Greetings,

#AugustMarketUpdate| #ArizonaRealEstate | #ArizonaRealtor | #AZRealestate | #SellForTopDollar | #ThankYou | #RealEstateAgent | #Community | #Integrity | #RealEstate | #RealtyONE | #EricWilliamsonRealtor

Every single thermometer we use to measure our current market, even the ones using mercury, say the exact same thing, we’re on fire. Last month in STAT, pointed out that “although our market is on fire, a hot market does not necessarily mean we have a healthy market”. In STAT we report current market conditions. These metrics also offer insights as to what we might expect over the next six to 12 months (although a year gets a little trickier where we’re somewhat guessing). Beyond a year we’re only guessing. That said, I’m quite confident, barring another unforeseen event like COVID-19, that sales volume will show year-over-year gains in both August and September, and most likely October. I wouldn’t even be surprised that when 2020 ends, sales volume will exceed 2019. Through the first seven months, sales volume in 2020 is 4.7% lower than 2019, with 5 positive months and 2 dismal months. I also think the median price gains will moderate through the end of the year as our normal seasonal patterns finally kick in. As for the longer term, nobody knows how long our “fuego” market will last, but we do know the extreme measurements we’re seeing today will eventually change. No market cycle lasts forever. At The Information Market we have the privilege of working with the finest analysts in our marketplace. There are a bunch of bright individuals out there all trying to build better crystal balls. I can share with you the primary questions they’re asking. They center around housing affordability, changes in foreclosure activity now that mortgage forbearances are ending, how the unrest in other major cities might affect our housing demand and finally, when do we see the current market cycle ending and how mild/severe will it be. We don’t have the answers to any of these questions at this time, but I promise you, we will be closely monitoring the data and will share the answers with you when we find them. 14 ARMLS STAT JULY 2020 Pending Price Index Last month the STAT mathematical model projected a median sales price for July of $310,000. The July reported median was $315,000. Looking ahead to August, the median sales price is expected to increase. The ARMLS Pending Price index is projecting a median sales price of $320,000. Our mathematical model has underestimated the actual median sales price the last three months. I do not expect this to be the case in August. We begin August with 7,479 pending contracts, 4,315 UCB listings and 681 CCBS, giving us a total of 12,475 residential listings practically under contract. This compares to 10,855 of the same type of listings one year ago. At the beginning of August, the “pending” contracts were 15% higher than last year. There were 22 business days in July of 2019 and 22 this year. ARMLS reported 8,726 sales in August of 2019""

ARMLS-STAT JULY 2020

Arizona Real Estate market update July 2020 +++ Half the year is in the books and we were 1 sale away from a record! ++++

-Sold listings bounced up from last month's decline to 9249 units, this is about the same level we had a year ago and what would be considered in a normal range. 

Interestingly, we actually closed more homes this month than compared with 1 year ago by +2.1%. 

-Prices continue to climb (this appreciation goes hand in hand with the rental market where the same property last year would now fetch about 250 dollars more per month) 

The average sales price is up +5.1% year-overyear while the year-overyear median sales price is also up +9.0% .

The average sales price sits at an all time high water mark! @ +$369/k

 

-Distressed sales, including foreclosures, hud homes & short sales pending month-over-month showed a decrease of -10.5% while the year over-year figure was down -34.1%. I think this shows two things. 1) low rates and home owner equity will help weather some of the economic pressure from covid and how it relates to housing. 2) the overall strength of the housing market here in the valley. Distressed sales are a good measure of the health of the housing market.  Distressed sales accounted for 0.6% of total sales, the same as the previous month. Short sales dropped -60.0% year-over-year. Lender-owned sales decreased -26.8% year over-year.

According to Frank Nothaft, chief economist at CoreLogic, “Pending sales and home-purchase loan applications are higher than in June of last year and reflect the buying activity of millennials.” It’s clear, record-low mortgage rates and millennials are driving home sales.

Sales volume for the first 6 months of 2020 show that we will pass 2019 sales vloumes. This is really remarkable given the way the year has gone. Sales volume is a key metric. It seems impossible, but if just one more average priced home had sold in the first six months, 2020 would have reported the highest dollar sales volume in its history. 

Truly remarkable. 

Typically, our home buying/selling season kicks off with the Super Bowl and then slows as our summer temperatures rise with pending contracts peaking in late April and home closings topping out in May and June. This year, pending contracts hit their current high-water mark on June 29, and there is still a good chance we might report an even higher number of pending contracts in the weeks to come. The chart below compares the number of properties under contract to the number of active listings in Maricopa County. 

This is an extremely stretched position for buyers vs sellers. 

One segment of our housing market that was unfazed by the “Corona Pause” was new construction. Newly built homes sold in the second quarter of 2020 exceeded the number sold in 2019 for the same period. An amazing result considering the dire March predictions. The spreadsheet below displays both sales volume as well as the median sales price. The median sales price for newly built homes has been rising at a much slower rate over the last several years than the resale market. The gap between a median priced resale home in Maricopa County and a median priced newly built home in Maricopa County is about $60,000. Put in terms of a monthly payment, with the current extremely low interest rates, the difference is about $170 per month. Anecdotally,  savvy “buy and hold” rental investor purchasing new builds for their portfolio telling me “the numbers” work.

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Here are the numbers:

-Active listings are down 30%

-Sold listings are down 37%

-Prices have increased by +6% median sales price & + 8% median sales price per sq ft. 

Over all our market in Arizona remains very strong. We are seeing the same frenzied buying as 23% of homes listed sold above asking price. More listings are currently under contract that are available for sale. Over the last few weeks the number of properties under contract has jumped by 20%.Our recovery since the COVID crash is around 68% of normal sales activity. The most active price points are the range of 200/k-400/k these include areas in the southeast valley, west valley north & south phoenix. Even the luxury market is rebounding as counteract over 500/k are up 159% for the year.Overall inventory levels are at a low point for buyers sitting at March levels of around 11/k properties. Low interest rates continue to be a driver for buyers. As stated 23% of all closed homes sold above ask price. up from 17% in Jan and 19% in Feb.  

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.

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 as of today it was a 170.2 , 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 2020 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 last week, 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 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:

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 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. Last 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:

• We are seeing increases in second home purchases which is unusual in a financially stressful time.
• 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.

I hope you stay safe and continue to be well. 

Thank you very much for reading this update and please let me know if I can help in any way with your real estate needs.