We now have 3 weeks of data showing the very beginning of a trend! I am happy to report that these emerging trends are positive. Please continue sharing this good news with your clients. Right now there is a battle between the media and consumer sentiment. Unfortunately for the media, good news doesn’t sell, however, fortunately for you, it does. The bottom line of that good news is that we are seeing increased activity across all markets; people are ready to get out and find a new version of “normal.” Real estate coach Tom Ferry is calling this month “May Madness” since we missed March’s.

Arizona Market:

To measure the health of the market we look at new listing counts, which illustrate seller confidence. To measure demand we look at new pendings. Since the week of April 19^th we have seen increased buyer demand and increased new listings. We’re even now seeing multiple offers in a wider range of price points, including the luxury market.

Supply:

In the Phoenix metro area, from March 14^th through April 18^th we had a 32.4% increase in new listings hitting the market. Despite that increase, in March we had a 2.2% drop in new listings, year over year. In April we had a 23% drop in new listings, year over year. We are finding ourselves where we recently were, crazy low inventory, again.

Demand:

Physical showing requests also show the increasing demand, after a 63% decrease in requests, we have already made up 44% of that loss and now are only down 19% from the peak on February 22. After 5 weeks and a 26.6% drop in new pendings, we seemed to have hit the bottom and are starting to slowly but surely inch our way back up. New pendings are up 1.2% in the last 2 weeks of April. The severely low inventory is a challenge; buyers can’t buy homes that are not on the market. Since the week of April 5^th weekly new contracts are up nearly 32%. That helps counteract the 39.1% drop we had the previous six weeks.

Cromford Market Index (CMI):

On March 20^th the CMI was 241 and yesterday it was a 147.2 (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.) The CMI clearly has dropped drastically and in a short period of time. In the weeks since April 19, the CMI’s rate of decline has started slowing. The closer the green and red lines get to each other, the more balanced the market becomes.

New Listings & Pendings:

When new pendings outpace new listings, we have a market frenzy. Look at the week over week comparison for the southeast valley. As mentioned above, the week of April 19^th was the turning point in our market.

Price & Appreciation:

April sales volume is down 27.3% year over year. But prices are up and 27% of all closings in April closed above asking. These closings were mostly for contracts written before the stay at home orders. May’s closings will tell a better story. Seller concessions have started to slightly increase. We will see a larger rise in seller concessions before we see significant price drops. The average price per square foot dropped slightly in April. This is due to an increase in sales of lower priced homes. There is little indication of price drops and values remain stable. Dr. Lawrence Yun, the chief economist of NAR 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.”

If Arizona has 0% appreciation for the rest of the year, we will still have an appreciation of 6.5% in 2020. Normal appreciation is 3% a year. The one thing that will push down prices is sustained unemployment. April’s unemployment numbers will be released today.

Other News:

• iBuyers are back in the game. Opendoor starting purchasing again in Phoenix this past Monday. They will re-enter the Raleigh-Durham market this coming Monday. They plan to re-enter each market over time. They are also offering a new program called Home Reserve. There are some similarities with knock.com’s iBuyer model. It is for those looking to buy and sell at the same time, which is roughly 60% of consumers. Through this option, Opendoor will then buy and hold, or “reserve,” a family’s new home on their behalf with an all-cash purchase. The homeowners will then be allowed to move into the home, and then Opendoor will list and sell their old home once it’s empty.
• Offerpad is re-entering all of their markets today.
• And do you remember about 18 months ago when Realogy, the parent company of Coldwell Banker, Century 21, Sotheby’s, Better Homes & Garden and more partnered with Amazon? The partnership is now suspended as of yesterday. It was a program that gave consumers smart home products when Amazon referred buyers to the partnered brokerages. Between this, last week’s buyer driven cancellation of the $400,000,000 sale of Cartus, Realogy’s relocation company, and their falling stock prices I wouldn’t be surprised if we see more law suits and restructuring.
• Confusing forbearance: Any time a borrower calls their lender and asks about forbearance the borrower is automatically categorized as in forbearance, even if they never miss a payment. Depending on their loan type, once a borrower is in forbearance they cannot get a new purchase loan or do a refinance. The timelines have not been clearly defined so we do not know how long these borrowers will be unable to obtain a new loan.

Conclusion:

What does this all mean? It means the market is delicate but recovering. In order to successfully navigate today’s market, consumers need guidance from professionals who understand the subtle nuances in each area. The agents who are winning today know their market, have pivoted to manage risk, and who can take care of their client’s needs quickly.

copyright 2020 by Sarah Perkins

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.

theazmarket.wordpress.com

The real estate market continues to move forward at varying speeds across the country. The lack of current data continues to make it difficult to draw a complete picture of our market. Again, I encourage everyone to be very mindful about their news consumption; a lot of it is very negative and very skewed. Remember consumer sentiment drives our economy and fear stops forward progress. We are starting to see a light at the end of the tunnel; so be sure to share the good news with your clients.

As I mentioned last week, the severity of each market’s new listing slow down is directly correlated with the severity of the lock down for that city. A general trend has emerged as we look at the first cities effected by the virus; Seattle, LA, Bay area, and NYC. In the first week of the virus really spreading in each city, there was an almost immediate response with a slow down in new listings coming to the market. They dropped anywhere from 50%-80% of where they were at the beginning of March. Yes, drops of 50-80% in a week! Immediate response. They hung out at the bottom for 3-4 weeks and then started a slow recovery. We are seeing increases in new listings in all areas across the country except for New York City. Aside from in New York, we are now seeing new listing volumes increasing at a rate of 20-30% a week since they bottomed out. At that rate we could reach 2019 new listing levels in about 2 to 4 months. Based on this information many leading economists and real estate analysts believe we will have a check mark recovery or something that looks like the Nike Swoosh. The national data for new pending listings for March will be released next week, and I will share it next Friday. February’s national data for new pendings shows an increase of 2.4% month over month. That info is for BC, before corona virus, though. Pendings illustrate demand and that will show us the true health of the market.

Keep in mind, new listing info is our way of tracking consumer intent and seller confidence. Buyer demand is measured by the amount of supply. Nationally, our months of supply went up from 3 months in February to 3.5 months by the end of March. Remember 6 months is considered normal. February 2020 saw an 7% increase in closings from February of 2019. March 2020 closings were only 0.8% above where they were in March of 2019. In Arizona, it during the first half of April that we saw a drop off in new listings hitting the market, since then it has been increasing. We are up 18%, from April 2019 in new listings hitting the market in April through the 22nd. Our pendings are down 30% year over year during the same time period.

As you listen to this information please keep in mind where we were in February. We had low, very low, and extremely low inventory across the country. Even with these increases in inventory, we are still not up to normal levels. In Arizona, our inventory levels as of yesterday are 47% below normal. Our demand is about 12% below normal. Today’s demand is still greater than today’s supply. It is a good time to list. There are distinctions by price point and the luxury market has been the hardest hit.

Showing Time has made our demand analysis more interesting. Based on their data the past 6 weeks has been a roller coaster for physical showing requests. Nationally, from March 11 through April 12 physical showings requests dropped by 80%. Since April 12th the requests have increased 23%. In Arizona, our requests also dropped off significantly. From March 8th through April 12th our showing requests dropped 59%. Since April 12th showing requests have increased 26%. And remember, the buyers that are out looking now are serious buyers.

Finally, I want to take a moment to address price. Nationwide there are still no indicators pointing at dropping values. More people pulled their listings off of the market than reduced their price to sell. Again, this is very price point specific. The national median sales price is around $280,000 and in Arizona it is around $300,000. Properties listed around the median sales price are selling the fastest. I am hearing about listings getting multiple offers and selling for above asking. A few months ago properties in these price ranges were getting 30 offers and selling way above asking. Now they are getting 3 offers and selling at or above asking. Making it still a seller’s market. The silver lining of all of this is the slowing of the appreciation. Nationally our housing market was increasing at an unsustainable rate. First time buyers were getting shut out of the market. A healthy market cannot have giant appreciation rates. For example, if Arizona has 0% appreciation for the rest of the year, we will still have an appreciation of 6.5% in 2020. Normal appreciation is 3% a year. The one thing that will push down prices is sustained unemployment. There are expectations that some aspects of the economy will reopen in May which will be good for everyone as long as we can keep people healthy while doing so.

copyright 2020 by Sarah Perkins

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.

theazmarket.wordpress.com

As someone who loves to analyze real estate activity, the recent events have definitely thrown a wrench in how we analyze the data. In a day when more information is  available than ever before, we keep running into one consistent truth, there still simply isn’t enough data available to give us a decent expectation for the coming weeks and months. With that said, we can only use the information that we do have. Before I dive in too much about that data, I want to encourage everyone to stop watching the news and for you to encourage your clients to do the same. There is a lot of garbage information going around full of negativity. Consumer sentiment drives our economy, there are still good things happening and activity in all markets. The amount of that activity is directly correlated with the severity of the lock down orders. New York City’s real estate market has had the greatest decrease, nationally, in new listings hitting the market and we can all understand why that is the case.

Let’s start with what we do know. Consumer intent is very hard to measure; just because people can, doesn’t mean they will. New listings hitting the market shows intent, we know these sellers want to sell and it gives us data to work with. Nationally the hardest hit cities saw a 50%-80% drop in new listings in March. Nationally, new listings are down 23% since the beginning of March. In Arizona, we didn’t see a drop in new listings until April and since the beginning of the month we have seen a 9% drop in new listings hitting. Nationally we have had low inventory for years and extremely low inventory for about a year, today we have about 3 months of inventory. In Arizona we have had super extreme low inventory for a year. Nationally and locally, demand has dropped. In Arizona our demand has dropped by nearly 16% since mid-March. However, our supply remains far below the demand as measured by the Cromford Report. As of yesterday, our supply has increased to 49% below normal and demand has dropped to nearly 8% below normal. For the last few years our supply and demand lines have been pretty far apart, to the benefit of sellers. They have started moving closer together. We do not know what will happen next but we do know that today we have low inventory and anyone listing now is up against less competition. The longer we go, the greater the potential for increased competition, not only from pent up demand to sell but for people having to sell because they can no longer afford not to.

The buyers that are out are being cautious, the more listing choices they have the more cautious they become, this is not the time to push the market. One thing I find to be very interesting is that our data is not showing any signs of price decreases however many of the local Realtors I talk with are telling me about reductions. They start usually with an increase in seller concessions. The price drops are very price specific, the higher the asking price the greater the reductions. In our lower price points we are still seeing contracts coming in at or above asking. Greg, you told me in the million dollar and up listings have seen the largest reductions.

In March, locally we had huge contract fallouts. Over the past 2 weeks we have seen that get back to normal, which is good news! More good news is that nearly 54% of American homeowners have at least 50% equity and 37% of all homes are owned free and clear. When I am asked if things will be like 2008, our equity positions point to absolutely not. More equity means more regular Realtor facilitated transactions, not REOs and short sales. We do not know what will happen with the iBuyers but with them out of the markets right now, there is opportunity for you, those sellers still need to sell. The other day Opendoor announced they are laying off 35% of their employees.

Our environment is changing faster than ever before, a week feels like a quarter. Over 20 million people have filed for unemployment. Spousal abuse is up 40%. Divorce attorneys are getting those “I cannot be with this person another minute calls.” One divorce attorney in Phoenix did a poll that showed 57% of Millennials said they are filing for divorce as soon as they can leave the house. The economic stress, unemployment, and increase in divorce filings are all likely indicators of coming inventory.

We do not know what our recovery will look like or how they will re-open the economy. We do know that real estate it a huge part of the recovery. Many experts believe that our industry will be what pulls us out of this; real estate is 16% of our GDP.  

Every household on the planet is reflecting on where they are now, today, and where things will go for in the coming weeks and months and they need you for guidance. Remember good Realtors can deliver good news, but great Realtors can deliver bad news. Your clients need your guidance more than ever before. Reach out to everyone right now. They want to hear from you. Be the counsellor, be the consultant, be the info source, be the strength, they need you.

I have one last comment about our real estate industry that isn’t directly related to the virus. Remember those 3 class action lawsuits that were filed about a year ago? They are currently in the discovery phase. In one of the 3 suits the defendants filed for a 60 stay due to the virus. The courts denied the request. These cases continue to move forward and it is important to be mindful of the extreme impact they will likely bring. If the plaintiffs win, listings will become even more valuable.

copyright 2020 by Sarah Perkins

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.

theazmarket.wordpress.com

The other day I was talking with a national real estate analyst and he has evidence that new listings hitting the market in March in the hardest hit areas in the country like Seattle, NYC, and some metro areas in California decreased anywhere between 50-80%. The rest of the country is feeling the decrease to a lesser extent. Fortunately, Arizona didn’t see a drop in new listings in March. We had an increase of 27% of new listings hitting the market from March 1st through 30th. Given our low inventory, it still put us at 28% below where we were at the end of March 2019. In the first 10 days of April, we saw a 9% drop in new listings hitting the market.

We continue to have a decent market in most of the Phoenix metro area and in some small pockets there remains even stronger. Price point is a main driver in this as we have had very low inventory in the lower price points. It is finally creeping up for the first time in many months as we are now seeing vacation rentals and properties that would have been purchased by iBuyers hitting the market. Most of these properties are under $350,000.

The past 3 weeks have been chaos. Initially we saw a spike in contract cancellations. The week of March 16th our cancellations doubled week over week to 927. Since then our cancellations have decreased quickly and we are getting closer to typical escrow fallout. The number of new contracts written has decreased significantly since the first week of March. The week of March 2nd there were 2584 new contracts and the week of March 30th there were 1508.

We do not know how long this will last but we do know it will be months and not years. This will end and there will be pent up demand. There will also be many sellers who waited to list. It is easy to believe that when the economy opens back up we will see a lot of listings flooding the market. If you are a seller and need to sell now, it is a good time to list in just about every part of the country. Today’s sellers are up against a lot less competition. Each week there will be more and more people out of work which will reduce the total number of buyers. The unemployment will push more people to list their properties who otherwise were not planning on selling.

There is no reason to believe that we will have large price depreciation in all price points. Price is a lagging indicator that often takes years to show up. For example, home sales started dipping at the end of 2005 but prices didn’t start dropping until late 2007. There will likely be an increase in seller concessions though. We have already seen early price depreciation in the upper end markets. Between the stock market shifts and jumbo loan liquidity challenges which Ryan has mentioned on the past couple of calls, that market has had an extreme slow down. We are optimistic that the loan challenges will be worked out soon! Nationally in the past 4 of 5 recessions we saw modest price increases in overall the real estate market.

One thing that is important to point out in all of this is that consumer sentiment is the leading market indicator. When there is fear, people don’t buy houses. These massive unemployment numbers are very upsetting. We have to remember though, this is the first time ever that unemployment benefits have been offered to 1099 independent contractors. You cannot compare today’s numbers with the past numbers. We also have to keep in mind that the National Association of Home builders put Phoenix in the affordable range and we are one of the cheapest big cities in the country. People were making more money today than ever before. Wages were up year over year. Homeowners across the country have, on average, more than 50% equity. Before the virus consumer sentiment was very positive. I am very optimistic that we will bounce back as soon as everyone is out of the house and back to work.

copyright 2020 by Sarah Perkins

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.

theazmarket.wordpress.com