May 22 & 23

Welcome Back, Weekend Warriors!

This is the Amy Jones Group's weekly newsletter, detailing local events, recent real estate news, and open houses.

This week, we're bringing you five fun-filled events happening around the Valley!

Market Update

Here are the basics - the ARMLS numbers for May 1, 2021 compared with May 1, 2020 for all areas & types:

• Active Listings (excluding UCB & CCBS): 5,080 versus 14,051 last year - down 63.8% - but up 24.2% from 4,089 last month
• Active Listings (including UCB & CCBS): 9,438 versus 17,867 last year - down 47.2% - but up 8.5% compared with 8,699 last month
• Pending Listings: 7,829 versus 5,676 last year - up 37.9% - but down 1.7% from 7,964 last month
• Under Contract Listings (including Pending, CCBS & UCB): 12,187 versus 9,512 last year - up 28.1% - but down 3.1% from 12,575 last month
• Monthly Sales: 10,172 versus 7,174 last year - up 41.8% - but down 2.2% from 10,396 last month
• Monthly Average Sales Price per Sq. Ft.: $243.50 versus $183.96 last year - up 32.41% - and up 5.1% from $231.75 last month
• Monthly Median Sales Price: $373,000 versus $299,999 last year - up 24.3% - and up 4.1% from $358,250 last month

These numbers are the most interesting we have seen for a long time. They show a very hot market with supply dramatically mismatched to demand. However they also confirm a cooling trend that has been developing over the last 7 weeks. This was first reported by the Cromford® Market Index, but is now being confirmed by a number of other metrics including:

• Active listings are UP significantly from the beginning of April, though admittedly from a very tiny number
• Under contract counts are DOWN for the second month in a row
• Sales counts are down compared with March

Markets do not get hotter indefinitely. The primary mechanism by which they cool down is through prices. In hot markets pricing goes up which causes demand to weaken, which means the supply gets a chance to recover. When prices go up, some buyers can no longer afford to buy and drop out. The faster that pricing goes up, the more buyers tend to drop out, at least in a healthy market. If this is not happening then you probably have a bubble where pure speculation has taken over and demand grows when prices rise. We are not seeing this.

12 months ago we were in the early stages of adjusting to COVID-19 so the year over year comparisons are not very meaningful. Demand dropped sharply in April 2020 only to recover quickly by June.

All changes tend to start small and then grow. The current market cooling is like that. We now have supply increasing and demand falling. This will gradually release some of the steam from the over-heating engine and the market can trend back towards normality. In a normal market prices still tend to rise, but in our current market, prices are rising at an unsustainable pace - the monthly average $/SF soared by over 5% in a single month. If the next 8 months behaved like April 2021, we would see the median sale price rise to $514,000 by the end of the year. I doubt that will happen.

Even though we have entered a cooling phase, it will probably take several quarters (if not years) to cool down to normal and prices will continue to rise at a brisk pace for quite some time.

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So, what does this mean for our buyers? Despite all the incredible news about rising real estate prices, a family making the median income of $79,000 in Greater Phoenix could still afford 62.8% of what sold in the first quarter of 2021. The National Association of Home Builders (NAHB.org) assumes that “a family can afford to spend 28% of its gross income on housing.” That means 62.8% of homes sold cost their new owners $1,843 per month or less assuming a 10% down payment and including principal, interest, taxes and insurance. According to HUD, $79,000 represents a 26% increase in the local median annual income over the past 5 years; up $16,500 from $62,500 in 2016.

While reassuring, it doesn’t remove the frustrations of competing for homes in this marketplace. Last month, 56% of all sales closed over asking price and half of them went $15,000 over or more to win. For the last 7 weeks, half of all listings that went under contract in the MLS were active for just 6 days or less.

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However, the last few months have shown a glimmer of relief for buyers as supply counts actually stopped declining; and in price ranges between $500K-$800K they have noticeably increased 40% since February. Supply is still 69% lower than last year at this time so there’s a long way to go before it’s considered normal, but it’s something.

And for our sellers? Well, you’re not going to notice this, but the housing market has begun to cool down.  It’s still hot however, like 400 degrees is still hot despite being cooler than 500 degrees. Sellers can still expect multiple offers and closings over asking price; however it’s important to note that supply has stopped dropping and has been rising in certain price points over $500K.  Seasonally speaking, Greater Phoenix supply should be dropping at this time of year, not going flat or rising.  When measures go against the season, it can be the beginning of a shift. 

The reason this shift will not be noticed is because supply is still much lower than demand, so any slight increase in competition is inconsequential to a seller’s ability to secure a buyer, even one willing to pay over asking price. One of the early indicators that a market is shifting, however, is the number of list price reductions. For example, supply between $600K-$800K has risen 45% since late February; in the same time frame, the number of weekly price reductions increased 223% and hit the highest count taken in nearly 6 months. That’s notable.  However in other price points where supply has flattened out, price reductions have remained low and stable.

The advantage in any market, not just housing, is being one of the first to know when things are shifting. Especially today, it’s a good idea to consult a Realtor® who can analyze your price point and area so you can make an informed decision regarding the sale of your home.

We’d love the chance to talk more about your current situation and how we can help - even if you aren’t quite sure what your question is, let us catch you up on the market of the moment! We’re so grateful to serve our community through real estate and would love to work with you AGAIN or for the first time!

Have more questions? Give us a call or schedule an appointment below - 

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