand and low inventory. That market isn’t healthy and it peaked in March. Now, we are, slowly, moving towards a healthier market and it is a good thing.
The median days on market have more than doubled from 5 days in April to 11 days in October. Sales over asking have declined by 22% but don’t worry, 47% of sales are still closing over asking. These changes are good for the overall health of the market and provide more options for our (slightly less) exhausted buyers.
National Real Estate:
- The share of homes listed for $1 million or more has increased from 3.48% in 2020 to 6.61% in 2021, that is a 90% increase. In Greater Phoenix the January to September year over year increase is 106%.
- According to Zillow’s recent consumer trends report about 65% of home sellers are also buyers, in the first nine months of the year 24% of home sellers received 4 or more offers, 65% of sellers received an offer waiving inspection, while only 16% closed without any inspections.
- In September, first time homebuyer purchases accounted for 29% of purchases, a two year low. Affordability remains the biggest challenge.
- According to a recent report from Corelogic, US home prices are up 18.1% in August which is the highest annualized increase since 1977, when the data was first collected. At 32.2% Idaho is the only state with a larger increase than Arizona’s which was 29.5%.
- Nationwide equity increased by $2.9 trillion since Q2 2020. This translates to an additional $51,500 in equity per borrower over the same time period. Arizona’s borrowers gained $79,000 in equity!
The AZ Market:
Join us next week for a Cromford Market Update Zoom meeting. Tina Tamboer will do a deep dive all about Greater Phoenix real estate. For details and registration, click here.
Greater Phoenix home values have increased by 73% over the past 5 years. From July to August prices were flat at about $400,000. In September the median sales price increased to $405,000 and into October the median sales price is up again to $410,000.
Why are prices increasing now? This is not the time of year when we normally see building demand and increasing prices. Demand is different today than a year ago. In August of 2020, 91% of buyers were owner occupied buyers. In August of 2021, 75% of buyers were owner occupied buyers.
The year over year appreciation rate of 25% on sales and the 36% rental increase over the past two years has driven the frenzy from institutional buyers. Rents increased by only 28% in the previous 18 year period. Regular home buyers struggle to compete with corporate deep pockets and many have been displaced from the market.
Over the past three months, iBuyers acquired 9% of all resale sales and their sales are not keeping up with their purchases. From September 2020 to September 2021, homes purchased by investors to be used as rentals increased by 77%. The investor and iBuyer demand make up about 16% of our current sales. What will happen if and when they stop buying at these levels? Inventory will rise and price appreciation will slow, but not go negative.
On January 1, 2022 Fannie Mae and Freddie Mac are increasing the conforming loan limit to $625,000 from $548,250. The limit is connected to the national average sales price. In dollars, it is the largest increase ever (data goes back to 1970). By percentage, at 14% it will likely be the second highest increase behind 2006’s 15.9% jump.
The labor-force participation rate (percentage of workers with a job or actively looking for one) has declined from 63.3% in February 2020 to 61.6% in September 2021, which equates to 3.1 million people.
By August, Greater Phoenix had fully recovered all of the jobs lost during the pandemic. Arizona has recovered 93% of jobs lost.
Arizona had a record breaking fiscal year (12 month period ending 6/30/21) in 2021 for statewide economic development. The Arizona Commerce Authority (ACA) worked with companies that committed to creating jobs and investing in communities and not only achieved its goals but blew past them.
Over the past 10 years residents of 103 suburbs changed from being primarily homeowners to being primarily renters, which is a 69% increase. Fifty-seven more are expected to shift in the coming five years. 79% of the 4.7 million new residents in the suburbs of the 50 largest cities are renters.
Quick highlights on the Greater Phoenix area:
• El Mirage had the fastest growth in the area. From a renter share of 29% in 2010, it grew to 40% in 2019.
• Sun City, while having the lowest renter share, saw a spectacular jump of 26%. From a 14% renter population, it grew to 18% in 10 years.
• Scottsdale saw its renter population grow from 26% to 32% by the end of 2019.
• Avondale grew from 36% to 43%, while Glendale had a similar rise, from 37% to 43%.
Real Estate News:
- Earlier this month Zillow moved forward with its acquisition of ShowingTime despite recent FTC warnings that they do so at their own risk.
- Opendoor revealed a new debt facility agreement in its October 4th SEC filing which will increase the company’s borrowing power to $9 billion.
- Last year Redfin partnered launched self-led Direct Access tours for vacant listings. Recently Redfin partnered with ADT who will provide 24/7 home monitoring for no additional cost.
- In addition to offering mortgages, real estate services, closing services, and homeowner’s insurance; Better.com is now adding cash offers to its list of services. Like Rocket, it is building its own full service platform.
- Homesmart is now offering a revenue sharing model, allowing agents to opt for an 80% split with a cap versus the company’s traditional 100% split.
- By the end of this year, roughly 20,100 nonresidential units will be converted into residential rental apartments which is double the conversions in 2019 and 2020 combined.
- Out of 500 organizations, the Greater Economic Council (GPEC) took the top spot at the recent International Economic Development Council annual conference. Criteria for selection is based on business plan execution, job creation, and unique problem solving approaches.
Remember real estate changes slowly. Yes, it has never moved so quickly but it doesn’t change overnight, despite what it seems. By understanding the implications of the slight shifts, we can all better council our clients. And while Sean Black, CEO of Knock, believes that within 5 – 10 years buying a house will be like booking a short term rental on Airbnb, a lot has to happen first.
Copyright 2021 Sarah Perkins
Sarah has been in title & escrow sales since 2004. As an award-winning sales executive and now the Director of Strategic Accounts, Sarah’s role is to bring real estate transactions to Clear 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.