2/23 Market Update
Low-interest rates keep housing demand high while available supply continues to dwindle. Today’s market is tough on buyers yet it is still a great time to buy; so we must continue to encourage them. And we must do the same for the sellers as well.
Stories of 75 offers in one weekend or a fixer-upper selling as-is for $50,000 over asking come almost daily. Real estate is not for the faint of heart nor is it boring.
The AZ Market:
- The median sales price is up 18% year over year.
- Available inventory is down 61% year over year.
- Monthly mortgage payments for the median house is roughly $150-$250 cheaper than rents for the same property.
- 37% of closings so far in February closed for more than asking.
- At this point in 2021, luxury sales of properties from $1M-$3M are up 102% year over year and sales over $3M are up a whopping 140% year over year.
- Join us Friday as Tina Tamboer does a deep dive into the AZ market at 11am via zoom https://zoom.us/meeting/register/tJYpduCupz8sHtd2dDHQh7w18HUtf4rPO0ok
Greater Phoenix is highly desirable and still considered affordable. An estimated 83,000 new residents moved here in 2020 and with it, they brought bigger budgets. Local buyers’ budgets averaged $509,000 while new buyers coming from out of state had an average budget of $627,000; 23% higher!
In a recent Zillow survey, Phoenix ranks second in 2021’s hottest market. The Sunbelt is leading the housing pack.
Phoenix ranks #7 in the Milken Institute Best-Performing Cities Index. According to the ranking, in 2020 San Francisco ranked #1 and this year it did not even make the list. To quote directly from the index:
“For years, Phoenix has been topping lists of the most rapidly expanding cities in the country — jobs grew 17.6 percent between 2014 and 2019 while wages increased by 34.2 percent in the same period.
Although home values are responding to the economic boom and spiking accordingly, the city continues to attract a healthy balance of economic power players and people looking for a more affordable place to make a start in life.
‘The metro continues to grow at unprecedented rates, including top-tier one-year job (sixth) and wage growth (15th),” reads the report. “Phoenix also improved five ranks in high-tech GDP concentration (47th), while its seven high-tech industries land it at 37th, highlighting a deepening high-tech economy.’”
Real Estate News:
- Fannie Mae’s Home Purchase Sentiment Index rose in January it is up 3.7 points to 77.7, 15.3 points down year over year but rising. Rising consumer confidence in housing is good. We need more sellers to be confident!
- CoStar attempts again to purchase CoreLogic for $7 billion after a recent failed attempt and before the current agreement was signed.
- Apartment developers are increasing the square footage of their units. Jason Morgan, principal of Morgan Properties said, “Micro-units was the buzzword. It’s never going to happen again. That really has shifted, and now it’s more about space.”
- The largest MLS, California Regional MLS, joined RE/MAX and Redfin and are now publicly displaying the offered buyer’s agent commission. As part of the recent DOJ and NAR settlement, this change is required nationwide by the end of the quarter.
- NAR membership grew 5% year over year and now tops out at 1.45 members strong.
Inventory is low. Everywhere. With fewer than 2,500 active single-family homes on the market in Maricopa County, we are 77% below the average listing count over the past 4 years. This makes everyone sensitive to small changes in inventory levels.
When big companies, like Opendoor manipulating their own inventory levels it is important to take notice. For example, from November 10 to December 10 Opendoor did not list a single property anywhere in the country. They continued purchasing properties though. An easy assumption is that they were stockpiling houses to release to the market after they went public on December 21 and to give their investors a strong Q1 2021 due to all of the closings pushed into the new year. They created a stockpile of artificial inventory.
It was only for a short period, listings are withheld in 23 markets for 4 weeks, yet it shows how much power one company has to dictate the market. What if they hold them all for a year? What if they hold them to inflate the market? What if the other iBuyers do the same, like when Zillow and Opendoor both simultaneously decreased buyer agent commissions to 2.25% from 3% last summer?
Opendoor is a publicly-traded company. Wall Street is motivated by money. And now Opendoor has shown the ability to and willingness to, withhold listings in the tightest housing market in history. Are they still selling convenience to the consumer or doing what is best for their bottom line?
Continues to be plagued by high materials costs, especially for lumber which increased over 150% last summer, then dropped and increased again, due to supply chain shortages, massive fires, labor shortages, closed mills, COVID, and larger homes under construction.
“While the market remains solid, median home prices are increasing due to higher building material costs, most notably softwood lumber, and a shift to larger homes.”
-Robert Dietz, Cheif Economist of the National Association of Homebuilders
National Real Estate:
Typically about 25% of active listings take at least one price reduction before selling. Today that number has dropped to only 18.7%.
The current active inventory of single-family homes on the market stands at just 344,415 this week. That’s down another couple percent from last week.
The latest forbearance numbers show improvement. The total number of loans in a forbearance program is around 5.29% or about 2.6 million, a decrease of about 100,000 in the last 2 weeks.
The foreclosure, forbearance, and eviction moratorium have all been extended through June 30, 2021.
Forbearance Exits from June 1, 2020 – February 7, 2021:
- 43.6% of forbearance exits are paid up and current.
- The number to watch remains at 13.8% of forbearance exits are doing so without a loss mitigation plan in place.
- This means that if all 2.6 million borrowers exited their forbearance plan today, about 348,000 would leave with no plan in place.
In Q4 2020 the mortgage delinquency rate, which includes those in forbearance who are behind, was 6.73%, a 0.92% decrease from Q3 2020 but still nearly 3% above this time last year. This nearly 1% quarterly drop is the biggest decrease since the Mortgage Bankers Association started tracking this data in 1979.
The 30-day lates reached their lowest since tracking began in 1979, while both 60 and 90 days lates also decreased. 90+ day lates remain the largest delinquent group at just above 5% of all mortgages.
Total mortgage delinquencies across the three loan types – conventional, FHA, and VA – and across the major stages of delinquency – 30-day, 60-day, and 90-day – declined from last year’s third quarter.
3D Printed House:
The nation’s first 3D printed house hit the market in Riverhead, New York with an asking price of $299,999. It is 1,500 square feet and made out of concrete.
Supply and demand are the foundation of economics. Real estate is no different. In order for something to change either demand will subside or supply will increase. When that happens it doesn’t mean that our market will crash or values will go down, it means that appreciation will slow to a rate more favorable to buyers and sellers will have to negotiate.
Only then can we get out of what Mark Fleming with First American so gracefully explained, “This is what we call the homeowner prisoner’s dilemma. There’s nothing to buy because nobody is selling, but nobody is selling because there’s nothing to buy.”
225 E. Germann Rd #130
Gilbert, AZ 85297
Member of a Fortune 500 Company
We understand the importance of your transaction and are doing all we can to insure a smooth closing. We appreciate your patience and understanding during these unprecedented times. Please stay safe!