the AZ market

Category: Weekly Market Update

  • Phoenix Area Real Estate Update 6/12/2020

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

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

    Arizona Market:

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

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

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

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

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

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

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

    Other Arizona News:

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

    Unemployment & Spending:

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

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

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

    Emerging Trends:

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

    Other Real Estate News:

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

    Final Thoughts:

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

    Copyright 2020 by Sarah Perkins

  • Phoenix Area Real Estate Update 6/5/2020

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

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

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

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

    Arizona Market:

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

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

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

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

    Other Arizona News:

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

    Unemployment/Economy/Spending:

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

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

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

    Emerging Trends:

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

    Other Real Estate News:

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

    Innovation:

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

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

    Final Thoughts:

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

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

    Copyright 2020 by Sarah Perkins

  • Phoenix Area Real Estate Update 5/29/2020

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

    Arizona Market:

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

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

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

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

    Other Arizona News:

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

    Employment:

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

    Projections:

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

    Emerging Trends:

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

    Other Real Estate News:

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

    Final Thoughts:

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

    Copyright 2020 by Sarah Perkins

  • Phoenix Area Real Estate Update 5/22/2020

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

    Arizona Market:

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

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

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

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

    Emerging Trends:

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

    Phoenix Trends:

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

    Unemployment:

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

    Forbearance:

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

    Other Real Estate News:

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

    Final Thoughts:

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

    copyright 2020 by Sarah Perkins

  • Phoenix Area Real Estate Update 5/15/2020

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Redfin rehired 14% of its furloughed employees.

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

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

    copyright 2020 by Sarah Perkins

  • Phoenix Area Real Estate Update 5/8/2020

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

    Arizona Market:

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

    Supply:

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

    Demand:

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

    Cromford Market Index (CMI):

    On March 20th the CMI was 241 and yesterday it was a 147.2 (Balance is 100, above 100 is a seller’s market and below 100 is a buyer’s market. Prices do not drop until the CMI hits 90.) The CMI clearly has dropped drastically and in a short period of time. In the weeks since April 19, the CMI’s rate of decline has started slowing. The closer the green and red lines get to each other, the more balanced the market becomes.

    New Listings & Pendings:

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

    Price & Appreciation:

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

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

    Other News:

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

    Conclusion:

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

    copyright 2020 by Sarah Perkins

  • Phoenix Area Real Estate Update 5/1/2020

    The light at the end of the tunnel got a little brighter this week. Despite the limited data available, new trends are emerging and they are good. Please continue to share this news with your clients because consumer sentiment is everything. The week of April 19th marked a noticeable shift in the market with increased activity in nearly every state. Perhaps it is due to the pent up demand from the would-be March buyers. Nationally, March saw a 20.8% decrease in new pendings month over month. March was rough. But as we moved through April, our human nature kicked in and we got a little more used to this (short-term) new normal. This brought about new activity and some renewed consumer confidence.

    Good News:

    • Zillow’s search traffic is skyrocketing, yes it plummeted in March, but by the 2nd week of April the US traffic on Zillow was up 13% year over year and rising.
    • After the significant drop in new listings hitting the market in March; April brought increases in new listings in all markets, including in NYC.
    • Nationally, since mid-April we have seen a 33% increase in physical showing requests, which helps chip away at the 80% drop in those requests from mid-March to mid-April.
    • In Arizona, since mid-April we have also seen a 33% increase in physical showing requests, which makes up for some of the 59% decrease in requests from mid-March to mid-April.  
    • Still no indication of prices dropping. Earlier this week, Dr. Lawrence Yun, the chief economist at NAR said, “In fact, due to the ongoing housing shortage, home prices are likely to squeeze out a gain in 2020 to a new record high.”

    Arizona Market:

    Despite inventory increases, demand continues to out-pace supply, according to the Cromford Market Index (CMI).  On March 20th the CMI was 241 and yesterday it was a 153. (Balance is 100, above 100 is a seller’s market and below 100 is a buyer’s market. Prices do not drop until the CMI hits 90.) The CMI clearly has dropped drastically and in a short period of time. We did see a tiny little blip of a slowdown the week of April 19, hopefully we see a that as a trend. The 24% decrease in demand we have seen since March 20 is slowing its rate of decline.

    • Newly accepted contracts bottomed out the week of April 5th with only 1,641. As of the week of April 19th we have 1,979 newly accepted contracts. We are working our way back up towards our peak which was the week of February 23rd with 2,696 newly accepted contracts.
    • Average days on market for the week of April 19th is 21, lower than it was in all of March.
    • Average list price per square foot at contract acceptance was $182.81 on April 19th. It was $190.05 the week of March 8th.
      • Between the lending challenges and the lower priced new inventory, I believe the reason for the lower average price per square foot is due to the fact that more lower priced homes are selling, not because prices are dropping.

    Remember, new listings hitting the market is a good indicator of the health of the market. It shows seller confidence. In the southeast valley, the week of 4/19 we saw a 5% increase in new listings hitting the market over the week of 4/12.

    Even more importantly, new pendings shows demand. Right now, all buyers that are out looking are serious buyers. The week of 4/19 we saw a 15% increase in new pendings over the week of 4/12, in the southeast valley.

    Conclusion:

    As much as I would like to tell you that everything is sunshine and rainbows; it isn’t. We have a rocky road ahead, total unemployment filings is up over 30 million, but the new applications continues to drop week over week. Nationally, mortgage forbearance requests are likely spiking this week. Less than 1% of all mortgages were in forbearance on March 2. As of April 19 nearly 7% of mortgages were in forbearance, that is 3.5 million mortgages in forbearance. Opening our economy safely and quickly will be the key. People are ready to get back to work, so much so new lawsuits are being filed regularly. Signature Sotheby’s International, a Michigan brokerage, is the 5th company to sue the Governor of Michigan stating that the lock down orders are overreaching and unconstitutional.  

    My final thought is that good agents are taking market share right now. A lot of your competition is at home and afraid. Buyers and sellers are doing their homework and want to talk to you about what is actually happening in the real estate market.

    copyright 2020 by Sarah Perkins

  • Phoenix Area Real Estate Update 4/24/2020

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

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

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

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

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

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

    copyright 2020 by Sarah Perkins

  • Phoenix Area Real Estate Update 4/17/2020

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

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

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

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

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

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

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

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

    copyright 2020 by Sarah Perkins

  • Phoenix Area Real Estate Update 4/10/2020

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

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

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

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

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

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

    copyright 2020 by Sarah Perkins