🏡 Phoenix Market Update – May 2020

we are still helping Arizona buy and sell homes, albeit under slightly different circumstances than normal. We’ve had time to look at the data from April, and as we turn in to May we seem to be finding solid ground. Listing counts spiked but have since leveled off; new contracts were in freefall, but have since found footing, boding well for sales which are down more than 20% since last month. Pricing has weakened slightly, thanks to an abnormal sales mix caused by the summer lull coming two months early in the luxury market. We anticipate less volatility in May than in April, as we see normalizations in both demand and supply, but we do not anticipate a rapid return to normalcy. 
Local & National Headlines
  • Arizona & National Unemployment  – There are now more than 250,000 Arizonans receiving unemployment benefits as of April 25th, up from 170,000 the week before. posted over 420,000 new unemployment filings in the last 5 weeks ending through April 25th, roughly 11.5% of Arizona’s labor force. Across the rest of the country, jobs reports are showing 30 million Americans are currently unemployed. more from www.azcentral.com
  • Fannie, Freddie & Forbearance – Government Sponsored Entities (GSE) such as Freddie Mac and Fannie Mae announced today that borrowers will never be asked to repay missed payments in one lump sum. The announcement clarified that 4 options will be available for those experiencing hardship and elect for forbearance. more from www.mortgagenewsdaily.com
    • Repayment Plan – allows borrowers to pay their regular monthly payment and an additional amount
    • Payment Deferral or Modification – monthly payments kept as originally agreed, missed payments added to end of the loan
    • Loan Modification – changing the interest rate, loan term, or other feature to lower the original payment amount 
    • Full Repayment – missed payments are repaid, and the loan is back on track
  • Mortgage Applications Up, Contracts Crater –  signed contracts for existing homes fell by more than 20% from February to March and fell by 16% on a year-over-year basis. This isn’t exactly a surprise, as touring open houses isn’t exactly outlined as something to do under social distancing guidelines. On the West Coast, new contract counts fell the hardest, down more than 21% when compared to the same period last year. NAR Cheif Economist Lawrence Yun is now predicting that nationally, home sales will be down 14% for 20202. more from cnbc.com
  • ASU to Resume in Fall 2020 – In March, Arizona State University announced that online classes would continue through the spring semester. Today we get some good news, University President let students know that classes will begin again in-person for the Fall Semester starting August 20, 2020. This is great news for not only students, but the businesses near the university, landlords who rent to university students and faculty, and more. more from www.fox10phoenix.com
Local Market Data
Stats for May 1, 2020, compared with April 2, 2020:
  • Active Listings: 14,051 vs. 13,450 last month – up 4.47%
  • Pending/Under Contract: 5,696 vs. 6,040 last month – down 5.7%
  • Monthly Sales: 7,136 vs. 9,117 last month – down 21.7%
  • Monthly Avg. Sales $/Ft.: $184.19/ft vs. $186.44/ft last month – down 1.2%
  • Monthly Median Sales Price: $300,000 vs. $302,000 last month – down 0.67%
  • Days on Market: 50 days vs. 56 days last month – down 10.7%
    • *lowest since 2006
$/Square Foot for Major Cities in Phoenix
  • Avondale – $136.07/ft  vs. $135.62/ft last month – up 0.33%
  • Buckeye – $142.65/ft  vs. $140.54/ft last month – up 1.55%
  • Chandler – $192.03/ft vs. $185.75/ft last month – up 3.38%
  • Fountain Hills – $245.55/ft vs. $239.79/ft last month – up 2.4%
  • Gilbert – $178.66/ft vs. $177.66/ft last month – up 0.56%
  • Glendale – $160.04/ft vs. $157.29/ft last month – up 1.75%
  • Goodyear – $154.02/ft vs. $153.20/ft last month – up 0.54%
  • Mesa – $175.87/ft vs. $172.71/ft last month – up 1.83%
  • Paradise Valley – $442.45/ft vs. $450.38/ft last month – down 1.76%
  • Peoria – $168.60/ft vs. $169.28/ft last month – down 0.4%
  • Phoenix – $194.28/ft vs. $191.54/ft last month – up 1.43%
  • Queen Creek – $149.44/ft vs. $145.58/ft last month – up 2.65%
  • Scottsdale – $297.36/ft vs. $291.07/ft last month – up 2.16%
  • Surprise – $151.61/ft vs. $146.94/ft last month – up 3.18%
  • Tempe – $201.02/ft vs. $196.48/ft last month – up 2.31%
Breaking Down the Local Data
Luxury Lulls & The Mix – When looking at market averages or headlines, the typical metrics looked at when it comes to housing are $/ft and median or average sales price. It’s okay, it’s natural, and most of the time these numbers will give you a pretty good idea of what is going on. When you see these numbers, however, it is important to consider the mix of homes sold. What exactly is “the mix”?
Think of the real estate market as a body of water, which rises and falls based on changes in average $/ft market-wide. While we see a smooth surface rising and falling, the headline number doesn’t always tell us what is happening underneath. The mix is what happens underneath; 400k homes priced around $200/ft (record-breaking $/ft figures) while luxury homes that sell for $300+/ft aren’t selling at all, and the data would tell us that home prices are falling. The luxury market has stalled in epic fashion over the last 6 weeks, skewed the sales mix dramatically, and dragged down the two most popular metrics with it.
Two metrics we like to turn to when we feel the headline numbers paint a poor picture is Listing Success Rate and Months of Supply. Looking at the data below, we can see that while there has been moderate weakness in the middle price brackets, the luxury brackets over $500k have been the hardest hit. Overall, the Listing Success Rate of the market is only down about 9% from an all-time record high of 89%.
  • Listing Success Rates – Feb 2020 vs. April 2020
    • $0k-$200k: 88% vs. 80% -9.0%
    • $200k-$300k: 93% vs. 88% -5.4%
    • $300k-$500k: 89% vs. 84% -5.6%
    • $500k-$1mm: 84% vs. 69% -17.9%
    • $1mm-$1.5mm: 73% vs. 53% -27.4%
    • $1.5mm-$2mm: 63% vs. 54% -14.3%
    • ENTIRE MARKET: 89% vs. 81% -9%
Months of Supply is the measure of how long it would take for a market (or market segment) to sell its entire inventory with no listings coming online; the formula is sales per month divided by current listing count. For many years, a “balanced” market was considered 6 months of supply, but modern-day wisdom suggests 4 months is more accurate threshold; it takes less time to buy a house, and houses are more accessible to the public than ever due to the internet). When there are less than 4 months of supply, the market tends to favors sellers. A quick look at the chart below shows us that the homes priced between $150k-$350k have less than half supply required to be considered to be a balanced market (less than 2), and homes up to $600k are still well-within a seller’s market (less than 4). 
New Listings Level Off, Fall – The number of homes for sale in the Arizona Regional MLS appears to have leveled off in the last two weeks, after more than a month of double-digit percentage growth.
As shown in the most recent data available above, the number of Active listings is falling once again. This is important because while demand is running slightly below seasonal levels, there is still a severe shortage of homes, and a continued surge in listings over several months could bring downward pressure on pricing.
Just for fun, the chart below is the same data as above, but including 2005/2006.
I wanted to include this to contract he extreme move in Active Listings was in 2005/2006, and how comparatively small this recent change in Active Listings has been. This rush of new listings is statistically larger due to a lower starting sample, but is similar in size to the seasonal rise in listings we typically see during the spring selling months here in Phoenix. In fact, we didn’t get a spring selling season as inventory never rose per seasonal fashion.
Listings Under Contract Stabilize – Under Contract Listings are a crucial metric for measuring demand, for two reasons: 1. UC listings are a near real-time pulse on the market, 2. UC Listings eventually close (typically), and are a good look at sales counts before they actually show up in the data.
Fewer Listings Under Contract is an indication of fewer future sales and less market activity overall, not necessarily lower prices market-wide.
The chart above of the latest data shows us a few interesting things.
  1. The number of listings going under contract was in freefall for over about a month, with escrows canceling left and right, and buyers hiding out at home
  2. The drawdown in Under Contract listings occurred at the busiest time of year, with
  3. We are starting to see what looks like more even ground, and it appears activity is returning to the market despite the stay at home order. We are not only seeing an increased number of virtual showings but an uptick in self-guided open house traffic and sight-unseen offers.
Case-Shiller® 20-City Composite House Price Index- Feb.20 vs. Dec.2019
Please note that these figures represent housing data as of the end of February, and illustrate just how backward-looking the Case-Shiller® Index really is; we won’t see March’s data until nearly June. That data will be very interesting due to the fact that cities such as San Francisco, Los Angeles, Seattle, and New York are under the most heavy-handed lockdowns. Phoenix continues to lead the pack in the 20-city composite index for home price gains nationally, close to double the national average, though slipping slightly in monthly numbers from February.
Month-over-Month Home Price Gains
  1. Seattle +1.35%
  2. Tampa +1.00%
  3. Minneapolis +0.93%
  4. San Francisco +0.90%
  5. Phoenix +0.71%
  6. Denver +0.61%
  7. Portland +0.58%
  8. Atlanta +0.48%
  9. Washington +0.46
  10. San Diego +0.46%
  11. Las Vegas +0.45%
  12. Miami +0.42%
  13. New York +0.39%
  14. Los Angeles +0.32%
  15. Detroit +0.30%
  16. Chicago +0.22%
  17. Cleveland +0.21%
  18. Charlotte +0.21%
  19. Dallas +0.11%
  20. Boston -0.05%
  21. NATIONAL AVG: +0.39%
Year-over-Year Home Price Gains
  1. Phoenix 7.5%
  2. Seattle 6.0%
  3. Tampa 5.2%
  4. Charlotte 5.2%
  5. Minneapolis 5.0%
  6. Boston 4.9%
  7. Portland 4.9%
  8. San Diego 4.6%
  9. Atlanta 4.6%
  10. Cleveland 4.3%
  11. Washington 3.7%
  12. Detroit 3.7%
  13. Los Angeles 3.7%
  14. Las Vegas 3.5%
  15. San Francisco 3.4%
  16. Denver 3.4%
  17. Miami 3.3%
  18. Dallas 2.5%
  19. New York 1.5%
  20. Chicago 0.7%
  21. NATIONAL AVG: 4.2%
We’re starting to see signs of stability and direction in the Phoenix real estate market, more so in the lower price ranges than in luxury. We expect pricing data to remain somewhat weak for the next 4-5 months. While average sale prices may statistically appear to be falling due to the mix of home sales being sold, demand is still far lower than supply, and home prices are unlikely to fall without a glut of homes for sale.  The biggest risk to markets and pricing is the solvency and availability of liquidity amongst mortgage lenders and servicers. 
If you or someone you know is moving soon, we want to help!
If you know someone who we can help, please forward them one of our monthly reports or tell them to give us a call! We hope you’ve found this market update useful, and look forward to the opportunity to work with you in the future. If you have any questions or concerns about the current state of the housing market, or if you would like to discuss the situation presented by the coronavirus. please don’t hesitate to give me a call directly.
Look for our report next month!
About the Author
I've learned through experience that informed buyers and sellers make the best real estate decisions. My top priority is keeping you updated and educated throughout the buying and selling process to ensure you won't be left wondering if you made the best decision.

My fiduciary responsibility to you is to not only be informed on the latest real estate trends in Arizona, but to be available from Day 1 for any questions or concerns you may have whether you're just starting your search or you closed escrow last year. My 100% commitment is a custom-tailored solution for your next purchase or sale, from consultation to close.

I've been helping families move in the Greater Phoenix Area since 2016, but have called "The Valley" home since 2011 and hope I never have to leave. I'm originally from the San Francisco Bay Area, but now live in Optimist Park, Tempe with my dog Katie. When I'm not assisting my clients with their homes, I love to golf, making it to last-minute Diamondbacks games, and breaking away from the city during our many months of great weather.

If you or someone you know is getting ready to buy or sell a home in the Greater Phoenix Area, it would be an honor and privilege to help them. Should you have any questions about the buying or selling process, please don't hesitate to call me at (480) 712-8722.