Market Summary October 2021
Here are the basics - the ARMLS numbers for October 1, 2021 compared with October 1, 2020 for all areas & types:
- Active Listings (excluding UCB & CCBS): 7,649 versus 8,101 last year - down 5.6% - but up 11.3% from 6,873 last month
- Active Listings (including UCB & CCBS): 11,622 versus 13,305 last year - down 12.6% - but up 5.8% compared with 10,988 last month
- Pending Listings: 7,605 versus 7,999 last year - down 4.9% - and down 3.9% from 7,917 last month
- Under Contract Listings (including Pending, CCBS & UCB): 11,578 versus 13,203 last year - down 12.3% - and down 3.8% from 12,032 last month
- Monthly Sales: 9,374 versus 9,632 last year - down 2.7% - but up 3.6% from 9,045 last month
- Monthly Average Sales Price per Sq. Ft.: $252.19 versus $198.80 last year - up 26.9% - and up 1.1% from $249.41 last month
- Monthly Median Sales Price: $410,000 versus $326,800 last year - up 25.5% - and up 2.2% from $401,000 last month
More short-term twists and turns in the market are creating a confused situation. Yes, we still have very much a seller's market with supply inadequate to meet demand. However, the demand is increasingly dictated by investors and iBuyers rather than traditional buyers - the owner-occupiers that make up the heart of the housing market. Demand from iBuyers surged dramatically in June, July and August, but not all iBuyers behaved the same. Opendoor increased their purchases from 66 in August 2020 to 728 in August 2021, but their buying tailed off in the second half of September. Zillow went from 34 in August 2020 to 253 in August 2021. Their purchases peaked at 90 during the second week of September but have since dropped back a little. OfferPad has been less volatile with 82 purchases in August 2020 growing to 152 in August 2021.
All the iBuyers have sold far less than they have bought, meaning there are many properties in inventory. This could mean an increase in supply over the next several weeks.
Active listing counts (excluding UCB and CCBS) are moving higher again after a lull in August. There was a rise of almost 25% during July, so the September increase of just over 11% is not as dramatic. However, the underlying trend seems to be for buyers to find a few more homes for sale, which must be a relief for them.
Demand looked strong all the way through September, but not so much at the beginning of October. Under contract counts and sales numbers suggest we may have seen the best of 2021 demand. With supply rising and demand appearing to plateau, we could possibly be in for some cooling during 4Q. But do not expect prices to fall. Indeed, September pricing was significantly higher than August and brings to an end the summer lull that started in June.
Contract Activity Spiked 20% In This Price Range
Luxury Sellers Over $1M Enjoying a Hot Summer
For Buyers:
Buyer demand has rallied sharply over the past 4 weeks, which is unusual for this time of year. The rally is exclusively between $400K-$800K, spiking nearly 20% in contract activity since the end of July. We have to wait until the transactions close and record to identify the buyers, but judging from July’s closing analysis we expect to find a surge in iBuyer purchases (aka “Internet Buyers”). The most notable iBuyers active in Greater Phoenix are OpenDoor, OfferPad, Zillow, and now RedFin. At least one of these organizations has increased their approved acquisition price to a $750,000 limit, which could explain the sudden spike in sales. iBuyers do not buy and hold property, they primarily engage in a short-term flip strategy and their activity does not constitute true demand. True demand is someone who will live in the home or rent it to someone who will live in the home. Flip investors are strictly the middlemen between the seller and the final buyer, which adds one extra closing to the books and makes true demand appear larger than reality by increasing the total number of sales without increasing the level of supply. The existence of institutional flip investors in the marketplace can be frustrating for buyers from a competition standpoint, but in the end these buyers still need to re-sell the home to someone. As prices have reached levels beyond the affordability threshold for a larger percentage of residents, the question is whether or not iBuyers will be able to flip their acquisitions with the same profit margins going forward. Permits for new homes are up 32% for January through July this year and are at their highest since 2006. Considering the average build time for a new home is anywhere from 10-14 months due to supply chain disruptions, iBuyers and sellers in general may be seeing more competition from new construction starting in the 4th quarter 2021 and into early 2022.
For Sellers:
While the $400K-$800K market is seeing elevated activity, the luxury market over $1M is a different story. Make no mistake, the luxury market is still extremely hot but it’s not because buyer activity is rising. Listings in escrow over $1M have dropped 17% since June, but that’s normal for this time of year in this segment. The reason the luxury market is still hot is due to a simultaneous drop in competing supply. It’s more prominent over $1.5M where supply has dropped 10%, also since June. So if contract activity isn’t rising, then why is supply over $1M dropping? It’s seasonal. Every year from May to July there’s an elevated number of cancelled and expired listings in this price point, which reduces the number of active listings. This year was no different. Additionally, the number of new listings added monthly to supply dropped 26% between April and August, which meant there were fewer new listings to replenish those that cancelled or expired. The result is a luxury supply count 31% lower than this time last year. This is good news for the sellers who remained active over the summer. Even though luxury demand came down, it’s still 21% higher than it was last September with fewer competitors. If the market follows its seasonal tendencies there will be a rally of new listings coming to the party in October, possibly giving buyers more choice in the 4th quarter.
Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report
©2021 Cromford Associates LLC and Tamboer Consulting LLC
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