Market Summary for the Beginning of September
Here are the basics - the ARMLS numbers for September 1, 2020 compared with September 1, 2019 for all areas & types:
- Active Listings (excluding UCB & CCBS): 8,028 versus 13,609 last year - down 41.0% - and down 5.3% from 8,477 last month
- Active Listings (including UCB & CCBS): 13,178 versus 17,577 last year - down 25.0% - and down 0.6% compared with 13,259 last month
- Pending Listings: 7,892 versus 6,350 last year - up 24.3% - and up 4.5% from 7,550 last month
- Under Contract Listings (including Pending, CCBS & UCB): 13,042 versus 10,318 last year - up 26.4% - and up 5.8% from 12,332 last month
- Monthly Sales: 9,225 versus 8,916 last year - up 3.5% - but down 12.5% from 10,543 last month
- Monthly Average Sales Price per Sq. Ft.: $194.85 versus $169.18 last year - up 15.2% - and up 1.9% from $191.16 last month
- Monthly Median Sales Price: $325,000 versus $280,000 last year - up 16.1% - and up 3.2% from $315,000 last month
The housing market remains extremely strong and continues to hit news heights. The closings in August were down from July, but this is partly due to August having fewer working days than July. The fact that pending listings and listings under contract rose between August 1 and September 1, tells us that demand is not weakening despite the lower number of closings. The balance between closed sales and contracts that have not yet closed has swung in favor of the latter.
We can see that supply remains very low indeed, but has only declined 0.6% over the past month. We anticipate that supply will start to grow over the next 30 days. This is because we are seeing far more new listings than we observed during the first half of the year. With the average price per square foot up more than 15% it is not surprising that this is tempting a few more sellers. In theory it should be tempting a few less buyers, but the low mortgage interest rates have kept buyer interest very high.
A startling figure is 26.4% - the amount by which listings under contract exceed this time last year. The level of growth is highly unusual.
Once again, supply is low and demand is high, so prices have to rise. The price increases have really started to accelerate over the past 2 months we now see appreciation over 15% measured by monthly $/SF and over 16% when measured by the monthly median sales price. This is even more shocking given that August is usually one of the weakest months of the year for pricing. By the time we get to year end, we can expect these numbers to be even higher.
The market is more stable than last month, with the Cromford® Market Index hovering near its all time high. The expected growth in supply over the coming 3 months should give some welcome relief to buyers. At least they should have a little more choice. However, there will be little to no respite from multiple offers and the ensuing stress levels. We expect price rises to eventually start negatively impacting affordability causing more buyers to drop out of the market and start a cooling cycle. But eventually could mean quite a long time in the current conditions. The market remains hard to predict, so instead will require close and timely observation.
We do that, so you don't have to. If you read our daily observations, you should not be caught by surprise.
July Breaks Records in 2020
65% of Homes Affordable in Greater Phoenix
For Buyers:
It’s a jungle out there for buyers, but despite recent appreciation rates the HOI* measure for Greater Phoenix increased to 64.8 for the 2nd Quarter 2020; the previous measure was 63.0. This means that a household making the current median family income of $72,300 per year could afford 64.8% of what sold in the 2nd Quarter of 2020. By comparison, the HOI measure for the United States was 59.6.
Historically, a normal range for this measure is between 60-75. During the “bubble” years of excessive appreciation between 2005-2006, the HOI plummeted from 60.1 to 26.6. Typically if it falls below 60, the market should start to see a drop in demand. With the most recent increase however, Greater Phoenix is still within normal range and experiencing demand 20% above normal for this time of year.
What makes this market significantly different from the infamous bubble and crash is the relation between resale housing growth and population growth. In the early 2000’s, housing was growing faster than the population and creating a glut. This glut went unnoticed due to excessive speculator (i.e. “false”) demand fueled by loose lending practices. When loans tightened up, the glut came roaring into focus as vacant inventory soared to over double the normal levels. However since 2006, the population has grown faster than housing. It has taken 14 years, but this population growth fueled by job growth has finally consumed the glut of re-sale housing created during the bubble years and now the market is facing a shortage of homes for sale.
This type of market and appreciation is not sustainable over time, however it’s here now and properties purchased today are expected to continue appreciating over the next 6-12 months.
For Sellers:
So much for the “Summer Slowdown”, July had a record number of closings go through the Arizona Regional MLS; surpassing every July as far back as 2001. July also broke records in dollar volume with $3.9 Billion sold. The best July ever recorded prior was in 2005 at $2.9 Billion. The monthly appreciation rate finalized 12.5% higher than 2019 and was the 4th highest appreciation rate for July going back to 2001.
One third of homes closed were over asking price and only 15% involved any sort of seller-paid closing cost assistance; down from a high of 27% last May. Half of all sellers who accepted contracts in the first week of August did so with 7 days or less on the market.
Contracts on luxury homes over $1M are up an incredible 93% over last year at this time. Between $500K-$1M, contracts are up 64%. Between $300K-$500K, they’re up 39%. Between $250K-$300K, up 15%. If you need to sell, this is the time to do it.
*The HOI Index stands for “Home Opportunity Index” and is published quarterly by the National Association of Home Builders and Wells Fargo. It measures the percentage of homes deemed affordable in an area based on lending guidelines, interest rates, median income levels and median price. The most recent report was released on August 8th, 2020.
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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Information provided courtesy The Cromford Report.
