February 2021 Market Update

Median Sale Price Up 18%–Inventory Down 61%
Luxury Sales Up 140%

2021-02 Infographic

For Buyers:

Yes, it’s still a good time to buy. Is it fun? No.

Inventory is down 61% from this time last year and competition among buyers is steep. New listings are not keeping up with demand and the purchase experience can be stressful, disappointing and heartbreaking; but it’s a good time to buy.

The median sales price has risen 18% to $339,000 and the median monthly rental rate through the Arizona Regional MLS has also risen 18%. A 1,500-2,000 square foot home is roughly $1,600-$1,700 per month to purchase with 10% down while that same home rents at a median of $1,850 per month, up $250 over last year at this time. For those who would like to reduce and stabilize their monthly housing expense with a historically low 30-year fixed mortgage rate, it’s a good time to buy.

According to the National Association of Home Builders, a family making the median annual income of $72,300 in Greater Phoenix could afford 60.6% of what sold in the 4th Quarter of 2020. That rate has been steadily declining, but it’s still within the normal range of 60-75% for now. In San Francisco, the median sales price is $1,350,000 and a family making the median annual income of $130,900 can only afford 11% of what’s selling there. For those who can work from home and no longer need to live in the same expensive city as their employer, it’s a good time to buy.

Finally, it’s a good time to buy because Greater Phoenix is experiencing a housing shortage. Over the past decade a gap between the total number of housing units built and the total number of people to be housed has been growing wider and developers have not been able to bridge it. This is not something that will be solved this year, and probably not next year either. As affordability wanes, it’s a good time to stake your claim on a home while it’s still an option.

For Sellers:

Brace yourself, the showings are coming. It’s not uncommon these days to see a stampede of buyers through a home within the first day or so on the market. It doesn’t matter the price range, all areas and types of homes are flying off the market and so far this month 37% of closings are over asking price.

The most impressive development has been in the luxury market. After California announced it was considering raising income and other taxes last summer, contracts over $1M surged in Greater Phoenix. So far in 2021, sales between $1M-$3M are up 102% and sales over $3M are up 140% over last year and there is little sign of a slow down.

Appreciation rates based on annual sales between $1M-$2M range between 5%-6.5% and 2%-5% over $2M. While the northeast cities of Paradise Valley and Scottsdale have long been associated with luxury real estate, Gilbert has emerged in the top 5 cities for sales over $1M in 2020.

Appreciation rates for homes sold below $600K range from 7%-11% annually and 5%-7% for sales between $600K-$1M.

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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.

January 2021 Market Update

2020 Broke Record for Luxury Sales
Supply Down 51%; Slim Pickings for 2021

2021-01 Infographic

For Buyers:

There were 111,036 new listings added to the Arizona Regional MLS (ARMLS) in 2020, only 38 more than 2019, while 100,650 sold. As of January 10th, 2021 there were only 6,162 listings still active in the MLS, which is the lowest supply count recorded in at least 20 years. To make matters worse, 10% of those proper-
ties are outside of the Greater Phoenix boundary.

While the number of new listings barely changed last year, demand for homes accelerated between June and December to 35% above normal. Luxury sales over $1M soared after the pandemic restrictions were lifted.  While they were already up 7.7% over 2019 at the end of June, by the end of December annual luxury sales were up 48.7%, securing an enormous record for 2020 at 2,575 sales over $1M.  Outside of the MLS, new home developers have been struggling to meet demand as well. Despite the road blocks in production due the pandemic, forest fires and supply line disruptions, as of November builders still managed to sell 14% more homes and obtain 28,204 more single family permits for future supply, up 24% over 2019. The median price of a new single family home only rose 6% from $333K to $353K and considering the median price of a resale home is $335K, that’s extremely competitive.

As supply began to drop last month, December saw 33% of sales closed over asking price and only 10% involved seller-paid closing costs in the 4th Quarter.

Bottom line for buyers starting their search in 2021, be on top of your loan and be ready to pounce on every new listing that fits your needs. Many new listings will be on the market for less than a week prior to accepting a contract.

For Sellers:

The state of Arizona ranked 3rd in the nation for population growth behind Texas and Florida in the latest 2020 Census release. When the full report comes out later this year, we expect to see California as the #1 source of inbound migration for Greater Phoenix. Moving companies such as Atlas, United Van Lines and North American have released their annual migration reports and 2 out of the 3 list Arizona in their Top 5 states for inbound moves. United Van Lines specifically cites “retirement” as the primary reason for 37% of inbound moves, 70% were over 55 years old and 63% made incomes over $100,000 per year.  While median home prices have risen 15.5% year-over-year, the median rental rates through ARMLS have also risen 12.9% from $1,550 to $1,750/month. This increase, combined with historically low mortgage rates, has fueled more demand to purchase.

As the population continues to grow, the housing gap is becoming harder to close.   After a decade of underbuilding, this will take more than a few months or a year to correct. However as prices rise and affordability quickly drops, it’s reasonable to expect some demand to drop with it. With that expectation, home prices are still projected to rise throughout 2021 but possibly at a slower rate in the latter half of the year. It will be another great year for sellers.

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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.

The New Normal

December 2020 - MVP - Social Media Image B

“2020 will be known for a lot of things, and a record-breaking year for real estate will certainly be one of its more unexpected legacies,” prominent economist Daryl Fairweather said.1 And he’s right: most of us would have expected the housing market to suffer from circumstances like a once-in-a-hundred-years pandemic and historic inventory shortages.

But, rather than a slowdown, we are continuing to experience a surprisingly robust real estate market across the country. And experts estimate that these conditions are likely to last well into the new year. Fannie Mae Senior VP and Chief Economist Doug Duncan predicts that existing home sales will ultimately “be up a percent or more in 2021.” He believes home prices will continue to rise due to limited inventory, but he is confident the Federal Reserve will keep interest rates low into the future, which will be “very good for households.”2

Market conditions like fewer available listings, changing criteria for desired homes, and record-low mortgage rates are changing the way people buy and sell homes, most likely in a lasting way. But this sustained activity, even in the uncertainty that is 2020, proves that our country still views real estate as a sound investment. The only question now is how you can take advantage of the housing market’s “new normal” in 2021?

FEWER LISTINGS = A SELLER’S MARKET

Inventory, meaning the number of homes for sale, is at a record low across the country. The National Association of Realtors (NAR) reports there are fewer homes on the market today than the association has seen in data going all the way back to 1982.3 Currently, the total housing inventory is about 1.47 million units, which is a decline of 19.2% from one year ago.4

Experts do predict some relief on the horizon. MarketWatch had previously anticipated housing starts would occur at a pace of 1.45 million and building permits would come in at a pace of 1.52 million.5 But it turns out that the market exceeded expectations: compared with last year, housing starts are up 11% and permitting for new homes occurred at a seasonally-adjusted annual rate of 1.55 million. That represents a 5% increase from August and an 8% increase from a year ago.

For now, the fact that there are fewer listings creates an advantageous housing market for sellers. There are several reasons why.

For one, buyers have to act fast to snap up available homes. As a result, most properties that come on the market stay for an average of just 21 days before they are sold.6 “That is the fastest ever recorded in our monthly series,” says NAR Chief Economist Lawrence Yun.

Another benefit is that sellers are enjoying higher net returns on their listings. This is thanks to the tough competition for homes, which often results in bidding wars between buyers. Nationwide, the median home price in September rose to $311,800. That translates to about $40,000 (15%) more than just a year ago.7

This seller’s market is not simply a product of the pandemic. In fact, in the country’s top 100 metro markets, inventory has been dwindling since the first quarter of 2020.8 This means that even with increased construction, buyers can’t simply wait for things to go back to normal before reentering the market. Rather, all signs indicate that this is the new normal.

What It Means for Homeowners: 

These higher home prices show that buyers are willing to spend more on a home right now than they did last year. So, if there ever were a time to list for top dollar—and expect to receive asking price quickly—that time is now. Ask us for a free consultation of your home’s value today.

What It Means for Homebuyers:

Due to low inventory, buyers could easily find themselves in a bidding war. Time is of the essence in a seller’s market, so you’ll need to get your financing in order and be preapproved for a loan before you begin your home search. We can connect you with a trusted mortgage professional to get you started.

BUYERS BENEFIT FROM LOW MORTGAGE RATES AND A BIGGER PLAYING FIELD

Don’t worry, homebuyers. This “new normal” of real estate has benefits for you too.

For example, people used to base their next home purchase on how far the commute was to work or in which public school district it was. But now, thanks to the pandemic shifting the locus of jobs and work, they are free to consider what they need from a home to make it a place they truly want to be in as they work, teach, exercise, cook, and live.

Often, this equates to needing more space in different types of areas. Realtor.com consumer surveys show that people are desiring quieter neighborhoods, home offices, updated kitchens, and access to the great outdoors.9 The search for these criteria is driving residents out of densely populated metropolitan areas and into the suburbs.10 And this exodus from cities is good news for buyers: it opens up more possibilities for inventory that they could not have considered pre-pandemic.

Another advantage for buyers is the record-low mortgage rates. The average rate for a 30-year fixed-rate mortgage hit a record low in mid-October when rates fell to 2.81%. That’s the lowest since Freddie Mac began conducting the survey in 1971, and well below last year’s 3.69%.11 Similarly, a 15-year fixed-rate mortgage can be had for as low as 2.35% compared to 3.15% a year ago.

Thanks to these rates, buyers are afforded the opportunity to buy nearly $32,000 more home than they could one year ago, while keeping their monthly payment the same.12 So even though home prices are high now, it is currently more affordable to buy a home now than it was last year.

If you want to take advantage of these rock-bottom mortgage rates, you need to act fast. Though rates are projected to stay low, housing economists predict that the window of opportunity to get the best rate could be closing in the coming months. Mike Fratantoni, chief economist at the Mortgage Bankers Association, said he expects the average rate on a 30-year mortgage to rise to 3.5% by the end of 2021.13

What It Means for Homeowners:

Record-low mortgage rates offer you the opportunity to lower your monthly payment—or even take out some equity—with a refinance. With those additional funds, you could even choose to invest in a second home in a new desirable location. Reach out to us for a referral to a trusted mortgage professional or an agent in those markets.

What It Means for Homebuyers:

The time is now to determine how much home you can comfortably afford and make a plan to find it. We can set up a search for you to find homes that best meet your new needs, even if they’re in neighborhoods you wouldn’t have considered before.

A RECORD-SETTING YEAR FOR HOME SALES IS JUST THE BEGINNING

Despite the seemingly adverse buyer conditions, 2020 experienced a 14-year high number of home sales, NAR reports. Existing-home sales, which include single-family homes, townhomes, condominiums and co-ops, rose 9.4% in September to a seasonally adjusted annual rate of 6.54 million.14 That’s a 21% increase from a year ago!

Every region of the country has seen a surge in sales activity. According to George Ratiu, senior economist for Realtor.com, part of the reason for these continued sales is that the pandemic has created a paradigm shift in the patterns of real estate.15 For example, housing needs are typically resolved by late summer and early fall to coincide with the commencement of the new school year. With homeschooling and remote work, however, buyers have been freed to continue their home search into the traditionally slow winter months.

Another reason for the robust market is that Millennials are finally putting their money into homeownership. According to the U.S. Census Bureau, the homeownership rate for 25-to-34-year-olds rose to 40.7% by the end of last year.16 This is significant because Millennials, the generation of people in their mid-20s to late-30s, currently surpasses Baby Boomers as the nation’s largest living adult generation. As the remaining percentage of this group starts investing in homes in the near future, demand will persist.

All of these factors indicate that the housing market is poised to remain strong as we head into the new year. And as Jonathan Woloshin, head of U.S. real estate at UBS Global Wealth Management, believes, they could “buoy the housing market for years to come.”17

What It Means for Homeowners:

It’s tempting to believe that homes will basically sell themselves in a market like this. But we’re still seeing properties that are overpriced and under-marketed sit unsold. We can help you optimize the process of selling your home so you can get the best possible offer.

What It Means for Homebuyers:

Preparation is key to success in a seller’s market like this, but don’t let yourself become paralyzed. We are here to answer your questions and offer sound advice to guide you through all the options that are available to you.

REAL ESTATE IS A SAFE BET

Your other investments might have been on roller coasters this year, but the real estate market has been steady, competitive, and strong throughout. That makes it a good choice for your financial future.

National real estate numbers can give us a pulse on the market, but real estate happens in our own backyard. As your local market experts, we can help you understand the finer points of the market that impact sales and home values in your own neighborhood. 

If you’re considering buying or selling a home in 2021, contact us now to schedule a free consultation. We’ll work with you to develop an actionable plan to meet your goals.

Sources:

  1. Redfin – https://www.redfin.com/news/housing-market-news-september-2020/
  2. Housing Wire – https://www.housingwire.com/articles/fannie-maes-doug-duncan-offers-his-predictions-for-2021/
  3. CNBC – https://www.cnbc.com/2020/10/22/september-existing-home-sales-jump-9point5percent.html
  4. NAHB – http://eyeonhousing.org/2020/10/existing-home-sales-surge-despite-record-low-supply
  5. MarketWatch – https://www.marketwatch.com/story/new-home-construction-slows-slightly-in-august-driven-by-pullback-in-multifamily-starts-2020-09-17
  6. National Association of Realtors – https://www.nar.realtor/newsroom/existing-home-sales-soar-9-4-to-6-5-million-in-september
  7. Business Insider – https://www.businessinsider.com/how-2020-broke-the-housing-market-inventory-could-run-out-2020-9
  8. Forbes – https://www.forbes.com/sites/petertaylor/2020/10/11/covid-19-has-changed-the-housing-market-forever-heres-where-americans-are-moving-and-why/#74e7355761fe 
  9. Realtor.com – https://www.realtor.com/research/top-consumer-home-features-coronavirus/ 
  10. Wealth Advisor – https://www.thewealthadvisor.com/article/covid-19-has-changed-housing-market-forever-heres-where-americans-are-moving-and-why
  11. Washington Post –https://www.washingtonpost.com/business/2020/10/15/30-year-mortgage-rate-drops-record-low/
  12. Forbes – https://www.forbes.com/advisor/mortgages/buying-a-home-low-mortgage-rates/
  13. BankRate – https://www.bankrate.com/mortgages/refinance-window-could-close-soon/
  14. National Association of Realtors – https://www.nar.realtor/newsroom/existing-home-sales-soar-9-4-to-6-5-million-in-september
  15. Forbes – https://www.forbes.com/sites/petertaylor/2020/10/11/covid-19-has-changed-the-housing-market-forever-heres-where-americans-are-moving-and-why/#74e7355761fe
  16. TD Economics – https://economics.td.com/us-falling-mortgage#:~:text=The%20homeownership%20rate%20among%20millennials,47.7%25%20at%20a%20comparable%20age.&text=This%20means%20that%201.4%20million,that%20of%20the%20older%20generation
  17. Axios Media –https://www.axios.com/real-estate-market-819e3c85-3765-4014-91c0-b545be6d5935.html

December 2020 Market Update

Supply Down 48%; Contracts Up 35%
Eviction Moratorium to Expire 12/31

2020-12 Infographic

For Buyers:

Existing protections in place for homeowners during times of financial hardship have come to the forefront in 2020. While both renters and homeowners alike were struck with unemployment and loss of income this year, homeowners in particular were provided with more immediate relief and a pathway to recovery than their renting counterparts.  Case in point, there are few experts in the field predicting a foreclosure crisis for homeowners; however, there are many housing experts concerned about an eviction crisis for renters after the eviction moratorium ends December 31st. Under normal circumstances in Arizona a homeowner typically has to miss multiple monthly payments before the lender files a Notice of Trustee Sale, which then provides another 90 days for the homeowner to remediate the situation prior to foreclosure. However, a renter can be at risk of eviction within a few shorts weeks after missing a single rent payment depending on their landlord’s disposition and rental agreement.

The CARES Act extended another layer of protection for homeowners through forbearance, allowing them to postpone their payments in 3 month increments for up to a year without an effect on their credit. Many lenders have already put in place refinance options after forbearance for homeowners who have accumulated thousands of dollars in unpaid mortgage payments. There is no such plan for renters after the eviction moratorium. Their rents will be due in full and if they haven’t received rental assistance or sufficient unemployment benefits to cover the amount owed, they will be facing eviction and their credit will be affected.

So for those questioning whether or not purchasing a home is a good financial decision, the answer is yes.  The value of owning a home is not just in its market value, but in stabilizing monthly housing costs during a period of rising rents and the comfort of more protection during times of financial and job insecurity. Losing one’s home, whether rented or owned, is one of the most stressful things a human being can endure.

For Sellers:

If you are one of the many homeowners facing the end of a forbearance period sometime in the next 3-4 months, you have at least 5 options to remediate your situation. 1) STAY IN YOUR HOME and consult your retirement plan administrator about tapping into your retirement account without penalty until December 31st to cover your unpaid payments; 2) STAY IN YOUR HOME and consult a lender about refinancing your unpaid payments into a new loan; 3) MOVE OUT and rent your home for more than your mortgage payment to cover missed payments or replenish your retirement account; 4) MOVE OUT and consult a lender about acquiring a new loan on a more affordable home; 5) MOVE OUT and sell your home for more than your mortgage balance, walk away with your equity and credit intact to purchase another day.

None of these options were viable solutions for homeowners facing the 2008 housing crash 12 years ago.  These options are why there is little risk of a foreclosure crisis and price crash in 2021. Because population growth has consistently outpaced housing growth every year over the past 10 years, rents and values are projected to continue rising through 2021 in Greater Phoenix unless builders are able and willing to ramp up production at ludicrous speed. They are doing their best, but even 25,549 permits issued and 19,889 sales closed on brand new single family homes through October this year hasn’t proven to be enough to satisfy the level of demand for housing that has descended on Greater Phoenix. Sellers need not worry about their home values declining anytime soon.

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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.

November 2020 Market Update

Demand for Homes Up 36%
Rents Up 17% Since April

2020-11 Infographic

For Buyers:

The Rent vs. Buy scenario has become heavily in favor of buying over the last 5 months. Eviction moratoriums due to the pandemic have greatly reduced turnover rates in a rental market that is already short of supply. Lease rates on listings through the Arizona Regional MLS have increased 17% since April overall; and for a home between 1,500-2,000sf the median lease price in the 4th Quarter is $1,850 a month, up a whopping $255 from the 4th Quarter last year.  While leases have been rising, home values have also risen 16%; however declining interest rates have kept the monthly payments level. The median sales price for a 1,500-2,000sf home is currently $316,000, up $27,000 since April. Despite this 9% increase (assuming a $15,000-$30,000 investment and interest rate under 3%), purchasing a home could possibly save a renter hundreds of dollars on their monthly budget while simultaneously building equity and ensuring a level of stability in their housing cost.

For Sellers:

While many people are waiting for the final results of the 2020 election, at least one thing is for certain in Greater Phoenix. The housing market will not crash in 2021 regardless of the outcome. It may be hard to believe, but the new and resale housing markets don’t move quickly. Unlike the stock market where it takes a push of a button to sell a stock and record the price, it takes longer to sell a home between the marketing time and escrow process. In today’s market, it may take up to a week to negotiate an offer and another 30-45 days for the price to be publicly recorded. When a market weakens, it takes longer.

Supply in Greater Phoenix has been gradually shrinking for 6 years and was the driver behind price appreciation until the pandemic. To put things in perspective, the Arizona Regional MLS should seasonally have between 25,000-30,000 listings active at this time of year; as of November 9th there are under 8,600. That type of shortage doesn’t happen overnight and new construction will not be able to fill the gap quickly.  Listings Under Contract should seasonally have between 9,000-10,000 in escrow at this time of year; as of November 9th there are over 13,000. This level was reached in June and has stayed consistent for nearly 5 months. Even if demand were to scale back in 2021 and return to a normal level, the market would not see a massive drop in prices; just a slowing in appreciation.

DOWNLOAD YOUR COPY

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.