“…if you don’t know where you are, you don’t know where you’re going.” Terry Pratchett.
2019 was an unusual year. It began as a gentle seller’s market which was decidedly shifting towards a balanced market. Until it wasn’t. Once the spring buying season got underway, the direction changed rapidly. Active inventory hovered at 24,000 active properties for sale February through April – well above 2018 levels. But by June that reversed course dropping below 2018 numbers. Supply continued to drop while demand held strong throughout the rest of the year. Despite the typical seasonal pattern of more supply and less demand (i.e. end of year slowdown) – 2019 ended with contract and seasonal trends looking much stronger than normal. Contracts were up, supply of homes was down. As of this writing, supply stands at 15,746 properties for sale (12,682 if we remove homes under contract).
Not surprisingly, prices responded to the low inventory and rose in the closing months of the year. The fact that, as of yet, demand is not diminishing due to this rise in pricing, signals 2020 is likely headed towards a very strong spring selling season.
Summarizing the end of 2019, is Michael Orr of the Cromford Report:
“We have a situation that favors sellers to an almost alarming degree. Supply is down 25% compared to this time last year, when it was already well below normal. Demand has retained strength much later into the season than normal.
Pricing has moved higher over the last 2 months, but we are only at the beginning of the latest leg upwards. A rise of $10 per square foot represents an increase of almost 6% in just 2 months.
Things will not get easier for buyers in the weeks ahead. Supply always falls during December as many sellers take their homes off the market for the holiday season. Even without this effect, we have wholly inadequate supplies for the current level of demand. The real test will come in January when we see which ramps up faster from the low point of January 1, 2020 – will it be active listings or the under contract counts. Comparing these 2 numbers using the contract ratio will give us a good forecast of how the spring selling season will turn out. At the moment it looks as though sellers will be firmly in control.”
As Michael Orr further states “Active listing counts have been low for so long we have started to feel like low numbers are normal. But they are not normal”. We couldn’t agree more – so to reacquaint yourself with normal, take a look at the chart below for long term comparisons.
City Active Dec 11, 2019 Long Term Average Difference
Avondale 89 370 -76%
Gilbert 360 1,168 -69%
Chandler 354 1,028 -66%
Glendale 332 957 -65%
Mesa 584 1,665 -65%
Phoenix 2,021 4,682 -57%
Tempe 134 305 -56%
Surprise 438 949 -54%
Peoria 442 924 -52%
Queen Creek / STV 515 1,000 -49%
Scottsdale 1,323 2,375 -44%
Goodyear 337 574 -41%
Maricopa 273 439 -38%
Cave Creek 173 270 -36%
Fountain Hills 177 260 -32%
Buckeye 397 507 -22%
Paradise Valley 276 333 -17%
So was 2019 really just 2006 all over again? No. But not surprisingly the low inventory combined with healthy demand has allowed for a few records to have been set. In June, we set the highest monthly record of number of home sales at 11,705 (compare that to the low record set January of 2008 at 2,517). We should be mindful, however that there are more homes to sell in 2019 than existed in 2005/2006. Active listings price per square foot also hit a record of $242.95 per square foot on 12/29/19. But before we celebrate, it is important to note the sold price per square foot record is still held in 2006. Asking prices are not “getting” prices – but they can be a leading indicator of the future trend. 2020 could very well be the year to break the 2006 record.
To summarize, we expect 2020 to intensify the patterns of 2019. Of course, supply and demand is a scale that will balance eventually. Prices rise which eventually dampens demand, dropped demand allows for more homes on market equalizing the balance of power between buyers and sellers. The only question is when will the rebalance occur? As soon as the market answers that question, we will share it with you. In the meantime, here’s to a wonderful 2020.
Russell & Wendy (mostly Wendy)
Yours to Count On,
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