Market Summary November 2021
Here are the basics - the ARMLS numbers for November 1, 2021 compared with November 1, 2020 for all areas & types:
- Active Listings (excluding UCB & CCBS): 7,777 versus 8,682 last year - down 10.4% - but up 1.7% from 7,649 last month
- Active Listings (including UCB & CCBS): 12,104 versus 13,901 last year - down 12.9% - but up 4.1% compared with 11,622 last month
- Pending Listings: 8,507 versus 7,862 last year - up 8.2% - and up 11.9% from 7,605 last month
- Under Contract Listings (including Pending, CCBS & UCB): 12,834 versus 13,081 last year - down 1.9% - but up 10.8% from 11,578 last month
- Monthly Sales: 8,765 versus 10,019 last year - down 12.5% - and down 6.6% from 9,383 last month
- Monthly Average Sales Price per Sq. Ft.: $262.12 versus $207.38 last year - up 26.4% - and up 4.0% from $252.14 last month
- Monthly Median Sales Price: $415,000 versus $332,000 last year - up 25.0% - and up 1.2% from $410,000 last month
Supply has started on a slight downward trend once more, which will dismay buyers and please sellers. This trend is only a couple of weeks old, but is very likely to continue through the rest of 2021 since that would conform to the usual seasonal pattern. We are certainly not seeing the flood of new supply that would suggest an end to house price appreciation.
Demand is more complicated. The closed sales count for November was unimpressive, down over 12% when compared to November 2020. However the counts of listings under contract and pending listings are up sharply from last month. This indicates that demand is strengthening but closings are taking longer. Overall, demand is rising again.
The combination of the demand and supply trends is causing the Cromford® Market Index to start increasing once more. It is already at a very high level around 345 to 350, so we can expect more price rises over the near term. During November the average $/SF rose a massive 4% bringing the summer lull to an emphatic end. You should expect more increases to come.
Some people appear to think Zillow exiting the home buying business signals a top in the market. These people are mistaken. It indicates that Zillow did not understand how to operate a home buying business. They drastically overpaid for homes and were then surprised when they could not sell them for a profit. If they had waited a few months, that problem would have gone away because of market appreciation. However, that would have tied up an enormous amount of capital. Their primary mistake was over-paying for homes compared to their market value. Since the fundamental claim for Zillow is that they can calculate any home's market value, this rather undermines their core value proposition. Zestimates are not very accurate, but they are an effective way of drawing visitors to the Zillow site. Those visitors are not in a position to judge the accuracy of the Zestimate and in a frame of mind to believe it. That Zillow believe their own Zestimates led to their downfall in the home buying business. (You can see a list of Zillow Owned homes by clicking this link....link shows the first 200 of 1004 listings...it is interesting to click the tax records to see what they purchased the home for. you will see most of the homes are selling for a loss....Zillow Owned Homes (200 out of 1004)
New homes are still scarce thanks to supply chain and skilled labor shortages. So there is little sign of imminent improvement in the chronic shortages of homes for sale, whether new or resale. There is therefore still room for further increases in home prices. We are now well into levels that make homes much harder to afford for typical home buyers. But there appears to be still plenty of appetite to buy among investors and several new players entering the buy-to-rent business.
Home prices do not go down when interest rates rise. Home prices do not go down just because they have gone up. What goes up must come down is a saying that relies on gravity. There is no gravity involved in home prices.
Home prices go down when supply exceeds demand. With supply as low as it is at present, demand would have to collapse far below normal. Instead demand remains well above normal right now and appears to be on the rise.
The End of Forbearance is Not the End of a Seller Market
Supply Up 93% Since April, Prices Continue to Rise
For Buyers:
The housing supply shortage is still in full swing, and there is online speculation that the end of forbearance may be the source of relief as some homeowners may need to sell. According to Black Knight, the national number of mortgages in forbearance has declined 67% from a peak of 4.76M in May of last year to 1.6M as of September 28th, 2021. Surveys from the Mortgage Bankers Association indicate that at least 80% of homeowners have stayed in their homes after forbearance. That means roughly 600,000 properties have already been added to the national supply of homes for sale over the past year without causing home values to decline. If we can expect 20% of the 1.6M remaining homeowners in forbearance to leave their home; that’s roughly 6,400 properties per state on average. Since Greater Phoenix alone records roughly 11,000-14,000 closings per month, the number of properties exiting forbearance may be enough to ease the lack of supply for a short while, but probably not enough to cause prices to decline in Greater Phoenix.
For Sellers:
The Greater Phoenix housing market is cooling, but it is far from cold. To put the last 6 months in perspective, from April 1st to October 1st, supply rose 92% from 3,591 to 6,883* active listings in the Arizona Regional MLS. In the same time frame, listings under contract dropped 9% from 11,939 to 10,878*. While a rise in supply combined with a decline in contracts in escrow indicates a cooling of the market, it’s important to put it in perspective from a seasonal and a non-seasonal point of view. Seasonally, it’s normal for listings in escrow to drop between April and October. However, despite the most recent drop to 10,878 is still higher than previous counts on October 1st from 2014-2019, which ranged between 8,100 and 9,800. This places demand notably higher than even the pre-pandemic seller markets. It is not seasonal for supply to rise between April and October, so a 93% increase is a notable shift. However, a count of 6,883 active listings is extremely low. In the last balanced market of 2014, the count on October 1st was 21,796. During the seller markets from 2015-2019, October 1st counts declined from 18,000 to just over 12,000 listings. So despite the 93% increase in supply, it’s still 45% lower than the pre-pandemic 2019 seller market and 68% below the last balanced market of 2014.
The effects of this 6-month weakening are mild. Here are a few:
· The Median Days on Market prior to contract has increased from 5 days to 11 days
· The Sale Price to List Price ratio has decreased from 101.8% (1.8% over list price) to 0.3%
· Sales over Asking Price have decreased from 60% of sales to 47% of sales
· The Median Amount over List has decreased from $20,000 to $11,000.
It’s good to be a seller.
Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2021 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: TroyHolland44@yahoo.com
Web: www.AZ-RealEstateGroup.com
Raving Fans: Client Reviews Here
