Why do we have a housing shortage?:

This is a housing shortage for real. This is not like 2005-2008. We are waiting for the census for the newest numbers, not yet for the county but soon. Expects all numbers by May 2021.

In 2019 we were already in trouble. We under built the past 10 years. We had a glut of housing in 2008 and it has all been absorbed. Since then we have been behind. Overbuilt for 10 years and then under-built for 10 years. All housing types; rental, condos, townhouses, single-family.

From 2010 through 2019 our population increased by 18% while housing units increased by 9%.

AZ ranked #3 for population growth from June 2019 to June 2020. Behind Texas and Florida. CA lost people for the first time in over 100 years.

23% of inbound migration to Arizona is from California.

We have diversity of labor force and job growth. More jobs are coming because we have lots of highly skilled workers. It is pushing out the people who cannot afford the housing prices. Workforce housing is really being impacted.

• 100 is balanced and prices rise at the rate of inflation, below 100 is a buyer’s market, above 100 is a seller’s market, prices drop below 90, prices rise at 110.
• On 2/5/2020 we were at 215.1
• On 3/20/2020 we were at 241
• On 5/15/2020 we were at 145.2
• Yesterday we were at 461.4.
• Prior to this run, the previous peak was 312.9 in the spring of 2005.
• CMI is the predictor, it moves first and then appreciation follows.

We are 30% above normal for demand. Supply is about 72% below normal. Our supply was stable for most of the year, just at a very low rate. In December inventory started dropping. Demand also started dropping in December. Supply dropped faster than demand and it is still in favor of sellers. Demand is down 4% but supply is down 5.6%

On 1/1/21 we were at 432 and now we are in the 461.4, super-fast increase. We cannot even discuss prices going flat, let alone down until CMI starts dropping. This indicator needs to drop in order to even lead to a price decrease. It will still take us a year to get to a balanced, aka normal, market for prices to go flat. At this rate, if demand dropped now, prices would not decrease until at least 2022.

• Contract ratio is 171 right now.
• For every 100 listings active there are 171 in escrow
• January is always the lowest for contract ratio and December is always the second-lowest, until 2020 and now December and January are the top months for this year.

Thank you very much and Happy Holidays to all of you!

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.