Mid Year Market Update
And just like that, 2020 is halfway over…What a ride so far! Last month we saw Phoenix real estate getting back to “normal”. Now, 30 days later and the market has taken off like a rocket with no signs of slowing. As predicted, a built up demand from our lockdown days means a surge of backlogged activity. As they say, a picture is worth a thousand words, take a look at this…
This chart shows the preceding 5 years of “listings under contract”. AKA, the time of year when people are buying and selling homes in Arizona. It’s pretty obvious to even an untrained eye that we have a clear seasonal pattern here in Phoenix. It’s almost as predictable as the sunrise. Jan – April we ramp up, then start a gradual taper down from May to December.
Now, overlay this years numbers and we see a very different story.
We’ve recovered alright, and then some.
Averaged out, we are actually right on par with previous years amount of home sales. The only real effect here is that home buyers disappeared at once. And then, as if everyone called each other to coordinate, buyers all came out at once and bought up all the homes on the market.
The end result is now a record low amount of homes for sale in the valley. Low amount of homes for sale + strong demand = rising prices.
Yes, it’s tough out there to be a buyer today! There are just not enough homes to go around. For a short brief period in March and April there was a little reprieve for buyers. Even new home builders started offering some nice incentives to keep sales moving. Now, just 3 months later, not only did they quickly withdraw those incentives, but prices have already been raised across the board, with more price increases likely coming down the line. It’s becoming more clear this was more of a hiccup than a long term issue.
Another interesting number to look at is the average listing price. This number can correlate with the confidence that home sellers have in the market.
Pre-covid we were averaging around $190 per foot for average list price when a contract was accepted. We dropped all the way to $179 at the beginning of May, and since rebounded to $193/ft.
As we’ve been saying for the last several years, Buyers continuing to wait to get a “better deal” are likely going to be disappointed.
Please think about the following seriously…
Sometime it’s hard to see an opportunity when it’s sitting right in front of us. If anyone could go back and buy a home 10 years ago as an investment, you would have found a way to do it without a question, knowing what we know now. It was hard to see at the time.
But the opportunity we have in front of us right now does not lie within “reduced” home prices as they did 10 years ago.
Yet, we still have a major opportunity in buying a home right now. There’s a big silver lining. Actually, let’s call it a gold lining: Interest rates. Yes, boring old interest rates.
Interest are so insanely low right now that the cost of home ownership is actually more affordable than it was even 2 years ago.
If you bought a $400k home with 10% down in Phoenix in 2018 you could have paid around 4.75% with a principal and interest payment of $1,878/mo. Two years later, that same home may cost around $450k. With the same 10% down and an interest rate of 3.25%, your monthly payment is now $1,763. That’s $115 per month LESS, and $87,000 over the life of a 30 year loan. That’s HUGE!
And that’s just two years ago, lets not even talk about what a 6.5% interest rate 12 years ago would look like.
Really let that sink in. We have an amazing opportunity sitting in front of us right now with the lowest rates we’ve EVER seen, by far.
Please don’t hesitate to reach out to me if you have any questions on this material or need a referral for a qualified lender to speak to.Contact Me