Feb 2021 Market Update
Here are the basics - the ARMLS numbers for February 1, 2021 compared with February 1, 2020 for all areas & types:
- Active Listings (excluding UCB & CCBS): 5,180 versus 11,974 last year - down 56.7% - and down 14.5% from 6,055 last month
- Active Listings (including UCB & CCBS): 9,727 versus 16,035 last year - down 39.3% - and down 0.6% compared with 9,788 last month
- Pending Listings: 7,070 versus 5,969 last year - up 18.4% - and up 15.2% from 6,135 last month
- Under Contract Listings (including Pending, CCBS & UCB): 11,617 versus 10,030 last year - up 15.8% - and up 17.7% from 9,868 last month
- Monthly Sales: 7,330 versus 6,464 last year - up 13.4% - but down 26.8% from 10,015 last month
- Monthly Average Sales Price per Sq. Ft.: $217.59 versus $182.18 last year - up 19.4% - and up 2.9% from $211.50 last month
- Monthly Median Sales Price: $339,000 versus $289,900 last year - up 16.9% - and up 2.1% from $332,000 last month
January is usually a very good month for new listings and overall supply tends to be stronger at the beginning of February than it was at the turn of the year. However 2021 has been completely different. New listings arrived in the weakest flow we have ever recorded and although demand subsided a bit, it was more than strong enough to soak up almost everything sellers could offer. Instead of rising, supply collapsed another 14.5% during January. This does not show up if we look at active listings including UCB and CCBS, because so many agents place listings into these statuses when a contract is signed, rather than the more traditional pending status. The vast majority of these "active" listings are not really being marketed and the signed contract will quickly proceed to closure. Having a listing subject to the buyer's property selling is not so much of an issue when selling that property is easier than falling off a log.
The supply situation is the worst we have ever recorded, lower than the first quarter of 2005, which used to hold the record. When supply is this low, it starts to drag demand numbers down with it. Sales volumes are limited by the number of homes for sale. Although they are still much higher than January 2020, sales counts and under contract counts are not growing as fast as normal. This is probably due to a combination of factors: higher interest rates, lack of supply and affordability concerns. Prices rose by almost 3% over the last month, so in theory demand should decline as prices increase. We will see how true that turns out to be as prices are set for extremely high rises over the next several months. The annual appreciation rate has already surpassed 19% and could easily reach 30% by the time we are well into the second quarter.
New home builders are trying as hard as they can to create more supply, but there are many physical, financial and legal limits to how quickly they can do this. These additional homes are sure to be priced well above the current level. In times like this the MLS data paints an incomplete picture because a much larger percentage of transactions never touch the MLS:
- homes sold privately (usually to investors for flipping or conversion to rental)
- new homes (only a small percentage of these get listed on the MLS)
We can use the county records to track total sales and pricing but this takes much longer to collate than using data from the MLS. You can see this more complete and accurate, but far less timely, data in the Cromford® Public section of this web site. It is now complete to the end of 2020. but it will be the end of February before January's data is fully checked and processed.
There is currently no indication that supply trends will improve and at the moment it looks like supply will drop further over the next 2 months. We would not be surprised to see demand continue to trend lower, but this will have little effect on prices. We already have far more buyers than the market can support. Our best guess is that the average price per sq. ft. will continue to rise at about 2% to 3% per month for the next several months.
2020 Broke the Record for Luxury Sales
Supply Down 51%, Slim Pickings in 2021
For Buyers:
There were 111,036 new listings added to the Arizona Regional MLS (ARMLS) in 2020, only 38 more than 2019, while 100,650 sold. As of January 10th, 2021 there were only 6,162 listings still active in the MLS, which is the lowest supply count recorded in at least 20 years. To make matters worse, 10% of those properties are outside of the Greater Phoenix boundary.
While the number of new listings barely changed last year, demand for homes accelerated between June and December to 35% above normal. Luxury sales over $1M soared after the pandemic restrictions were lifted. While they were already up 7.7% over 2019 at the end of June, by the end of December annual luxury sales were up 48.7%, securing an enormous record for 2020 at 2,575 sales over $1M.
Outside of the MLS, new home developers have been struggling to meet demand as well. Despite the road blocks in production due the pandemic, forest fires and supply line disruptions, as of November builders still managed to sell 14% more homes and obtain 28,204 more single family permits for future supply, up 24% over 2019. The median price of a new single family home only rose 6% from $333K to $353K and considering the median price of a resale home is $335K, that’s extremely competitive.
As supply began to drop last month, December saw 33% of sales closed over asking price and only 10% involved seller-paid closing costs in the 4th Quarter.
Bottom line for buyers starting their search in 2021, be on top of your loan and be ready to pounce on every new listing that fits your needs. Many new listings will be on the market for less than a week prior to accepting a contract.
For Sellers:
The state of Arizona ranked 3rd in the nation for population growth behind Texas and Florida in the latest 2020 Census release. When the full report comes out later this year, we expect to see California as the #1 source of inbound migration for Greater Phoenix. Moving companies such as Atlas, United Van Lines and North American have released their annual migration reports and 2 out of the 3 list Arizona in their Top 5 states for inbound moves. United Van Lines specifically cites “retirement” as the primary reason for 37% of inbound moves, 70% were over 55 years old and 63% made incomes over $100,000 per year.
While median home prices have risen 15.5% year-over-year, the median rental rates through ARMLS have also risen 12.9% from $1,550 to $1,750/month. This increase, combined with historically low mortgage rates, has fueled more demand to purchase.
As the population continues to grow, the housing gap is becoming harder to close. After a decade of underbuilding, this will take more than a few months or a year to correct. However as prices rise and affordability quickly drops, it’s reasonable to expect some demand to drop with it. With that expectation, home prices are still projected to rise throughout 2021 but possibly at a slower rate in the latter half of the year. It will be another great year for sellers.
Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2020 Cromford Associates LLC and Tamboer Consulting LLC
If you, or anyone you know, is looking to buy or sell, Please let me know!
Troy Holland
Cell: 480-773-5792
Email: Troy@Sell4Free-AZ.com
Web: www.FlatFee-NoFee.com
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