Market Summary for the Beginning of 2020
Courtesy of The Cromford Report
The current situation is remarkable.
Here are the basics – the ARMLS numbers for January 1, 2020 compared with January 1, 2019 for all areas & types:
- Active Listings: 12,141 versus 17,339 last year – down 30.0% – and down 12.5% from 13,869 last month
- Active Listings (including UCB & CCBS): 15,018 versus 19,900 last year – down 24.5% – and down 14.6% compared with 17,577 last month
- Under Contract Listings: 7,539 versus 6,301 last year – up 19.6% – but down 21.2% from 9,572 last month
- Monthly Sales: 7,764 versus 6,457 last year – up 20.2% – and up 8.7% from 7,142 last month
- Monthly Average Sales Price per Sq. Ft.: $179.92 versus $165.21 last year – up 8.9% – but almost unchanged from $179.90 last month
- Monthly Median Sales Price: $289,500 versus $260,500 last year – up 11.1% – and up 3.0% from $281,000 last month
The lack of supply can only be described as shocking. A 30% decline since this time last year to reach the lowest level since August 2005. This to satisfy a population that has grown more than 20% since 2005. Anyone who thinks this severe shortage will not result in a significant rise in prices is going to have another thought coming pretty soon. The median sales price is already up 11% over the last 12 months and the average price per square foot is up almost 9% and probably heading for a double figure appreciation rate.
Demand remains higher than normal but the Cromford® Demand Index has eased from around 107 to around 103 over the past 4 weeks. This will not make much of a difference while supply remains under half of what is needed for a balanced market.
The big hope for buyers must be for a surge in new listings arriving over the next 12 weeks. Perhaps sellers will be tempted by the higher pricing they can achieve. However if they are staying around Phoenix, they will have to pay more for their new home too. Phoenix is currently the strongest large-city housing market in the USA and this is fueled by inter-state population movements. Retirees are a big part of that, but so are people moving here from California and other Western states for work and the lower cost of living. Demand is likely to remain healthy despite the rising prices.
The primary question is whether we will see any change in the meager supply of homes for sale. If this is to take place it is likely to be visible over the next few weeks. There has been no sign of an improvement in new listing flows in the last several weeks of 2019. But 2020 is a new year, so we will be watching closely for signs of change.
The urgency for buyers cannot be stressed enough; real estate prices are not projected to decline in the Greater Phoenix area in 2020. There is not one measure from any angle that supports that theory. Not only will they not decline, they will not stop rising this year at the current levels of supply and demand.
On January 9th, active supply was counted at just over 12,000 listings for all of Greater Phoenix. This is down 32% from this time last year and excruciatingly low. To put it in perspective, a “normal” level of inventory should be at least 28,000 – 30,000 active listings in the MLS for a metropolis the size of Maricopa and Pinal County. The last time inventory was recorded this low was in 2005 at 9,000 listings with a population of 3.8M. Now Greater Phoenix has 4.8M people with less than 1% of existing housing available for sale. With monthly sales up 17% over last year, fueled by population growth, job growth, income growth and low interest rates in the area, sellers have few reasons to sell below market value. It’s not logical to expect prices to soften in this environment.
Buyers who have been waiting for sales prices to decline before they purchase have nearly missed the boat. This is because while they were watching prices rise, the payments for those same homes declined for a year with declining mortgage rates. However, when mortgage rates stabilized 6 months ago, hovering around an average of 3.75%, payments started to creep up again.
In short, if someone wants to purchase a home and they have the means, then they should lock into one. They should expect competing offers, expect to lose some opportunities, and expect to do some upgrades. They should also expect to live in their new home for at least 5 years to build up enough equity to mitigate the risk of ups and downs in the future.
This is an exciting time for those who need to sell. Anyone who owns property has probably been contacted multiple times by multiple means throughout the year by people wanting to buy their home. While sellers are under much less pressure to perform repairs and upgrades in order to sell their home, it doesn’t mean that they will sell it as quickly or for as much as those that are move-in ready. But, it will sell in this market. Those who are considering selling to an internet investor buyer (aka iBuyers who offer some up-front certainty and convenience in the selling process), should know that they still have negotiating power in the transaction and have the option to be represented by a Realtor if they choose.
Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report