the AZ market

Tag: #weeklymarketupdate

  • 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 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 9/4/2020

    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

  • Phoenix Area Real Estate Update 6/19/2020

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

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

    The AZ Market:

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

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

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

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

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

    Other AZ News:

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

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

    Emerging Trends:

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

    Other Real Estate News:

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

    Final Thoughts:

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

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

    Copyright 2020 by Sarah Perkins

  • 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 5/15/2020

    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