the AZ market

Category: Weekly Market Update

  • Greater Phoenix Real Estate Update 10/30/2020

    Disclaimer: This update discusses the history of politics and housing based entirely on data and facts. At no point are personal political opinions inserted.

    Over 68 million Americans have already voted and we will see that number significantly increase in the next few days as we approach what seems to be the most contentious election yet. I researched how Republican and Democratic administrations impact housing and the economy and was somewhat surprised by my findings; the president’s political party influences housing and the economy even less than I initially thought. And real estate’s relationship with the president and Congress is based almost entirely on policy created by both sides of the aisle.

    Housing, the economy, and political leanings.

    Wall Street:

    Both housing and the stock market are influenced, not exclusively by the president but mostly by policy. The stock market does not like uncertainty. On average, it performs better in election years when the incumbent party wins, regardless of party. Since 1950, Wall Street investors have benefitted the most from a split Congress. This is because a split means less major policy change and Wall Street responds negatively to change.

    On average, since 1950 Wall Street has had the greatest returns with a Democratic president and a Republican Congress at 18.3% per year, while a Republican president and Democratic Congress has been the weakest at 8.7% per year. (LPL Research, Bloomberg)

    Ten of the past 11 recessions began with a Republican president, the one exception being President Carter in 1980.

    In 20 of the last 23 elections, the incumbent party has been re-elected when the S&P 500 was positive in the three months before the election. On August 3, the S&P 500 closed at 3,295. Yesterday, it closed at 3,310. An almost unnoticeable 15 point difference.

    The luxury and second home markets are impacted by the stock market more so than lower priced, occupied properties.

    Example of Policy Impact on Wall Street – Maximum Corporate Tax Rates:

    • In 1986 Republican President Reagan dropped corporate tax rates from 46% to 28%.
    • In 1993 Democratic President Clinton increased corporate tax rates from 28% to 35%.
    • In 2018 Republican President Trump decreased corporate tax rates from 35% to 21%.
    • In 2020 Democratic Vice President Biden proposed a corporate tax rate increase to 28%.

    US Corporate Tax Rates 1970-2020

    US Corporate Tax Rates
    US Corporate Tax Rates 1970-2020

    Housing Policy:

    In the 1990’s Democratic President Clinton started a big push to increase homeownership rates by instituting looser lending guidelines. Republican President Bush continued President Clinton’s strategy and homeownership rates peaked in 2005 at 69.1%. Homeownership rates then dropped to a bottom of 63% in 2016, the lowest rate since 1965; erasing all progress made by Presidents Clinton and Bush.

    In 2009 the government sponsored a first-time home buyer’s credit which, briefly, pushed the market back into a seller’s market before dropping back down into an epic decline and buyer’s market.

    In 2010 the Dodd Frank Act passed, despite being created for consumer spending protection this act has impacted how we close transactions.

    Vice President Biden has proposed a new first time home buyer’s credit. This would increase buyer demand across the country like it did in 2009. Based on our current inventory levels this would push prices even higher and faster; increased demand on already low inventory drives prices up.

    NAR’s Pending Home Sales Index:

    Since 2001 the pending home sales index has followed along with the overall economy, regardless of who is in the White House. Not only that, in September, pending sales were up 20.5% year over year. (NAR)

    “The demand for home buying remains super strong, even with a slight monthly pullback in September, and we’re still likely to end the year with more homes sold overall in 2020 than in 2019. With persistent low mortgage rates and some degree of a continuing jobs recovery, more contract signings are expected in the near future.”

    Dr. Lawrence Yun, Chief Economist for NAR

    According to a recent Redfin study, 16% of Americans said they would consider moving out of the country if their presidential candidate of choice is not elected, up from 9% during the 2016 election. That would help with our inventory struggles!

    Mortgage Interest Rates:

    Interest rates have been dropping consistently since the peak of 19% in 1981. Throughout the years there hasn’t been much more than a 2% increase before leveling out.

    The Federal Reserve is the largest purchaser of mortgage-backed securities (MBS) in the world. The current rate at which the FED is buying the MBS is keeping rates at these historic lows. At some point, the FED will slow its purchases of MBS which will drive rates up. (MBA, Urban Institute)

    Real Estate Campaign Donations:

    Presidential campaign donations from the real estate industry favored Republican candidates in the 2004, 2008, and 2012 elections and favored Democratic candidates in the 2016 and 2020 elections.  (Center for Responsive Politics):

    2020 Election (through 10/23)

    Biden Campaign (D)            $34,059,973

    Trump Campaign (R)           $22,710,600

    2016 Election:

    Clinton Campaign (D)         $15,552,405

    Trump Campaign (R)           $11,162,279          

    2012 Election:

    Obama Campaign (D)         $5,781,496

    Romney Campaign (R)       $15,470,102

    2008 Election:

    Obama Campaign (D)         $11,571,746

    McCain Campaign (R)         $9,570,576

    2004 Election:

    Kerry Campaign (D)        Did not make the top 5 and was less than $5.1M

    Bush Campaign (R)          $11,329,316

    Rentals:

    According to the Mortgage Bankers Association in September 8.5% or 2.82 million renters missed their payment. Many landlords that own single-family houses, duplexes, and/or triplexes will have equity and will be able to sell and make money on their investment, keeping them from defaulting on their commitments.

    In Greater Phoenix, single-family rentals are now renting at higher rates than a mortgage payment for the same house, including taxes and insurance. (Tina Tamboer)

    The apartment complexes will have more trouble. If there is a CARES Act 2 that provides assistance for landlords we may be ok but if not, there will be some fallout. The distress levels really depend on location, this will be a regional problem more than a national problem. San Francisco and New York City are already struggling with vacancies. Here in Greater Phoenix, places are full and a high percentage of renters are paying rent. My crystal ball is still blurry on what will happen next. Provided we do not shut down again or have mass hospitalizations everywhere in the country I would expect more of the same. If we have more of the same, delinquencies will continue to decrease and our economy will continue to recover.

    Final Thoughts:

    Regardless of who is sitting in the White House in January, residential real estate will, likely, continue to thrive and grow. Experts forecast 2021 to be another solid year with high demand. Real estate professionals should not be distracted by headlines or sensationalized news. Be part of the solution. If you haven’t already voted, VOTE! Early voting is still available, for more information and locations visit https://recorder.maricopa.gov/pollingplace/

    Please share this with your colleagues and clients.

    Copyright 2020 by Sarah Perkins

  • Greater Phoenix Real Estate Update 10/23/2020

    During recessions housing always does well, except when the recession is caused by housing. Despite external pressure, real estate continues to amaze economists and industry experts alike. Stay mindful of the misleading headlines and continue sharing current information with your clients. Logan Mohtashami wrote, “Stay positive, healthy and safe – and try not to create problems for yourselves by buying into boy-band folklore and fairytales.”

    The AZ Market:

    Cromford Market Index (CMI): Is the best leading indicator available (balance is 100, prices rise at 110, and drop at 90). Yesterday it was 354.3. The pre-COVID peak was 241 on March 20 then dropped to 145.2 May 15 and has been rising since.

    Supply: Inventory is 63% below normal. Active listings excluding UCB crept up slightly to about 8,400 but is still down 43% year over year.

    Southeast Valley New Listings: This a bi-weekly comparison of new listings in 2019 and 2020 for Tempe, Mesa, Chandler, Gilbert, Apache Junction, and Queen Creek. 2019 followed the typical annual cycle showing more activity in the first half of the year. 2020 is not following any typical patterns. Which makes it impossible to know what the orange line will do next.

    Demand: Pending sales are up 24% year over year, incredible considering the low inventory. Our demand continues to rise quickly and is 31% above normal.

    Sales & Prices: Monthly closed listings are up 21% year over year. The median sales price is $330,000, up 16.8% year over year. The median sales price has increased by 12% since June.

    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 illustrates our pandemic real estate rollercoaster. The last few weeks have hit peaks yet still show volatility.

    National Real Estate:

    • Luxury sales increased by 42% year over year in Q3 2020. (Redfin)
    • Existing home sales surged 21% in September year over year, pushing us to a seasonally adjusted annual rate of 6.5 million sales, all while inventory is at record lows. (NAR)
      • Pre-pandemic 2020 projections were for about 5.8 million sales.
      • In 2019 there were 5.35 million sales.
    • Rental growth is outpacing homeownership growth. Roughly 2/3 of households are owner-occupied while 1/3 are rentals. Lately, especially in the more expensive urban areas, rentals make up 50% of households. (Inman)
    • Through the first 9 months of 2020 there were 400,000 fewer listings on the market than there were through the first 9 months of 2019. (KCM)
    • Phoenix is the #2 metro area for in-migration from March through September. (Orbital Insight)
      • Nationwide people are moving to more favorable climates, with more favorable taxes, lower cost of living, and less social unrest. (Ivy Zelman)
    • Of the 15.9 million people who moved from February through July; 28% said they moved to avoid getting sick, 23% due to college campus closures, 20% to be with family, and 18% for financial reasons. (USPS)

    Affordability & Moving Trends:

    A growing number of experts are voicing concerns about sustainability and affordability. While the sky rocking prices are nice for sellers, more inventory and slower appreciation lead to a healthy housing market.

    • Nationwide total Inventory is down 38% year over year and down 41% for single-family homes. (NAR)
    • The national median sales price is up nearly 15% year over year to $350,000. (NAR)
    • Over the past 10 years, new household formation for owned properties has increased by about 5%. It has increased by 10% for new household formation for rented properties. Much of this is due to the lower homeownership rates for Millennials. (Zelman, US Census)
      • Population growth in Arizona, Utah, Idaho, Texas, and Nevada was 20% from 2010-2020.
      • Population growth in Connecticut, Pennsylvania, New York, Illinois, and California was 3% from 2010-2020.
      • Population growth in West Virginia was negative during the same time period.
    • From 1998-2002, 15% of Americans moved each year.
    • From 2013-2018, 11% of Americans moved each year.
    • In 2019 it was 9.8% of the population. (Ivy Zelman)

    Commercial Real Estate:

    • Retail sector rent collections increased in September to 83.16%, up from August’s 80.80%, and July’s 78.02%. (Datex)
    • At 5.8%, Phoenix had the largest single family, rental appreciation in the country in August, year over year. Nationwide the increase was 2.1%. (Corelogic)

    Wall Street:

    • More and more real estate companies are going public via IPO or SPAC.
    • On August 18 the S&P 500 closed higher than the previous all-time high on February 19, thus ending the shortest bear market in history. (Jeremy Kisner, Surevest)

    Real Estate News:

    • NAR has proposed changes to the Realtor social media professional standards in order to reduce discriminatory posts. Critics on both sides are upset about the proposal either being not enough or too controlling. Whether or not these changes will be adopted, expect changes to come.
    • FHFA and FHA extended pandemic forbearance plan options to single family owners with FHA loans through 12/31/2020. It was initially set to expire 10/30/2020. FHA forbearance plans are 6 months with an option to extend for an additional 6 months.
    • The anti-trust lawsuit the Department of Justice filed against Google on Tuesday may create a new timelines for the seller paid buyer commission anti-trust lawsuit against NAR and other entities. Many question if Amazon and Facebook will be next.
    • A recent article from Mike DelPrete, real estate tech consultant, illustrated the downward pressure on commissions coming from Opendoor and Zillow, both offering 2.25% co-broke versus the ARMLS average of 2.8%.

    Lending:

    • According to the Mortgage Bankers Association (MBA), purchase mortgage originations for 2021 are expected to increase by 8.5% from 2020. They expect 2021 will hit an all-time record of $1.54 trillion!
    • This week we hit another record low on mortgage interest rates. (MBA)
    • This chart shows 50 years of interest rates. My parents bought their first house in 1980 at 18%

    Delinquencies:

    • Over 6 million households (renters and owners) were either late or missed their full or partial payment in September. (MBA, RIHA)
      • 8.5% or 2.82 million renters missed their payment.
      • 7.1% or 3.37 million owners missed their payment.
    • At the beginning of April, 3% of renters were receiving unemployment benefits, at the end of September it was 7%. (MBA, RIHA)
    • At the beginning of April, 3% of homeowners with a mortgage were receiving unemployment benefits, at the end of September, it remained at 3%. (MBA, RIHA)
    • Landlords lost roughly $9.2 billion due to unpaid rents during Q3 2020, an improvement over Q2 2020. (MBA, RIHA)
    • Lenders lost roughly $19.4 billion due to unpaid mortgages during Q3 2020. (MBA, RIHA)
    • Early-stage delinquencies, less than 90 days, have dropped down to pre-pandemic levels. (Black Knight)
    • Seriously delinquent, 90+ days, mortgages dropped by 43,000 in September. The first sizeable drop since the onset of COVID 19. (Black Knight)

    Forbearance:

    • Mortgages in forbearance dropped from 6.32% to 5.92% to roughly 3 million loans, down from the previous week’s 3.2 million loans. (MBA)
    • This removes another 200,000 from forbearance programs. One reason given for the 400,000 over the past two weeks coming off is that borrowers do not know they can stay on or further negotiate their plans. If borrowers do not make any phone calls or connect with their lenders or servicers they are automatically being removed from their forbearance plan. This is a big deal.

    “The share of loans in forbearance declined across all loan types, primarily because of borrower forbearance plans expiring at the six-month mark. Federally backed loans under the CARES Act are eligible to be extended for up to 12 months, but borrowers must contact their servicer for an extension. Without that contact, borrowers exit forbearance, whether they are delinquent or current on their loan.

    Borrowers with federally backed mortgages should contact their servicer if they still have a hardship due to the pandemic.”

    Mike Fratantoni, MBA’s Senior Vice President and Chief Economist

    Resources:

    Unemployment:

    • In September Arizona’s unemployment rate was 6.7%. National unemployment was 7.9%. (Elliott Pollack)
    • Last week there were 787,000 in initial unemployment claims, down 55,000 from the previous week. (US DOL)
    • Continuing unemployment was 8,373,000 a drop of 1,024,000. This number is moving in the right direction! (US DOL)

    Arizona Facts:

    • Arizona has the 3rd lowest percentage of persons born in state at 39.9%. We are behind Nevada at 27.2% and Florida at 35.8%. Louisiana has the highest at 77.6%. (Elliot Eisenberg)
    • The Greater Phoenix Economic Council (GPEC) was named top economic development organization in the country for cities with populations of 500,000 or more. (Rose Law)

    Final Thoughts:

    There are pandemic winners and losers. The winners are those who sell goods and real estate. The losers are those who sell services, entertainment, and travel. Keep in mind that as the economy gets healthier, mortgage rates will increase and real estate demand will slow. Set this stage with your clients today and guide them through their decision making.

    Please share this with your colleagues and clients.

    Copyright 2020 by Sarah Perkins

  • Greater Phoenix Real Estate Update 10/16/2020

    Residential real estate is outperforming the rest of the economy. The strong market going into the pandemic combined with historic low interest rates enabled to us to get here. We learned that these low rates trump COVID and our home is our castle. Despite the unexpected growth we are experiencing today, many experts are seeing warning signs around future affordability.

    The AZ Market:

    Cromford Market Index (CMI): Is the best leading indicator available (balance is 100, prices rise at 110, and drop at 90). Yesterday it was 353.9, way above the pre-COVID peak of 241 and nearly 210 points above the 145.2 we hit on May 15.

    Supply: We stand at 1.4 months of supply and as of yesterday, our inventory is 63.4% below normal. Active listings excluding UCB crept up slightly to about 8,500 down 43% year over year. Today houses are like hand sanitizer and toilet paper in March, they are flying off the shelves.

    Demand: Pending sales are up 36% year over year, incredible considering the time of year and low inventory. Our demand is nearly 30% above normal. Demand rates slowed early in September and picked up speed towards the end of the month and continue into October.

    Sales & Prices: Monthly closed listings are up 23% year over year. The median sales price is $331,343, up 17.8% year over year. The median sales price has increased by 12% since June.

    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 illustrates our pandemic real estate rollercoaster. The last few weeks have hit peaks yet still show volatility.

    National Real Estate:

    Throughout the entire pandemic real estate as outperformed expert’s forecasts and economists have been surprised and surprised again by the resilience of the residential market. Check out these leading indicators:

    For those who have growing fear of a repeat housing market crash, please read my post comparing the 2005 and 2020 markets here https://theazmarket.com/2020/09/11/phoenix-area-real-estate-update-9-11-2020/ and this chart illustrates the extreme supply differences between then and now. The oversupply, among other things, brought prices down. Today’s extreme undersupply is driving prices up with no end in sight.

    Nationwide inventory is down 38% and the national median sales price is up 12.9% year over year to $350,000. (Realtor.com)

    Affordability:

    Ivy Zelman, a premier real estate expert, and several other economists have a warning and advice for us in real estate. It is to take advantage now of the historic low rates. The low inventory is likely to stay for a long period of time, especially in the move up market. This pushes up prices. The low mortgage rates are making homes more affordable driving up demand. These rates will not last forever and as rates increase along with the price increases, fewer people will want to move or be able to move. And more people will want to stay with their incredibly low rates. Creating a slowing of the market. Zelman calls it an “immobile market” and believes we will start seeing it in 2022. She expects 2021 to remain strong. But as the economy rebounds and gets healthier the interest rates will rise. A quarter point increase in rates equals a 3% increase in monthly payment which hurts affordability.

    The bottom line is that now is the time to be talking to everyone you know who is even slightly considering a move. Now is the time they can sell and take advantage of the low rates and the fast sales. If they are waiting, they will only be waiting for higher prices and tougher affordability which could lead to longer sales times. Based on her projections we have 15 months to get everyone into their dream home now before we see a potential market shift. And that market shift is only a slowness, no depreciation and certainly no crash. She says there is about a 0% chance of a foreclosure crisis.

    Zelman said, “Whatever they are waiting for, there is no good reason to wait. Waiting will only cost the consumer more.” She said now is the time to take advantage of this once in a lifetime opportunity.

    Commercial Real Estate:

    • Average apartment has shrunk by 9.7% since 2010. (RCLCO Real Estate Advisors)
    • Commercial investors are preparing for big opportunity in commercial real estate come Q2 2021 and Q3 2021 as forbearance and other protections, coined Compassionate Capitalism, expire. (Bisnow)
    • Arizona and Utah are the strongest performers for commercial real estate across all asset classes, this is likely due to lower cost of living, lower taxes, less social unrest, and high quality of life. (Phoenix Business Journal)
    • Federal guidance allows landlords to start eviction proceedings before the 12/31/2020 moratorium expiration. This is a likely response to the surge of lawsuits filed against the federal government by several landlord trade groups. (Washington Post)
    • Build to rent communities are on the rise and expected to continue as single family rentals increase continue to increase in demand. Today 22% of rentals are single family homes versus only 11% in 2000. (Elliott Pollack)

    Real Estate News:

    • Softbank’s multi-billion dollar Vision Fund is launching a special-purpose acquisition company or SPAC and is looking for a tech start-up to take public. This is the type of company that is taking Opendoor and UWM public. I expect to see this trend continue in the real estate disruptor space. This will bring large quantities of capital into the selected company. (Inman)
    • Finance of America announced they will go public via SPAC in early 2021 giving it a $1.9 billion valuation and $250 million. Blackstone will retain 70% ownership. (Wall Street Journal)
    • Offerpad is partnering with Aires, an international relocation firm. The partnership gives business access to all of Offerpad’s services including licensed Offerpad employees and their concierge services. (Inman)
    • Tempe is number 10 on Zillow and Yelp’s “Cityness Index” which rates suburbs based on affordability and quantity of urban amenities.

    Forbearance & Delinquencies:

    • Fannie Mae and Freddie Mac recently clarified that if a borrower missed a mortgage payment while in forbearance and did not make 3 timely, consecutive payments post-forbearance they are NOT eligible for new financing whether it is for a new purchase or refinance until 3 consecutive, timely, payments are made.
    • Forborne loans have to be paid back, forbearance is not forgiveness, it is a deferral only.
    • Total loans in forbearance dropped from 3.4 million to 3.2 million last week bring the percentage down to 6.32% from 6.81%.
    • Two-thirds of borrowers exiting forbearance were current, repaid forborne amounts, or moved into a permanent loan modification. (MBA)

    “The share of loans in forbearance declined across all loan types. With the forbearance program for federally backed loans under the CARES Act reaching the six-month mark, many borrowers saw their forbearance plans expire because they did not contact their servicer. Another reason for expirations was that borrower information needed to determine an appropriate loss mitigation option was not yet in place.”

    Mike Fratantoni, MBA’s Senior Vice President and Chief Economist
    • In September commercial and multifamily delinquencies decreased across all sectors. Lodging has the highest delinquency rate of 22.1%, down from 23.5% in August. Multifamily has the lowest delinquency rate of 1.7%, down from 1.9% in August. (MBA)
    • Americans have equity, a foreclosure wave is unlikely, a trickle may happen. 42% of American own their home free and clear. (John Burns Consulting)

    Resources:

    Unemployment:

    • Arizona unemployment is up last week but down from a month ago. We also had 3 consecutive weeks with under 10,000 initial claims. (Elliott Pollack)
    • National initial unemployment claims increased last week by 53,000 to 898,000. (DOL)
    • Continuing unemployment claims decreased by 1,165,000 to 10,018,000, hopefully next week we can get below 10 million! (DOL)
    • Experts do not expect unemployment rates to rise. (KCM)
    • Unemployment is disproportionately impacting younger people and lower income earners predominantly employed in the service industry. We are seeing a slow recovery in that sector as well, this recovery will move the needle the fastest on our unemployment numbers.
    • Today’s economic downturn is performing very differently than past recessions in timelines.

    Final Thoughts:

    Housing continues to outperform all other economic sectors. It is bolstering our economy and keeping many people employed. There are many outside pressures pushing very hard and yet real estate continues to amaze economists and industry experts alike. Stay mindful of the misleading headlines and continue sharing current information with your clients. Logan Mohtashami write on HousingWire, “Stay positive, healthy and safe – and try not to create problems for yourselves by buying into boy-band folklore and fairytales.”

    Please share this with your colleagues and clients.

    Copyright 2020 by Sarah Perkins

  • Greater Phoenix Real Estate Update 10/9/2020

    Last week a client told me about an acquaintance of hers who had received their 3-month forbearance letter stating they now owed their lender $8,000. They got scared and sold their home to Opendoor. They did not know they had extension options or the ability to stay in their house. There is an extreme lack of information being shared on forbearance.

    On a recent webinar, I heard a representative from Freddie Mac say the servicers and Realtors need to be the ones talking about forbearance, not the lenders or GSEs (Fannie, Freddie, Ginnie). Yikes!

    Forbearance:

    Disclaimer: I do not think we are going towards a foreclosure crisis, nor do I believe that the forbearance numbers will be seriously detrimental to our market.

    The worst thing for the housing market is to have empty houses. We went through that 10 years ago. Forbearance is not new, but how they are structured today is. The CARES Act enabled significant changes to benefit the borrower. Forbearance is designed to keep homeowners in their homes, which keeps the housing market healthy.

    One thing to note is that borrowers in forbearance are considered delinquent and they are being reported as delinquent. The delinquency is not hurting their credit score though, for now. The forbearance protections are for mortgage loans. There could be negative credit score impacts for delaying payment of credit cards or car loans. Also, at least for Freddie Mac, when a borrower leaves their forbearance plan they do have a slight hit to their credit. The extent is unknown.

    For the past 17 weeks in a row, total loans in forbearance continue to drop. Last week the rate dropped to 6.81%, down from the previous week at 6.87%. This means roughly 3.4 million mortgages are in forbearance.

    There are many different forbearance plans so it is important for borrowers to talk with their mortgage lender or servicer to learn the options available. Most forbearance plans are 3 or 6 months long with options to extend. Given that we are now 6 months into the pandemic about 70% of loans in forbearance are on extension.

    “The significant churn in the labor market now, more than six months into the pandemic, is still causing financial distress for millions of homeowners. As a result, more than 70 percent of loans in forbearance are now in an extension.”  

    Mike Fratantoni, MBA’s Senior Vice President and Chief Economist

    Of the 6.1 million homeowners who have been in pandemic-related forbearance plans, 41% or 2.4M have since exited, with the vast majority of those borrowers currently making their payments.

    Record levels of equity continue to help mitigate foreclosure risk, with only 9% of homeowners in forbearance having less than 10% equity in their homes. Foreclosure filings were down over 80% in August year over year, mostly because of the foreclosure moratoriums. Once those are lifted, we will see the full extent. Ultimately, because of the record levels of equity, I do not see a huge rush of foreclosures.

    The extremely low levels of available housing inventory, here and across the country will continue pushing prices higher adding to the equity available to the homeowners, giving struggling borrowers more options. In Greater Phoenix, housing has appreciated 17% in the past 12 months. (Black Knight and MBA)

    Delinquencies:

    • The national non-current (combination of delinquent and in foreclosure) is 7.2%
    • AZ non-current rate is 5.7%. We have the 12th best rate in the country. Idaho has the lowest non-current rate at 3.8% and Mississippi has the highest non-current rate at 11.7%. (Black Knight)
    • 30-day delinquencies dropped in Q2 2020 indicating new delinquencies may have peaked. (Elliot Eisenberg)
    • Through September 22, 88.9% of mortgages were paid, up from 88.6% in August. (Black Knight)

    Exiting Forbearance:

    In order for a borrower to leave forbearance they have to make 3 consecutive payments and come up with a plan with their servicer or lender on how they will pay back the forborne amount that was deferred while they were in forbearance. One thing that is very important for everyone to know is that forborne payments will be repaid, they are not forgiven.

    There are a number of ways a borrower can leave forbearance, not all of them require the owner to sell their property. Some of these options include:

    • Utilizing a 401K in one of two ways.
      • Individuals are allowed to borrow from their 401K with the option of paying themselves back with interest, since it is a loan being paid back – essentially paying yourself back there are no penalties. Talk to your 401K administrator for details.
      • Through provisions of the CARES act an individual can also withdraw an amount of their 401K with no penalties. Again, talk to your 401K administrator for details.
    • Permanent loan modification or refinance, after making 3 payments in a row, to something that allows borrowers to stay. Some scenarios include adding the forborne amount at the end of the loan, some pay a lump sum to get caught up, some offer payment plans to get caught back up.
    • Rentals are in high demand with quickly appreciating values. What about moving out of the property and renting it out to make up the difference in payments.
    • Sell and buy something more affordable, after 3 payments in a row have been made. Pay off the loan and get a new loan with more agreeable terms.
    • Sell, pay off the loan and forborne amount and rent or move in with family.

    Resources:

    Unemployment:

    September’s numbers came out last Friday showing that our economy added 661,000 jobs. This was below expectations. They did revise up the total of new jobs from August though. The unemployment rate is now 7.9% and we have made up 11.5 million of the 22 million jobs lost, which is over 50%. (US Department of Labor)

    Elliott Pollack expects a full recovery of all industries in Arizona by the end of 2022. It would be great to be back at full employment in two years.

    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 352.6, way above the pre-COVID peak of 241 and over 200 points above the 145.2 we hit on May 15.

    Supply: New listings have increased by 11% but they were absorbed as quickly as they arrived so our total inventory remains very low. As of yesterday, our inventory is 63.6% below normal. Active listings excluding UCB  crept up slightly to about 8,300 down over 42% year over year.

    Demand: Pending sales are up 25% year over year, huge despite our low inventory and time of year. Our demand is over 28% above normal. Demand rates slowed early in September and picked up speed towards the end of the month and continue into October.

    Sales & Prices: In September closing were up 11% year over year. The median sales price is $329,900, up 17% 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 illustrates our pandemic real estate rollercoaster. You can really see the increase in sales in September!  

    Real Estate News:

    • NAR’s motion to dismiss the seller-paid buyer commission, class action lawsuit was denied. Discovery is ongoing. Patrick Kearns of Inman writes, “In denying the motion to dismiss, Judge Andrea Wood argued that the plaintiffs would have paid ‘substantially lower commissions,’ if not for the buyer broker commission rules, and the rules have created an artificial inflation of commission rates.”
    • Gary Keller announced Wednesday that he is stepping back from CEO to be the Chairman of the new holding company, KWx. Josh Team, will now be the President of Keller Williams Realty and will take over the majority of Gary Keller’s roles. (Inman)
    • In September the national median sales price reached $319,769, an all time high. (Redfin)
    • Utah MLS is the first MLS to adopt an API for its data feed. API is instant, IDX and RETS feeds are slow and clunky, this will enable data to transfer nearly immediately and will allow anyone connected to that API to aggregate the data more easily. The benefit is more accurate, faster data straight to the consumer. I expect all other MLS’s to follow suit. (Inman)
    • In 2019 the FTC opened an investigation into Opendoor investigating advertising on its website. (Inman)
    • Experts at Bankrate compiled a resource with the 50 best online mortgage lenders including the pros and cons of online lending, how to choose the best lender, and the key differences between a conventional lender and a fully remote process. Click here for the article.

    Realtor Survey:

    Jim Dalrymple with Inman surveyed Realtors across the country asking for an evaluation on how their business is doing now and how it was 6 months ago. These are the results:

    Final Thoughts:

    As many in our industry have the best months of our careers it is important to be mindful of outside influences on housing. There is no time for complacency, things have never changed faster.

    Please share this with your colleagues and clients.

    Copyright 2020 by Sarah Perkins

  • Greater Phoenix Real Estate Update 10/2/2020

    Our economic recovery is complicated and Q4 2020 will be a continuation of the complication. I expect we will see more of the same; tight inventory, high demand, continued recovery – slower than we would like but progress nonetheless, and holiday commercials will replace political ads.

    The AZ Market:

    Real estate consultant Jim Belfiore expects to see a coming wave of new home construction in Pinal County, specifically in Coolidge, Florence, and Casa Grande.

    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 350.2, way above the pre-COVID peak of 241 and over 200 points above the 145.2 we hit on May 15. The past 7 days saw a 5.1 point increase.

    Supply: New listings have increased by 11% but they were absorbed as quickly as they arrived so our total inventory remains very low. As of yesterday, our inventory is 63.8% below normal. Active listings excluding under contract accepting backups (UCB) are still around 8,100 (we should have 25,000) down over 41% year over year.

    Southeast Valley New Listings: This a bi-weekly comparison of new listings in 2019 and 2020 for Tempe, Mesa, Chandler, Gilbert, Apache Junction, and Queen Creek. 2019 followed the typical annual cycle showing more activity in the first half of the year. 2020 is not following any typical patterns. Which makes it impossible to know what the orange line will do next.

    Demand: Pending sales are up 25% year over year, huge despite our low inventory and time of year. Our demand is nearly 27% above normal. Demand rates slowed early in September and picked up some speed towards the end of the month.

    Sales & Prices: In August, 35% of homes closed over asking price. Phoenix metro area closed sales are up nearly 17% year over year. The median sales price is $326,800, up 17% 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 illustrates our pandemic real estate rollercoaster.

    National Real Estate:

    In August we hit 6 million (seasonally adjusted annual rate) existing home sales. The last time we hit that number was December of 2006. Sales were up 10.5% year over year. This is particularly surprising since there were only 1.41 million properties (annualized rate) on the market in August, the lowest level on record, with limited data prior to 1999. (Matthew Gardner, Windermere Chief Economist)

    The Fannie Mae Home Purchase Sentiment Index illustrates consumer confidence for buying and selling real estate. According to the most recent update, from August, consumers believe it is a good time to buy. The buyer consumer confidence index has fully recovered to pre-pandemic levels. What is interesting is that seller consumer confidence has not fully recovered. This is seen in our low inventory levels with continued high demand.

    Many expect that when consumer confidence for selling fully rebounds is when we will see an increase in inventory. As sellers gain confidence and enter the market the extreme sales price appreciation will slow and buyers will have more choices. This will be good for buyers and for the overall health of the real estate market.

    Do not let the idea of rising inventory levels scare you. We desperately need more available listings across the country. Nationwide available inventory is down 36.4% year over year. (NAR)

    New home sales hit a 14 year high in August and crossed the 1M in sales mark. While new home listings decreased by 4.1% in August. Labor shortages and high cost of lumber are likely factors. (Redfin)

    Commercial Real Estate:

    • 90.1% of apartment renters made full or partial payments by September 20, up from 90% in August. (National Multifamily Housing Council)
    • Investor confidence continues to struggle for commercial real estate in most sectors. (Green Street)

    Real Estate News:

    • Spencer Rascoff, the former CEO of Zillow, is co-chairing a new special purpose acquisition company (SPAC) with a goal of taking a tech company public. It is through a SPAC Opendoor and UWM will go public. (Inman)
    • Realtor.com and Rocket Mortgage announced an advertising partnership that directs buyers to Rocket Mortgage’s pre-approval application for a digital mortgage approval.
    • Facebook announced it is working on a new augmented reality glasses project. Remember Google Glass? Similar but with newer technology. The project is several years from completion. Proptech investors are already planning on how to use it within real estate and property management. Starting in San Francisco and Seattle, Facebook has teams out collecting information via sensors gathering video, audio, and location data. Facebook is collecting data from inside buildings as well.

    Mortgage & Forbearance:

    • For the 16th straight week loans in forbearance decreased. They went from 6.93% to 6.87% dropping the number to roughly 3.4 million mortgages enrolled in a forbearance plan. (MBA)
    • Mortgage applications are up 22% year over year.

    “The share of loans in forbearance continues to decline and is now at a level not seen since mid-April. Many homeowners with GSE loans are exiting forbearance into a deferral plan and resuming their original mortgage payment, but waiting to pay the forborne amount until the end of the loan.”

    Mike Fratantoni, MBA’s Senior Vice President and Chief Economist

    Resources:

    Economy:

    • College enrollment is down 2.5% year over year. During economic downturns, community colleges tend to see an increase in enrollment however, this year enrollment is down 7.5%. (National Student Clearinghouse Research Center)
    • Personal savings rates have increased to 24% compared to early March when they were 7%. Bank deposits are up $2 trillion in 6 months. (Matt Stephani, Cavanal Hill Investment Management)
    • Elliott Pollack expects that nearly all industries in Greater Phoenix will be fully recovered by the end of 2022 and that housing will continue being the strongest sector.
    • Hotel occupancy rates in August in Arizona were 47.9%, up from 46.5% in July, and down from 64.6% in August 2019.
    • One in six or about 100,000 restaurants have closed permanently, leaving about 3 million people out of work and an expected $240 billion in losses by the end of the year. (New York Times)
    • In July, the most recent available data, US airlines carried 73% fewer passengers than in July 2019, better than the 96.1% drop seen in April 2020 compared to a year earlier. (US Department of Transportation)
    • Nationally, new business applications dropped from 27,000 a week to 18,000 a week from mid-March through mid-April. By early July they were up to 40,000 a week, the average is 22,500 a week. Applications have dropped since July but remain 20% above normal. This economy is driving entrepreneurship! (Elliot Eisenberg)

    Unemployment:

    • This morning September’s numbers were released and I will go deeper into those next week.
    • Elliott Pollack on Phoenix unemployment, “While the United States was losing 98 percent of all jobs created between the last recession and February, greater Phoenix only lost 41 percent.”
    • Initial unemployment claims were 837,000 last week, a decrease of 36,000. (US Department of Labor)
    • Last week, continuing unemployment decreased 980,000 dropping to 11,767,000. (US Department of Labor)

    Final Thoughts:

    Matthew Gardner said, “In all, the reports were very solid and show housing as being the shining light in an economy that is still mired by the COVID-19 pandemic.”

    Please share this with your colleagues and clients.

    Copyright 2020 by Sarah Perkins

  • Greater Phoenix Real Estate Update 9/25/2020

    As we approach the fourth quarter new and/or updated projections for the coming year are emerging. Politics aside, nothing about 2020 has been predictable; economists and analysts struggle to make sense of it all.

    “The US economy and labor market are recovering from the coronavirus-related downturn more quickly than previously expected, economists said in a monthly survey.

    Business and academic economists polled by the Wall Street Journal expect gross domestic product to increase at an annualized rate of 23.9% in the third quarter. That is up sharply from an expectation of an 18.3% growth rate in the previous survey.”

    Harriet Tory, Wall Street Journal

    National Real Estate:

    • In August resale home sales increased 10.5% year over year with the most sales since 2006. It was the 102nd straight month of annual gains. (NAR)
    • New homes crossed the one million sales threshold in August, the first time since 2006. (US Census Bureau)

    “Home sales continue to amaze, and there are plenty of buyers in the pipeline ready to enter the market. Further gains in sales are likely for the remainder of the year, with mortgage rates hovering around 3 percent and with continued job recovery.”

    Dr. Lawrence Yun, nar’s Chief economist
    • Lumber shortages due to mill closures and massive wildfires have driven up prices 170%, adding, on average, $16,000 to the cost of a single-family new build. (NAHB)
    • Given the unexpected, continued demand, despite high unemployment rates, major real estate companies adjusted their future price projections significantly. Zillow initially predicted a 3% decrease in home prices and now is predicting a 3.6% increase. Corelogic the outlier from the start went from a 6.6% decrease to a 0.6% increase. (must have missed the 16% appreciation in greater Phoenix!)

    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 347.6, way above the pre-COVID peak of 241 and over 200 points above the 145.2 we hit on May 15. The past 7 days saw a 2.5 point increase, a far cry from the 20 point increases we saw in June.

    Supply: Inventory has actually, slightly, increased, but it is easy to miss since it is absorbed so quickly.  As of yesterday, our inventory is 64.0% below normal which is actually up 0.1%!!! Active listings excluding under contract accepting backups (UCB) remain around 8,100 (we should have 25,000) down 42% year over year and down over 2.5% month over month. This is the time of year when we typically see inventory increases.

    New build permits were up 25.3% in August, year over year and up 11.9% year to date. (RL Brown)

    Demand: Pending sales up 23% year over year, huge despite our low inventory and time of year. Our demand is over 25% above normal. After demand increases began to slow, it has started increasing a little faster again.

    Sales & Prices: In August, 35% of homes closed over asking price. Phoenix metro area closed sales are up nearly 19% year over year. The median sales price is $325,000, up 16% 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 illustrates our pandemic real estate rollercoaster. What stands out to me is the September spike.

    Commercial Real Estate:

    • With an affordable home shortage of 7 million, mobile home parks continue to be one of the best performing real estate investments and are often considered recession-proof. There are roughly 45,000 parks nationwide. On average they bring a 4% annual rate of return and have low vacancy rates of 4%-6%. (Inman)
    • Startup, Civvl, is a new company created to “connect landlords with gig workers to help with evictions.” The legality is questionable particularly given the CDC’s eviction moratorium. Several tenants’ rights groups have raised concerns as well. (Bisnow)
    • There are roughly 48 million rental units nationwide and The Urban Institute estimates it would cost about $16 billion a month to directly support tenants, which by default would support their landlords.
    • New lawsuits have been filed against the CDC stating that the federal government has overstepped its authority with the nationwide eviction moratorium. (Rose Law Group)

    Zillow:

    Zillow announced on Wednesday that it is changing the structure of its iBuyer, Zillow Offers. Soon its iBuyer purchases and sales will be handled by a licensed, salaried, Zillow employee.

    This change will take effect January 2021 in Atlanta, Phoenix, and Tucson with other markets to follow. All properties for sale will be listed on the local MLS which means that Zillow Homes, the brokerage, and its agents are members of NAR. Zillow Offers currently operates in 25 markets nationwide.

    Combined with Zillow’s mortgage company, Zillow Home Loans, and title company, Zillow Closing Services, Zillow can now offer a complete end to end transaction.

    Zillow maintains its stance that it does not want to represent buyers and sellers outside of properties it does not own or purchase directly. Although many believe this is Zillow’s soft launch into traditional real estate.

    Unlike Opendoor and Offerpad who both now offer listing services, Zillow will continue working with its partner Realtors, non Zillow agent-employees, in referring the sellers of properties not purchased by the iBuyer. Zillow Offers currently purchases about 2% of all seller inquiries.

    Given Zillow Homes’ local MLS membership, Zillow will be adjusting its previous data feeds, which currently come from around 10,000 agreements, to come through a direct IDX feed. This will allow it complete access of current listing information and roughly 600 data feeds to manage. This is a game changer for Zillow. Not only does this reduce data costs, it will improve accuracy, timeliness, and provides the ability for far more detailed data aggregation. It will have the ability to have the accuracy of Redfin for its 200 million monthly unique visitors.  Web traffic and effective data aggregation are what built giants like Facebook, Amazon, and Google.

    The IDX feed may impact the brokerages who currently do not syndicate to Zillow.

    The appearance of listings on Zillow will be subject to the local MLS regulations. Buyer’s agents contact information will now be shown separately from the listing agent’s information. Premier Agents will see some changes in customer-facing advertising but not in lead flow.

    Zillow and Trulia will be discontinuing their “featured listings” option.

    Deutsche Bank, one of the world’s leading financial services providers and international investment bank, for the second month in a row upgraded Zillow’s stock price, this time due to Opendoor’s recent announcement of going public. The bank believes that Opendoor’s movement will draw further attention to iBuying thus driving more business to Opendoor and its biggest competitor in the iBuying space, Zillow Offers, meaning more business for Zillow Homes and its agents.  As they say, “a rising tide lifts all boats.”

    The research analysts said, “We see Zillow’s conversion to a more formal brokerage model as it relates to sales of Zillow Offers (ZO) homes in several markets as a natural evolution to improve unit economics in ZO and vertically integrate to better control the user experience and cross sell other Zillow products.”

    The bank sees this as a positive financial move for Zillow, furthering the separation from being a media company to becoming a portal with significantly greater earning potential.

    Real Estate News:

    • United Wholesale Mortgage (UWM) plans to go public in Q42020 via special purpose acquisition company (SPAC) or blank check company. Gores Holdings IV is already publicly traded and will merge with UWM. The valuation is estimated to reach $16.1 billion, which makes this the largest SPAC deal ever. (Wall Street Journal)
    • LoanDepot is considering an IPO with a potential valuation of $12-$15 billion, which could happen as early as Q42020. (Bloomberg)
    • 28.7% of Redfin’s users looked to move to another area, up from 27.4%, and is the highest percentage yet. Sacramento, Austin, and Phoenix topped the charts for destination cities; affordability being one the biggest drivers.

    Mortgage & Forbearance:

    • Mortgage applications increased last week by 6.8% from the previous week. 64.3% of those applications were for refinances, up from 62.8% last week. (MBA)
    • Total loans in forbearance dropped to 6.93%, down from 7.01% last week, continuing the 5-month decline. Roughly 3.5 million loans are in forbearance programs. (MBA)
    • Roughly 680,000 homeowners are late on their mortgage and are eligible for a forbearance plan but are not in a forbearance plan. A recent survey shows the lack of participation is due to confusion, fear, and lack of awareness of such options. (Wall Street Journal)
    • The CFPB, FHFA, HUD, VA, and USDA created a joint effort mortgage and rental assistance platform, for more information visit https://www.consumerfinance.gov/coronavirus/mortgage-and-housing-assistance/

    Unemployment:

    You may hear about 25-30 million unemployed Americans. There is a variety of unemployment categories; these are the biggest ones from yesterday’s report. Despite the slowing of these drops, most of these are going in the right direction. (US Department of Labor)

    • Initial unemployment claims
      • National: 870,000 an increase of 4,000 from the previous week.
      • Arizona: 10,015 a decrease of 1,328 from the previous week.
    • Continuing unemployment claims
      • National: 12,580,000 a decrease of 167,000 from previous week.
      • Arizona: 194,479 a decrease of 5,705 from the previous week.
    • There were 630,080 initial claims for Pandemic Unemployment Assistance which provides unemployment benefits to independent contractors who otherwise are not eligible for regular benefits. A decrease of 45,074 from the previous week.
    • There were 11,510,888 continuing claims for Pandemic Unemployment Assistance. A decrease of nearly 3 million from the previous week.

    Greater Phoenix continues to be the best performing job market in the country for 2020. Arizona is #3 for best performing state job market, behind Utah and Idaho. (Elliott Pollack)

    An unemployment rate of 4.1%-4.7% is considered full employment. The US Bureau of Labor Statistics and Wall Street Journal survey of economists projects 2023 to be the year we get back to being, at least close to full employment. (KCM)

    Final Thoughts:

    Big money keeps getting bigger with sky-high valuations and it is coming after real estate, that isn’t new, but the volume of capital is. I expect demand to continue to be strong, as long as rates stay low. At some point, likely in the not too distant future, more homeowners will realize how much equity they are sitting on and will be inspired to list bringing up inventory levels and providing buyers more options.

    To quote Bob Dylan, “The times they are a-changin’.”

    Please share this with your colleagues and clients.

    Copyright 2020 by Sarah Perkins

  • Phoenix Area Real Estate Update 9/18/2020

    Last week I received additional questions regarding forbearance, so let’s start there.

    Forebearance:

    • Mortgages in forbearance dropped to 7.01% last week from 7.16% putting roughly 3.5 million homeowners in forbearance plans. (MBA)
    • 9.48% of the forbearance exits were due to permanent loan modifications. (MBA)
    • 33.69% of loans in forbearance are in the initial plan state, 65.35% are in an extension, and 0.96% are re-entering into forbearance.

    The literal meaning of forbearance is “holding back”. It is a temporary postponement of mortgage payments resulting in a form of relief for the borrower in lieu of forcing a property into foreclosure. The borrower will have to pay the postponed payments back later.

    If you see headlines stating “delinquency rates on the rise” those rates include mortgages in forbearance which are planned deferrals.  According to Black Knight Financial, there are about 2 million more delinquent mortgages than there were in February.  This chart shows that 30-day delinquencies are 14% lower than pre-pandemic numbers and the initial wave is subsiding.

    “The COVID-19 pandemic will lead to a rise mortgage defaults and foreclosures. But as the housing market muscles through this economic downturn, it looks as if foreclosures will for a trickle rather than a flood, housing experts says.”

    Jeff Ostrowski, Senior Mortgage Reporter at BankRate

    Unemployment:

    • There were 860,000 initial unemployment claims this week, down 33,000 from last week.
    • Continuing unemployment decreased by 916,000 down to 12,628,000. (US Department of Labor)
    • The leisure and hospitality sector (which tend to be renters) August unemployment rate was 21.3% while the financial activities sector August unemployment rate was 4.2% (essentially full employment) another illustration as to why real estate remains strong. (US Department of Labor)
    • In March and April Amazon hired 175,000 new warehouse employees. Now Amazon plans to hire another 100,000 employees and has 33,000 available positions. Amazon is looking to add over 300,000 employees in 2020! (Bisnow)

    National Real Estate:

    • National median sales price increased by 11% year over year to $328,400. Tight inventory and high demand continue to push prices up. Only San Francisco and NYC have seen significant inventory increases as residents now have more affordable options outside of these cities. (Redfin)
    • A recent report from Realtor.com shows inventory declines are slowing as homeowners are realizing how quickly prices are going up while demand has slowed, only slightly.
    • The week ending September 5 was the 17th straight week of price increases at or above the previous week’s increases, illustrating why we have surfaced 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 345.1, over 100 points above the pre-COVID peak of 241 and nearly 200 points above the 145.2 we hit on May 15. The past 7 days saw a 2-point increase, a far cry from the 20 point increases we saw in June.

    Supply: Inventory remains low but has stopped dropping. As of yesterday, our inventory is 64.1% below normal. Active listings excluding under contract accepting backups (UCB) are at 8,100 (we should have 25,000) down over 40% year over year and down 2.5% month over month.

    Southeast Valley New Listings: This a bi-weekly comparison of new listings in 2019 and 2020 for Tempe, Mesa, Chandler, Gilbert, Apache Junction, and Queen Creek. 2019 followed the typical annual cycle showing more activity in the first half of the year. 2020 is not following any typical patterns. Which makes it impossible to know what the orange line will do next.

    Demand: Pending sales up 21% year over year, huge despite our low inventory and time of year. Our demand is nearly 24% above normal. The demand continues to rise but at a very slow rate.

    Sales & Prices: In August, 35% of homes closed over asking price. Phoenix metro area closed sales are up nearly 19% year over year. The median sales price is $325,000, up 16% 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 illustrates our pandemic real estate rollercoaster. What stands out to me is the lack of end of August closing spike.

    Commercial Real Estate:

    Q4 2020 Projections (Bisnow):

    • Industrial: Strongest performing asset type driving tons of building which could lead to increased vacancy rates.
    • Office: Prior to the pandemic roughly 5% of employees worked from home. In May it was estimated that 42% of employees were working from home. An estimated 15% will work from home as we come out of the recession. Office rents are decreasing and sub-leases are increasing.
    • Hotel: Demand bottomed out at nearly an 84% drop the week of April 11. The increases have been small and the end of the year it is expected demand will still be down 60%-70% year over year.
    • Retail: US retail space was struggling prior to the pandemic with mall closures. Analysts expect 20,000-25,000 store closures this year.
    • Multi-Family: Vacancy has increased slightly from 4.3% to 4.6%, less than expected. Surprisingly enough apartment rent payments are strong. As of August 27, 92% of apartment rents were paid either partially or fully. With the CDC moratorium on evictions many housing associations are voicing their concerns for lack of landlord support.
    • Restaurants: In January restaurants were expected to see a 4% growth rate in 2020. However, according to Yelp in July 16,000 restaurants that were temporarily closed, shut their doors permanently. Aaron Allen & Associates, a restaurant consulting firm expects 231,000 to close permanently this year.

    Real Estate News:

    • Summer vacation rentals across the country are turning into fall and even winter vacation rentals as remote working allows employees new-found freedom. (Redfin)
    • The National Association of Home Builders/Wells Fargo Housing Market Index hit 83 this month, a record high for the 35-year-old index. There is a looming shadow though, lumber prices have increased 170% since April and the raging west coast wildfires are putting lumber stocks at risk. (CNBC)
    • The 4 largest builders in Lexington, KY stopped building altogether due to the sky-high lumber prices. (Sherri Kelley)
    • From February to July the number of young adults, aged 18-29, living with their parents has increased from 47% to 52% or 26.6 million, the first time this number has been above 50%. Closed college campuses and the higher unemployment rates for younger people are the leading causes. (US Census Bureau & Pew Research)
    • Phoenix has the 8th highest rate for data center leasing. Considering we are fairly new to this market and more and more are coming here each year, expect this to increase. (AZ Big Media)

    Opendoor:

    After the rise and fall of iBuyer marketshare, from roughly 0.6%, nationally, in January to 0.1% in July. These companies are scrambling to reinvent themselves. Even Phoenix, where Opendoor launched in 2014, saw the marketshare drop from 6% in January to 1.4% in July.

    iBuyers like Knock.com completely changed course and opted to focus on bridge loans and are no longer purchasing property at all. Others pivoted towards traditional sales and higher agent referrals, Offerpad is now paying a 3% referral fee, up from the previous 1%, and partnerships like Realtor.com and Opendoor.

    Since the beginning none of them have turned a profit. Softbank’s Vision Fund, the largest investor in Opendoor is paying more attention to profitability. If any of the iBuyers lose their funding they will not be able to survive at all, despite any of these recent pivots.

    After the disastrous 2019 IPO attempt by WeWork, another organization funded by Softbank’s Vision Fund, profitability has taken center stage for the multi-billion dollar investor.

    After a few days of rumored talks, on Tuesday, Opendoor announced it is going public. In order to avoid pre-IPO scrutiny, which took down WeWork, Opendoor merged with Social Capital II, a special purpose acquisition company or SPAC, also knows as a blank-check company. Since Social Capital II is already publicly traded Opendoor will not have to explain to Walls Street why they want to go public but still have never turned a profit. Social Capital’s business is solely for taking companies public and has no other business. (Bloomberg)

    Despite an impressive $4.7 billion in revenue in 2019, Opendoor had a net loss of $327 million, up from the $192 million in net losses in 2018. The merger gives Opendoor a valuation of $4.8 billion and a likely infusion of $1 billion in capital.

    Final Thoughts:

    Real estate continues to thrive despite significant headwinds. We continue to watch rentals, eviction moratoriums, and what that means to landlord survival. Home has never been more important and for the 160 million employed American there are options.

    Please share this with your colleagues and clients.

    Copyright 2020 by Sarah Perkins

  • Phoenix Area Real Estate Update 9/11/2020

    Lately I have been getting more and more questions about foreclosure data and defaults and what we could potentially see coming in the next several months. Even more recently I am hearing about conversations Realtors are having with sellers who plan to sell and then rent because they are afraid to lose equity, like in 2008. These conversations inspired me to research the similarities and differences between the Phoenix metro area real estate markets during 2005-2007 and 2020.

    The intensity of today’s market is somewhat reflective of the 2005 housing market giving many people 2008 PTSD. Although the market may feel similar, in reality, it is very different. You must ignore the headlines and remember the media’s goal is to increase eyeballs for advertisers. Shocking stories sell.

    Every market is different. The Phoenix market is one of extremes, making it easy to use for comparisons over time.

    Lending:

    In 2005 lending was loose. If you could fog a mirror you could get a loan. Lenders went as high as 120% loan to value. People bought houses with $0 out of pocket costs and were over-leveraged. Today’s lending requirements include higher credit scores, minimum down payments, and a job.

    Today’s historic low-interest rates are driving demand higher as properties are more affordable now than they were in 2005 when the average interest rate was roughly 6%. Ivy Zelman with Zelman & Associates, a major national housing research and consulting firm, said low-interest rates are more important to the American consumer than is an economic recession.

    Supply, Demand, & Appreciation:

    In 2005, the easy loans drove up demand quickly. However, demand started decreasing in April 2005 and inventory started increasing in June 2005. Demand hit bottom in October 2007 when supply hit its peak. Demand was 43% below balance and inventory was 114% above balance, meaning we had 57 buyers for 214 listings. Today demand is nearly 23% above balance and inventory is 64% below balance, meaning we have 123 buyers for 36 listings.

    In August 2005 we hit an annual appreciation of 45%. In August 2020 we hit an annual appreciation of 15%. With the appraisal the regulations implemented in 2010 the guidelines prevent collusion and steady the pace of appreciation. This is why appraisals often come in low during times of significant price increases.

    Prices are a lagging indicator and it took about two years for prices to start decreasing, which happened in 2007. We hit 20.6 months of supply in January of 2008. As of yesterday, our supply is 1.4 months.

    Nationally, inventory has been decreasing since 2018 and demand has been increasing since mid-April. Existing home sales increased by 25% in July 2020. June saw an increase of 21%. Based on these increases Dr. Lawrence Yun, NAR’s chief economist, revised his 2020 forecast to 5.4 million existing home sales, a 1.1% increase over 2019’s 5.34 million sales. He also expects 800,000 new home sales this year, a 17% increase over 2019. (NAR)

    True Demand versus False Demand:

    There is a significant difference between true demand and false demand. True demand is when a property is purchased for the purpose of being lived in, whether is it owner occupied or renter occupied. Given the out of control appreciation in 2005 people purchased properties for the sole purpose of parking money to appreciate and resell. There were a number of fraudulent schemes created that took advantage of the appreciation as well. These properties were never lived in. Today properties are purchased to be lived in or rented, i.e. true demand. According to the US Census Bureau, rental vacancy rates and homeowner vacancy rates in 2005 were double what they are today.

    Another way to illustrate true versus false demand is with rent prices. In 2005 rent prices actually decreased due to lack of demand. Today’s rent prices are appreciating about as quickly as sales prices. This is especially true in the single-family market.

    Today’s demand increase is due primarily to #1 low interest rates and #2 people want bigger homes to accommodate working and teaching from home. Commute times are a much lower priority. (NAR)

    A recent Zillow study shows that upwards of 2 million renters could afford a typical starter home just outside of their current metro area. With an increase in remote working, these renters could turn into buyers in the near future.

    New Construction:

    New home construction boomed in 2005. Builders built even when they knew they were over building for the market. In 2007 new construction came to a near standstill and last month was the first time new home sales compared to the volume in 2005. In the past 10 years new construction has not kept up with household formation. We currently have a national housing shortage of about 5 million houses. (NAR)

    Phoenix is the fastest growing city in the country. From 2010-2019 more than 234,300 people moved to the valley. (US Census) During the time of large population growth we had minimal home building.

    Local real estate expert, Jim Belfiore says new home sales peaked last month as it was the highest new home sales month since late 2005. He expects a strong housing market through 2021 based on low interest rates, low inventory, and population growth. Belfiore said, “The growth of sales has slowed.” He expects prices to continue to rise due to limited supply and continued demand. Remember when you are going 180 MPH and slow down to 120 MPH, it feels like you hit a brick wall. It may take a moment to realize you are still going 120 MPH.

    According to CoStar, Phoenix may have an over-supply of new industrial real estate. So far this year 9.6 million square feet has been completed with another 10.6 million square feet under construction.

    A single-family new construction home has an impact on the economy of $327,681. Of that number $188,962 goes into wages and salaries. (National Association of Homebuilders)

    Today’s Underlying Fragilities:

    Our current environment does not come without its complications. The 2005 bubble and bust were caused by real estate. Today, real estate is bolstering the entire economy and is a big part of the solution.  Regardless, we will face significant hurdles in the coming months.

    Unemployment:

    The vast majority of people who lost their jobs are under 25 years old and make less than $50,000 a year. According to NAR, only 3% of homeowners are under 25. The unemployment rates have impacted renters significantly more than homeowners. About 10.5 million of the 22 million jobs that were lost have come back and our unemployment rate now stands at 8.4%. Unsurprisingly, unemployment rates are inversely proportional to education level. The unemployment rate for those with a college degree or higher is 5.3% and the rate for those without a high school diploma is 12.6%. Homeownership rates for those with at least a college degree are 23% higher than those without a high school diploma. (US Bureau of Labor Statistics)

    Last week initial unemployment filings hit 884,000, the same as the week prior. Those on continuing unemployment increased by 93,000 to 13,385,000. (US Department of Labor)

    The chart below shows the past 10 years of unemployment and our unemployment rate today is lower than it was in 2010.

    Mortgage & Forbearance:

    About 3.6 million mortgages or 7.16% are in forbearance, a 5-month low. There is a lot of misleading information surrounding forbearance. There are many different programs ranging in length of 3-12 months. Not all mortgages in forbearance are behind on their payments. Since this is not public data, I cannot confirm but have read that 25%-67% of mortgages in forbearance remain current. (MBA) Additionally, about 90% of loans in forbearance have at least 10% equity. The average American homeowner has $177,000 in equity. It is unlikely we will have a large wave of foreclosures. (KCM) From 2008-2010 there were 8.8 million foreclosures nationwide.

    Often used for first time home buyers, FHA loans make up about 10-12% of loans in forbearance, which is the largest group of any one loan type. (MBA)

    Mortgage applications increased last week by 2.9% after 3 weeks of declines. (MBA) The application increase is likely due to the new all-time low-interest rates hit last week at 2.86%. (Freddie Mac)

    Election:

    Presidential elections tend to decrease buyer demand from about October 15-November 15. Then demand fully recovers by January. There is very little indication of price changes due to elections. (KCM)

    A study done by Kiplinger shows that during election years from 1980-2016, average appreciation is 4.15%. During off years from 1978-2014 the average appreciation is 4.37%. With 2020’s national appreciation pushing 9% those averages may adjust. (NAR)

    COVID Resurgence:

    Ivy Zelman also said, “Our home is our castle, more so than ever before.” We are living, working, and teaching our kids at home. And for the 160 million working Americans, during this time of change and uncertainty finding the right home is more important than ever before. She believes that our housing market will stay strong throughout the pandemic because of this. She expects a cooling, not a drop, once there is a widely used vaccine and regular life has resumed.

    Final Thoughts:

    Local economist Elliott Pollack states that the Phoenix metro housing market will remain strong. Between the strength of our job market, affordable prices, stability, and good weather people will continue to move here from other parts of the country.

    Based on this data, homeowners who sell and then rent will lose the additional equity we are likely to gain in the coming months.

    Please share this with your colleagues and clients.

    Copyright 2020 by Sarah Perkins

  • Phoenix Area Real Estate Update 9/4/2020

    This weekly update has certainly evolved since I started it in April (I suppose everything has changed since April!). I would love your feedback, what should I add? What should I remove? Would you prefer it only covers real estate or do you like the economic and unemployment info? Would you prefer shorter and specific topics that change weekly? Please share your real opinions with me, I write this for you and want to make it better.

    National Real Estate:

    Residential real estate is providing the most significant boost to the economy. While other industries struggle residential real estate is going gangbusters and is a part of the solution.

    “Perhaps in the middle of 2021, we will have more semblance of a balanced market.”

    Dr. Lawrence Yun, NAR
    • Matthew Gardner, Windermere’s Chief Economist revised his 2020 projections to 5.2 million sales and expects it would be much higher if there were more inventory.
    • 5.34 million homes sold in 2019. (NAR)
    • Dr. Lawrence Yun, Chief Economist for NAR believes 2020 will surpass 2019 in total sales and then significantly surpass 2019 in 2021. (NAR)
    • With the continued demand, significant lifestyle changes, and incredibly low supply Yun does not believe we are in a bubble. The increase in builder permits is a sign of inventory to come which will help keep price appreciation in check.
    • Pending home sales increased from June to July by 5.9% and are up 15.5% year over year. (NAR)

    The AZ Market:

    Local economist Elliott Pollack states that the Phoenix metro housing market will remain strong. Between the strength of our job market, affordable prices, stability, and good weather people will continue to move here from other parts of the country.

    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 342.6, over 100 points above the pre-COVID peak of 241 and nearly 200 points above the 145.2 we hit on May 15. The past 7 days saw a 1.5 point increase, a far cry from the 20 point increases we saw in June.

    Supply: Inventory remains low but has stopped dropping. As of yesterday, our inventory is 64.4% below normal. Active listings excluding under contract accepting backups (UCB) are at 8,000 (we should have 25,000) down 40% year over year and down over 3% month over month.

    Southeast Valley New Listings: This a bi-weekly comparison of new listings in 2019 and 2020 for Tempe, Mesa, Chandler, Gilbert, Apache Junction, and Queen Creek. 2019 followed the typical annual cycle showing more activity in the first half of the year. 2020 is not following any typical patterns. Which makes it impossible to know what the orange line will do next.

    Demand: Pending sales up 18% year over year, huge despite our low inventory. Our demand is over 22% above normal. The demand continues to rise but at a very slow rate.

    Sales & Prices: Phoenix metro area closed sales are up 1% month over month and up over16% year over year. The median sales price is $325,000, up 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 illustrates our pandemic real estate rollercoaster. What stands out to me is the lack of end of the month closing spike. Next week’s chart will be more telling.

    Commercial Real Estate:

    • About 25% of New York City office employers are reducing their office space by 20% and 16% are moving out of the city. (Bisnow)
    • After 10 years of declines and closures, 2020 is especially bad for American malls. Coresight Research expects another 1,000 malls or roughly 25% of remaining malls to close in the next five years.
    • Department and apparel stores are taking the biggest hit with revenue declines of 200% and 150% respectively. (Moody’s)
    • Retail owners have started the eviction process for many tenants nationwide. (Wall Street Journal)
    • 77% of retail tenants are current on their payments, better than the 54% who made payments in April. (Wall Street Journal)
    • 28% of industrial California companies are looking to expand or move to Phoenix, up from around 18% last year. (Phoenix Business Journal)
    • Despite eviction moratoriums, a recent survey of civil rights and legal aid attorneys found that 91% reported illegal evictions taking place throughout the country. (National Housing Law Project)

    Real Estate News:

    The Centers for Disease Control and Prevention (CDC) instituted a temporary national residential rental eviction moratorium through 12/31/2020. The CDC has the authority implement such measures to prevent the spread of COVID-19. (Forbes)

    Eligibility:

    • Individuals must earn less than $99,000 a year or couples filing jointly $198,000 or less.
    • Received a stimulus check this year.
    • Certify inability to pay rent is due to COVID with evidence of previous support applications.
    • Show that they would become homeless if evicted.

    Unintended Consequences?

    • This only delays eviction; it does not prevent it.
    • The order does not prevent additional fees, penalties, or interest from being added.
    • NAR President Vince Malta and National Multifamily Housing Council President Doug Bibby both spoke out against the moratorium stating without additional funding both landlords and renters will suffer.

    “While NAR appreciates and is supportive of administration efforts to ensure struggling Americans can remain in their homes, this order as-written will bring chaos to our nation’s critical rental housing sector and put countless property owners out of business.”

    Vince Malta, NAR President

    Other Real Estate News:

    • NAR membership is up 2% year over year and increased 1% from June to July. Membership is now a record high of 1,409,727. (NAR)
    • Pinterest will pay $89.5M to get out of its 490,000 square foot lease in San Francisco. Their post-COVID plans include hiring talent without location restrictions, i.e. working from home anywhere.
    • Last December California’s state insurance commissioner instituted a 12-month ban on insurance companies from canceling homeowner insurance policies on properties in and around recent wildfire locations, protecting roughly 800,000 houses. The ban is not renewable and no new agreement has been reached. High cost, low coverage insurance is available to those who cannot get private insurance coverage. Yet another reason more Californians move to Arizona daily. (New York Times)
    • Zumper, a digital marketplace for rental housing launched Rent Guarantee, a program that helps small landlords by guaranteeing up to 12 months of rental payments. (Inman)

    Unemployment:

    The American economy added 1.4 million jobs in August bringing the national unemployment rate to 8.4%. This is the first time it has been below 10% since March. (Department of Labor)

    Mortgage & Forbearance:

    Mortgage rates have a greater impact on American borrowers than does a recession. Let that sink in, the reason our real estate market continues to appreciate with such intensity is because the buyers are still coming to the market. They do so because of the affordability created from low rates. If you look at interest rates during the past recessions, when they dropped, real estate appreciated. During the tech bubble recession during 2000/2001 homes appreciated by 6.5%. (Ivy Zelman)

    The recent Federal Reserve changes include Chairman Powell saying he would let inflation rise to about 2% in order to keep rates low and promote job growth without inflation fears. Given that bonds and inflation are arch enemies and the FED is the largest buyer of bonds, the FED has the control. (Federal Reserve)

    Mortgage purchase applications stayed flat week over week but are up 28% year over year. Refinance applications dropped 3% week over week and are up 40% year over year. Refinance applications made up 62.5% of all mortgage applications last week. (MBA)

    After 10 weeks straight of decreases, loans in forbearance stayed flat this week. 7.2% of mortgages are in forbearance which is roughly 3.6 million loans. (MBA)

    Economy:

    • Unsurprisingly tourism has taken a GIANT hit with estimated losses of $341 billion since March. (New York Times)
    • Hospitals are struggling as elective procedures are canceled. It is expected that hospitals will see losses of $323 billion from March through December. (American Hospital Association)
    • Telemedicine is way up. Before March about 11% of patients used telemedicine, today 46% of patients are using telemedicine. (Bisnow)
    • Supply chain disruption is subtle but real. Prior to COVID about 6% of consumer goods were out of stock at any given time. Today 21% of paper products, 18% of household cleansers, and 18% of canned vegetables are out of stock. Do not worry, grooming supplies are at all surplus with only 4% of products are out of stock. (Elliot Eisenberg)

    Final Thoughts:

    Real estate continues to thrive despite significant headwinds. Home has never been more important and for the 160 million employed American there are options.

    Copyright 2020 by Sarah Perkins

  • Phoenix Area Real Estate Update 8/28/2020

    Projections, forecasts, and predictions are educated guesses and are the only guides we have available today. Navigating uncharted territory without a compass is challenging at best. Nothing about this year’s real estate activity fits into the usual cyclical patterns.  Data companies are updating their projections seemingly daily.

    Projections are based on trends and it takes at least 3 weeks to see an emerging trend. Before the trends, there is consumer sentiment. Will you please help me gauge consumer sentiment by completing a quick 2-minute survey? If so, here is the link https://theazmarket.com/8-28-2020-consumer-sentiment-survey/

    National Real Estate:

    Home has never been more important. Today we live, work, play, and teach at home. This is why real estate is the shining star in the midst of so much bad news.

    • With a 58% increase in new starts from June to July, multi-family new builds made up the majority of the 22.6% new housing starts in July over June. The new builds are the only thing keeping prices from skyrocketing out of control. (Bisnow)
    • In July, single family starts were up 7.4% year over year. (Elliot Eisenberg)
    • New single-family sales are were up in July 36.3% year over year. (US Census Bureau & HUD)
    • Resale closings in July were up 24.7% from June which were up 20.7% from May. July’s closings were up 8.7% year over year. (NAR)
    • After 101 straight months of price increases the national median sales price is $304,100; the highest ever and an 8.5% increase over July 2019. (NAR)
    • The median listing price increased 10.1% year over year for week ending August 15. (Realtor.com)
    • People are buying larger houses. In July sales of houses with a square footage range of 3,000 – 5,000 are up 21.2%. (Redfin) Reasons for the increased space:
      • 21% dedicated office space to work from home.
      • 21% outdoor/recreation space.
      • 7% home-schooling space.
    • During Q2 2020 San Francisco is the only city in the country without an increase in prices. (FHFA house price index)

    CoreLogic recently adjusted their future pricing projections significantly. They initially projected a 6.6% value decrease over the next 12 months. Their revised projections are’ a 1% value decrease and are now much closer to the other real estate pricing projections.

    “Although housing prices have consistently moved higher when the favorable mortgage rates are factored in, an overall home purchase was more affordable in 2020’s second quarter compared to one year ago.”

    Dr. Lawrence Yun, Chief Economist for NAR

    This chart from KCM shows, by state, the last time homes were at the same affordability level as today. For many states it has been 25+ years!

    The AZ Market:

    Local economist Elliott Pollack believes that the Phoenix metro housing market will remain strong. Between the strength of our job market, affordable prices, stability, and good weather people will continue to move here from other parts of the country.

    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 341.1, MORE THAN 100 POINTS above the pre-COVID peak of 241 and nearly 200 points above the 145.2 we hit on May 15.

    Supply: Inventory remains low but is not dropping at incredible rates. As of yesterday, our inventory is 64.4% below normal. Active listings excluding under contract accepting backups (UCB) are at 8,000 (we should have 25,000) down 40% year over year and down over 4% month over month.

    Southeast Valley New Listings: This a bi-weekly comparison of new listings in 2019 and 2020 for Tempe, Mesa, Chandler, Gilbert, Apache Junction, and Queen Creek. 2019 followed the typical annual cycle showing more activity in the first half of the year. 2020 is not following any typical patterns. Which makes it impossible to know what the orange line will do next.

    Demand: Pending sales up 16% year over year. This is significant given the low inventory. Our demand is nearly 22% above normal. The demand continues to rise but at a slow rate.

    Sales & Prices: Phoenix metro area closed sales are up 3.2% month over month and up 15% year over year. The median sales price is $320,500, up 14.5% 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 listing progress we have made. It remains to be seen whether or not last week’s dip in new listings is a trend or an anomaly. Demand continues to increase slightly, absorbing the new listings quickly.

    Commercial Real Estate:

    • With office buildings only at 10-15% capacity, commercial office owners are implementing expensive upgrades to make the tenants more comfortable working at the offices again. (Bisnow)
    • Delinquencies for hotel commercial mortgage-backed securities hit an all-time high in July at 23.45% or $20.6 billion in loan volume. (Trepp Analytics)
    • According to Joe Blackbourn, CEO of Everest Holdings, there are about 13.5 million square feet in planned or in-development industrial and warehouse building in greater Phoenix.
    • Temporary furloughs are becoming permanent layoffs in many New York City hotels. This trend is expected to become the norm for hotels across the country. It is also expected that it will take years for the hotel industry to recover. (Bisnow)

    Mortgage & Forbearance:

    • Mortgage applications are down 6.5% week over week, mostly due to a 10% decrease in refinance applications, likely due to the recent slight increase in rates. (MBA)
    • Purchase mortgage applications are up 33% year over year. (MBA)
    • VA loan originations we up 113% in Q2 2020 from Q2 2019. (Department of Veterans Affairs)
    • Fannie Mae and Freddie Mac are delaying the implementation of the 0.5% fee added to refinances from September to December. (FHFA)
      • The fee will not be charged on refinances with balances under $125,000.
      • When the additional fee was announced it was met with significant opposition from MBA and NAR.
    • Christina Hughes Babb, a DC News Reporter said, “More than 1 million households in forbearance are still paying their mortgage. Both MBA and Black Knight show that about a quarter of households in active forbearance plans are still making their mortgage payments.”
    • For 10 weeks straight the number of loans in forbearance has decreased, though the size of the decrease is slowing. We dropped from 7.21% last week to 7.20% this week with about 3.6 million loans in forbearance. (MBA)
    • Mortgage delinquency rates are rising for all loan types. In Q2 2020 the delinquency rate increased to 8.22%, up from Q2 2019’s 4.53%. Forbearance programs and foreclosure moratoriums significantly impact the outcomes of these delinquencies.  
    • In April the MBA initially projected that 30% of loans would go into forbearance. (MBA)

    Economic Indicators:

    • Elliott Pollack estimates that as many as 30-35% of business will permanently close due to COVID.
    • US debt is $14.3 trillion. The total annual US GDP is about $20 trillion. (Federal Reserve Bank of New York)
      • 70% or $9.8 trillion in mortgages
      • $1.54 trillion in student loans
      • $1.3 trillion in car loans
      • $820 billion in credit cards
      • $380 billion in revolving lines of credit
      • $400 billion in miscellaneous

    Other Real Estate News:

    • Realtor.com is now including flood zones and flood risk information for all properties. Risk data is provided by First Street Foundation. Flood zones data is determined and provided by the Federal Emergency Management Agency (FEMA). (Inman)
    • Airbnb announced last week a worldwide ban on parties. They have an occupancy maximum of 16 people and it is effective immediately and remains in effect indefinitely. (Airbnb)
    • According to Elliott Pollack, New York City lost 1% of its population in July. He continues that the combination of COVID 19, social unrest, and increased crime rates will push many people out of the major cities.

    Jobs & Unemployment:

    • No one is forecasting unemployment increasing. (KCM)
    • Federal job cuts restrictions will be lifted on October 1 and American Airlines plans to furlough 19,000 employees. (New York Times)
    • Elliott Pollack said, “Greater Phoenix is the best performing major employment market in the country so far this year.  While employment is down 1.4% compared to the first seven months of 2019, Greater Phoenix has lost fewer jobs in percentage terms than any other major employment market.”
    • Last week’s initial unemployment claims decreased by 98,000 from the previous week but were still slightly above 1 million. (US Department of Labor)
    • Continuing unemployment decreased by 223,000 down to 14,535,000 bringing us to a revised unemployment rate of 9.9%. (US Department of Labor)
    • A total of 58.4 million initial claims have been filed since March.

    Final Thoughts:

    Projections are useful and the better info we have the better projections we create.

    I agree with real estate consultant Jim Belfiore when told Fox 10 Phoenix, “Data suggest nearly 50% of home shoppers have no home to sell today. The supply issue is severe and will continue to be severe, meaning prices are rising rapidly. As for the number of current homeowners in forbearance, it is low here in Arizona, and I do not foresee a significant hiccup in demand or a substantial rise in supply in the next 12 or 24 months.  I see a market where we need to encourage more labor in-migration before prices rise beyond the incomes.”

    Only time will tell what happens next.

    Copyright 2020 by Sarah Perkins