Wall Street & Real Estate:
- Opendoor, Offerpad, Zillow have all re-entered the market and started again in Phoenix.
- The volatility in the stock market settled before they re-entered.
- For many years Phoenix has been affordable.
- Ideal affordability range is 60-75. Below 60, properties are no longer considered affordable.
- Phoenix is currently 63. We recently dropped from 68.
- Median household income in $72,500, which means that the median household could afford 63% of homes that closed in the first 6 months of the year.
- Phoenix Metro has been the fastest growing area for the past 4 years.
- Population by density for 2020 and projections for 2030.
- We will start seeing an increase in density as we are running out of centrally located space.
- Largest growth areas are in the southeast valley and west side (lower average prices).
- Yards will get smaller and land more expensive.
- AZ is doing better than the rest of the country.
- We have growth in the tech sector.
- Must continue watching these numbers.
- Over the past 10 years our economic development has been working hard bringing medical, tech, accounting, insurance jobs.
New forbearance requests are dropping. The decline started earlier than expected. The ultimate consequences of forbearance will be seen later. Too early to tell. How long will the extra unemployment benefits be available and what impact will that have on forbearance? Only time will tell.
The Cromford Market Index:
Available on the main page of the Cromford Report: http://cromfordreport.com/ (without a subscription)
- 100 is balanced, below 100 is a buyer’s market, above 100 is a seller’s market
- On 2/5/2020 we were at 215.1
- On 3/20/2020 we were at 241
- Today we are at 185.9
- On 6/9/2020, the date of our class it was 172.2
- When it is at 100 property values increase at the rate of inflation.
- Our supply is 49.3, 50.7% under where we should be.
- Our demand has decreased is 91.7, 8.3% below normal.
- As long as the CMI is above 110, prices will continue to rise, just at a slower rate
- As of the week of April 19th the dramatic free fall corrected
- Only Paradise Valley is in balance (due to price point). Every other city is in a seller’s market.
- We are seeing a U shape recovery
- Price is a lagging indicator
- Vacancies cause the biggest risk to real estate values
- Forbearance keeps people in their homes
- When inventory and demand both drop at the same time prices do not decrease
- Prices are currently up 3.9%
Supply & Demand:
- When demand outpaces supply, prices go up. When supply outpaces demand, prices go down.
- The last time they crossed was 2014.
- No indication of a crash, compare 2007 with 2020.
- 5 weeks of 32% increase, March 14-April 5
- 8 weeks of decline Since April 19, we are only about 3% above where we were in March
- We should have at least 25,000 listings to sustain our population.
- April and May new listings are down 20%
- June is shaping up to be at 33% year over year decrease in active listings
- This week our supply of properties asking $250,000-$300,000 is up 13% more year over year. Last week it was 25% more. In one week it dropped by half. Every week that your buyer waits the fewer options for 250-400K, biggest market point.
- Median sales prices $303
- Demand dropped slightly last week and immediately increased again this week.
- Demand dropped at the end of February. February 23 was the peak.
- We dropped 39% and then we are up 68% since then
- Weekly new contracts are 11.1% higher in new contracts than we were at this time last year.
- Summer has not been slowing down. likely to change the typical cyclical nature of the business.
- 55+ communities are in balance, not a buyer or seller market, hit the hardest by pandemic, will likely recover when travel opens up and health confidence is renewed.
- Biggest news over the past couple of weeks is over $500K, initially dropped 65%. Since April 5th have seen huge growth, we are now 11% higher since February 23. 58% up year over year. Huge number of increases year over year in recovered contracts. Now we have to see that in closing numbers to get a better idea for pricing.
- What is in escrow getting ready to close compared to what we have on the market
- On June 2 it was 110; meaning we have 110 in escrow and 100 active on the market
- May 2nd was 71. We increased 39 in 4 weeks.
- March 7th was 117 (for every 100 active listings, there were 117 properties in escrow INSANE)
- April 18th was the lowest at 66
- Some parts of town have 3x in escrow than what is listed.
- All areas of the market cooled in March and April and we have recovered all of that cooling to some insanely hot zip codes.
- Seller concessions:
- 5 weeks we are at about 26.4%
- Specifically from the $100,000-400,000 range it is 31%
- Lower sales prices have more seller concessions. mostly on the west side
- Budget this into closing costs
- Sales under $500K, 8.5% up year over year, over $500,000 appreciation is flat, didn't lose and didn't gain.
- Rents have gone up 7.4%
- $1625 monthly average rental, which is 1600 square feet is median size. $1.02 price per square foot.
- The bigger the home the less per square foot you get on your rental (and purchase)
- Over Asking:
- In the first 7 days of June, 23% of all closings closed over asking price.
- For properties between $200,000-$250,000; 38% closed over asking.
- For properties between $250,000-$300,000; 27% closed over asking.
- Expect listings sold over asking will increase in the coming 4-6 weeks.
We do not know what will happen next but we do know what is happening right now. We cannot guarantee anything for the future. Right now is the time to strike while the iron is hot. It is a good time to buy as prices will likely to continue to increase. It is a good time to sell as sellers have less competition.