Metro Realty Real Estate Market Report
Here are the basics – the ARMLS numbers for August 1, 2020, compared with August 1, 2019, for all areas & types:
- Active Listings (excluding UCB & CCBS): 8,477 versus 13,746 last year – down 38.3% – and down 3.5% from 8,788 last month
- Active Listings (including UCB & CCBS): 13,259 versus 17,920 last year – down 26.0% – and down 7.1% compared with 14,279 last month
- Pending Listings: 7,550 versus 6,479 last year – up 16.5% – but down 5.5% from 7,993 last month
- Under Contract Listings (including Pending, CCBS & UCB): 12,332 versus 10,653 last year – up 15.8% – but down 8.1% from 13,424 last month
- Monthly Sales: 10,536 versus 9,340 last year – up 12.8% – and up 8.5% from 9,714 last month
- Monthly Average Sales Price per Sq. Ft.: $191.02 versus $169.72 last year – up 12.6% – and up 4.5% from $179.82 last month
- Monthly Median Sales Price: $315,000 versus $280,000 last year – up 12.5% – and up 3.3% from $305,000 last month
The housing market is extremely strong and has been hitting a number of new records in the last few days.
We can see that supply remains very low indeed but has only declined 3.5% over the past month, a much weaker trend than last month.
This is because we are seeing far more new listings than we got during the first half of the year. This increase in new listings appears to be setting in for the long run, which is a little bit of good news for buyers.
July 2020 was a very active month for closings, up almost 13% compared with July 2019.
All those closings have caused the number of listings under contract to decline 8% since last month. The total remains very high for early August and it is up nearly 16% compared with August 2019.
We can conclude that demand has not only recovered from the COVID-19 pandemic but has reached heights that make it very strong by any historical standard.
We should all know that when supply is low and demand is high, prices will rise. They certainly did that with a vengeance during July.
The monthly average price per sq. ft. rose 4.5% during just 31 days, something we would think quite normal if it were an annual increase.
This happened during a summer month, making it even more remarkable, because summer months are usually rather weak for pricing, even in strong markets.
The same thing shows up in the median sales price – up 3.3% in a single month, and up 12.5% for the last 12 months.
“Appreciation rates are now well into double figures, something which we have not seen for 6 years.”
Dennis Kolodin, CCIM Metro Realty
Despite the rise in new listings, the environment is extremely unfavorable for buyers.
They have to contend with prices rising at an unusually high rate. When they do find a house on which they would like to make an offer, they will also probably find dozens of other buyers with exactly the same idea in mind.
We do not see things improving for buyers during August, and most sellers can get away with being pretty much as unreasonable as they wish to be. Frustration, tension, and stress are the order of the day.
The market will not stay like this forever, but there is no immediate sign of a change in direction. We will consider the chances of a sea-change this time next month.
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 2000s, housing was growing faster than the population and creating a glut.
This glut went unnoticed due to excessive speculators (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. This growth fueled by job growth has finally consumed the glut of re-sale housing created during the bubble years. 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.
“Properties purchased today are expected to continue appreciating over the next 6-12 months.”
Dennis Kolodin, CCIM Designated Broker ®
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 in 2019 and was the 4th highest appreciation rate for July going back to 2001.
One-third of homes closed 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.”
Dennis Kolodin, CCIM, Designated Broker ®- Metro Realty