By Mike Bodeen · 11 May 2020
Before reading too deeply into this title, please understand that the article is NOT implying that lower (or higher) real estate values are worse (or better) than people dying from pandemic deaths. The virus is deadly serious and folks all around us are having their lives tragically cut short. When all is said and done, real estate values matter little to none in the face of friends, family and loved ones suffering and passing away from any source.
That stated, our timely articles are about the Phoenix Metro residential real estate market. There are many articles written about the national or state real estate scene, but what’s unique about our stats/numbers, is that they’re fresh and accurate almost in real time. We create these articles each Monday.
Yes, we attempt to see the silver linings because we’re bullish on Arizona, and in particular, Maricopa County real estate. But we also feel a responsibility to the truth, even if it’s not so good.
As you can see by the chart below the number of listings under contract in the Phoenix/Metro market are down by 20% compared to this time one year ago. The last time listings in May under contract were lower than today goes back to 2008 – 12 years ago.
Sales per month are down 37% from one year ago. (6397 vs 10,119). Sales per year, (97,704) which were up just one month ago, are now down 4% compared to 2019. The median price is down 3% from last month. It had been gaining regularly since 2011.
One bit of silver lining here? You will notice that in the last few weeks the amount of homes under contract has been pushing upward again. It would seem we may be on the way out of the dive bombing demand we were experiencing.
Well Mike, that’s pretty negative stuff! What can be worse than this?
So, here’s the buyer wake-up call. Currently buyers are experiencing a window of opportunity. This window is called 3.5% mortgage interest rates. The number of active listings, though still slightly dropping, are much slower in their drop than they had been.
What we don’t have a handle on is future inflation based on many trillions of dollars recently created out of thin air to keep the economy alive. Inflation will increase interest rates. If mortgage rates go back to levels seen in 2008, for example, the rate would double to over 7%. Rates going back just 11 years ago to 1989 would see rates at 11% – over 3X current level. Heaven forbid we go back 19 years (1981) to our historic mortgage rate peak, the rate would be 18.63% – over 500% higher.
Truthfully, even an interest rate increase to 5% or 6% would initially halt many buyers from buying. It would halt many sellers from selling. And that would be worse than this.
And, if there’s a statewide economic correction which brings normalcy to our markets, and our nation’s markets, and rates remain viable, then real estate prices, due to lack of supply and ever greater migratory demand, will again send values upward, perhaps greater than we ever thought possible, which would decrease buyer affordability. And that would be worse than this.
But for now, buyers have opportunity to lock in price and mortgage payments – and that would be a great thing!