Back to School 

Welcome back to our What's Up Southeast Valley for the month of August!

Since our last broadcast, there have been many changes within our community, environment, work life, home life and how we conduct our days, including kids going back to school in an online work environment.

We are in this together and will get through this together!

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📈 Market Update

💬 Covid-19 Market Response

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. See the Daily Observations for more details on these.

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, but 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.

Despite the rise in new listings, the environment is extremely unfavorable for buyers. Not only do 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 probably find dozens of other buyers with exactly the same idea in mind.

Sellers are seeing some of the best pricing and terms for their homes in Arizona history and buyers are interviewing real estate agents who are going to be skilled enough to help them win the deal. The challenges for both buyers and sellers in this market extend to the iBuyers (online teams of investors who look to make cash offers on your home often well under market value) who have seen their acquisition numbers collapse since the first quarter and their market share drop substantially as a result. Curious about what working with Opendoor, Offerpad, or Zillow Offers looks like?

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Slow and steady might win the race but it also is the way we’d prefer to describe a market correction when it happens. The current real estate market is pushing the boundaries of unprecedented just like its COVID counterpart who brought along one of the strongest markets in Arizona’s history at a time when many thought that it would simply cease to exist. The extreme shortage of available housing coupled with the booming number of buyers who are taking advantage of historically low interest rates has forced a competitive market unlike anything we’ve ever seen. Sellers are selling for well above asking, buyers are refinancing on houses they’ve lived in for less than a year and everyone is wondering just how long this can possibly go on for. That my friends, is the million dollar question. And when, because it is when and not if, the market is no longer sizzling hot like it is today - will we be talking about the steadying of the market from increased inventory and decreased buyer demand that happened over several years as builders picked up their production and interest rates slowly rose or will we be wondering how we went from frenzy to fizzle so quickly. My gut is that the tortoise will beat out the hare every time but I’d rather be in the race than on the sidelines in the meantime.

Knowing your options is my number one piece of advice for everyone out there with a home, paying for someone else’s home, working from home, homeschooling from home, or wanting to get a home to keep everyone at home in. Gone are the days, at least for now, where you can walk into a builder’s fancy show room and put some money down for the floor plan and lot of your dreams. Want to go see a property that popped up in your neighborhood in three days, after your big meeting on Wednesday, and then sleep on it until Saturday after the kid’s soccer game? Good luck. Buyers have to be prepared, think on their toes, and often make big decisions in little timeframes that can be scary. So why do it? With few homes available for sale in the East Valley, and builders starting lotteries, drawings, and wait lists so that they can time their builds and not take the two years to build your house that their contracts allow (yes, we read the entire contract and yes, they actually have two years to build your home) buyers are uniquely positioned to make one of the most valuable purchases of their lifetime. 

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So, if it's such a great time, then why aren’t more people doing it? Why aren’t more homes on the market if it's really a once in a lifetime chance to access that virtual bank account of equity most people are sitting on? It’s typically one of two things - either they are trying to time the market, to ride the coattails of the exceptional market and not pull the trigger until we’ve reached the absolute peak which they’ll only know because we’ve started to come back down, or they are afraid - afraid of how it will all work, afraid of the complications of buying and selling at the same time, afraid of finding something they love as much as their current home, afraid of losing all that equity because it just feels better knowing its there for access when you need it. But the truth of the matter is, it’s not accessible whenever you need it - its accessible now. We’ve already seen the loss of some down payment assistance programs and jumbo loan programs due to COVID, now we’re seeing the loss of some home equity lines of credit programs, greater restrictions for self employed borrowers trying to get cash out from a refinance, and mortgage brokers prioritizing purchase contracts over refinances making it more difficult and taking longer to get that refinance completed. 

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So where are we headed? Well, I think we’ll see more people taking out a home equity line of credit in preparation for wanting to purchase without a contingency, I think we’ll see some people leveraging their assets like 401Ks and the like to take out nearly free money to help bridge the gap between their purchase and their sale, and I think we’ll see people using the recast option and graciously accepting gift funds for downpayment and then paying back their family in dollars (and hugs) when their house sells. I also think we’re going to see some buyers move to the sidelines and not because the opportunity doesn’t exist but because they are tired. Tired of fighting tooth and nail for every last bit in the contract, standing in a very real line in the 110+ degree weather waiting for a builder to call their name, and waiting up until 9:30 at night for a seller to agree to change the contract price when the appraisal comes in low. These are all true stories and while we’ve seen and heard many of them in the last 6 months - I think we’ve only started writing the first chapter. 

Unprecedented times can be scary but they can also be unique, challenging, exciting, and full of opportunity. Now is not the time to sit in your basement concocting some master plan to play chess with your life’s pieces and only seek guidance when things don’t go as planned. Play the proverbial chairman or woman and assemble your board of experts - lenders, financial advisors, real estate agents, and that one really nice guy at the coffee shop - and let them help you understand your options and how to maximize these unprecedented times.

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