the AZ market

Category: AZ Real Estate

  • Phoenix Area Real Estate Update 6/19/2020

    Econ 101 taught us about supply and demand. To measure the health of the real estate market we look at new listings AKA supply, and new pendings AKA demand. When demand out paces supply, prices go up. This has been good news for a lot of sellers over the past several weeks. However, we are moving closer and closer to running out of houses to sell.

    According to NAR before the pandemic, our housing supply was short by 5-6 million units. Housing starts are still down by 20% year over year. NAR’s Chief Economist, Dr. Lawrence Yun said, “Significant growth in new home construction, however, is required in the upcoming months and possibly even stretching into the next three years. Consequently, home prices will be pushed higher thereby making ownership opportunities for first-time buyers more difficult. More homes need to be built.” This national chart illustrates our decreasing supply. In Phoenix, our situation is magnified.

    The AZ Market:

    Cromford Market Index (CMI): The CMI is the best leading indicator available (balance is 100, above 100 is a seller’s market and below 100 is a buyer’s market. Prices rise at 110 and drop at 90). On March 20, the CMI peaked at 241, and yesterday it was at 194, up from the bottom of 145.2 we hit on May 15 and up over 17 points in the past seven days.

    Supply: Our local inventory started dropping on May 12 and has continued to decrease every day since. As of yesterday, our inventory is 51.6% below normal. In the past seven days we have dropped just over 2%. New listings are down nearly 33% year over year. Nationally, according to Redfin for the week ending on June 14 new listing median asking price is nearly 12% higher year over year and 2% higher than only last week.

    Demand: Pending sales are up 10.7% year over year. Our demand is 6.2% below normal and increased by nearly 5% in the past seven days. According to Showing Time, in AZ, physical requests peaked on February 22 and then immediately dropped by 63% through mid-April. As of Wednesday, we are up nearly 7% from the peak in February and up 5.4% year over year. Inventory continues to struggle to keep up with demand.

    Sales & Prices: As of June 10, the median sales price increased 5.7% year over year. I expect this appreciation rate to increase especially given the increase in the median asking price. In the first 10 days of June 23% of the closings, closed over asking. Total closings were down nearly 31% year over year.

    Southeast Valley New Listings, Pendings, and Closings:  This week over week comparison for Tempe, Mesa, Chandler, Gilbert, Apache Junction, and Queen Creek since March 15 shows this week’s increased demand and decreased supply. Only time will tell if it is pent up demand or actual demand. Based on February’s demand it is likely to be actual. Closings always increase at the end of the month.

    Other AZ News:

    According to Yardi Matrix, Phoenix is the top western market for multi-family commercial investment. Despite the substantial year over year decline in investment, from $4.9B to $4.2B. This table shows investments from January through April 2020. These top markets represent nearly all of the transaction activity in the region.

    • Hines, Oaktree scheduled the ground-breaking for next month for their industrial project of building out nearly 1.2 million square feet. The project is located on the Loop 303 corridor.
    • Many area restaurants and bars are closing again due to COVID-19 which really hurts as we are only just starting to see improvements. This week’s visits to seated diners were down 58.3%, year over year, an improvement over the 64.2% year over year drop the previous week.
    • New business applications increased last week and are up 16.7% year over year.
    • Despite a slowing appreciation for single-family rents, Phoenix remains at the top with 6.6% year over year appreciation.

    Emerging Trends:

    • According to the University of Michigan consumer sentiment index, in early June we saw our second month over month gain. May’s job gains moved the index to 78.9 in June versus 72.3 in May and 98.2 a year ago.
    • Bidding wars increased month over month across the country. Last weekend one listing in Phoenix received 70 offers.
    • 91.2% of economists believe the recovery has already started and real estate is leading the way. These are the same economists that 60 days ago said real estate was dead.
    • Last week I mentioned the $88,000 economic impact of one new home sale and the $43,000 economic impact of a resale home sale. There are roughly 5 million real estate transactions a year, that pushes $325 billion into our economy.
    • Commercial real estate continues to work to figure out how to survive. A new “hub and spoke” office model is emerging. Downtown offices will get smaller as companies allow some to work from home and they will expand into smaller spaces in the suburbs, again keeping foot traffic down.
    • AirBnB, VRBO, and other vacation rental sites are all seeing an increase in traffic and bookings. AirBNB announced year over year growth in bookings from May 17 through June 6.  
    • “Agrihoods” are gaining in popularity and are expected to go from a niche market to a mainstay. These are agricultural-based communities, like Agritopia in Gilbert, AZ.
    • The International WELL Building Institute created a new rating system that evaluates how a building protects/endangers the occupants against COVID-19. It will be used for nearly all property types including offices, retail, restaurants, schools, and hotels.
    • According to Redfin, searches for single-family residences are increasing and are at the highest levels in 4 years.
    • The “Resuburbanization” movement is pushing people further out and to larger homes. McMansions are once again garnering more attention as people are working from home and have multiple generations living there as well.
    • According to a Realtor.com report released this week, 54% of the largest cities in the country had a 13% increase in listing views in suburban ZIP codes in May, 6% ahead of listings in urban ZIP codes.
    • According to the National Association of Homebuilders, they are seeing an increase in demand for larger homes and expect this demand will continue over the coming years.
    • According to a recent Harvard study, wealthier households are spending 17% less than they were in January, while lower-income households are spending only 4% less than they were in January. The study further suggests that the wealthiest 25% of Americans are responsible for 66% of the decline in spending since the beginning of the year.

    Other Real Estate News:

    • According to a recent Gallup poll they found, “Real estate, at 35%, remains the most favored investment for Americans, as has been the case since 2013 when the housing market was on the rebound. More than one-third of Americans have named real estate as the top investment since 2016.”
    • According to CNBC the job growth in May was the largest single-month increase in jobs since 1939.
    • Fed will keep interest rates where they are until we are back to full employment, which is a 5% unemployment rate.
    • According to Tom Ferry, 60% of Realtors have “ghosted” themselves and believe the market is not moving. 45% of that 60% went over 9 weeks without even looking at the MLS.
    • According to the Real Deal, EasyKnock raised another $20M this week. This start-up, launched in 2016, buys the property and then leases the property back to the owner-turned-tenant allowing access to the earned equity.
    • The owner of the Mall of America, Canadian Triple Five, a privately owned company is in trouble. They have about $5B in debt on their properties and have missed mortgage payments, according to a Bloomberg report.
    • New York City has been hit the hardest, they are still down 76% in new listings. In May new lease signings were down 62% year over year but did see an increase over April. The local real estate board is cutting pay and laying off employees due to a decrease in membership dues coming in.
    • Mortgage purchase applications increased for a 9th straight week, leading to a 75% increase since mid-April, a 20% increase year over year, and putting us at an 11 year high.
    • There was a slight increase in forbearance requests this week. 8.55% of all residential mortgages are currently in forbearance. According to the Mortgage Banker’s Association’s Chief Economist, Michael Fratantoni, “The level of forbearance requests is still quite low, but there was a noticeable increase in call volume over the course of the week.”
    • The good news is that nearly 60% of Americans have at least 50% of equity in their homes. The average is $177,000 in equity. With that said only 9% of the homeowners currently in forbearance have 10% or less equity; meaning that it is unlikely we will see a massive wave of foreclosures based on the current level of mortgages in forbearance.
    • In a joint effort the Consumer Finance Protection Bureau (CFPB), Federal Housing Finance Agency (FHFA) and U.S. Department Housing and Urban Development (HUD) created a website that outlines the housing relief options created by the CARES Act: https://www.consumerfinance.gov/coronavirus/mortgage-and-housing-assistance/ 
    • The National Association of Home Builders and Wells Fargo’s Housing Market Index increased by 21 points in May to 58 bringing us back into a positive outlook. The recent report stated, “Inventory is tight, mortgage applications are increasing, interest rates are low and confidence is rising. And buyer traffic more than doubled in one month even as builders report growing online and phone inquiries stemming from the outbreak.”
    • Housing starts in May were up 4.3% from April but were down 23.2% year over year.

    Final Thoughts:

    MIT did a study on how news is shared via Twitter. The study stated, “The results were stark. False information was retweeted by more people than the true stuff, and faster to boot. True stories took, on average, six times longer than falsehoods to reach at least 1,500 people. Only about 0.1% of true stories were shared by more than 1,000 people, but 1% of false stories managed between 1,000 and 100,000 shares.” Tom Ferry said, “Flight to quality has never been more important than ever before. Be the knowledge broker.” It is up to you to share accurate information.

    If you have buyers and sellers on the fence, the time to act is now. With the low inventory, sellers are competing against fewer listings. With prices rising and low rates, now is a great time to buy. There is no guarantee that any of this will remain in the future.

    Copyright 2020 by Sarah Perkins

  • Afternoon Bite 6/15/2020 (Video)

    Every Monday Amber Kovarik and I discuss the latest in real estate news, stats, and happenings.

    Today’s Takeaways:

    • Inventory is 50.4% under normal.
    • Inventory has decreased by 5% since mid-April.
    • Inventory is 33% down year over year.
    • Demand is 9% below normal. Demand has increased by 11% since mid-April.
    • Prices are going up.
    • In the first 9 days of June, 23% of closings closed over asking. For the properties closing in the $200,000-$250,000 range, it is 38% of closings are over asking.
    • Affordability: the ideal affordability range for a city is 60-75. For a long time Phoenix hung out at 68. We have recently dropped down to 63. What that means is that based on total household income, a family earning the median income could afford 63% of the homes that sold in the first 6 months of the year.
    • Prices are going up. Buyer on the fence, buy now. Sellers on the fence, sell now, less competition.

  • Phoenix Area Real Estate Update 6/12/2020

    In 1789 Benjamin Franklin wrote, “In this world, nothing can be said to be certain, except death and taxes.” I suppose we should add his quote to his list as another certainty.

    Recently some experts were discussing whether or not real estate is going through a recovery right now or not. They asked, how can something that did not truly seem to collapse recover? Given that we are beating out several year over year metrics the question is valid. Today the real estate market is showing strong signs of stability and strength. Tomorrow we hope remains the same.

    Arizona Market:

    Cromford Market Index (CMI): The CMI is the best leading indicator available (balance is 100, above 100 is a seller’s market and below 100 is a buyer’s market. Prices rise at 110 and drop at 90). On March 20, the CMI peaked at 241, and yesterday it was at 176.7, up from the bottom of 145.2 we hit on May 15 and up nearly 14 points in the past seven days. I see a U-shaped recovery here:

    Supply: Our local inventory started dropping on May 12 and has continued to decrease every day since. As of yesterday, our inventory is 49.5% below normal. In the past seven days, we have dropped just over 2%. At the rate we are going it will be very difficult to keep price appreciation under control.

    Our new listings are dropping, demand is increasing, and prices are rising. Remember real estate trends in the Phoenix metro area are usually magnified. For example, during the 2008 market crash, nationally prices dropped about 20%, here they dropped 50-60%. While the rest of the country faces tightening inventory, we are facing something bigger. In March we had a 1.9% year over year drop in new listings, in April it was an 18.3% year over year drop, in May it was a 22.1% drop and June is on pace to be a 33% year over year drop. The market’s increasing demand and decreasing inventory are unsustainable.

    Demand: Showing Time shares its physical showing request data. The requests peaked on February 22 and then immediately dropped by 63% through mid-April. As of Wednesday, we are 4.6% above February’s peak and only 0.9% below where we were last year. Our demand is running just under 11% below normal and increased by 4% in the past seven days. In April pending listings had a year over year decrease of 24.6% and in May it dropped to 18.4% year over year.

    Mike Miedler, CEO of Century 21 explains why agents are in huge demand, he said, “Our value is as high as it’s ever been, and our communities need us more than ever.” Remember consumers have no idea what is happening in real estate. And they certainly do not realize the significant implications of our decreasing inventory.

    Appreciation: Prices did not drop. There is no indication that they will, quite the opposite in fact. In the first nine days of June, 23% of all closings closed over asking price. For properties between $200,000-$250,000; 38% closed over asking. For properties between $250,000-$300,000; 27% closed over asking.

    Fun fact, since 1945 home values have dropped only two times. One was a slight dip of 1% during the summer of 1992 and the other was 2008-2011.

    Other Arizona News:

    Another data center is coming to Phoenix. Stack Infrastructure purchased 79 acres and plans to develop a group of data centers with up to one million square feet. They selected Arizona due to our lower cost of power (well below the national average), are business-friendly, and have the vacant land available. Jessica Morin, director of market analytics for CoStar in Phoenix, wrote, “Phoenix has become one of the most active data center markets in the country, not only because of the vast consumer base but also due to Arizona’s tax incentive for data center development, a robust and growing power grid, and limited occurrence of natural disasters.”

    Unemployment & Spending:

    The trend of declining new unemployment filings continued this week with (only) 1.5 million, bringing the total to roughly 44 million. Only 21.9 million are receiving benefits. Additionally, the Census Bureau disclosed that last week’s data had classification errors. After fixing the errors the actual unemployment rate in April was 19.7%, in May it dropped to 16.3%.

    According to economist Elliot Eisenberg, “Hotel occupancy is up for the seventh straight week, albeit from a staggeringly depressed level. For the week ending 5/30/20, US hotels enjoyed (if you can call it that) an occupancy rate of 36.6%, pushing weekly demand to about 11 million room nights.”

    Coresight Research, a global advisory and research firm specializing in retail and technology, estimates that more than 25,000 stores with a national footprint will close by the end of 2020. According to a monthly survey done by Alignable of over 400,000 small businesses nearly 3% report they have permanently closed and 41% temporarily closed due to the pandemic.

    Emerging Trends:

    • According to the National Multifamily Housing Council, apartment rent collections are reporting a 93% in tenant rent payment for May; far better than the roughly 50% of retail businesses making their rent payments.
    • Demand for existing suburban commercial space is increasing as social distancing is easier to follow at arrival, departure, lines, and walking around inside the space.
    • According to a study by LendingTree, 53% of future homebuyers have moved up their timelines and plan on purchasing in the next 12 months. For first time home buyers, it is 73% in the next 12 months.
    • Homesnap does a monthly confidence metric. According to CEO, John Mazur, “We poll about 40,000 agents every month about the market,” he said. “In March we saw the biggest drop off we’ve ever seen, where only 18 percent said they were optimistic about the market. But in April, it went up to 25 percent, in May, up to 45 percent.”
    • In 2019 Zillow purchased about 2.5% or 6,500 properties of the 264,000 instant offer requests received. Of the 257,000 that did not sell to Zillow, roughly 40% eventually sold through a Realtor.
    • Like Opendoor and Offerpad, Zillow is returning to markets all over the country. Traffic to Zillow’s listings is up 51% year over year and their pending sales are up 24.5% month over month.
    • According to Adam Weiner, Redfin’s chief growth officer, “Rising prices and the freedom to work from home are causing buyers to reconsider their options. Pageviews on Redfin.com for cities under 50,000 people and rural areas are growing 5x faster than pageviews for cities with more than one million people.”

    Other Real Estate News:

    • According to Matterport CEO, Robin Daniels, iBuyers hardly ever ask for a virtual tour, however including one often results in listings selling 20% faster and for 9% more, on average. Additionally, having these reduces the number of potential buyers physically in a property as the buyers are better equipped to make decisions based on information provided online.
    • Real estate experts are encouraging listing agents to use floorplans. Check out BoxBrownie or the Magic Plan App for options.
    • Venture capital money is still flowing into real estate tech. In 2016 about $2 billion was invested. In 2019 it was $32 billion. Despite real estate making up 17% of the GDP (it went up) real estate tech accounts for only 4% of venture capital investments.
    • Wire fraud is on the rise again with many more attempts. Stay focused this is still a major threat to buyers and sellers.
    • At the end of last week, Realogy announced it was looking to raise $400 million, the exact amount of the recently canceled Cartus sale. Cartus is Realogy’s relocation company. On Tuesday, in a filing with the SEC, they announced that due to greater demand than anticipated they actually raised $550 million.
    • As of the week ending on June 2, we saw the first decline in new forbearance requests since the CARES Act went into effect. Roughly 8.9% of mortgage loans are currently in forbearance.
    • The Fed announced that they are keeping rates as is for the foreseeable future, up to 3 years. Dr. Lawrence Yun, Chief Economist for NAR said, “It is also very likely that the Fed will be aggressively purchasing mortgage-backed securities behind the scenes. That (also) means mortgage rates will be at or near 3 percent and near record lows for an extended time.”
    • This week the nation’s largest co-living community opened in Fort Lauderdale with 639 units, definitely less than optimal timing.
    • Q1 2020 home flipping hit a 14 year high, up 7.3% year over year, while returns bottomed at a 9 year low.
    • In July 2019 Realogy filed a lawsuit against Compass for illegal recruiting and unfair business practices. Compass’s motion to settle through arbitration was denied earlier this week.
    • Among the most expensive real estate markets in the country, the Bay Area is already realizing the impact of the new, more permanent work from home options. The managing partner of a company that owns several large multi-family communities said, “We’re seeing an uptick in tenants who are paying the breakage to get out of leases and relocate. There’s a lot of them moving out of state.”
    • Team-based real estate has been gaining speed over the past several years. Today, as the concept of home is more important than ever, it is about the human element and connecting with people where they are. It is very difficult for individual agents to compete with teams who are better able to keep up with consumer demand. The trends are showing the team model, meaning 2+ agents, are gaining market share and connecting with clients in a more significant way.

    Final Thoughts:

    Remember, “Data without analysis is just noise.” As you digest this information, what does it mean to you? It means that things are changing faster than ever before, and your competition is struggling to keep up. It means buyers are out looking and competing for fewer and fewer listings. This is the time to work hard, communicate with your clients, let them know what is really happening, listen to their needs, and respond accordingly. That is how you will win.

    Copyright 2020 by Sarah Perkins

  • Afternoon Bite 6/8/2020 (Video)

    Every Monday Amber Kovarik with Guild Mortgage and I spend 15 minutes (or less) talking about what is currently happening in the real estate market, title, and lending. We give a few key points to share without taking up too much time.

    Today’s Big Takeaways:

    • May’s job report was way better than predicted. Rather than losing 8 million jobs, the United States created 2.5 million jobs!
    • Demand has grown 7% in the past 3 weeks and it is increasing daily. It has increased to only 20% below normal.
    • Inventory is decreasing daily and we are now nearly 49% below normal.
    • With demand being higher than inventory, prices are pushing upwards.
    • Many listings are seeing multiple offers. One of Amber’s clients had a new listing that had 70 showing requests this past weekend.
    • Lending guidelines are clearer now. New options available including self employed loan options and jumbos.
    • It is very important to get pre-qualified early on as houses are moving so quickly right now.

  • Phoenix Area Real Estate Update 6/5/2020

    Things truly are better than only a few weeks ago; consumer sentiment is up month over month. Things are definitely better than what the headlines read. As David Childers, with KCM, said, “The media often does more to terrify than clarify.” He is right. With all that said, we cannot diminish everything that is happening in our world today.

    Robert Reffkin, the CEO of Compass said, “It’s OK to not be OK in this time. Agents and members of the real estate industry are always putting on a “happy face” but right now real estate professionals are dealing with a rapidly changing world and two simultaneous crises.”

    During this week’s virtual Inman Connect, Brad Inman begged the leaders of our industry to; “To step up and go beyond making vague commitments to diversity, charities and economic fairness.” The CEOs of Zillow, Redfin, RE/MAX, Compass, eXp, Keller Williams, Realogy, Coldwell Banker, and the president of NAR are all speaking out against racism and implementing new policies and practices.

    Speaking of real estate leaders, Adam Contos, CEO of RE/MAX, is very encouraged by the leading indicators and believes that during the second half of 2020 we will make up a lot what was lost during the first half of the year. A recent report from Zillow shows the same prediction. Yes, transactions will be down but not nearly by the amount initially predicted. Most people pressed pause, not stop. Economists considered real estate dead 60 days ago. Today some are saying that housing is the driver for our entire economy. At 16% of the GDP, I agree. When someone buys a new home, on average, $88,000 is pushed out into the economy. When someone buys a resale home $42,000 is pushed out.

    Arizona Market:

    Cromford Market Index (CMI): The CMI is the best leading indicator available (balance is 100, above 100 is a seller’s market and below 100 is a buyer’s market. Prices do not drop until the CMI hits 90). On March 20, the CMI peaked at 241, and yesterday it was a 162.9, up from the bottom of 145.2 we hit on May 15 and up 10 points in the past seven days.

    Supply: Our local inventory started dropping on May 12 and has continued to decrease every day since. We finished May nearly 28% below where we were at the end of May 2019 and that is nearly 48% below normal inventory levels. To keep prices under control, we need more listings, desperately. Dr. Lawrence Yun, the chief economist of NAR said, “More listings and increased home construction will be needed to tame price growth.”

    Demand: Showing Time shares its physical showing request data. The requests peaked on February 22 and then immediately dropped by 63% through mid-April. As of Wednesday, we are only 2.7% below February’s peak and only 4.8% below where we were last year. Our demand is running about 15% below normal and increased by 3% in the past week.

    New Listings, New Pendings, and Closings: When new pendings outpace new listings, we have a market frenzy. This week over week comparison for the southeast valley since March 15 shows an early drop in new listing counts which is concerning given the growing demand. Only time will tell if it is pent up demand or actual demand. Based on February’s demand it is likely to be actual. If this is the case, prices will rise rapidly. Closings always increase at the end of the month. May’s end of the month was not only bigger than April’s, but the closing increases started earlier. Good signs for what is to come!

    Other Arizona News:

    • High paying tech jobs continue coming to AZ.
    • Despite the headlines, Boeing is hiring and growing.
    • Mitsubishi’s location in the Falcon Field district in Mesa is growing and they are bringing in more jobs.
    • Industrial building continues in NE Mesa and companies are occupying them quickly.
    • More businesses have committed to moving to AZ bringing several hundred jobs.
    • According to Elliot Pollack & Company as of the week of May 16 in Maricopa County retail and recreational trips are down 27.3% year over year.
    • April hotel occupancy levels were 24.8%, down from 73.8% year over year and from 47.9% in March.
    • Hotel demand in April was down 69.4% year over year and supply dropped 8.9% year over year. Several closed their doors completely.

    Unemployment/Economy/Spending:

    Experts previously predicted that in May we would have a loss of 8 million jobs instead, we gained 2.5 million jobs in May, awesome!! Those predictions were off by 10.5 million! Not only did we reach the tipping point for unemployment; unemployment numbers improved from April’s 14.7% to May’s 13.3%. Amazon hired 175,000 new employees and announced that they will be keeping 150,000 of those new employees. Of the nearly 42 million who have filed for unemployment around 22 million are collecting benefits. A study from the University of Chicago found that 68% of unemployed workers who are receiving benefits that exceed the lost earnings. Further, 20% of the unemployed workers are receiving benefits that exceed two times the lost earnings. Becker Friedman from the Institute of Economics at the University of Chicago said, “The CAREs Act actually provides income expansion rather than a replacement for most unemployed workers.”

    What remains to be seen is the long-term impact of unemployment, the supply chain interruptions, and the 25-30% of the non-essential businesses that closed and will not reopen. On Wednesday, AMC Theatres, the world’s biggest movie theater chain, stated they have “substantial doubt” they will be able to stay in business due to the extended closures.

    National savings rates are up; April was 33% versus 12.7% in March and 8.4% a year ago. Remember one person’s spending is another person’s income. Saving is good yet so is spending. Spending on travel is slowly increasing. According to the TSA as of May 23 travel is down 89.1% year over year, an improvement from 91.3% the week before. Traffic through Sky Harbor is down 93% year over year in April.

    Emerging Trends:

    • Zoom fatigue. It is possible to Zoom too much, be sure to balance health, safety, and our basic human need for real interaction.
    • We are seeing increases in second home purchases which is unusual in a financially stressful time.
    • Glenn Kelman, CEO of Redfin said, “The listings that are getting all the traffic right now are in small towns. Almost all of our customers are considering a relocation.”
    • Zillow listing views are up 40% year over year, 500% increase in the use of 3D tours, 123% more saves on properties with 3D tours in March
    • Errol Samuelson head of research and development at Zillow said that the 3D tours are helpful, but everyone needs to include a floor plan in their listing images.
    • Today’s consumers are researching commute time, wifi strength, cell strength, access to Amazon Prime Now, etc. These will likely become searchable data points in the future.
    • Moody’s Analytics expects that by the end of the year office vacancy rates could reach an all-time high of 19.4%.
    • 75% of Americans that are working from home said they would like to continue doing so and of those 2/3 said they would like to move.
    • 40% of homes do not have an extra room for a home office; 31% of people working from home are working in their living room or family room, 10% in the kitchen, and 3% in the attic.
    • Affordable housing startup, United Dwelling, is building small rental units in residential backyards. They charge $87,900 to install a unit that is then managed by United and keeps a portion of the unit’s rent for 15 years at which time the homeowner then gains complete ownership of the unit.

    Other Real Estate News:

    • Four-year-old tech start-up Voiceter Pro permanently closed its doors this week, stating the shutdown is due to COVID 19.
    • Realogy is bringing back a portion of their furloughed employees.
    • Offerpad is launching a traditional listing option in addition to its iBuying. Their licensed W2 Realtors will list and sell a consumer’s home. While it is on the market the seller can decide to switch the iBuyer option at any time. Sellers can utilize the company’s concierge services to prep the home for market or do renovations. Offerpad’s partnership as Keller Williams’ iBuyer which operates as Keller Offers, remains intact.
    • Court denies Top Agent Network’s (TAN) restraining order application against NAR’s Clear Cooperation policy. TAN filed a lawsuit against NAR on May 11 stating the policy violates the anti-trust laws along with others.
    • Pocket Listing Service (PLS), is the latest pocket listing network to file a lawsuit against NAR and a number of MLS’s also stating the Clear Cooperation Policy violates anti-trust laws.
    • CEOs Glenn Kelman of Redfin, Adam Contos of RE/MAX, and Gary Keller of Keller Williams all expect to see new mergers and acquisitions, as they often happen during economic downturns. Only this time they will look different. Offices and their cultures will likely stay intact as the acquiring company may never occupy the space and remain separate. More business will continue to be done outside of physical meetings. Additionally, they expect to see other sources of revenue generation as part of the acquisitions such as other real estate services like title, lending, property management, home inspections, etc.
    • According to the Mortgage Bankers Association, purchase mortgage applications are up for the 7th week in a row and are up 18% year over year. Only 7 weeks ago, we were down 35% year over year.

    Innovation:

    My favorite real estate strategist, Mike DelPrete, agrees the data is all positive. Things are absolutely picking up and going in the right direction. In March, every single market had an immediate and dramatic drop in demand. DelPrete questions how much of today’s demand is pent up demand versus actual demand, which is market-specific and too early to tell.

    This week at Inman Connect Now, DelPrete discussed how both traditional real estate brokerages and iBuyers both need to work hard to stay relevant and capture market share. iBuyers need to figure out how to be profitable. Traditional brokerages need to speed up and pivot, develop virtual showing options, double down on marketing, and create digital transaction platforms. If done right, we will see traditional real estate brokerages and iBuyers come together and ultimately offer more benefits to consumers and Realtors. He said, “Over time, iBuyers will look more like traditional brokerages and the traditional industry will look more like iBuyers and there will be an overlap of services. The industry is moving fast. Figure out what you can do to stay ahead of the curve.”

    Final Thoughts:

    Rich Barton of Zillow is calling today, “the great re-shuffling.” The real estate industry is a lot smarter than it was in 2008. “We are a more robust industry now,” he said. Necessity is the mother of invention which is why real estate has been driving innovation. Pete Flint, founder of Trulia said, “A five-year revolution has happened in three months.”

    Remember, “Data without analysis is just noise.” As you digest this information, what does it mean to you? It means that things are changing faster than ever before, and your competition is struggling to keep up. It means buyers are out looking and competing for fewer and fewer listings. This is the time to work hard, communicate with your clients, let them know what is really happening, listen to their needs, and respond accordingly. That is how you will win.

    Copyright 2020 by Sarah Perkins

  • Phoenix Area Real Estate Update 5/29/2020

    The other day I was talking with Tina Tamboer with the Cromford Report and she said, “Real estate is going gangbusters, I don’t think that it got the memo about the world-wide pandemic.” There continues to be increased optimism and momentum in real estate. Even the national economists are talking about the positive movement in real estate, and they are never positive! Demand is up. The major platforms and Realtors across the country are seeing the buyer demand move away from large, expensive cities to places with larger houses, bigger lots, and lower prices.

    Arizona Market:

    Cromford Market Index (CMI): The CMI is the best leading indicator available (balance is 100, above 100 is a seller’s market and below 100 is a buyer’s market. Prices do not drop until the CMI hits 90). On March 20, the CMI peaked at 241 and yesterday it was a 152.9, up from the bottom of 145.2 we hit on May 15. On May 16, the CMI increased for the first time in over two months. It has continued to increase each day since with May 28 having the largest single day increase yet at 1.2 points. Demand is increasing and inventory is decreasing.

    Supply: Our local inventory started dropping on May 12 and has continued to decrease every day since. The new listing counts the for the first half of May are down 26% year over year. We are running over 46% below normal inventory levels. To keep prices under control, we need more listings, desperately. Dr. Lawrence Yun, the chief economist of NAR said, “The economic lockdowns – occurring from mid-March through April in most states – have temporarily disrupted home sales, but the listings that are on the market are still attracting buyers and boosting home prices,” he continued, “Still, more listings and increased home construction will be needed to tame price growth.”

    Demand: Showing Time shares their physical showing request data. The requests peaked on February 22 and then immediately dropped by 63% through mid-April. By May 22 we surpassed our previous peak by 0.6%. The days following the holiday weekend did see a drop of 5.8% and the coming week’s data will be very interesting. My theory is that it has something to do with the decreasing inventory. Not only can buyers not buy houses that are not for sale, they cannot go look at them either.

    New Listings, New Pendings and Closings: When new pendings outpace new listings, we have a market frenzy. Look at the week over week comparison for the southeast valley since March 15. The drop in new listing counts this early into our recovery is concerning. Demand is growing. There are simply not enough homes for sale to satisfy the current demand. If this continues, prices will rise rapidly which will prevent first time home buyers from entering the market. Based on this graph, now closings are increasing as we are now about a month out from our lowest levels in new pendings.

    Other Arizona News:

    • Nationally prices increased 6% year over year through April.
    • Phoenix continues to be number one in appreciation with the largest gains 10 months straight at 8.2% year over year. Seattle was number two and Charlotte number three.
    • According to the U.S. Census Bureau in 2019 Phoenix lead the country in population growth for the fourth year in a row.
    • Mid-April was the bottom, for not only real estate, but for consumer spending. According to economist Elliot D. Pollack, on April 16 consumer spending was down 32.8% since the beginning of January. On May 10 it was down only 19.4%.
    • Since restaurants re-opened on May 11, business is still down 76.1% year over year as of May 23 in the Phoenix metro area for dine-in only. Nationally that number is 90.8% year over year. (source Elliot D. Pollack & Company)
    • Disclaimer: I am not a health professional, but I do love graphs that illustrate clear trends and this is definitely clear:

    Employment:

    Arizona is number two, year to date, for employment. Year to date, Utah’s employment increased by 0.2%. Arizona had the smallest decline of 0.2%. In comparison to the rest of the country, Arizona is doing well; especially so in the Phoenix metro area. According to Elliot D. Pollack & Company, “The Valley is now the second-best employment market in the U.S. for the first four months of the year.  It did manage to lose a lot of jobs in April.  But, it has lost only one-third of the jobs gained from the trough in September 2010 to the peak in February 2020.  That’s way better than the country as a whole.” Nationally, the US lost nearly all of the jobs created since 2010. The Phoenix metro area has “only” lost 43% of the jobs created since 2010.

    Projections:

    Real estate consulting group T360 polled Dr. Lawrence Yun of NAR, Skylar Olsen Zillow’s senior principal economist, Michael Fratantoni the Mortgage Bankers Association chief economist, and Danielle Hale Realtor.com’s chief economist asking for their projections for the rest of this year. They all agreed that we will have many fewer sales this year but to what extent varies greatly. Here are their projections:

    Emerging Trends:

    • Virtual showings, 3D tours, and video are providing buyers with enough confidence to purchase without ever seeing the property, many experts believe this trend will continue after everything is fully reopened.
    • People are getting to the point where they can’t stand to be in their houses any longer. Robert Reffkin, the CEO of Compass said, “Buyers have never been so intimately aware of the inadequacies of their home.”
    • Renters are moving away from the sharing economy and are now looking for property amenities over community amenities. Or as my husband says, “They want their own stuff.”
    • Vacation rentals in places like the Hamptons, Malibu, and Tahoe are fully booked for top dollar for the entire summer; people want to get out of their houses.
    • Peloton rooms are the newest must have amenity
    • In the past when we had economic challenges people sold their second homes, today people are keeping them and renting them for top dollar or using the property for themselves; everyone wants to get out.
    • Many new lawsuits are emerging as both buyers and sellers are suing anyone and everyone for anything and using COVID as the reason.

    Other Real Estate News:

    • As a title company we look at the mix of business, unsurprisingly for the past several months we have had a significantly high amount of refis and over the past few weeks, Lawyers Title of Arizona, has seen a shift of slightly fewer refis and increased purchase activity.
    • Redfin rehired 35% of its furloughed staff.
    • Mortgage applications from first time buyers is up 9% year over year and only 6 weeks ago we were down 35% year over year, nationally.
    • 8.36% of mortgages are in forbearance, up from 8.16% last week. This continues the trend of smaller and smaller weekly increases.
    • Josh Team, CEO of Keller Williams, does not expect many Realtors to get out of the business. Many of the jobs Realtors gravitate towards when leaving real estate are not available so there is no place to go. He does expect a large portion of licensees to do less and less business.

    Final Thoughts:

    My new favorite quote is from Gino Blefari the CEO of HomeServices of America. He said, “Data without analysis is just noise.” As you digest this information, what does it mean to you? It means that you have less competition. It means buyers are out looking and competing for a small pool of listings. This is the time to push hard, communicate with your clients, provide the best customer service out there and you will win.

    Copyright 2020 by Sarah Perkins

  • Candid Conversations with Jenn Newman (video)

    Jenn Newman with the Brokery invited me to be a guest on her video series “Candid Conversations.” In this video interview we discuss the COVID-19 pandemic and it’s implications for the Phoenix metro area real estate market. We cover where we are now, supply and demand, what is happening with prices, and our projections for the future.

    Jenn Newman is a top-selling Realtor who specializes in Phoenix, Scottsdale, and Paradise Valley real estate. She can be reached at 480-848-5222 or www.TheJennNewman.com.

  • Phoenix Area Real Estate Update 5/22/2020

    According to the media, the sky is still falling. According to the facts, real estate is gaining momentum and picking up speed. Mid-April was the clear bottom for the housing market, and we have been in recovery mode since. Purchase mortgage applications are down only 1.6% year over year. The new challenge we face today is that demand is increasing faster than supply is. Over 480,000 properties have gone under contract since the onset of the pandemic and that is roughly 86,000 more properties than have hit the market during the same time period. This not only keeps prices stable; it pushes them up. We entered March with low inventory and despite the slight increase the market remains tight; forcing prices to rise.

    Arizona Market:

    Cromford Market Index (CMI):
    The CMI is the best leading indicator available. On March 20, the CMI was 241 and yesterday it was a 147.3 (balance is 100, above 100 is a seller’s market and below 100 is a buyer’s market. Prices do not drop until the CMI hits 90) In recent weeks the CMI’s rate of decline not only slowed but flattened and even curved back up and saw an increase. On May 16, the CMI increased for the first time in over two months. It has continued to increase each day since. Demand increased and inventory decreased.

    Supply:
    Last week was the first week since mid-March we saw declines in new listing counts, which were low to begin with. The total active listing count as of May 10 was down nearly 20% year over year and new listing counts the first week of May are down 26% year over year. We are running about 45% below normal inventory levels.

    Demand:
    Physical showing requests illustrate the increasing buyer demand. After a 63% decrease in requests, as of yesterday, we surpassed the peak on February 22 by 0.2%. Pending listings are down 25% year over year. This is because of the low inventory. Buyers cannot buy houses that are not for sale.

    New Listings & New Pendings:
    When new pendings outpace new listings, we have a market frenzy. Look at the week over week comparison for the southeast valley since March 15. The drop in new listing counts this early into our recovery is concerning. Demand is only likely to grow. There are simply not enough homes for sale to satisfy the current demand. If this continues, prices will rise rapidly which will prevent first time home buyers from entering the market.

    Emerging Trends:

    The top portals continue seeing an increase in listing views in smaller towns versus large urban metros. Redfin had an increase of 105% for small towns over the 16% increase in listing views in large metro areas. Over 50% of residents in some of the largest, most expensive cities in the country said they would move away if they could work from home full time.

    Phoenix Trends:

    Check this info-graphic out! While it is not an emerging trend as it represents a familiar trend in the Phoenix metro area. Unsurprisingly, Los Angeles makes up over 25% of the out of state relocations coming to Phoenix. All of this is consistent with the past many years of incoming out of state relocation. It is also consistent with the information above. With 51.7% of people wanting to leave Seattle and 10.9% of them coming here, Seattle is a good place to advertise your listings!

    Unemployment:

    This week 2.4 million people filed for unemployment benefits. That is 500,000 fewer than last week continuing the weekly downward trend since the peak in late March. A staggering 38.6 million have filed BUT only 25 million are collecting benefits, 1 million fewer than last week. Meaning many have already gone back to work. Of the new unemployment filings in April 88% defined themselves at temporarily laid off.

    Forbearance:

    As of May 10, 8.16% of all mortgage loans were in forbearance, increase from 7.91% the first week of May and the smallest week over week increase. Simply inquiring about forbearance puts a borrower into forbearance. Fannie and Freddie updated their guidance and now borrowers can obtain a new loan (refi or purchase) after they have 3 consecutive months of full payments after their forbearance ends.

    Other Real Estate News:

    • Zoom plans to open research and development locations in Phoenix and Pittsburgh. “Both Phoenix and Pittsburgh have incredibly well-educated, skilled, and diverse talent pools that are well-positioned to help support Zoom’s ongoing growth and continued success,” said Eric S. Yuan, CEO of Zoom.
    • Last week Top Agent Network (TAN) became the latest organization to sue NAR stating that the Clear Cooperation Policy violates antitrust and unfair competition laws.
    • The Softbank Vision Fund, which funded 88 tech startups like Opendoor, Compass, Uber and WeWork, with $81 billion, predicts that up to 15 of their investments will go out of business due to COVID. The fund posted a loss of $800 million last quarter, with Uber losing $450 million. A total of 47 of their investments lost money.
    • Taiwan Firm, TSMC, is planning the development of a $12 billion chip factory in Arizona.
    • On Monday Zillow’s iBuyer segment re-entered the Phoenix market along with 3 others.
    • There is new speculation that we will see an increase in second home purchases by the wealthy, as this could be considered a safer option than hotels or short term rentals. We do not have enough data to see a clear trend, so we are watching this closely.
    • Government loan purchase applications are up 5% year over year indicating this is not necessarily pent up demand but a positive trend.
    • For any clients you have struggling to make their rent or mortgage payment, be sure to share this new website: https://www.consumerfinance.gov/coronavirus/mortgage-and-housing-assistance/ It is a joint effort by the Consumer Finance Protection Bureau (CFPB), Federal Housing Finance Agency (FHFA) and U.S. Department Housing and Urban Development (HUD) that outlines the housing relief options created by the CARES Act.

    Final Thoughts:

    With only about 20-25% of Realtors out there are working to crush it right now, you have a huge opportunity. The rest are behind the times and not working to pivot their business to function in today’s environment. We desperately need new listings and your competition is not getting the word out, so it is up to you to do so. As Tom Ferry says, you must control the narrative and Adam Contos, the CEO of RE/MAX, is telling all agents to step up, be clear and present, update your business model, and be confident. We will see new leaders emerge out of this.

    copyright 2020 by Sarah Perkins

  • Afternoon Bite 5/18/2020 (Video)

    Every Monday Amber Kovarik with Guild Mortgage and I spend 15 minutes (or less) talking about what is currently happening in the real estate market, title, and lending. We give a few key points to share without taking up too much time.

    Today’s Big Takeaways:

    • Cromford Market Index, the best leading market indicator we have, was a 145.8 yesterday. Above 100 is a seller’s market, below 100 is a buyer’s market.
    • Tuesday 5/12 1st day of inventory decline since March 20
    • Thursday 5/14 1st day of no CMI drop since March 20, it fell nearly 100 points in about 2 months. The past 3 weeks the drop has slowed but hasn’t stopped
    • Saturday 5/16 we had our 1st CMI increase and our first demand increase from March 20
    • The demand dropped nearly 28% in the past 2 months and is now increasing
    • We need more inventory. We are still 45% below where we should be
    • Prices remain stable
    • 33 million people have filed for unemployment benefits, however (only) 26 million are receiving unemployment because 7 million are already back at work.
    • 40% of the unemployed make less than $40K a year, it is unlikely that a large proportion were potential home buyers, which is why demand remains more stable
    • In April 76% of people paid their mortgage and/or rent in full
    • In May 69% of people paid their mortgage and/or rent in full
    • On Thursday the CFPB, FHFA and HUD in a joint effort launched a website with info on payment assistance for both renters and borrowers outlined in the CARES Act: https://www.consumerfinance.gov/coronavirus/mortgage-and-housing-assistance/
    • Small business owners who received PPP loans are eligible for a home loan.
    • Still no updated guidance on forbearance. There is optimism that this will be addressed soon. Because this is an issue: Simply inquiring about forbearance puts a borrower into forbearance and they will not be able to obtain a new loan until they have 12 months of consecutive payments after being placed in forbearance. Look for this to change as this is very detrimental for those who never end up missing a payment.

    copyright 2020 by Sarah Perkins

  • Phoenix Area Real Estate Update 5/15/2020

    Over the past 2 weeks the CEO’s of Realogy, Zillow, Redfin, RE/MAX, Keller Williams, and eXp all stated their confidence in the real estate market and expect continued increases in demand. Sellers are selling and buyers are buying. We are still not out of the woods yet and we do not know what will happen tomorrow, but there is a lot to be optimistic about today. Another week of data continues to support these early trends. Please continue sharing the good news. Steve Harney founder of Keeping Current Matters (KCM) said, “It will be real estate that pulls us out of this.” Given that our industry is 16% of the GDP, I think he is right.

    Arizona Market:
    The Phoenix metro area real estate market it hot. It was so hot coming into this pandemic that despite the cooling, it is nowhere close to cold. Prices are stable. Today’s buyers and sellers have a whole new set of requirements and standards. Market share is up for grabs.

    Cromford Market Index (CMI):
    The CMI is the best leading indicator available. On March 20 the CMI was 241 and yesterday it was a 145.2 (balance is 100, above 100 is a seller’s market and below 100 is a buyer’s market. Prices do not drop until the CMI hits 90) In the weeks since April 19, the CMI’s rate of decline started slowing. The week ending on May 9 we had a significant slowing of the CMI drop. The CMI has dropped nearly 100 points since the March 20.

    Supply:
    This week was the first week since mid-March we saw declining new listing counts; which were low to begin with. Active listings as of May 10th are down nearly 20% year over year. And we are running about 45% below normal inventory levels. The extremely low inventory is keeping house prices stable. On May 11 we had a true market frenzy with 53 new listings with 163 new pendings in the southeast valley. NAR’s chief economist Dr. Lawrence Yun is quoted saying, “Supply is extremely limited, and there are simply not as many homes for sale to meet the demand among potential buyers. More supply and more listings are needed to provide a faster recovery for the economy.” This couldn’t be truer for our market.

    Demand:
    Physical showing requests also show the increasing buyer demand. After a 63% decrease in requests, we have already made up 48% of that loss and now are only down, as of yesterday, 15% from the peak on February 22. Pending listings are down nearly 21% year over year. One reason they are down so much is due to the low inventory. Buyers can’t buy houses that are not for sale. Over the past 4 weeks the $500,000+ market has seen a 65% increase in new pendings. Despite the increase, pendings are still down 30% from early March. Today super low mortgage interest rates are keeping housing affordable and are bringing out the once side-lined buyers.

    New Listings & New Pendings:
    To measure seller confidence we look at new listing counts. To measure buyer demand we look at new pending counts. In the past 4 weeks we have had a 40% increase in new pendings. When new pendings outpace new listings, we have a market frenzy. Look at the week over week comparison for the southeast valley since March 15. It is clear the week of April 19 was the turning point in our market. (the drop in new inventory mentioned above took place after 5/9)

    Price & Appreciation:
    The April monthly median sales price is up 8.9% year over year. Sales prices have remained stable due to the extremely low inventory. It is very unlikely buyers will see much, if any depreciation. Since price is a lagging indicator, May’s closings will tell a more complete story. Over the past 4 weeks seller concessions have increased from 18% to 25% of all closings. This will likely increase before we see significant price drops. Dr. Lawrence Yun is quoted saying, “More temporary interruptions to home sales should be expected in the next couple of months, though home prices will still likely rise.”

    55+ Communities:
    The 55+ market is suffering a lot. Given that these buyers are the most at-risk group and they mostly come from out of state, this will likely be the last market segment to recover. Once travel restrictions are lifted and people are comfortable traveling, expect recovery to start immediately.

    Unemployment/Inflation:
    This week 2.9 million people filed for unemployment benefits, the lowest number of new weekly applicants, continuing the 6-week downward trend. Over 33 million have filed. Keep in mind this is the first time 1099 independent consultants have been able to file for unemployment benefits, making it an impossible comparison from previous reports. There are some silver linings to these giant numbers. Of the new unemployment filings in April 88% defined themselves at temporarily laid off. We hope they are able to return soon! Of the 33 million that filed for unemployment only 26 million people are receiving it. This means that people went back to work within weeks if not days of being laid off. Dr. Yun pointed out that household savings is increasing, home improvement spending is up, and people are already going back to work; all positive. He also acknowledges that inflation is likely to rise in the next 5 or 6 years. These are his projections:

    Forbearance/Payments:
    Mortgage loans in forbearance increased from 7.54% the last week of April to 7.91% during the first week of May. Only 0.25% of loans were in forbearance at the beginning of March. That is interesting and all BUT simply inquiring about forbearance puts a borrower into forbearance. The borrower will not be able to obtain a new loan (refi or purchase) until they have 12 months of consecutive payments after being placed in forbearance. Look for this to change as this is very detrimental for those who never meant to be considered in forbearance.

    In April 76% of Americans paid their rent/mortgage in full. In May the number decreased to 69% for full payment.

    Housing Relief:
    A new website was launched yesterday outlining mortgage/rent payment relief options created in the CARES Act. It is a joint effort by the Consumer Finance Protection Bureau (CFPB), Federal Housing Finance Agency (FHFA) and U.S. Department Housing and Urban Development (HUD). https://www.consumerfinance.gov/coronavirus/mortgage-and-housing-assistance/

    Other Real Estate News:
    Working remotely continues to push people to reevaluate their housing situation. Based on search patterns the major platforms, Realtor.com, Zillow and Redfin, we should expect a mass migration away from the large expensive, primarily coastal, cities to smaller, more affordable cities. Zillow senior principal economist, Skylar Olsen said, “Buyers, who just a few months ago were looking for walkability, are now looking for extra land to go along with more square footage.”

    iBuyers Opendoor, Offerpad and Redfin (not in AZ) are purchasing again. Zillow plans to restart very soon. This model continues to baffle many as it has yet to be profitable. During the first quarter of 2020 Zillow lost, on average, $4,478 per listing sold. (revenue grew elsewhere)

    Redfin rehired 14% of its furloughed employees.

    Economists from ASU expect a full recovery by early 2021. We are fortunate to be in Arizona; I hope our urban sprawl continues to keep us healthy as we reopen the rest of our economy.

    Final Thought:
    Steve Harney believes we are at the halfway point right now. Which means it is time to push the petal to the metal and gain a giant lead over the competition.

    copyright 2020 by Sarah Perkins