By Mike Bodeen · 1 June 2020
Then:
Last week we discussed, that with two exceptions, the global pandemic had not been seriously affecting our Phoenix Metro residential real estate market. Those two exceptions included the high-end market of over $1,000,000 and our “over 55” communities.
For several weeks following the revelation of the seriousness of the pandemic, new real estate business really slowed down, a number of escrows in place experienced cancellations, and many buyers paused their buying. Also, a number of sellers pulled their homes off the market, or delayed putting their homes up for sale, at what is normally the best time of year for sellers.
Therefore, market time (months of supply) increased, sales dropped 27% from one year ago, and sales prices dropped $4.50 per square foot. It looked like there could be a huge drop-off in business. Then, as quickly as the market slowed, it accelerated.
Now:
At the first part of June, the market continues to speed up. We currently have 12,204 homes listed for sale, 13% fewer than one month ago, and 28% fewer than one year ago. Listings under contract now total 12,223 vs 9512 last year – a 29% increase from the beginning of May! The median sales price and the average sales price (annualized) are now higher than one month ago setting historic high values. And, we’re still in a catastrophic pandemic!
How is this possible? It’s possible for many of the same reasons that we’ve been sharing for months and years now. People want to live here, and their numbers are increasing. Industry wants to relocate here, and many companies are. Historically low mortgage interest rates are spurring many toward getting that first home. And these insanely low rates are spurring record numbers of homeowners to refinance. And these homeowners will no doubt be holding onto their homes longer than before.
Will new construction increase supply? Yes, but not soon enough and not in enough numbers to help the affordability cause.
Who’s Buying?
The Cromford report recently came up with interesting behind-the-scene numbers from April sales. Buyers intending to use their purchase as a primary residence rose from 72% in Q1 to 82% in April. Every other type of intended use fell sharply including:
Investor purchases dropped from 11% to 9%
Second home purchases dropped from 13% to 8%
iBuyer (OpenDoor, Offerpad, Zillow, etc.) purchases dropped from 3% to less than 1%.
The Rental Market?
And what about the rental Market? Same ole story here-continuing to rise! (See chart) In just 3 months, the average rental price per square foot rose from $1.00 to $1.04 (4% rise), no doubt contributing to the large increase of new buyers in April.
And once again, we urge any buyers on the fence: Jump!
Market data referenced in this article comes from The Cromford Report.