🏡 Phoenix Real Estate Update – December

Phoenix Real Estate Update – December 2020

We’re back with our final report for the wild year of 2020! I want to thank all the readers who have stuck with me throughout the year during this crazy real estate market. As always, if you have any questions about our Monthly Reports or where this real estate market might be headed, please contact me! I look forward to another year of market analysis in 2021; thank you again!
The Cromford Market Index, aka the Supply vs. Demand Index, is the broadest measure of housing market sentiment that we have for the Phoenix Metro area. When strength or weakness first shows its head, it shows up here first. Right now it is showing renewed strength into the end of the year.
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After spending 2 months edging higher slightly since the end of summer, the Index began rising much more rapidly at the end of October. We will continue to see this Index rise until we see a large new arrival of listings hit the market.
Local & National Headlines
2021: AZ Economy – ASU JP Morgan Chase Economics Outlook Center is forecasting a return to normalcy in 2021 for Arizona’s ecconomy; with job growth outpacing estimates even through the pandemic and it’s effects. Forecasters call for approximately 100,000 in the state in order to return to pre-pandemic levels; Arizona is slated to procude and additional 115,000 by the end of 2021.
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ASU forecast: Arizona, U.S. could be back near economic normal in 2021
It isn’t a painless recovery, and certain sectors — lodging, restaurants and entertainment in particular — could co…
The Arizona Republic
FHA Raises Loan Limits – Great news for homebuyers in 2021! The FHA has increased their maxiumum loan limit for Maricopa County by more than 10%! The new limit for 2021 is set for $368,000, up from $331,760 in 2020.
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FHA raises loan limit by nearly $25,000 for 2021 – HousingWire
Given massive year-over-year gains in home prices, the Federal Housing Administration (FHA) is raising its 2021 loan lim…
HousingWire
Glendale, Goodyear, Mesa: Growth – New development projects in Phoenix Valley cities are driving growth, includng the Novus Innovation Corridor in Tempe.
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These projects are igniting Arizona’s economy | AZ Big Media
In 2020, Arizona saw economic development wins all over the stateI, new projects were being built, and new companies wer…
AZ Big Media
Phoenix Metro Market Data
Market Stats – December 1, 2020, compared with November 1, 2020
  • Active Listings: 7,388 vs. 8,584 – down 13.4%
  • Pending/Under Contract: 7,347 vs. 8,002 – down 8.9%
  • Sales per Month: 9,269 vs. 9,700 – down 4.44%
  • Active Listings $/ft: $273.28/ft vs. $268.20/ft – up 1.89%
  • Average Sales $/ft.: $207.48/ft vs. $208.10/ft – down 0.30%
  • Monthly Median Sales Price: $330,000 vs. $332,000 – down 0.60%
  • Days of Inventory: 44 days vs. 50 days – down 12.0%
  • Days on Market: 40 days vs. 49 days – down 10.82%
$/Square Foot – December 1, 2020 compared with November 1, 2020
  • Avondale – $152.70/ft vs. $152.05/ft – up 0.43%
  • Buckeye – $153.56/ft vs. $156.94/ft – down 2.15%
  • Chandler – $206.39/ft vs. $204.96/ft – up 0.70%
  • Fountain Hills – $257.48/ft vs. $257.79/ft –  down 0.12%
  • Gilbert – $196.67/ft vs. $194.25/ft – up 1.25%
  • Glendale – $180.59/ft vs. $175.39/ft – up 2.96%
  • Goodyear – $169.65/ft vs. $166.75/ft – up 1.73%
  • Mesa – $184.62/ft vs. $181.77/ft – down 0.10%
  • Paradise Valley – $402.54/ft vs. $434.03/ft – up 10.8%
  • Peoria – $183.18/ft vs. $184.49/ft up 0.22%
  • Phoenix – $213.26/ft vs. $206.66/ft – up 1.08%
  • Queen Creek – $162.25/ft vs. $160.06/ft –  up 1.72%
  • Scottsdale – $302.90/ft vs. $306.16/ft – up 5.21%
  • Surprise – $157.37/ft vs. $154.08/ft down 0.12%
  • Tempe – $216.24/ft vs. $211.97/ft – up 1.54%
  • OVERALL MARKET: $221.81/ft vs. $220.87/ft – up 1.68%
Price Gains Ease
According to our records, month-over-month $/ft price gains from October to November averaged 4.9%. From November to December we saw around 2.6%. Please note that this does not mean that every home in the Phoenix Valley increased by 7.5% in the last two months, this is just the average gain in $/ft. That said, the entire Phoenix Valley has seen remarkable price growth since the beginning of the year.
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Seasonally it is normal to see price gains take a breather during the holiday season as both buyers and sellers withdraw from the marketplace. We don’t anticipate much of a breather for price through the holiday season this year given how tight inventory still is.
Luxury Sales Break Records
The chart below compares shows total sales volumes in the Phoenix Metro area for Q3 2019 vs Q3 2020. All brackets experienced growth in sales volume, except for the sub-$250,000 bracket, due to the sheer lack of homes available in that price range. 
Dollar Volume for Closed Listings 3Q 2019 3Q 2020 Change
Under $250,000 $1,937M $1,363M -30%
$250,000 to $500,000 $4,304M $5,460M +27%
$500,000 to $1 million $1,651M $2,719M +65%
Over $1 million $759M $1,635M +115%
To add to the strength in sales volumes we’ve seen in Q3, October saw more than 100 listings that closed over $2,000,000, nearly 3 times the previous record for October of 38 in 2019. In November, 90 listings over $2,000,000 closed, nearly double the previous record set in November 2019.
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We are truly seeing astounding strength in our luxury housing market, an indication that strength in the rest of the market is here to stay for at least a while. When wealthy people are buying real estate in droves around you, that is a good sign. 
Tis’ The (Slow) Season
For new listings, at least. December is our slowest month of the year when it comes to new homes being listed for sale. If you’re a buyer looking rush of new listings, the next 30 days are historically bleak. That said, new listing strength in January typically makes up for weakness in the preceding December, so buyers who are sitting on the sidelines will want to have their financing ready when new listings hit the market in January.
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Between the holidays and personal tax planning, many of our clients who have not already sold this year are choosing to list their homes until after the end of the year. This indicates to us that there will continue to be competition from buyers for any available properties, and any homeowners who list during this time will be able to take advantage of thin inventory.
Rental Price Remain Elevated
The case for Phoenix as a desirable location for investment property continues as average rental prices remain elevated. The average price per square foot of a rental property in the Phoenix metro area is around $1.17/ft, up nearly 20% from December 2020. Where rental prices go from here will be a function of the amount of homes available for sale, and we consistently see that metric fail to improve.
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Why, you might ask? There are a couple of reasons.
  1. Low Inventory: particularly in entry-level price brackets. With more buyers competing for the fewer homes, buyers without strong qualifications are beat out in multiple-offer situations. If this occurs enough times, buyers run out of time if they are currently renting, and are forced to resign leases.
  2. Migration & Relocation
    1. Location Decision: recent migrants to the Phoenix area are faced with a tough choice in determining where to live. Many choose to rent for 6 months or a year, allowing them to find the part of town in which they want to purchase.
    2. Morgage Qualification: recent migrants to Phoenix who have transferred jobs will often be required to hold their new positions for an amount of time before qualifying for purchase, forcing them to rent until becoming more established.
The Bottom Line:
BUYERS: The number of available homes for sale is falling as we enter the holiday season, as homes continue to sell faster than they are listed. This time of year is historically slow, and this year looks to be no different. If you’re a buyer, you have probably looked through their lists of available homes several times with no new contenders, so we have some advice:
  • Get your financing in order for your purchase, obtain a prequalification with a lender now, and you will be ready to strike when more homes are listed in January
  • Competition will still be fierce for available homes, as pent-up demand from the holiday season is now unconstrained by buying hurdles
  • If you are using FHA financing, you can now start shopping higher! The new limit is $368,000!!
SELLERS: After several weeks of rising supply, the number of homes for sale is turning down once again for the holiday season. There is still fierce competition for housing here in Arizona. Buyers choosing to shop during this time will be the most motivated. 
  • Price your home competitively, doing so will result in a multiple offer situation, giving you the best chance to get the highest price. 
  • Look for buyers with HIGH down payments who may be able to obtain appraisal waivers for the purchase of your home
  • Cash and conventional offers remain strongest! 
Do you know someone who is moving soon? We want to help!
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.