🏡 Phoenix Real Estate Update – July 2020

🏡 Phoenix Real Estate Update – July 2020

We hope you had a great holiday weekend, even if the celebrations may have had less of a bang than years past. At the time of our June report, it was starting to seem like life was returning to normal; much of the country was reopening after the first brunt of COVID-19 related shutdowns, local home purchase and listing activity were on the rise, and many of those who had been laid off or furloughed had begun to return to work.
In the past few days, new rules have come down from Arizona’s State Government once again closing establishments not deemed essential. Real estate activity remains largely unaffected by these new restrictions at the moment, though we are taking extra precautions by wearing masks for the safety of our clients.
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The resiliency of the Phoenix housing market was thoroughly demonstrated during the second quarter of 2020. If you took a nice, long nap starting somewhere in the middle of March, and woke up last week, you probably wouldn’t notice much difference in the housing market, except that prices are higher and there are even fewer homes for sale. Some zip codes are dealing with inventory drawdowns of more than 90% (looking at you, Chandler), and the historically slow summer listing environment doesn’t bode well for buyers looking to purchase property. Sellers already on the market likely amazed at the response their homes are receiving. 
Local and National Headlines
Arizona: Jobless Claims Rise – While we’re still waiting for the final numbers from the last week of June, we know that new unemployment insurance claims are starting to tick up once again. UI Claims had been falling for more than a month as Arizona attempted to reopen, but no as more businesses are forced to close, and as businesses are forced to close permanently, new claims are on the rise. It does not help that AZ is no experiencing UI claim system fraud much like what the State of Washington experienced, forcing them to halt their program. more from azcentral.com
New Low for Mortgage Rates – Mortgage rates across the board are falling further, with rates on the 30-yr fixed trending between 2.94% and 3.29%, with most borrowers hitting near 3.09%. Rates on the 15-year fixed are as low as 2.56%.  more from yahoo finance
Construction Spending Holds – On an annual basis, construction spending managed to eke out a slight 0.3% gain against 2019’s figures, while down 2.1% from April 2020. Low funding costs from cheap rates continue to drive development in single-family and high-density multifamily sectors. more from mortgagenewsdaily.com
Local Market Data
Market Stats for July 1, 2020, compared with June 1, 2020:
  • Active Listings: 8,864 vs. 11,078 – down 19.99%
  • Pending/Under Contract: 7,965 vs. 7,224 – up 10.26%
  • Sales per Month: 9,757 vs. 6,986 – up 39.67%
  • Monthly Avg. Sales $/Ft.: $183.60 vs. $179.69 – up 2.18%
  • Monthly Median Sales Price: $306,000 vs. $293,000 – up 4.44%
  • Days on Market: 55 days vs. 49 days – up 12.24%
Market Stats for July 1, 2020, compared with January 1, 2020
  • Active Listings: 8,864 vs. 12,141 – down 26.99%
  • Pending/Under Contract: 7,965 vs. 4,662 – up 70.85%
  • Sales per Month: 9,757 vs. 7,789 – up 25.27%
  • Monthly Avg. Sales $/Ft.: $183.60 vs. $179.85 – up 2.09%
  • Monthly Median Sales Price: $306,000 vs. $289,500 – up 5.70%
  • Days on Market: 55 days vs. 70 days – down 21.43%
$/Square Foot for Major Cities in Phoenix, July 1 compared with June 1, 2020:
  • Avondale – $143.61/ft vs. $134.66/ft – up 6.65%
  • Buckeye – $142.62/ft vs. $139.73/ft – up 2.07%
  • Chandler – $187.03/ft vs. $187.77/ft – down 0.39%
  • Fountain Hills – $237.91/ft vs. $240.24/ft –  down 0.97%
  • Gilbert – $177.35/ft vs. $179.36/ft – down 1.12%
  • Glendale – $160.69/ft vs. $160.62/ft – up 0.04%
  • Goodyear – $152.11/ft vs. $148.63/ft – up 2.34%
  • Mesa – $174.56/ft vs. $174.94/ft – down 0.22%
  • Paradise Valley – $434.87/ft vs. $389.87/ft – up 11.54%
  • Peoria – $165.35/ft vs. $173.90/ft down 4.92%
  • Phoenix – $200.77/ft vs. $195.85/ft – up 2.51%
  • Queen Creek – $150.25/ft vs. $152.50/ft –  down 1.41%
  • Scottsdale – $280.39/ft vs. $286.01/ft – down 1.96%
  • Surprise – $149.23/ft vs. $144.42/ft up 3.33%
  • Tempe – $202.20/ft vs. $203.38/ft – down 0.58%
  • OVERALL MARKET: $197.27/ft vs. $194.13/ft– up 1.13%
$/Square Foot for Major Cities in Phoenix, July 1 compared with January 1, 2020:
  • Avondale – $143.61/ft vs. $134.88/ft – up 6.47%
  • Buckeye – $142.62/ft vs. $136.11/ft – up 4.78%
  • Chandler – $187.03/ft vs. $182.65/ft – up 2.40%
  • Fountain Hills – $237.91/ft vs. $241.28/ft –  down 1.40%
  • Gilbert – $177.35/ft vs. $169.22/ft – up 4.80%
  • Glendale – $160.69/ft vs. $155.07/ft – up 3.62%
  • Goodyear – $152.11/ft vs. $146.09/ft – up 4.12%
  • Mesa – $174.56/ft vs. $167.34/ft – up 4.31%
  • Paradise Valley – $434.87/ft vs. $437.50/ft – down 0.60%
  • Peoria – $165.35/ft vs. $168.59/ft down 1.92%
  • Phoenix – $200.77/ft vs. $187.72/ft – up 6.95%
  • Queen Creek – $150.25/ft vs. $149.92/ft –  up 0.27%
  • Scottsdale – $280.39/ft vs. $277.09/ft – up 1.19%
  • Surprise – $149.23/ft vs. $145.19/ft up 2.78%
  • Tempe – $202.20/ft vs. $189.17/ft – up 6.89%
  • OVERALL MARKET: $197.27/ft vs. $192.52/ft– up 2.98%
Breaking Down the Local Data
Active Listings
If you’re currently searching for a home to purchase in the Phoenix area, chances are that you’re frustrated. The number of homes for sale has taken a tumble and now sits at a 15-year low; we last saw this amount of homes for sale in September 2005. Some zip codes are dealing with inventory drawdowns of more than 90%, far below what was seen in the run-up before the housing crash. To paint a picture, recent images have been floating around on social media of Open House lines in the Phoenix Valley that are more than 30 people long in areas seeing the most market frenzy.
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If you’re a homebuyer searching under $300,000, chances are that you are more than frustrated and likely becoming a bit stressed. As Realtors, we feel your pain, our lives are much harder or more stressful when there are so few homes for sale. In a metropolitan area of more than 4,800,000 million people, there are just 747 homes for sale for less priced less than $300,000. For reference, there were 1,857 homes for sale at the beginning of the year, and 4,000 for sale at the beginning of 2019.
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If you’re a buyer between $300,000-$500,000, as are the majority in the Phoenix Valley area, you’re not quite as worried but you’re still only working with 65% of the inventory at the beginning of 2020. Expect there to be continued competition for homes in the price range until the fall selling season, and likely beyond that. There are large fundamental migration trends occurring, especially with buyer relocation from states with higher costs of living both near and far. Only Texas outpaces Arizona in population and job growth.
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If you’re buying in the $800,000+ range, compared to recent trends, there are slightly fewer homes for sale than you might expect in the middle of summer, but supply levels remain relatively normal.
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Condos/Townhomes/Patiohomes
Much of what we focus on with these reports is the action in the single-family residence market, reason being that it makes up the majority of the housing market in the Phoenix Valley. The supply of condos has not been impacted nearly to the degree that single-family homes have been; the overall supply of single-family homes has fallen 32% while condo supply has fallen just 7% after a 50% increase from March to April. 
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The simple explanation is that people are fearful of being near one another and want more space, thus opting to move to single-family homes. This likely explains the bulk of this movement, but not all of it. This chart also represents investors, particularly those looking for higher returns via VRBO properties, getting squeezed out of their properties without serious buyer interest. We are now seeing buyer activity return in the condo market, though as slower pace than the single-family market.
Contract Ratios
Contract ratios the contract ratio represents how many homes are Active versus UCB/Pending. They’re a good way to measure how “hot” a market is i.e. how fast are homes selling, or, are sellers getting full asking price or multiple offers. We like to use this tool to watch for market changes and also feature on our website. If you’re currently looking for a home to purchase in any zip codes that are shaded dark red or gray, you’re currently in for an uphill battle.
On our map, “Insanity” means that for every 1 home that is available, 5 are already taken. If you’re buying in any of these areas, expect multiple offers on quality properties that are priced right, and don’t hold your breath for price reductions until we see Active listings start to reverse course and go up dramatically. This will naturally occur as we approach the fall season, but demand should return right alongside and difficulty level will remain the same or become even tougher for entry-level SFR buyers in the Phoenix Valley.
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Here are a few of the more popular valley zip codes with contract ratios that are…eyewatering. For reference, a balanced market is considered 1:1, and an extremely hot market is around 2:1. If you are a seller in any of these zip codes, in all of history there has never been a better time to sell; for the first time in my career I can say that with no fluff.
  1. 85224 (Chandler) – 15:1
  2. 85306 (Glendale) – 9:1
  3. 85043 (Phoenix) – 8.75:1
  4. 85392 (Avondale) – 8.67:1
  5. 85035 (Phoenix) – 7.83:1
  6. 85031 (Phoenix) – 7.5:1
  7. 85204 (Mesa) – 5:1
  8. 85208 (Mesa) – 5:1
  9. 85296 (Gilbert) – 4.9:1
  10. 85225 (Chandler) – 4.7:1
The long and short of the current situation is that we are seeing large distortions on the supply side of the market, especially amongst the broader market in homes priced around $400,000 or less. In the higher price brackets of the market, specifically in properties priced $600,000
BUYERS: Quality properties are lasting a day or two on the market right now. We are advising our buying clients that can’t wait to offer aggressively on properties they find attractive. For those who can afford to wait, this is likely not the best time to get a great deal on a property. We are also preparing our clients for competition above asking price and giving them an edge with the use of escalation clauses. 
SELLERS: We are advising clients that are selling to not over-bid the market, but rather price their homes competitively and in-line with comparables, then watch the offers roll in. You’ll be able to accept the strongest of many offers, and you’ll want to watch out for offers that appear strong. The housing market is hot and properties are selling above asking, but we are starting to see low appraisals creep back in, especially for properties selling above $600,000. Watch for offers that appear strong, but buyers that won’t be able to pay additional cash settlement above a potentially low appraisal.
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.