Market Summary July 2021
Here are the basics - the ARMLS numbers for July 1, 2021 compared with July 1, 2020 for all areas & types:
- Active Listings (excluding UCB & CCBS): 5,699 versus 8,788 last year - down 35.2% - but up 15.9% from 4,917 last month
- Active Listings (including UCB & CCBS): 9,783 versus 14,279 last year - down 31.5% - but up 4.5% compared with 9,361 last month
- Pending Listings: 7,294 versus 7,993 last year - down 8.7% - and down 6.8% from 7,829 last month
- Under Contract Listings (including Pending, CCBS & UCB): 11,378 versus 13,424 last year - down 15.2% - and down 7.6% from 12,317 last month
- Monthly Sales: 10,204 versus 9,718 last year - up 5.0% - and up 5.6% from 9,665 last month
- Monthly Average Sales Price per Sq. Ft.: $252.04 versus $182.73 last year - up 37.9% - and up 1.3% from $248.83 last month
- Monthly Median Sales Price: $397,000 versus $305,000 last year - up 30.2% - and up 1.8% from $390,000 last month
Supply is now on a clear upward trend, growing almost 16% from last month, though it is still down over 35% from this time last year and a very long way below normal. This upward trend is thanks to a strong flow of new listings and a decline in the rate of listings going under contract.
Demand looks strong when we look at the closed sales numbers, up 5% from last year and 5.6% higher than last month. However June 2021 contained 22 working days, 10% more than May 2021, so the number of closings per day was actually down 4% compared with last month. Demand looks very weak when we look at the listings under contract, which is the forward-looking element of demand. This count is down over 15% compared with this time last year and down almost 8% from last month. This is a clear signal that the rapid rise in prices is having the expected dampening effect on demand.
We expect sales rates to slow in the second half of 2021. We forecast that prices will continue to rise but at a slower pace than during the first half. These means that dollar volume will remain very high compared with historical numbers.
The CMI looks likely to fall well below 400, but the rate of decline will depend very much on the rate of arrival of new listings. The first several days of July are of little use as a guide because of Independence Day, but we should have a clearer picture of supply patterns by the middle of July.
We anticipate a growing divergence between the supply patterns of 2021 and 2005, since there were many thousands of empty homes held by speculators in 2005 which were listing for sale during the third quarter of 2005. We see very few of these speculative empty homes in 2021. In July 2005, we got 12,580 new listings across Greater Phoenix, far above the monthly rate we are seeing in 2021. There have been 58,109 new listings across Greater Phoenix during the first 6 months of the year.
Should Buyers Wait to Buy?
Median Sales Price $390K, up 32% from 2020
For Buyers:
There’s a lot of conflicting advice for buyers online these days, and there’s no shortage of headlines advising them to wait. Many authors cite the unpleasantness of multiple competing offers and rising prices as the reason to wait out the market. This is despite their acknowledgment that home values are not expected to stop rising in the near future and that interest rates are expected to eventually rise.
It’s undeniably more pleasant to purchase a home when there’s a plethora to choose from and you’re the only game in town, however there’s a reason you may be the only buyer in that scenario. That’s the end of a Seller Market, and signifies the top of price.
The top of price is either the beginning of a Balanced Market or a Buyer Market, which either way means the end of exciting annual appreciation rates. There’s a misconception that waiting for a Buyer Market to buy a home is a good idea. This is not true. Home values decline in Buyer Markets because, by definition, there are more homes than buyers to buy them. While that sounds like a magical dream land these days, the reality is that no one likes to purchase a home and watch its value decline or go flat. Ironically, if you want your home to appreciate right after you buy it, then you want to buy in a Seller Market. Perhaps we should rename Seller Markets “Winner Markets”, because both buyers and sellers win in a sense.
Admittedly, the extreme Seller Market Greater Phoenix is experiencing doesn’t feel like “winning”, but there is some relief on the horizon. The market has been losing strength since mid-March, but it’s not plummeting. At its current rate of decline, the Greater Phoenix market is still projected to remain in a Seller Market for 16 months. That’s a target of October 2022 before prices stop rising. As the Seller Market weakens, appreciation rates will still be positive moving forward but there will be a little more supply to accommodate demand. My advice to buyers frustrated with the market, don’t wait for the market to balance out. Take a breath, take a vacation, but don’t give up. Change is subtle.
For Sellers:
Typically this time of year we start talking about the imminent “Summer Slowdown” in contract activity as kids are out of school and people take vacations to escape the heat. Last year, the Greater Phoenix market didn’t experience this typical seasonal trend. As trips were cancelled and people stayed home, there was a large surge in purchase contract activity that continued through the end of the year. This year, as people are getting back to some form of normalcy, it looks like we will see a seasonal slowdown in buyer activity once again. If the trend continues and the market follows previous years, we should expect contract activity to slowly decline through the end of the year.
The seasonal slowdown is typically nothing to be concerned about, mainly because there tends to be a dip in new listings as well. However this year there’s an event coming up that could alter that scenario, that is the end of forbearance for many homeowners. While the vast majority of forbearances have ended with homeowners staying in their home, anywhere from 16%-20% have resorted to selling their home one way or another according to the Mortgage Bankers Association. This could result in an increase in supply over the next few months, adding extra days of marketing time to your listing and possibly a few price reductions. Stay tuned.
Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2021 Cromford Associates LLC and Tamboer Consulting LLCIf 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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