Latest Arizona Real estate market update, April 26th 2020.

Hope everyone is keeping sane, I know there’s some of you out there that are not as good as others, and some that are good one day and not at all the other.  For me if I can remove the unknowing, it can help alleviate some fear.  The mainstream news is doing us all a disservice at the moment, and in Arizona, we are lucky, safe, and not going to be as affected has other states and cities.  As for real estate, I wanted to go over these graphs again, like in the video I did last week, here.  The prices have not come down and its an industry that still moves forward, with some pausing at the moment, everyone’s just taking a breath it seems, but there is still demand, and still low supply.  Doug Ducey needs to give us a plan this week!!  The market changes weekly but as of now prices have still not come down for sellers wanting to keep their price.  And for buyers, there are more homes to choose from.  The supply is still low, but at least there is something to choose and look at.

Here are some links to websites, some graphs to help you understand and facts for now in time from my notes i took from some of our Real Estate Webinars:

 

The latest links:

Governor Doug Ducey allows elective surgery May 1st and lists the 3 options we have:

Vice President Pence mentioning that AZ is starting elective surgeries but not much else opening as for now,

April 17th video I made about the market. 

 

Wall Street & Real Estate

• Vacation rentals
  • Nearly 17% increase in available vacation rentals from 3/1/2020 to 4/7/2020
• iBuyers stop purchasing properties (Opendoor, Redfin, Offerpad, Zillow)
  • cancelled existing contracts
  • tight buy box, Zillow would go all the way up to $300,000
• Luxury market hit the hardest
  • Responded immediately to Wall Street shifts
  • Started dropping the week of March 16^th

 

• 60% of active listings that went TOM had an asking price of over $500,000
• The rest of the market also responded with a drop in existing listings, cancelled contracts, and a flood of new listings
• New listings hitting the market in March in Seattle, NYC, and California decreased anywhere between 50-80%.
• We had an increase in new listings in March
  • New active listings increased 27% in March
  • We are still down 28% from where we were last year
• In the first 9 days of April we have had a 9% drop in new listings
• Many of the new listings in March were under $300,000, selling very quickly

 

Prices

• property values change slowly
• Before sale prices go down, the asking price has to drop, people who have been pushing the market have to stop in order to sell
• April is seeing the lowest seller concessions in months, expect to see this rise first
• Prices are not expected to drop but transaction volumes have started to drop

The Cromford Market Index

Available on the main page of the Cromford Report: http://cromfordreport.com/ (without a subscription)

 

The Cromford Market Index (CMI):

• 100 is balanced, below 100 is a buyer’s market, above 100 is a seller’s market
• On 2/5 we were at 215.1
• On 3/20 we were at 241
• When it is at 100 property values increase at the rate of inflation.
  • 2011 it was negative
  • now it is 1.6%
  • the farther over 110 sellers make more
• Demand is dropping faster than supply
• Our supply is 49.9, still over 50% under where we should be.
• Our demand has decreased to 94.7, which is below normal
• If we continue at this pace we could reach a balanced market by May or June
• As long as the CMI is above 110, prices will continue to rise, just at a slower rate
• We have had a drastic drop in CMI, Tina and many economists predict a V shaped recovery, we are watching!
• Despite the drop even the cities with the lowest CMI are still above 150, mostly cities with higher price points.

 

Indications:

• CMI is the first market indicator out of the gate
• Everything else follows the CMI
• When you see price reductions, concessions, extra “perks” the CMI will have already adjusted
• Rental rates have increased 7.5% a year since 2014
• Rental rates have held steady for April 2020
  • April 2019 average rental was $1 per square foot
  • April 2020 average rental is $1.01 per square foot
• There are many reasons to not believe it will not be list the 2008 market crash
  • Since the 2007 we have had 3 downturns in the market but no one noticed because prices didn’t decline.
    • After the first time home buyer credit expired in 2009/2010
    • Canadian fix/flips 2012-2014
    • Boomerang buyers (pent up demand) 2015-2018
  • 2005 had false demand
    • Rental prices decreased
    • Rental vacancies
    • People did not live in these properties
  • “dumb loans”
  • 2005 lots and lots and lots of new builds.
  • Public believes a “crash” is a 10% loss in value (apparently the public didn’t live in AZ from 2008-2011)
• Keep in mind, not all recessions see property valuation decreases see below from Corelogic:

 

Demand:

*Today’s drop in demand is NOT due to changes in the market. It is an outside stimulus which pushes all indications that the recovery will be quick*

• Factors that influence demand:
  • Interest Rates
  • Appreciation/Deprecation (affordability)
  • Relocation (inbound)
  • Employment/Income
  • Loose/Tight lending practices (tightening is likely brief)
  • Population growth
  • Consumer sentiment (biggest factor)
• We need to keep Baby Boomers healthy, they spend the most in tourism, shopping, and leisure, they come to AZ to spend money
• Right now consumer sentiment is driving everything. Fear overrides logic.
• Unemployment is creating fear

 

Employment

• Unemployment numbers are creating terror
• 1099 independent contractors are filing for unemployment benefits, these benefits have never been available to independent contractors before. This is why the numbers are so high and not a true comparison to past numbers.
• Unemployment is expected to drop significantly once the economy is re-opened
• In 2008 when the market crashed the majority of AZ jobs were based in real estate and hospitality.
• Today our employment is much more diverse
• Leisure and hospitality make up 10.8% of our employment today

 

Employment (continued):

• Wages have been increasing over the years
  • Private sector earnings are up 3.7% nationally since 2011
  • Private sector earnings are up 6.5% in Arizona since 2011

Affordability:

• Some of the highest equity we have ever had
• The average homeowner has 53% equity
• Tighter lending practices than in 2005
• Affordability, in 2005 got too high, messed with everything because there was nothing that was sustainable, 2005 was not affordable.
• Today we are within affordability range

 

Supply:

• What Affects Supply?
  • New home construction
  • appreciation/depreciation (equity)
  • Vacation rental vacancies
  • Foreclosures
  • relocation (outbound)
  • marriage/illness/death/job losses/tragedy
  • Consumer sentiment (biggest driver) how people feel
• Will iBuyers come back?
• Inventory increased by 27.1% in the past 3 weeks, still 28% below where we were this time last year
• First week of April saw a 9% dip in new listings hitting the market
• Biggest supply increases have been in the under $350,000 market, we are still 30-40% below where we were last year. still frenzy market
• Highest price cities have smallest increases

 

Supply continued:

• liquidity in lending is a big issue. perfect storm. lending needs to be on point when the pent up demand releases
• inflation affects the market, once the new money is circulated, inflation is coming,
  • Can take up to 10 years to hit the market.
  • Still haven’t seen the inflation from the money printed 10 years ago (last stimulus)
• We will likely see a smaller drop of pendings from here on out because we have fewer contracts. it is reasonable to believe that it will not stay down
• Most activity is in vacant houses. the occupied properties are less likely to be on the market.
• Upper ranges we have seen the largest drops in written contracts
• Pinal County and SE valley, Gilbert especially, have only just started slowing

Sales & Pending Contracts:

• Contract ratio for April is 82, meaning that for every 100 active listings, there are 82 in escrow, July 2019 was the only month last year that was higher it was 83.
• Contract ratio for March was 117, meaning that for 100 active listings, there were 117 in escrow
• 28% of all closings in March/early April closed above asking
• Contract ratio since February 29th has dropped from complete insanity to above average
• Gilbert, Chandler, Ahwatukee, Laveen, Tolleson, Buckeye, West Valley, still frenzy
• Expect demand to continue to weaken. Properties will take a little longer to sell, but will still sell.

 

 

 

 

 

 

 

 

This is a video I made on April 17th, not much has changed and we’re still waiting on a plan from Governor Doug Ducey.

Listen to Governor Doug Ducey speech on his latest update, he’s been doing such a good job with not much death and infection in our state, click here.  But Where’s are plan Doug?

Important President Trump plan to reopen the Country recorded April 16th, click here. Along with the opening of America again, here.

Opening up America:  The plan, click here.

Some new guidelines are:

• Border control strict still.
• State by state decisions, Gov Doug Ducey should be having a press conference in the coming weeks.
• Preparing states and hospitals for safety to workers and proper protective gear
• Gyms etc can open with 6 feet distancing along with other shops etc.
• 3 Phases depending on what area you live.

 

Some quick facts/links on how to keep up to date with the Coronavirus spread.

• Click here daily for Arizona Department of health Covid
• Keep track of the virus at worldometer.com here. 
• Governor Doug Ducey Full April 14th Corona Virus Update.  Click here
• Opening up America video, click here.

Links on what you can do right now if the you’ve been affected financially!

• Apply for the Rental eviction prevention Assistance program, here.
• $1200 stimulus checks, should be coming soon
• Call your bank / lender and get your mortgage deferred.
• Here is how to protect yourself and others from Covid-19, click here.
• Small business cares act, click here. For small business relief application including the $10,000 

• Federal COVID-19 economic relief resources for U.S. airbnb hosts.

• Unemployment insurance benefits.

• Save Our Home AZ – Foreclosure Assistance if you’re having trouble with your mortgage payments.

Jay Bru

480-466-4917

jay@jaybrugroup.com