June 2020 Market Update

Frenzy Is Back–23% of Sales Over Asking
Luxury Market Rebound–Contracts Up 159%

2020-06 Infographic

For Buyers:

Greater Phoenix is officially back to a frenzy market with more properties under contract than what’s available for sale. Over the past 4 weeks the number of contracts accepted weekly has jumped another 20% since last month’s report, bringing the total recovery since April 5th to 68% and 2.5% higher than it was in late February; before the stock market crashed and the stay home orders were imposed due to COVID-19.

The most frenzied areas are those with average sale prices between $200K-$400K. That includes just about all of Southeast Valley and West Valley, North and South Phoenix. At last count, there were 2,061 properties for sale between $200K-$300K and 4,333 under contract already. Between $300K-$400K, there were 2,006 available for sale and 3,017 under contract (24% higher than this time last year).

While all price ranges have rebounded in contract activity, May saw the largest comeback between $500K-$1M where the number of accepted contracts soared 167% from a low of 148 contracts the first week of April to 395 the first week of June. That’s 58% higher than last year’s count in the same week of 250 contracts. Even more dramatic, contracts over $1M are now up 85% compared to this week last year.

The result for buyers is an inventory that’s back to a pre-pandemic low. In our March update, inventory was at a historic low of 11,087 listings before vacation rentals began flooding the market for sale. Inventory rose 35% over the course of 4-5 weeks and peaked in mid-April. Since then, inventory has consistently dropped week over week and now lies at 11,232; just 145 more listings than before this whole situation began.  Low interest rates and positive affordability indicators continue to fuel demand and cause prices to rise. The big question buyers ask, “Is it still a good time to buy?”. The answer is yes, for now. Affordability is still within normal range, which is a good reason as to why there’s so much demand. However if affordability drops below the normal range for those making the median family income, then the market will begin to cool. We are not there yet. It’s best to get in while it’s affordable.

For Sellers:

Not surprisingly, there is an increasing percentage of closings over asking price. 23% of all closings so far in June have recorded over asking price, up from 17% recorded in January and 19% recorded in February. That percentage increases to 38% for closings between $200K-$250K and 27% between $250K-$300K. It’s not uncommon for sellers to experience multiple offers, escalation clauses and appraisal waivers in today’s environment. In fact, there have been reports of 70 competing offers or more on homes under $300K.

Sellers who have been on the fence about listing their home lately should seriously consider it now and take advantage while the market is hot. This spurt in buyer activity may peak very soon and then fall into the typical seasonal decline the Greater Phoenix market experiences every year from July to December. Pent up demand from the pandemic is now being released, but there’s no guarantee that it will continue at this level for long. If you planned to sell your home this year, now is the time to list it.

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Contact the real estate experts at NextHome Valleywide in Chandler, AZ at 480-621-6828 for more information.  If you are currently looking to Buy or Sell a home in the Phoenix metro , Scottsdale or East Valley area and are not sure where to turn we can help! Search for homes at Valleywide.realestate where you can find single family homes, golf and lakefront properties, 55+ communities, townhomes and much more. Visit our blog at NextHome Valleywide for a monthly Phoenix Market Update.

May 2020 Market Update

Pandemic Effect:  Closed Sales Down 31%, But . . .
Weekly Contracts Up 40%

2020-05 Infographic

For Buyers:

Greater Phoenix contract activity dropped 39% over the course of 6 weeks between March and mid-April.  The effects of those declines are now being reported over a month later as a 31% decline in closed sales. This isn’t surprising, you can’t close what was never opened. But that’s already old news, what isn’t getting reported yet is the 40% increase in accepted contracts over the past 4 weeks. This is key information for buyers right now, especially if they’re on the fence waiting for the market to “crash”. This 4-week increase in buyer demand will not be widely reported for 6 more weeks because these contracts still need to close.

One mistake approved buyers make is waiting for closing reports before acting. By the time a property closes escrow and a sales price is publicly recorded, the condition that transaction was created under may have passed. The opportunity for buyers lies in knowing how many contracts are being accepted right now in their price point and area. They also need to know the average list price at contract to gauge where they are this week compared to 10 weeks ago. This information can only be obtained through a REALTOR®.

They’ll discover a significant increase in contract activity across all price points in Greater Phoenix, but the average list price per square foot is only down on contracts written over $500K. All other price points below $500K are seeing the average list price per square foot either higher than or equivalent to where it was 10 weeks ago in February. This does not indicate an impending doom for home values.

Buyers hoping for cheap homes should not retreat in despair, however. Mortgage rates have declined to an average of 3.26% according to Freddie Mac; last year at this time mortgage rates were 4.1%. So while the median sales price rose 8.9% over last year, the principal and interest payment on a $300K, 30-year, fixed- rate mortgage went from $1,450/month to $1,307/month. That’s down $143, a 10% decline over the course of a year. The biggest mistake buyers make is sitting around waiting for sale prices to decline while their potential mortgage payment plummets. Low mortgage rates are not something to ignore or take for granted as they can change quickly for better or worse.

For Sellers:

The increase in contract activity is great news for sellers. However, there are fewer cash buyers offering top dollar for homes in “as-is condition” compared to 10 weeks ago; meaning increased pressure on sellers to do repairs and offer concessions to normal buyers in order to sell their home for their desired price. This is reflected in the percentage of homes closing with seller-assisted closing costs, which increased from 18% to 25% over the past 4 weeks.

The market over $500K is recovering slower than the other price ranges after dropping 58% in weekly contracts due to travel restrictions and the stock market crash from late February through March. While contract activity rose 65% over the past 4 weeks, it’s still down 30% from its peak 10 weeks ago. The irony is that one would expect a massive number of price reductions after such a dramatic drop in demand, but that was not the case. Instead, sellers over $500K simply picked up their ball and left the field. The highest percentage of cancelled listings were seen in the luxury market, which reduced supply and mitigated the loss in demand. As a result, sales prices over $500K have remained stable thus far and are up just 0.9% from this time last year.

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Contact the real estate experts at NextHome Valleywide in Chandler, AZ at 480-621-6828 for more information.  If you are currently looking to Buy or Sell a home in the Phoenix metro , Scottsdale or East Valley area and are not sure where to turn we can help! Search for homes at Valleywide.realestate where you can find single family homes, golf and lakefront properties, 55+ communities, townhomes and much more. Visit our blog at NextHome Valleywide for a monthly Phoenix Market Update.

April 2020 Market Update

Corona Aftermath:  Good News for Buyers
Sellers Not Pushing Market Values

2020-04 Infographic

For Buyers:

The kickoff of 2020 was developing into a nightmare for normal buyers who just wanted to find a place to live. Extreme competition for homes between wholesalers, cash buyers, vacation rental investors and traditional buyers depleted supply and created an environment consisting of multiple offers, appraisal waivers and an increasing number of sales over asking price. The Greater Phoenix housing market was on the precipice of seeing price appreciation accelerate at an alarming rate and had analysts wondering what could possibly slow it down. Well, they have their answer; an act of nature.

The COVID-19 pandemic came in like a wrecking ball in March shutting down tourism and crashing the stock market single-handedly over the course of a few weeks. Hedge funds and iBuyers (funded by Wall Street) bowed out of purchases and vacation rental buyers put their plans on hold. This is providing much needed relief to normal homebuyers, if only they could leave their house.  Stay-at-home orders to stem the impact of the pandemic has “pinched the hose” on what is arguably one of the hottest housing markets in the country. This is causing a build-up of pent up demand that will undoubtedly return with some gusto when travel restrictions are lifted and a level of stability returns.

Don’t expect prices in Greater Phoenix to drop like they did in 2008, however. Back then when investors pulled out of the market, prices were so high that families making the median income could only afford 27% of what was selling. This time around as investors once again pull out of the marketplace, families making the median income can afford 68% of what’s selling with today’s incomes and interest rates. This is well within normal range and puts regular homebuyers in a better position to pick up the pieces left by Wall Street and vacation rental investors.

For Sellers:

Lock downs and travel restrictions across the country are causing buyers who need to relocate to Arizona, either for a job or to retire, to put those plans on hold for now. The effects of COVID-19 span the job market, stock market, corporate profits, and exchange rates. This has had the highest impact on high-end luxury market buyers. Not only are these buyers restricted from leaving their home cities at the moment, they have instability in their portfolios as well. Under these circumstances it should not come as a surprise to see that weekly contract activity over $500K has slowed down by 64% since their peak on February 24th while price points under $500K have only seen a 30-40% slow down.
Sale prices are not declining at the moment, but seller expectations are adjusting. Upticks in weekly price reductions tell us that sellers are beginning to ease up on pushing market value. Sellers are also beginning to realize that it will take longer to sell their home under these conditions. Weeks ago, some listings were receiving multiple offers within a matter of hours, but that’s not a reasonable expectation now. Active listings that would’ve flown off the market 4 weeks ago could be on the market for weeks at this rate.
Information, communication and strategy will be important during the course of the pandemic response. It’s situations like these where professional Realtors get to show the value of their experience and service.

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Contact the real estate experts at NextHome Valleywide in Chandler, AZ at 480-621-6828 for more information.  If you are currently looking to Buy or Sell a home in the Phoenix metro , Scottsdale or East Valley area and are not sure where to turn we can help! Search for homes at Valleywide.realestate where you can find single family homes, golf and lakefront properties, 55+ communities, townhomes and much more. Visit our blog at NextHome Valleywide for a monthly Phoenix Market Update.

March 2020 Market Update

Frenzy:  11% More Contracts Than Listings
Contracts Over $1M up 60%

2020-03 Infographic

For Buyers:

Not even the COVID-19 coronavirus can slow down the Greater Phoenix housing market. For every 100 active listings in the Arizona Regional MLS there are 111 that are already under contract. Greater Phoenix is officially a frenzy and it’s only March. We can expect to see this continue at least through May without relief as buyer demand is typically highest in the Spring.  It’s even more dramatic in the Southeast Valley, West Valley and North Phoenix and all areas where prices land between $175K-$300K. For a stark example, on March 7th in Glendale there were 3 properties for sale  between $175K-$200K and 25 under contract. In Chandler there were 3 properties active between $200K-$250K and 37 under contract. In the North Phoenix Moon Valley area there were 8 properties for sale between $250K-$300K and 30 under contract.

There is a reason why people continue to pounce on what’s available for sale. The average price for a 1,500-2,000sf home is now $331K and continues to rise.  That may seem alarming considering it was $324K at the peak in 2006, but contrary to popular belief it’s more affordable today because of the interest rates.  In April 2006, with an average of 6.51% the monthly principle and interest payment on a 30-year fixed loan with 10% down was $1,854.

Today at an average of 3.45% the same home is $1,331, a savings of $523. More recently, over the last 16 months despite prices having risen 9.4% for median-sized homes the monthly payment dropped by approximately $112/month.

For Sellers:

There’s not much more to say to sellers under $500k, frankly their homes may be sold before we’re done  saying it. The stark gap between supply and demand doesn’t ease up until budgets go over $600K. Sellers in areas such as North Scottsdale, Paradise Valley, the Camelback Corridor and Downtown Phoenix still have plenty of competition to contend with, but well-priced, updated, move-in ready homes will still see heightened buyer interest.

The luxury market is doing exceptionally well, however sellers should not expect the stampedes seen in the  rest of the market. There are 522 properties under contract over $1M, up a whopping 60% over last year at  this time. However there are still 1,657 competing properties for sale in this price range and those that sold in February averaged 5-6 months on the market.

Contact the real estate experts at NextHome Valleywide in Chandler, AZ at 480-621-6828 for more information.  If you are currently looking to Buy or Sell a home in the Phoenix metro , Scottsdale or East Valley area and are not sure where to turn we can help! Search for homes at Valleywide.realestate where you can find single family homes, golf and lakefront properties, 55+ communities, townhomes and much more. Visit our blog at NextHome Valleywide for a monthly Phoenix Market Update.

Covid-19 Update

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To stay current on Phoenix area market trends we subscribe to the The Cromford Report and bring it to you every month. Michael Cromford is our local real estate data expert and is widely considered THE expert on Phoenix Metro real estate trends. Cromford gained fame as one of the few real estate gurus to accurately call the 2008 housing crisis, and we have followed him closely ever since. We have been reading his updates daily and thought it important to share some of his daily insights with you:

  • 3/14: We have all learned a lot about the novel corona virus since my last observation on that subject. There is now little doubt that it will spread to every corner of the globe and will have a huge effect on the world, both in human and economic terms. It will therefore have an effect on the Phoenix housing market but these changes will be minor compared with the effect on families who lose loved ones and the businesses directly affected.
  • 3/15: Arizona has less than 2 infections per million as of March 14.
  • 3/16: Several subscribers have asked me what effect the corona virus is having on the housing market numbers and the answer so far has been almost none. I know this is hard to believe, but we scour the data every day for any sign of a change.
  • 3/18: A number of people seem to assume that we are heading for a recession and that home prices will fall. The first assumption is quite reasonable. The second assumption is based on fear and has little analytical data to back it up. Obviously anything can happen in an uncertain and disrupted world, but a fall in home prices is still looking very unlikely from today’s numbers . . . In 2005 the housing industry started to sicken because homes were being used as speculative commodities not for places to live . . . In 2020, housing is an innocent bystander to a probable recession caused by a pandemic. It has supply at extremely low levels and most homeowners have a large amount of equity.
  • 3/19: From looking at the housing numbers every day you would not be able to tell that we have a dangerous worldwide pandemic. There are a few slight changes in trend as mentioned on March 17, but compared with the chaotic financial markets, the housing market is steady as a rock.

As we all attempt to come to grips with this virus we can expect to see some impact on our local market. Obviously, workers in most directly impacted market segments–airline, restaurant, hospitality, travel, etc.–can expect to see a temporary reduction in income, and for many would be buyers, this will remove them from the home buyer pool for some months. And certainly others will be sidelined by other concerns–some economic–and many psychological or fear based. However, it is important to note that in our current Phoenix market the most significant driver of pricing remains the lack of available supply. As some buyers are sidelined, this will create additional opportunities for those who remain in the market–particularly those that have struggled to get a home under contract because of fierce competition.
Housing supply is at all time lows, rates remain at historic lows, prices continue to climb and the Phoenix metro real estate market remains fundamentally unchanged from several weeks ago. Lenders, title companies and real estate offices are all open for business, and we remain–as always–dedicated to continue to serve your real estate needs. We will continue to be vigalent and bring you any updates and changes as they occur.