Greater Phoenix Real Estate Update 2/11/2022

Sensationalism in the news media hurts consumer sentiment. Consumer sentiment has the greatest impact on the market and the economy as a whole. As much as we value our individualism and our ability to think for ourselves, we are heavily influenced by the decisions and actions of others.

When consumers see other consumers pull back, they question, “What do they know that I don’t?” Unfortunately, it is not unusual for groups of people to make drastic choices based on nothing.

This is why it is so important to share accurate and timely information with our home buyers and sellers. Be wary of clickbait and remember, sometimes it is the last sentence in the article that sheds the most amount of light on the topic.

Yes, there are headwinds. Yes, this year will not be like last year and that is ok. The 2021 housing market was unsustainable. And besides, no two years are ever exactly the same. That would be boring.

Fannie Mae’s January Housing Survey:

In March 2021, 53% of Americans thought it was a good time to buy a house. Today 70% said it is a bad time to buy. Consumer sentiment has changed. Prices are higher, rates are higher, there are fewer listings available, and the competition is fierce. The counterintuitive piece is that declining demand will allow inventory to grow and will slow appreciation which will ultimately bring that consumer confidence back up because then the buyers have more options to choose from.

“Younger consumers — more so than other groups — expect home prices to rise even further, and they also reported a greater sense of macroeconomic pessimism. Additionally, while the younger respondents are typically the most optimistic about their future finances, this month their sense of optimism around their personal financial situation declined. All of this points back to the current lack of affordable housing stock, as younger generations appear to be feeling it particularly acutely and, absent an uptick in supply, may have their homeownership aspirations delayed.”

-Doug Duncan, Fannie Mae Chief Economist

National Real Estate:

• The rate of appreciation from Q3 2021 to Q4 2021 declined slightly. The year over year median sales price increased by 15.9% in Q3 21 and by 14.6% in Q4 21.

“Homebuyers in the last quarter saw little relief as home prices continued to climb, albeit not as fast as earlier in the year. The increasing prices are indicative of a seller’s market, with an abundance of eager buyers and very limited supply.”

-Dr. Lawrence Yun, NAR Chief Economist

• Available national single family inventory hit another new all time low, dropping by nearly 6% this week to 256,000. Down 17% below the record low on April 30, 2021. In normal markets, mid-January is the low point of inventory for the year.
• In 2021 we saw an average of 100,000 new listings each week. So far this year we are seeing about 80,000 new listings a week. Last week 31% of homes sold immediately, within one day. Last year it was about 25% sold in one day.
• Despite the volatile stock market and rising mortgage rates, demand remains solid, declining some but still at elevated levels. Prior to now, the most recent rate hike took place at the end of 2018. Nationally demand declined and inventory grew by about 6% (not in Greater Phoenix).
• There may be a pull back on purchases but do not expect an increase in defaults and foreclosures. The typical American mortgaged homeowner has $185,000 in equity.
• Usually, interest rates increasing deters second home buyers and investors before demand declines for primary homes. According to Redfin, January’s second home demand was 87% higher than pre-pandemic, only September of 2020 was higher at 90%. Primary home demand is up 42% from pre-pandemic numbers.

The AZ Market:

Join us on Wednesday, February 16 for our next Cromford Market Update with Tina Tamboer. She will spend an hour doing a deep dive into the Greater Phoenix real estate market. For details and registration, click here.

Following in the footsteps of Minnesota, California, and Oregon; Arizona’s lawmakers have proposed a bill that allows the state to override local zoning ordinances and enable developers to build higher density and multi-family in areas that previously only allowed for single family homes. NIMBYism (not in my backyard) has long prevented local zoning changes. The entire proposal can be found here.

In 2021, Greater Phoenix was the most popular city for relocation bringing 85,000 new residents. Dallas came in second with 56,000 new residents and Orlando came in third with 53,000 new residents.

In ten years, the median sales price increased by about 300%. Today homes under $200,000 are nearly non-existent and in 2011 the majority of our market was under $200,000.

New Construction:

I recently had the privilege of attending the AZ Dealmakers event on January 27, 2022. It is an event that includes industry leaders in the residential new construction arena. The presenters included economists, housing analysts, builders, lenders, and more. The conversation was all about the future of new home development in Arizona. My notes and takeaways from the event are here.

Real Estate News:

• In 2021, the most popular ‘how to become’ search on Google was for ‘real estate agent’ followed by flight attendant and notary.
• In 2021, publicly traded residential prop-tech companies lost 65% to 75% of their value including Zillow, Redfin, Compass, eXp, Opendoor, and Offerpad. That is $90 billion in shareholder value gone in a year. This year all eyes will be on these companies to see if they can become profitable.

Final Thoughts:

Clickbait headlines like “75% of homebuyers acknowledge some regret over recent home buy” lead to incorrect conclusions. If you read through the full article, it explains that 75% of buyers that purchased in the past two years have at least one regret about their home purchase. It is probably fair to say that most people have one regret about their new house, regardless of when it was purchased, there are always woulda, coulda, and shoulda’s.

In order to be confident, consumers need reliable information that helps them make choices based on their specific needs. If consumer confidence is waning, remember real estate moves slowly, albeit currently, it is moving faster than ever before, there is plenty of time to plan and pivot accordingly.

Copyright 2022 Sarah Perkins