Supply - Its Worse Than You Think

New supply tends to be thin on the ground between mid November and the end of December, though we are seeing a higher rate of arrival than we did in 2019 and 2018. This increased rate is not enough to compensate for the elevated demand and the number of homes available for sale is declining in the vast majority of areas.

We have had so little supply for so long, it is easy to forget what normal is like. Here are a few examples of what is available compared with the long term average:

Market Segment	Active excluding UCB & CCBS	Long Term Average	Difference
All Areas & Types	8,257	27,009	-69%
Greater Phoenix	7,616	21,678	-65%
Greater Phoenix Single-Family Detached	5,564	16,850	-67%
Greater Phoenix Townhomes	643	1.385	-54%
Greater Phoenix Apartment Style	752	1,298	-42%
Greater Phoenix Twin / Duplex	62	127	-51%
Greater Phoenix Patio Home	109	286	-62%
Greater Phoenix Mobile Home	464	679	-32%
Greater Phoenix Loft Style	17	39	-56%
Greater Phoenix Modular / Manufactured	5	16	-69%
Single-Family Detached Homes in:
Phoenix	1,193	4.469	-73%
Mesa	390	1,587	-75%
Scottsdale	809	2,290	-65%
Peoria	245	886	-72%
Queen Creek / San Tan Valley	196	958	-80%
Avondale	56	349	-84%
Paradise Valley	195	325	-40%
Fountain Hills	83	250	-67%
Cave Creek	105	259	-59%
Buckeye	151	487	-69%
Maricopa	115	415	-72%
Chandler	196	977	-80%
Glendale	168	908	-81%
Gilbert	179	1,109	-84%
Surprise	243	907	-73%
Goodyear	133	552	-76%
Tempe	99	293	-66%
Gold Canyon	79	209	-62%
Sun Lakes	36	150	-76%
Arizona City	20	107	-81%
Tolleson	11	170	-94%
Litchfield Park	57	198	-71%
Sun City West	82	292	-72%
Laveen	45	232	-81%
Anthem	27	211	-87%
Apache Junction	40	195	-79%
Casa Grande	81	330	-75%
El Mirage	20	150	-87%
Sun City	115	301	-62%
Florence	43	160	-73%
Coolidge	34	98	-65%

 

The housing market is short of everything, everywhere.

The dwelling types that are least scarce are mobile homes & apartment-style condos. Geographically, the most expensive areas are down less but are still massively short of supply compared with average. This is exacerbated by the unusually high demand for high-end homes

Tolleson wins the prize for the lowest supply compared with its long term average. Anthem and El Mirage are runners-up...

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The above is a great reference I give my client's for perspective, particularly for potential buyers. One has to consider what could change the disparity between supply and demand: 

Demand: Factors that could dampen demand? Higher interest rates. Loss of affordability. Other geopolitical possibilities? Certainly. But unlikely.

Supply: On the supply side it's also difficult to see where the inventory part of the equation changes much. Builders are building. Homes.com says there are 3211 new homes for Sale in Maricopa County. However, FlexMLS shows only 95 available active new homes (built in 2020). The total current available 'Active' inventory excluding UCB is a shocking 7721, even though there were 10,420 new listings in October. 

Clearly, Supply continues to lose ground relative to demand. The current 7721 Active listings in ARMLS should break the record low of 8342 set in April of 2005!

Once again, message to buyers: Time is not on your side. Anticipating even greater demand with our traditional high season just ahead, the best Christmas ever might be a new chimney for Santa to navigate! And hurry, only 29 'shopping days' left:)

For your Holiday Season success,

Annual Appreciation Numbers

The line charts below show the annual appreciation based on annual average sales price per square foot for single-family detached homes in the 17 largest cities by dollar volume broken out by area:

Phoenix:

SE Valley:

West Valley:

NE Valley:

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2 observations: 

1. The visual trend line makes it easy to see that Annual Appreciation by Price per Sq. Foot is accelerating Valleywide - clearly reflecting both the lack of inventory relative to an unseasonably sustained demand and...
2. With long term appreciation in the Valley averaging around 5% per year we're on track to be about double that in this year of the pandemic!

Rent vs. Buy - Heaving Swing for Buying in Last 5 Months

Demand for Homes Up 36%
Rents up 17% Since April

For Buyers:
The Rent vs. Buy scenario has become heavily in favor of buying over the last 5 months.  Eviction moratoriums due to the pandemic have greatly reduced turnover rates in a rental market that is already short of supply.  Lease rates on listings through the Arizona Regional MLS have increased 17% since April overall; and for a home between 1,500-2,000sf the median lease price in the 4th Quarter is $1,850 a month, up a whopping $255 from the 4th Quarter last year. 

While leases have been rising, home values have also risen 16%; however, declining interest rates have kept the level of the monthly payment. The median sales price for a 1,500-2,000sf home is currently $316,000, up $27,000 since April.  Despite this 9% increase (assuming a $15,000-$30,000 investment and interest rate under 3%), purchasing a home could possibly save a renter hundreds of dollars on their monthly budget while simultaneously building equity and ensuring a level of stability in their housing cost.

For Sellers:
While many people are waiting for the final results of the 2020 election, at least one thing is for certain in Greater Phoenix.  The housing market will not crash in 2021 regardless of the outcome. It may be hard to believe, but the new and resale housing markets don’t move quickly. Unlike the stock market where it takes a push of a button to sell a stock and record the price, it takes longer to sell a home between the marketing time and escrow process. In today’s market, it may take up to a week to negotiate an offer and another 30-45 days for the price to be publicly recorded.  When a market weakens, it takes longer.

Supply in Greater Phoenix has been gradually shrinking for 6 years and was the driver behind price appreciation until the pandemic. To put things in perspective, the Arizona Regional MLS should seasonally have between 25,000-30,000 listings active at this time of year; as of November 9th there are under 8,600.  That type of shortage doesn’t happen overnight and new construction will not be able to fill the gap quickly.

Listings Under Contract should seasonally have between 9,000-10,000 in escrow at this time of year;  as of November 9th there are over 13,000.  This level was reached in June and has stayed consistent for nearly 5 months. Even if demand were to scale back in 2021 and return to a normal level, the market would not see a massive drop in prices; just a slowing in appreciation.

Luxury Demand Skyrockets

The explosion in demand for luxury homes continues to amaze. During October there were 101 closed listings across Greater Phoenix with prices over $2 million. This is a truly colossal total, given that the previous record for October was 38. In fact it is quite rare for the over $2M count to exceed 50 during any month. Since January 2000 it has happened only 13 times, all but 2 of these occurring since 2018. The monthly total has exceeded 66 only 3 times. All 3 of those times have been during the last 4 months. There have been 627 closed listings over $2 million in 2020, Last year we counted 445. The annual increase is therefore 41%. Is it going to continue in November? Probably, given that there have been 25 closings during the first 5 working days alone. _________________ MikeB Commentary ~ So, money is moving here. And RLSIR is getting the Lyon's share of the luxury sector. The Cromford Daily Observation above counts 101 closed listings in greater Phoenix (ARMLS) over $2M. I must be counting differently somehow, because I get 130! Of those 130 RLSIR is on 52 sides, or 40% of the 130 luxury transactions over $2M. 40 of those 52 sides came from 20 transactions where RLSIR had both sides - most notably Lisa Westcott and Shawna Warners record-breaking $24.1M sale. And on several transactions, one agent or one team double sided the transaction i.e. represented both buyer and seller!

Market Update - 11/5/2020

Market Summary for the Beginning of November

Here are the basics - the ARMLS numbers for November 1, 2020 compared with November 1, 2019 for all areas & types:

• Active Listings (excluding UCB & CCBS): 8,682 versus 14,525 last year - down 40.2% - but up 7.4% from 8,101 last month
• Active Listings (including UCB & CCBS): 13,901 versus 18,322 last year - down 24.1% - but up 4.5% compared with 13,305 last month
• Pending Listings: 7,862 versus 5,919 last year - up 32.8% - but down 1.7% from 7,999 last month
• Under Contract Listings (including Pending, CCBS & UCB): 13,081 versus 9,716 last year - up 34.6% - but down 0.9% from 13,203 last month
• Monthly Sales: 9,992 versus 8,037 last year - up 20.5% - and up 3.6% from 9,641 last month
• Monthly Average Sales Price per Sq. Ft.: $207.37 versus $174.14 last year - up 19.1% - and up 4.3% from $198.84 last month
• Monthly Median Sales Price: $332,000 versus $285,000 last year - up 16.5% - and up 1.6% from $326,800 last month

The flow of new listings remained strong until late October but has started to fade noticeably over the last week. Since we are already very short of supply, this does not bode well for buyers who are likely to be fighting each other over a dwindling list of homes for sale during the last 2 months of the year. With demand at a very high level, especially for the normally quiet fourth quarter, the market is even more out of balance than it was last month.

Closed sales were over 20% higher than in 2019 during October. This is even more remarkable given that in 2019 October had 23 working days, 1 more than in 2020. With the average price per square foot up over 19% from last year, the dollar volume is exceptionally high at $4,272 million, up from $2,786 million last year. And last year we thought we had a strong market. We are running out of superlatives to describe the state of the current market.

Average and median prices are running away skywards, but some of this is fuelled by a sales mix which increasingly favors upscale properties. During October we saw 37 closed listings over $3 million. This is not only the highest total for any October in history, it is the highest total for any month in history. The average for all months since 2001 is 9 and in October 2019 we counted 10.

The size of the market below $300,000 is shrinking fast, constrained by lack of supply and by the fact that last year's home at $270,000 is now priced well over $300,000. However any home priced under $300,000 is likely to see hordes of buyers.

Is there any sign of the upward surge in pricing losing pace. In a word - No.

At this time last year we had no idea of the impending pandemic, but unless something similarly surprising happens in the next few months, the housing market in Greater Phoenix is unlikely to stop rising.

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It's amazing what our Scottsdale offices do.

Of those all-time record breaking 37 closed listings over $3 million (although I count 39), Russ Lyon Sotheby's International Realty was the listing brokerage on 14 of them (36% of the 39 actual) and was the brokerage on both sides of 11 of the 14! Or put another way, we sold 79% of our 14 listings over $3M in October, 2020. AMAZING!!!

Follow this link to see the 39: https://www.flexmls.com/link.html?1j05te2c1jv2,12,1 This link is valid until 12/5/2020.

I think you should be able to use the above in your luxury listing presentation. Afterall, sellers list with us in no small part because they feel we're best qualified to actually 'sell' their property. To be able to say most recently we did, in fact, sell about 80% of our own inventory over $3M is quite a statement.

If your next question is how did we do YTD?

RLSIR was on both sides of 25 of the 80 closings in ARMLS over $3M YTD, or 31%. Selling roughly a third of our own inventory is also amazing, but puts perspective on just how amazing was October of 2020!