Market Summary June 2021
Here are the basics - the ARMLS numbers for June 1, 2021 compared with June 1, 2020 for all areas & types:
- Active Listings (excluding UCB & CCBS): 4,917 versus 11,917 last year - down 68.7% - and down 3.2% from 5,080 last month
- Active Listings (including UCB & CCBS): 9,361 versus 17,171 last year - down 45.5% - and down 0.8% compared with 9,439 last month
- Pending Listings: 7,873 versus 7,224 last year - up 9.0% - and up 0.6% from 7,829 last month
- Under Contract Listings (including Pending, CCBS & UCB): 12,317 versus 12,478 last year - down 1.3% - but up 1.1% from 12,187 last month
- Monthly Sales: 9,692 versus 7,045 last year - up 37.6% - but down 5.0% from 10,204 last month
- Monthly Average Sales Price per Sq. Ft.: $248.37 versus $179.79 last year - up 38.1% - and up 2.0% from $243.39 last month
- Monthly Median Sales Price: $390,000 versus $293,000 last year - up 33.1% - and up 4.6% from $373,000 last month
We note that the number of active listings is slightly higher than last month. That is entirely because June 1 fell on a Tuesday while May 1 fell on a Saturday. Saturdays tends to have much higher counts because of all the new listings activated on Thursday and Friday. In contrast, Tuesdays and Wednesdays have the lowest counts every week. If we compare the same day of the week, the number of active listings is up from last month by about 7%. When supply is this low, the signal to noise ratio is poor, so we have to look more closely to get a correct impression. Supply is definitely rising, but not at a rate to help buyers very much, or to raise an alarm. It is rising because new listings are coming along at a faster rate than normal. However most of them are getting offers in the first week and they do not last very long. The market remains very hot even though it has cooled since March.
The demand numbers are moderating, with monthly sales down 5% compared with last month. However listings under contract are up slightly which means the downward trend in demand has stalled for now.
The rate of change in both supply and demand are both now moderate, but the rate of change for prices remains very high. We are seeing appreciation rates of 38% if you use price per sq. ft. or 33% if you use monthly medians. Both of these are flattering because part of the rise is due to high end homes taking a larger share of the market than normal for June. But however you measure them, home prices are at nose-bleed levels and will continue to rise while supply remains dramatically below normal. It is 76% below normal at the moment.
The period since June 2020 has been a painful 12 months for buyers and many are likely to be feeling bruised and beaten up. It would not be surprising if demand weakened further because of this, but withdrawing from the market is unlikely to be wise from a financial perspective. Prices still have a quite a lot of upward momentum and mortgage rates could easily move higher than today. Local buyers need to remember that to a buyer from California or Washington, Phoenix still looks like amazingly good value for money, even after another 20% price hike.
And what is your alternative - rents continue to climb at a steep rate and are unlikely to stop rising. At least if you buy a pricey home today you will benefit from the price growth tomorrow in the form of home equity. None of your rent payment will do that.
62.8% of Homes Sold Considered Affordable Last Quarter
Median Sales Price Up 27%, Incomes Up 26%
For Buyers:
Despite all the incredible news about rising real estate prices, a family making the median income of $79,000 in Greater Phoenix could still afford 62.8% of what sold in the first quarter of 2021. The National Association of Home Builders (NAHB.org) assumes that “a family can afford to spend 28% of its gross income on housing.” That means 62.8% of homes sold cost their new owners $1,843 per month or less assuming a 10% down payment and including principal, interest, taxes and insurance. According to HUD, $79,000 represents a 26% increase in the local median annual income over the past 5 years; up $16,500 from $62,500 in 2016.
While reassuring, it doesn’t remove the frustrations of competing for homes in this marketplace. Last month, 56% of all sales closed over asking price and half of them went $15,000 over or more to win. For the last 7 weeks, half of all listings that went under contract in the MLS were active for just 6 days or less.
However, the last few months have shown a glimmer of relief for buyers as supply counts actually stopped declining; and in price ranges between $500K-$800K they have noticeably increased 40% since February. Supply is still 69% lower than last year at this time so there’s a long way to go before it’s considered normal, but it’s something.
For Sellers:
You’re not going to notice this, but the housing market has begun to cool down. It’s still hot however, like 400 degrees is still hot despite being cooler than 500 degrees. Sellers can still expect multiple offers and closings over asking price; however it’s important to note that supply has stopped dropping and has been rising in certain price points over $500K. Seasonally speaking, Greater Phoenix supply should be dropping at this time of year, not going flat or rising. When measures go against the season, it can be the beginning of a shift.
The reason this shift will not be noticed is because supply is still much lower than demand, so any slight increase in competition is inconsequential to a seller’s ability to secure a buyer, even one willing to pay over asking price. One of the early indicators that a market is shifting, however, is the number of list price reductions. For example, supply between $600K-$800K has risen 45% since late February; in the same time frame, the number of weekly price reductions increased 223% and hit the highest count taken in nearly 6 months. That’s notable. However in other price points where supply has flattened out, price reductions have remained low and stable.
The advantage in any market, not just housing, is being one of the first to know when things are shifting. Especially today, it’s a good idea to consult a Realtor® who can analyze your price point and area so you can make an informed decision regarding the sale of your home.
Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2020 Cromford Associates LLC and Tamboer Consulting LLC
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Troy Holland
Cell: 480-773-5792
Email: Troy@Sell4Free-AZ.com
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