By Jonathan Bodeen · 13 April 2020
As you can imagine, Real Estate has slowed in the Phoenix area along with most other industries. We first noticed it in the first weeks of March when the COVID-19 federal guidelines were released. It wasn’t until that Tuesday however, when our state gave the stay at home order, that buyer activity understandably seemed to drop off a cliff.
The question we have (and probably you too)? Is this downturn just a temporary set back for Phoenix Area Real Estate, or could this be the beginning of something longer term? We don’t have the answer yet, though we have our suspicions. In future articles, as we get more and more relevant data from the market, we will attempt to answer this question with more boldness.
What I can tell you, not only from the data, but personal experience, is that the affordability price ranges below $300,000 seem to be chugging along, still a tough time to be a buyer. Don’t get me wrong, recent events have certainly had an impact in this market, just not enough to derail the demand enough to overcome our incredibly low supply of homes.
I wrote an offer the other day for our clients on a home priced around $250,000. We came in aggressively with a deal that would have netted the seller 5k more than their asking price because we knew there would be multiple offers. We pulled out all our tricks too: cover letter from our clients complimenting the seller and their home, short video introducing themselves and their adorable baby, trying to create an emotional connection to help us against the competition, escalation clause, etc. But it wasn’t enough. We were still beaten by a higher offer.
These are the price ranges that are filled with young families and first-time home buyers more than anyone else. Typically, these buyers aren’t as concerned with what the market is doing or not doing. And even though they know their new home will also be an investment, they are thinking of it in terms of the next necessary step of their lives. For these buyers, their next real estate purchase feels urgent.
I’m not saying that $300,000 and below market is invincible. No, all markets change eventually. But I am saying we would have to have many more months of this before it could get to anything approaching a buyer’s market. Again, this is more true for the affordable price ranges than the upper tiers.
What would have to happen to capsize the median and below market? In my estimation, a few things:
Our 100,000+ net population growth per year would have to slow significantly and continually
The job market in Phoenix would have to crash in the long term, not just temporarily.
The supply of available homes would have to increase dramatically.
We shy away from telling people too strongly when it’s good to buy or sell. We are not economists or fortune tellers (thank the heavens), but we prognosticate as best we can while not being afraid to say “We don’t know.”
My personal feeling is, at least for the 300k and below markets, that this time could be a great opportunity for buyers that need to buy soon. While it’s still tough out there, it is a reprieve from the heat of where the market was just a month ago. While many properties are still going like hotcakes, there are some that have been sitting awhile with anxious sellers made all the more desperate from the COVID-19 news and seeing their showings decrease. It can be a great time to get the most favorable negotiation outcomes possible from sellers. One strategy is to focus on properties that have been on the market for more than three or four weeks.
What about the higher price ranges you ask? Well the COVID-19 slump has put a halt to most of that business for now. Typically, folks buying 500k and above are not first-time home buyers. They have been around the block a few times and regard purchasing a home with more calculation and are in less of a hurry. Few of these buyers are in a spot where buying a property in the next few months feels essential or urgent, so it makes sense that we see a slump in the higher price ranges.
The good news in the higher price ranges is that what we aren’t seeing is a massive sell-off that some feared. This includes all price ranges. We did have a small wave of new listings in the first week or two of all this, but it seems for the moment anyway, that sellers are just as content as buyers to wait this out.