the AZ market

Category: National Real Estate

  • Afternoon Bite 8/24/2020 (Video)

    Every Monday afternoon Amber Kovarik and I talk about what happened this week in our local and national real estate market in 15 minutes or less.

    Today’s Takeaways:

    Many economists are calling this a K shaped recovery. That means that some are having a positive recovery or are fully recovered while for others the struggle continues to worsen. Economist and real estate consultant, Elliott Pollack calls it the “have and have not economy.” Those with jobs have saved money and are in good financial standing. Those who have lost their jobs, who are usually not homeowners, are finding themselves with fewer job prospects and, with the expiration of the CARES Act, significantly smaller unemployment checks.

    Economy:

    • Retail spending is up. National retail spending increased by 1.2% from June to July, increased 1.7% from February to July, and increased by 2.7% from July 2019. (Elliott Pollack & Company)
    • AZ retail spending increased by 4% in June and was up 13.7% over June 2019. (Elliott Pollack & Company)
    • People are buying stuff though, not services. Many young couples who had $30,000 saved for their weddings are now canceling their weddings and using that money for a down payment.
    • Small businesses are struggling. 97% of businesses in AZ are considered small businesses.

    Unemployment:

    • Initial unemployment claims in the US increased last week by 1.1 million, 135,000 more than the previous week. Continuing unemployment claims dropped by 636,000 to just over 14.8 million. (US Department of Labor)
    • Phoenix has the best performing job market in the country. It is not that more jobs were added, it is that fewer jobs were lost. (Elliott Pollack & Company)
    • Amazon announced it is bringing 3,500 new jobs to the valley, including a 500 employee tech hub in Tempe and a 150,000 square foot fulfillment center at Falcon Field in Mesa. (Arizona Republic)

    Mortgage:

    • For the ninth week in a row mortgages in forbearance decreased. It dropped from 7.44% to 7.21% or to roughly 3.6 million loans. Yes, we have a long way to go but an improvement is still an improvement. (MBA)
    • Mortgage loan applications declined 3.3% week over week. (MBA)

    Schools:

    Buyer trends are shifting, they want home offices, Zoom rooms, and home-schooling rooms. This week there was an article in Inman that said, “buyers are much less interested in things that used to be important: proximity to offices, shopping and urban centers, high-quality public schools, and even the prestige of neighborhoods.”

    Real Estate:

    • Commercial real estate is struggling. The biggest thing we have to watch is what happens with rentals given the unemployment challenges.
    • About 22% of single-family homes in the Phoenix metro area are rentals. (Elliott Pollack & Company)
    • 96% of rental owners are small Mom and Pop businesses.
    • Residential real estate is the shining star and what is pulling us in the right direction. Without the good things happening in real estate the entire country would be in far worse shape.
      • Supply: The available inventory continues to stabilize. Inventory remains low but is not dropping at incredible rates.
      • Demand: Pending sales up 16% year over year. This is significant given the low inventory. Our demand is over 21% above normal. The demand continues to rise but at a slowing rate.
      • Sales & Prices: Phoenix metro area closed sales are up 5% month over month and up 15% year over year. The median sales price is $320,000, up over 14% year over year. Healthy appreciation is 3% annually.
    • The National Association of Homebuilders/Wells Fargo Housing Market Index, which shows builder confidence, increased to 78, the highest reading since 1998.
    • Appraisals are getting trickier. They are taking longer to come in. Waiving the appraisal contingency is not working as well as it used to. Many appraisals are not coming in at value.

  • Phoenix Area Real Estate Update 8/21/2020

    “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness.” Leaving politics aside, the opening of Charles Dickens’ 1859 novel, A Tale of Two Cities, accurately describes today’s environment.

    Dickens continues, “It was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way—in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.”

    This is a tale of two economies and this tale is nonfiction.

    Economic Indicators:

    Many economists are calling this a K shaped recovery. That means that some are having a positive recovery or are fully recovered while for others the struggle continues to worsen. Economist and real estate consultant, Elliott Pollack calls it the “have and have not economy.” Those with jobs have saved money and are in good financial standing. Those who have lost their jobs, who are usually not homeowners, are finding themselves with fewer job prospects and, with the expiration of the CARES Act, significantly smaller unemployment checks.

    Best of Times:

    • National retail spending increased by 1.2% from June to July, increased 1.7% from February to July, and increased by 2.7% from July 2019. (Elliott Pollack & Company)
    • AZ retail spending increased by 4% in June and was up 13.7% over June 2019. (Elliott Pollack & Company)
    • Spending on goods is up 5% from February. (Elliott Pollack & Company)
    • People are canceling their weddings and using the money for a down payment for a house.
    • After a very rough March and April and then surprising jump in business, Airbnb filed initial public offering (IPO) paperwork with the Securities and Exchange Commission (SEC). (Airbnb)

    Worst of Times:

    • Spending on services is down 12% from February. (Elliott Pollack & Company)
    • Real GDP dropped 11% since February. (Elliott Pollack & Company)
    • Projections show a 5.2% GDP decline for 2020 (Blue Chip Financial Forecasts)
    • Airport travel is down 73.2% year over year. (TSA)
    • National hotel occupancy is 33.3% down year over year. (Elliott Pollack & Company)
    • Greater Phoenix seated restaurant dining is down 67.2% year over year. (Elliott Pollack & Company)
    • Many small businesses are struggling to keep their doors open.

    Jobs & Unemployment:

    Initial unemployment claims in Arizona dropped again last week. Our rate of new claims is only 218% above this week last year. It is an improvement over the 401% increase in year over year initial claims we saw in early July. (Elliott Pollack & Company)

    Initial unemployment claims in the US increased last week by 1.1 million, 135,000 more than the previous week. Continuing unemployment claims dropped by 636,000 to just over 14.8 million. (US Department of Labor)

    Phoenix has the best performing job market in the country. It is not that more jobs were added, it is that fewer jobs were lost. (Elliott Pollack & Company)

    Amazon announced it is bringing 3,500 new jobs to the valley, including a 500 employee tech hub in Tempe and a 150,000 square foot fulfillment center at Falcon Field in Mesa. (Arizona Republic)

    Mortgage & Forbearance:

    • For the ninth week in a row mortgages in forbearance decreased. It dropped from 7.44% to 7.21% or to roughly 3.6 million loans. Yes, we have a long way to go but an improvement is still an improvement. (MBA)
    • Mortgage loan applications declined 3.3% week over week. (MBA)

    School:

    Virtual learning is causing a lot of challenges across the country. The New York Times wrote about parents and teachers now being pitted against each other. School districts are changing plans almost daily. The San Tan Valley school district had to cancel in-school learning completely due to over 100 teachers calling out sick last Friday. Parents are feeling forced to choose between their kid or their job.

    My family is feeling the strain. The other day my husband and I were discussing our options for our three elementary school kids after we learned school is postponed again, this time until mid-October. I mentioned private school and my husband’s immediate response was, “If they go to private school I want to move.” We moved to our current location for the schools. If that conversation is happening in my house, it is happening elsewhere too.

    The length of the closures will influence the impact on housing. My kids are only 3 weeks into their virtual learning and I have already pulled them out of 2 different available options and upped my nanny’s hours by more than 50%. If this continues past October, we will be looking at more permanent alternative options. Kenya, in Africa, canceled the entire 2020/2021 school year.

    Based on survey results in my local district about 1/3 of students do not plan on going back when school reopens. Some school districts across the country report that up to 75% of students do not plan on attending in-school learning. Teachers are retiring in record numbers. Kentucky was having a teacher shortage prior to the pandemic and is not sure that all schools will be able to reopen due to a lack of available teachers. Some teachers are going private as families and neighborhoods are starting their own tiny schools in their own houses.

    Parents who were out of work are indefinitely delaying their return to work. Delaying the unemployment recovery furthers the divide between the haves and the have nots. A recent New York Times survey found that 1 in 5 families will have in-person help with homeschooling. That puts enormous pressure on households with two working parents. This is deepening the divide between teachers and parents.

    Buyer trends are shifting, they want home offices, Zoom rooms, and home-schooling rooms. This week there was an article in Inman that said, “buyers are much less interested in things that used to be important: proximity to offices, shopping and urban centers, high-quality public schools, and even the prestige of neighborhoods.”

    There is potential of a geographic redistribution of wealth that would have serious implications for housing. What remains to be seen is if this is a temporary issue or a systemic one.

    Residential Real Estate-The Best of Times:

    This is a good time to both sell and to buy given the low-interest rates. For the people who have stayed employed, savings are increasing and giving consumers the opportunity to re-evaluate home. Zillow president, Jeremy Wacksman said, “Consumers are thinking about changing their living space for a variety of different reasons. Whether it’s dreaming of a home office or moving to the suburbs because the commute doesn’t matter anymore, consumers are re-evaluating what they believe home is.”

    The Realtor.com Housing Market Recovery Index reached 104.8, meaning we have surpassed pre-pandemic numbers.

    The AZ Market:

    Cromford Market Index (CMI): Is the best leading indicator available (balance is 100, above 100 is a seller’s market, below 100 is a buyer’s market, prices rise at 110, and drop at 90). Yesterday it was 338.2, nearly 100 points above the pre-COVID peak of 241. On May 15 we hit 145.2.

    Supply: The available inventory continues to stabilize. Inventory remains low but is not dropping at incredible rates. As of yesterday, our inventory is 64.2% below normal. Active listings excluding under contract accepting backups (UCB) are below 8,000 (we should have 25,000) down nearly 41% year over year and over 6% month over month.

    Demand: Pending sales up 16% year over year. This is significant given the low inventory. Our demand is over 21% above normal. The demand continues to rise but at a slowing rate.

    Sales & Prices: Phoenix metro area closed sales are up 5% month over month and up 15% year over year. The median sales price is $320,000, up over 14% year over year. Healthy appreciation is 3% annually.

    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 the slight increase in listings and a slight slowing in demand. This will slow the massive price growth, which is a good thing. Closings always spike at the end of the month.

    The National Market:

    • This year is not following the typical seasonal shifts. This time of year we usually see an increase in listings and a slight drop in demand. Demand is increasing more slowly and inventory is no longer plummeting and prices continue to increase.
    • The National Association of Homebuilders/Wells Fargo Housing Market Index, which shows builder confidence, increased to 78, the highest reading since 1998.
    • Housing starts increased by 22.6% in July. (US Census Bureau)
    • A recent Zillow study shows that most urban real estate markets are selling as quickly as suburban markets are. Everywhere is a seller’s market.
    • According to Redfin rural home prices increased 11% in July, year over year. Suburban prices increased 9.2% in July, year over year and urban areas increased 6.7%.
    • Additionally, Redfin surveyed the evolution of home buyer’s choices comparing today to pre-pandemic plans.

    Commercial Real Estate-The Worst of Times:

    • While residential is doing exceptionally well, we have a looming dark cloud, rentals.
      • Most of the unemployed are renters.
      • With the expiration of the CARES Act and the upcoming expiration for the eviction moratorium, struggling renters will be more exposed.
    • About 22% of single-family homes in the Phoenix metro area are rentals. (Elliott Pollack & Company)
    • 96% of rental owners are small Mom and Pop businesses.
    • Luxury apartment and condo complexes are now offering 24/7 health care services including telemedicine and house-call options. Eden Health is a concierge health service partnering with commercial property owners to make the buildings more desirable.

    Final Thoughts:

    As we navigate the coming weeks and months, watching for the potential ripple effects of one economy into the other, it will be up to you to tell the real story of what is happening in real estate and why. It is up to you to filter through the noise to provide confidence and understanding.

    Copyright 2020 by Sarah Perkins

  • Afternoon Bite 8/17/2020 (Video)

    Every Monday afternoon Amber Kovarik and I talk about what happened this week in our local and national real estate market in 15 minutes or less.

    Today’s Takeaways:

    Second Quarter Earnings:

    In the second quarter of 2020, the total number of closed residential real estate transactions was down 17.8% year over year. This is because April and May were very low contract writing months. June was up. July even more so. (NAR) The drop in transactions is reflected in the Q2 2020 earnings reports from the major publicly traded real estate firms. Only three had year over year revenue gains.

    • Zillow: year over year revenue increased by 28%.
      • Hit a site-traffic record of 2.5 Billion visits.
      • iBuyer acquisitions dropped to the lowest levels since Q2 2018.
    • eXp World Holdings: year over year revenue increased by 33%.
      • Much of the growth is credited to headcount growth.
    • Redfin: year over year revenue increased by 8%.
    • RE/MAX: year over year revenue dropped by 24.2%.
    • News Corp, parent company of Move Inc which owns Realtor.com: year over year revenue declined by 6%.
    • Realogy, parent company of Coldwell Banker, ERA, Sotheby’s, Century 21, and Better Homes & Garden: year over year revenue decline of 27%.
    • Keller Williams: closed transactions were down 15.4% and sales volume was down 15%. (Privately owned company and shares limited data)

    Softbank Vision Fund, the primary source of funding for companies like Opendoor and Compass Real Estate posted profits in Q1 2020 after three-quarters of billion-dollar losses.

    Unemployment:

    • New unemployment claims dropped below 1M for the first time since the onset of the pandemic in March. 963,000 new claims were filed last week.
    • Continuing unemployment claims decreased by 604,000 to just under 15.5M
    • During July 1.8M new jobs were added bringing us down to a 10.2% unemployment rate.
    • The jobs added were mostly in leisure and hospitality, government, and retail (US Department of Labor)
    • The average American homeowner has $177,000 in equity. (KCM) This means that a financially burdened homeowner does not have to go through a foreclosure or short sale in order to sell the property.

    Housing:

    Sales & Prices: Phoenix metro area closed sales are up over 10% month over month and up 15% year over year. The median sales price is $319,490, up 3% month over month, and 12.5% year over year. Healthy appreciation is 3% annually.

    Lending:

    • Fannie Mae and Freddie Mac instituted a 0.5% refi fee for FHA and VA refinances. Adding on average of $1500 to the borrower’s closing costs for $300,000 refinances.
    • Rates are up slightly but still locking in people under 3%.
    • Appraisals are coming in low. Be sure to have the conversations with the appraisers. Give them the comps and ask questions.

  • Afternoon Bite 8/10/2020 (Video)

    Every Monday afternoon Amber Kovarik and I talk about what happened this week in our local and national real estate market in 15 minutes or less.

    Today’s Takeaways:

    Schools:

    • Before there are trends there is consumer sentiment. The conversations about “what do we do next?”
      • Private school and move?
      • Quit job and move?
      • What happens to the top performing school districts when the families move away?
    • Schools are a big part of location, location, location. If they are closed does the demand for a top-notch school district go down?
    • With kids at home, parents cannot go back to work or look for a new job; which will keep the unemployment numbers high.
    • Parents that are working from home are now also simultaneously teaching from home.
    • 85% of college students want to return to campus. Colleges and universities want to reopen but how? Some economists question whether major universities will be able to weather this storm. What would Tempe look like without ASU? (Chronicles of Higher Education)
    • Big 10 voted today to cancel the entire 2020 football season. This will be the first year since 1869 with no college football.

    Jobs:

    • In July 1.8 million new jobs were created.
    • Total filings are 55 million, continuing unemployment is at 16.1 million.
    • Nationally week over week filings decreased after 2 weeks of increases, those were the first increases since March. Hopefully we do not see more increases.
    • Arizona’s new unemployment filings continues to fall. We have not had any week over week increases since the beginning and Phoenix remains the strongest job market in the country.

    Forbearance:

    • Mortgages in forbearance declined for the seventh week in a row, down to 7.67% of all mortgages or roughly 3.8 million loans. (MBA)
    • With the expiration of the CARES Act, some foreclosure protections have ended and mortgage services are chomping at the bit to get the ball rolling on foreclosures. Remember these services are contractually obligated to make these loans whole, having to pay the difference to the lienholder in the secondary market.
    • 77% of loans in forbearance have at least 20% equity.
    • Many borrowers have no idea about options. This is a very important conversation to be having with your contacts.

    Real Estate:

    • Nationwide we are struggling with low inventory. The Phoenix listing market seems to have stabilized, just at an extremely low level. We are 63% below where we should be. Instead of 8,400 active listings we should have at least 24,000! Demand continues to outpace supply pushing prices higher. Right now we are running at an 11% appreciation rate. In years passed we were shocked that we hit 8%! And remember healthy appreciation is 3%.
    • 1031 Exchanges may be on the chopping block again. Getting rid of the nearly 100-year-old tax program to fund Joe Biden’s childcare and elder-care proposal. What does that mean for real estate? (Inman)

  • Phoenix Area Real Estate Update 8/7/2020

    Disneyland announced its closure due to COVID-19 on March 12. Despite being the usual 31 days, March lasted longer than any other month in history. People all over the world were glued to the news; trying to make sense of what was happening. April 19 was the turning point for Arizona real estate. In May the end was in sight. And then it wasn’t. Now it is August, a time when we used to buy school supplies and take the first day of school photos we are, instead, buying laptops for Kindergarteners begging them to hold still for one more minute.

    The intense political climate has brought more confusion than answers. Today it was announced that 50% of Americans do not trust the media. I was surprised that the number was not higher. We know a lot more now than we did five months ago but a great deal remains to be seen.

    Let’s start with what we do know. Real estate is saving our economy.

    What we know:

    Demand for real estate is intense all over the country and it is reflected in the 11% year over year sales price increase for the last week of July. The national median sales price is up to $315,000. (Redfin)

    TheAZMarket:

    Cromford Market Index (CMI): Is the best leading indicator available (balance is 100, above 100 is a seller’s market, below 100 is a buyer’s market, prices rise at 110, and drop at 90). Yesterday it was 324, the pre-COVID peak was 241 and bottomed out on May 15 at 145.2. This week we blew past the previous record set in 2005 at 312.9.

    Supply: The available inventory continues to stabilize; it just happens to be at an extremely low level. As of yesterday, our inventory is 63.3% below normal. Active listings excluding under contract accepting backups (UCB) are down over 42% year over year and nearly 11% month over month.

    Demand: Pending sales are down 2.5% since last month but up 16% year over year, which is significant given how much lower our inventory is today. Our demand is nearly 19% above normal and increased by 2.6% in the past seven days.

    Sales & Prices: Phoenix metro area closed sales are up nearly 15% month over month and up 16% year over year. The median sales price is $315,000, up 2.5% month over month and nearly 11% year over year. Healthy appreciation is 3% annually.

    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 the recent supply stabilization, demand continues to outpace supply, and sales are increasing. Closings always spike at the end of the month.

    What else do we know?

    • Today’s fast-paced, ultra-competitive real estate market is not only due to pent up demand, the historic low-interest rates and dropping inventory are fueling the fire. Realogy CEO Ryan Schneider said, “Today we are seeing inventory down 15 percent or more in every price band compared to a year ago when inventory was already at historic lows.” (Realogy earnings call)
    • NAR has added a new partnership to the Realtor Benefits Program, ReferralExchange, a concierge, lead vetting company. (NAR)
    • Nationally, new unemployment claims last week was 1.2M. 250,000 fewer than the week prior. We are now at 11% unemployment, down from 11.6% the previous week. (US Department of Labor)
    • New Arizona unemployment claims last week declined by 14% from the previous week. (US Department of Labor)
    • Mortgages in forbearance declined for the seventh week in a row, down to 7.67% of all mortgages or roughly 3.8 million loans. (MBA)
    • Delinquencies for commercial mortgage-backed securities hit 9.6% in July, up from 2.62% last year. (Bisnow)
    • Since the beginning of March 72,842 businesses on Yelp permanently closed. (Elliott Pollack)
    • Judge overturns Governor Ducey’s gym closure, stating they must be allowed to prove they can safely operate during the pandemic. (Phoenix New Times)
    • COVID changed homebuyers timelines, and not in the way expected. More are moving up their purchase timelines. (Redfin)

    “Somewhat counterintuitively, the coronavirus-driven recession is propping up the housing market. Homebuyer demand is surging despite GDP taking a historic nosedive in the second quarter, largely because Americans value the home more than ever and are willing to prioritize housing even as they cut back on other expenses. Additionally, the Fed is using low-interest rates to stimulate the economy, which is giving buyers more purchasing power and boosting home sales. But even with low rates, widespread unemployment and financial uncertainty mean not everyone who wants to buy a home is able to.”

    Redfin Chief Economist Daryl Fairweather

    According to a recent report by Point2, using data from Redfin, homebuyer profiles have also changed since the beginning of COVID. Full report: https://www.point2homes.com/news/us-real-estate-news/the-2020-us-homebuyer-profile.html

    What do we think we know?

    • McMansions are making a comeback. Maybe not 5,000 square foot houses, but definitely 3,000 square feet. (Inman)
    • Schools may reopen for in-person learning on 8/17 unless Governor Ducey extends the required delay in tonight’s press conference. In Chandler, where my kids go to school, the first quarter is now completely virtual with the possibility of in-person learning resuming mid-October.
      • Schools are a big part of location, location, location. If they are closed does the demand for a top-notch school district go down?
      • With kids at home, parents cannot go back to work or look for a new job; which will keep the unemployment numbers high.
      • Parents that are working from home are now also simultaneously teaching from home.
    • Both residential and commercial investors are backing away from new purchases. (Bisnow)
    • Economist Elliot Eisenberg said, “In yet another indication of a stalling national economy, after rising by ten percentage points a month in April, May and June, credit card purchases were flat in July and are now ten percent below their pre-Covid-19 level. This flatlining is probably due to rising coronavirus cases and subsequent behavioral changes in addition to state-imposed restrictions. The lack of continued improvement has primarily hurt restaurants/bars, gas stations, lodging, and airlines.”
    • Since February, rent growth is slowing at a greater rate in urban areas than it is in suburban areas. Reaffirming suburban migration trends. (Zillow)
    • Despite dropping to their lowest levels the “Investor Confidence Index” and “Startup Confidence Index,” investors in this sector are optimistic due to warp speed change, innovation, and increased adoption of new technologies within real estate. (MetaProp)

    What we do not know:

    • Typically, the second half of the year sells less than the first half. Starting in July we tend to see an increase in available listings and that increase remains through November. It is too early to tell if 2020 will fit the pattern.
    • 85% of college students want to return to campus. Colleges and universities want to reopen but how? Some economists question whether major universities will be able to weather this storm. What would Tempe look like without ASU? (Chronicles of Higher Education)
    • StreetEasy, a Zillow owned, NYC listing portal is implementing a 24-hour rule similar to the Clear Cooperation Policy. Non-compliance could lead to loss of the system’s tools and advertising. Will other advertising platforms follow suit? (Zillow)
    • eXp, coming off its most profitable quarter ever, purchased Showcase IDX with plans to create a consumer-facing search portal to compete with Zillow, Realtor.com, and Redfin. Is it possible to compete with portals of this size? (Inman)
    • In an effort to bring commercial tenants back into offices, landlords are now offering healthcare benefits through virtual health startup, Eden Health. Will it work? (Bisnow)
    • What is the future of commercial office space? Projections continue to indicate more trouble for the sector due to more permanent work from home options. (Bisnow)
    • The FED is playing a large role in bolstering the economy. The outcomes of the recent expiration of the expanded unemployment benefits created by the CAREs Act remains to be seen.
    • 1031 Exchanges may be on the chopping block again. Getting rid of the nearly 100-year-old tax program to fund Joe Biden’s childcare and elder-care proposal. What does that mean for real estate? (Inman)

    Too cool not to share:

    Loftus Hall, a 900 year old residential property in Ireland hit the market for $2.9M. In AZ an old house was built in 1980! Check it out here. https://www.irishcentral.com/dream-homes/irelands-haunted-house-sale

    Final Thoughts:

    There is a lot of information coming at us all of the time. After being the cause of a major economic downturn 12 years ago, the real estate industry is taking its role as the solution very seriously. We continue to overcome hurdle after hurdle. I am optimistic that we will continue to do so as we prepare for even more hurdles in the coming months.

    Copyright 2020 by Sarah Perkins

  • Afternoon Bite 8/3/2020 (Video)

    Every Monday afternoon Amber Kovarik and I talk about what happened this week in our local and national real estate market in 15 minutes or less.

    Today’s Takeaways:

    Communication with your clients is key. Be sure to share what is going on in real estate. The real estate industry is the driving force in our economic recovery. Things are happening quickly, demand is high, inventory is low, prices are increasing. This is a great time to be a seller and get top dollar. It is also a great time to buy with mortgage interest rates at historic lows.

    Lending:

    • Usually, there are about $2.5 trillion in loans being pushed through the pipeline, today it is $10 trillion. Four times more volume than usual!
    • Mortgages in forbearance declined again for the sixth week in a row. 7.74% of mortgages are in forbearance which is roughly 3.9 million loans. (MBA)
    • About 1.8 million loans in forbearance are seriously delinquent on their mortgage payments. (KCM)
    • 77% of the past due owners have at least 20% equity and 90% have at least 10% equity. (KCM)

    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, below 100 is a buyer’s market, prices rise at 110, and drop at 90). Yesterday it was 312.9 (matching the CMI’s record high from the spring of 2005), higher than the pre-COVID peak of 241, and more than double bottom we hit on May 15 of 145.2. Despite the over 15 point increase in the past week, the increase is slowing, slightly, which is good.
    • Supply: The available inventory continues to stabilize; it just happens to be at an extremely low level. As of yesterday, our inventory is 62.5% below normal. Active listings excluding under contract accepting backups (UCB) are down 42% year over year and 11% month over month.
    • Typically, the second half of the year sells less than the first half. Starting in July we tend to see an increase in available listings and that increase remains through November. It is too early to tell if 2020 will fit the pattern.
    • Demand: Pending sales are up 17% year over year, which is significant given how much lower our inventory is today. Our demand is 17.2% above normal and continues to increase.

  • Phoenix Area Real Estate Update 7/24/2020

    It is ironic that real estate caused the Great Recession and only 10 years later real estate is driving our economic recovery. As we face our economic reality of today; we have to look at the good (real estate), the bad (employment struggles and school closures), and the ugly (unemployment).

    “While other segments of the economy may be stuttering, the housing market continues to be a bastion of hope. Today’s (builder confidence) report indicates builders are confident that consumers will purchase new homes in this era of rock-bottom mortgage rates, despite the high unemployment numbers and other negative economic reports.”

    Bill Banfield, Executive Vice President of Capital Markets for Quicken Loans

    The Good: Real Estate

    • Nationally, homes are selling at the fastest rate ever recorded, on average within 20 days. (Zillow)
    • From May to June home builder confidence went up, housing starts increased over 17%, permits increased by 2%, and single-family completions increased by 9.6%. (US Census Bureau)
    • The national median sales price hit an all-time high in June at $311,300. (Redfin) This makes June the 100th month in a row with median sales price increases. (NAR)
    • Closings were up nearly 21% in June from May. We are now (only) 11.3% behind June 2019 in closed units. (NAR)
    • Industrial real estate, which was growing prior to March, has increased in appreciation and demand. Warehouses and large distribution centers are in high demand across the country. “The reality is these numbers are not the byproduct of the COVID pandemic; they are in spite of the COVID pandemic,” Colliers International principal Matthew Stauber said. (Phoenix Business Journal)
    • Mortgages in forbearance declined again for the fifth week in a row. 7.8% of mortgages are in forbearance which is about 3.9 million loans. (MBA)

    “The sales recovery is strong, as buyers were eager to purchase homes and properties that they had been eyeing during the shutdown. This revitalization looks to be sustainable for many months ahead as long as mortgage rates remain low and job gains continue.”

    Dr. Lawrence Yun, Chief Economist for NAR

    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, below 100 is a buyer’s market, prices rise at 110, and drop at 90). Yesterday it was 297.5, higher than the pre-COVID peak of 241 and significantly up from the bottom of 145.2 we hit on May 15. Up over 18 points in the past 7 days.

    Supply: The available inventory has started to stabilize. The drastic listing count decreases have slowed and have remained flat for the past 2-3 weeks. This stabilization happens to be at an extremely low level. As of yesterday, our inventory is over 61% below normal. Our total active inventory is down 29% year over year. When we remove under contract accepting backups (UCB) we are down 43% year over year.

    Demand: Pending sales are up 17% year over year, which is significant given how much lower our inventory is today. Our demand is 14.6% above normal and increased by over 3% in the past seven days.

    Sales & Prices: Phoenix metro area closed sales are up 20% month over month and up 13% year over year. The median sales price is $315,000, up nearly 5% month over month and 12% year over year. Healthy appreciation is 3% annually.

    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 the very recent supply stabilization. Closings always spike at the end of the month.

    The Bad: Employment Struggles & School Closures

    • Commercial office space occupancy protocols are being adjusted. The plans of phasing employees back into the office in groups of 25% has not worked out. To date, many office buildings are at around 5% occupancy. Rent payments remain near 100%. (Phoenix Business Journal)
    • Employers are looking for childcare options in order to get employees back to work.
    • “The back-to-work and back-to-school efforts are certainly linked,” Global Health Crisis Coordination Center Executive Director Ken Berta said, “We will need to get our children safely back to school to get all employees back to work.” (Bisnow)
    • Demand is increasing for private schools, tutors, and small-group homeschooling options. Given these options are only available to those who can afford it, there is a growing concern of an even larger disparity between the haves and the have nots.
    • It is unclear how the school closures will affect housing and employment, but the potential influences are significant. If schools do not reopen and there is a shift away from traditional education, people will not base their moves on school districts potentially changing the geographic distribution of wealth.

    The Ugly: Unemployment

    • First-time unemployment claims hit 1.4 million last week, up 109,000 from the previous week. This is the first week over week increase in 15 weeks. (Bureau of Labor Statistics)
    • Continuing unemployment claims dropped by 1.1 million to 16.2 million last week. Indicating new hires are outpacing layoffs. (Bureau of Labor Statistics)
    • This does not include the roughly 13 million independent contractors receiving benefits through the Pandemic Unemployment Assistance Program. (Wall Street Journal)
    • Both the expanded unemployed and the independent contractor benefits through the CARES Act are due to expire on July 31.
    • Rather than extending unemployment benefits for a short time, Congress is looking to create a new version of the CARES Act, but it is unlikely to happen before August.

    Other AZ News:

    • Unemployment in Arizona in June was 10%, lower than the national rate of 11.1%. (Bureau of Labor Statistics)
    • Arizona’s job losses are less than 48 states, behind only Utah. (Elliott Pollack & Company)
    • In June jobs were down 3.3% in Arizona year over year, nationally they were down 8.7% year over year. (Elliott Pollack & Company)
    • Greater Phoenix is the strongest employment market in the country; jobs are down only 3% year over year. (Elliott Pollack & Company)
    • Business applications are up 59.5% year over year. (Elliott Pollack & Company)
    • Single-family permits increased 4.3% year over year in the Phoenix metro area. (Elliott Pollack & Company)
    • Governor Ducey announced the extension of the moratorium on residential rental evictions from July 25 to October 31. (Governor’s Office)
    • A new plan has been created by the city of Phoenix officials to add 50,000 new housing units by 2030. According to a housing gap analysis, Phoenix needs an additional 163,067 housing units to accommodate the population growth.

    Emerging Trends:

    • Retail sales increased by 18.2% in May and 7.5% in June. Retail is now up 1.1% year over year. (US Census Bureau)
    • With the looming CARES Act expiration, publicly-traded multi-family property owners are adjusting protocols as they intend to collect past due rents or start the eviction process.
    • According to a recent Yelp survey 53% of the roughly 24,000 restaurants that have closed since March 1, have closed permanently. Other permanent closure rates are 35% for retail, 26% for gyms, 24% for beauty shops. The restaurant closures have sparked commercial investor interest and they are out looking for deals. (Restaurant Consultant Paul Ficalora)
    • The Fannie Mae monthly National Housing Survey which measures consumer confidence for housing shows a V-shaped recovery. Consumer sentiment for buying has made up all of the losses since March and is now matching November 2019 numbers. Consumer sentiment for selling is increasing and is on pace to fully recover by next month.

    Other Real Estate News:

    • According to the Mortgage Bankers Association this week, purchase applications are up 19% year over year, continuing the increase for nine consecutive weeks. Refi applications are up 122% year over year.
    • The First Time Homebuyer Pandemic Savings Act is a newly proposed act that allows first time home buyers to use up to $25,000 from their 401K as down payment, tax-free and penalty-free. It would expire on 12/31/2021. This new act builds on and extends existing provisions of the CARES Act that allows new and repeat buyers to use up to $100,000 of their 401K penalty-free, but not tax-free, and is due to expire on 12/31/2020.
    • The motion for a preliminary injunction filed by Top Agent Network (TAN) against NAR’s Clear Cooperation Policy has been denied. This is after their motion of a restraining order was denied in late May. The judge also stated that TAN is “unlikely to succeed” in their argument. Additional motions have been filed by brokerages and associations. (Inman)
    • The judge ruled against Realogy’s lawsuit forcing SIRVA to complete the $400 million acquisition of Realogy’s relocation company, Cartus. The judge stated Realogy violated the deal’s terms but could pursue a $30 million termination fee.
    • Realtor.com created a new Seller’s Marketplace platform offering traditional and iBuyer selling options. Rather than launching their own iBuyer, Realtor.com partnered with Opendoor, EasyKnock, HomeGo, and WeBuyHouses.com.
    • The Florida Panhandle is the best place to own a vacation rental according to rental management platform Rented Inc. Phoenix is #6.
    Source: Rented.com *based on a 3 bedroom, 2 bath stand-alone home.

    Final Thoughts:

    Arizona is leading the pack in our economic recovery. Real estate is a driving force in that recovery. As we continue in these uncertain times it is important to be cognizant of the facts in order to part of the solution.

    Copyright 2020 by Sarah Perkins

  • Afternoon Bite 7/20/2020 (Video)

    Every Monday afternoon Amber Kovarik and I talk about what happened this week in our local and national real estate market in 15 minutes or less.

    https://videopress.com/v/BRzI7aXv?posterUrl=https%3A%2F%2Ftheazmarket.com%2Fwp-content%2Fuploads%2F2020%2F06%2Fbite.png&preloadContent=metadata

    Today’s Takeaways:

    Know your numbers to communicate what is really happening in real estate. Provide good information to buyers, sellers, and borrowers. Without actual numbers, it is difficult for a potential consumer to make decisions.

    • According to the US Census Bureau Household Pulse Study, of the nearly 74 million renter-occupied housing units in the country, roughly 16% did not make their June payment. And of the nearly 150 million owner-occupied properties in the country, 5.5% did not make their June payment.
    • In Arizona, of the just over 1.6 million renter-occupied properties 9% did not make their June payment. And of the nearly 3.5 million owner-occupied properties in AZ, only 3.3% did not make their June payment. (US Census Bureau Household Pulse Study)
    • Mortgages in forbearance declined again, for the fourth week in a row. 8.18% of all mortgages are in forbearance, down from 8.39% the previous week. (Mortgage Bankers Association)
    • One-third of mortgages in forbearance are late on their payments. Two-thirds are current. (KCM)
    • Going deeper, of all the mortgages in active forbearance that are late on their mortgage, 77% have at least 20% equity. Only 10% of the past due mortgages have 10% or less equity. (Black Knight)
    • There are two types of unemployment temporary and Core or permanent unemployment. June’s Core unemployment was 5.9%. For comparison, it was 10.5% in April 2010 and 5% in February 2017. (KCM)
    • According to the US Census Bureau, 46% of the people who do not have a job and are over the age of 18 live in households with an income of less than $50,000 a year. These households tend to rent.
    • As economies reopen, we will likely see increases in listings. However, with the surges of new COVID-19 cases across the country (AZ isn’t the worst anymore!) sellers may delay selling, keeping inventories low and prices rising quickly.
    • As the CARES Act is set to expire at the end of the month, delinquencies may rise and that may impact housing however, with the high equity rates, the potential “distressed“ listings will still be regular sales.

    Conclusion:

    Windermere Chief Economist Matthew Gardner said, “We are exactly 120 days into this pandemic and, as much as there were some who fully anticipated that the U.S. housing market would have collapsed already, it simply hasn’t happened — and won’t happen.”

  • Phoenix Area Real Estate Update 7/17/2020

    Consumer sentiment has the greatest impact on our economy. It is more powerful than any piece of information or event. With today’s incredibly polarized media where everyone has an agenda, it is almost impossible to get accurate information. The headlines often conflict with what is actually happening, let’s talk about the real numbers.

    For example, look at the second quarter stock market returns versus the economic data. Investors have no idea why the markets ended so well when there was so much bad news in every headline. The S&P 500 increased by nearly 20%, the Dow Jones increased by nearly 18%, and the NASDAQ was up nearly 31%! Almost all of March’s losses were made up and the NASDAQ actually increased from previous highs. (Jeremy Kisner, Surevest Wealth Management)

    Suze Orman, a personal finance expert, not a real estate expert, is advising that now is a bad time to buy a house. That is as helpful as a dentist doing your taxes. Unfortunately for us, she has a large audience.

    Lendingtree released a study stating that 87% of home sellers are concerned about selling due to the pandemic, yet 372,000 homes sold in June. Our pendings are higher than they were 12 months ago and prices are increasing. Houses are selling faster today than they have in years.

    Last week I wrote about a report, from Apartment List, stating 32% of Americans did not make their housing payment the first 3 days of July. The same report said 30% did not make their June payment in the first 3 days of the month. These numbers were so high I dug deeper and found better data.

    According to the US Census Bureau Household Pulse Study, of the nearly 74 million renter-occupied housing units in the country, roughly 16% did not make their June payment. And of the nearly 150 million owner-occupied properties in the country, 5.5% did not make their June payment.

    In Arizona, of the just over 1.6 million renter-occupied properties 9% did not make their June payment. And of the nearly 3.5 million owner-occupied properties in AZ, only 3.3% did not make their June payment. (US Census Bureau Household Pulse Study)

    Forbearance:

    Mortgages in forbearance declined again, for the fourth week in a row. 8.18% of all mortgages are in forbearance, down from 8.39% the previous week. (Mortgage Bankers Association)

    One third of mortgages in forbearance are late on their payments. Two thirds are current. (KCM)

    Going deeper, of all the mortgages in active forbearance that are late on their mortgage, 77% have at least 20% equity. Only 10% of the past due mortgages have 10% or less equity. (Black Knight)

    Price Projections:

    There is a wide range of price projections emerging from top real estate experts. Mortgage Bankers Association projects a 4% annual appreciation and Corelogic, a clear outlier, expects a 6.6% depreciation. David Childers at KCM reached out to the chief economist at CoreLogic asking about this projection and was told it was entirely based on expected low demand solely due to unemployment. They did not address the lack of supply. That seems very odd when supply and demand are the fundamentals of pricing.

    Unemployment:

    According to the US Census Bureau, 46% of the people who do not have a job and are over the age of 18 live in households with an income of less than $50,000 a year. These households tend to rent.

    1.3 million people filed for unemployment for the first time this week, continuing the week over week decline for 15 weeks straight.

    There are two types of unemployment temporary and Core or permanent unemployment. June’s Core unemployment was 5.9%. For comparison, it was 10.5% in April 2010 and 5% in February 2017. (KCM)

    Future of Housing:

    Windermere Chief Economist Matthew Gardner said, “We are exactly 120 days into this pandemic and, as much as there were some who fully anticipated that the U.S. housing market would have collapsed already, it simply hasn’t happened — and won’t happen.”

    As economies reopen, we will likely see increases in listings. However, with the surges of new COVID-19 cases across the country (AZ isn’t the worst anymore!) sellers may delay selling, keeping inventories low and prices rising quickly.

    As the CARES Act is set to expire at the end of the month, delinquencies may rise and that may impact housing however, with the high equity rates, the potential “distressed“ listings will still be regular sales.

    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, below 100 is a buyer’s market, prices rise at 110, and drop at 90). Yesterday it was 279.4, higher than the pre-COVID peak of 241 and significantly up from the bottom of 145.2 we hit on May 15. Up over 21 points in the past 7 days.

    Supply: Our local inventory has been dropping every day since May 12. As of yesterday, our inventory is over 60% below normal. Our total active inventory is down 30% year over year. When we remove under contract accepting backups (UCB) we are down 43% year over year. We desperately need more listings.

    Demand: Pending sales are up 16% year over year, which is a big deal given how much lower our inventory is. Our demand is 11.5% above normal and increased nearly 4% in the past seven days.

    Sales & Prices: Phoenix metro area closed sales are up 10% year over year. The median sales price is up 5% month over month and over 11% year over year. Healthy appreciation is 3% annually.

    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 the continuation of demand outpacing supply. Closings always spike at the end of the month.

    Other AZ News:

    • Phoenix ranks #16 in the country for in most valuable residential real estate with a total value of $484 billion. (Lendingtree)
    • According to WalletHub Phoenix is the 41st most stressed-out city in the country. We have among the lowest financial, family, health, and safety stress but we are experiencing incredibly high work stress because we have the strongest job market in the country and have lost the fewest jobs. This means more of us are trying to juggle the stress of the world today while continuing to perform at work.
    • Phoenix area builder permits pulled in June increased by 9.6% year over year. (Home Builders Association of Central Arizona)
    • According to the Realtor.com Housing Market Recovery Index, the Phoenix metro area has completely recovered from the pandemic slow down. This index combines supply, demand, price, and days on market.

    Emerging Trends:

    • Realtor.com traffic hit an all-time high in June with 86 million unique visitors, breaking the previous record of 85 million in May. (Move.com)
    • Household savings rates are up 8% year over year, the highest since the early 1990s. (KCM)
    • Spending by the bottom 25% of earners has recovered from the 23% drop in March, while spending by the top 25% of earners is still down 17% though up from the 31% drop in March. The discretionary spending reduction continues to hurt the low-income earners who are the often the workers at salons, movie theaters, and restaurants. (Elliot Eisenberg)
    • Commercial real estate investors are starting to buy office buildings at 10-30% discounts in gateway cities. (Bisnow)
    • Meanwhile, industrial real estate sales prices continue to increase. (Bisnow)

    Other Real Estate News:

    • Mortgage interest rates hit all-time lows, again, keeping the demand high as every percentage drop equals roughly $40,000 of buying power.
    • According to Zillow, luxury home listings are recovering quickly while affordable home listings continue to decline, down 29% year over year.
    • Dotloop, the Zillow owned competitor of Skyslope, has a new third party data sharing policy. Agents using the platform need to opt-out of sharing the data rather than the typical opt-in. (Zillow)
    • In October, when the US Supreme Court reconvenes, they will determine whether or not the structure of the Federal Housing Finance Agency (FHFA) is constitutional. They recently ruled that the structure of the CFPB was unconstitutional.
    • According to the recently released Consumer Federation of America study, agent profiles on Zillow are the most useful for consumers; compared to Realtor.com, Yelp, Facebook, and Homelight.
    • New Silicon Valley start-up, Juno, is “reimaging” multi-family building. The prop-tech company is looking to disrupt the building process. (Jim Dalrymple, Inman)
    • In Fort Worth TX, a struggling multifamily property owner is suing the US Government challenging the eviction moratorium in the CARES Act. (Bisnow)
    • Knock.com is pivoting their model and instead of purchasing property they now offer mortgage financing, bridge loans, and concierge services. They are no longer working direct to consumer and will only partner with real estate agents.

    Final Thoughts:

    The negative news is growing at an alarming rate and the headlines are misleading. With so much bad info, it is important that you talk to your clients about what is really happening in real estate. Share this info, make videos, call your sphere, continue being the solution during these uncertain times.

    Happy Birthday Mom! I can’t wait until I can see you in real life again!

    Copyright 2020 by Sarah Perkins

  • Afternoon Bite 7/13/2020 (Video)

    Every Monday afternoon Amber Kovarik and I talk about what happened this week in our local and national real estate market in 15 minutes or less.

    Today’s Takeaways:

    The AZ Market:

    • Listings under contract are up nearly 20% year over year while active inventory is down 43% year over year. There are roughly 8800 available listings in our market, we should have 25,000 minimum for a market of our size.
    • Monthly median sales price increased by over 11% year over year. Supply and demand.
    • We have 1.5 months of inventory. Normal used to be 6. Three sounds great.
    • Nationally inventory has been dropping since September of 2019.
    • Mortgages in forbearance dropped for the 3rd week in a row.

    Other Real Estate News:

    • After a decade of growth in public transportation use, the car is king again.
    • Pop-up drive-in theaters are emerging in mall parking lots and other unused large open commercial spaces.
    • State and local legislators across the country working to pass upzoning laws. This would allow multi-family housing structures on land zoned for single-family residences.
    • Commercial mortgage-backed security delinquency rates increased to 10.32% in June, nearly hitting an all-time high. The June 2019 delinquency rate was 2.84%.
    • According to the Federal Reserve, the results for the Dodd-Frank mandated stress tests required for banks show that the largest American banks could lose as much as $47.6 billion on commercial real estate loans over the next two years.
    • According to a study by Apartment List released Wednesday, 32% of Americans did not make a complete July housing payment within the first three days of the month. This number will decrease throughout the month. In June it dropped from 30% to 11% of people who did not make their June housing payment in full.
    • Last week the US Supreme Court ruled that the Consumer Financial Protection Bureau (CFPB)’s structure (not the agency itself) is unconstitutional.
    • Last week Airbnb announced renters under 25 who have fewer than 3 positive reviews will not be able to book single-family residences near where they live.
    • The new Chinese National Security Law cracking down on dissent in Hong Kong is making American real estate investors question their investments.
    • Quicken Loans filed for IPO as Rocket Companies.
    • The real estate industry received 3% of the total money distributed by the Paycheck Protection Program (PPP)