Phoenix Market Update – February 2020
March is here, the spring selling season is well underway in the Phoenix. and what interesting times we live in.
COVID-19 (coronavirus) is sending shockwaves of volatility through global financial markets not seen since the Financial Crisis. Investors spooked by the coronavirus have flocked to buying safe havens such as US Treasuries (bonds), driving prices of those safe havens up. Why does this matter to you?
Due to the interconnectivity of bonds and mortgage-backed-securities, mortgage interest rates (the cost to borrow) on a 30-year fixed term hit an all-time low of 3.2% according to Mortgage News Daily.
Here are the current market stats for March 1, 2020 compared with February 1, 2020 for the entire Phoenix Metropolitan Area:
- Active Listings: 11,003 vs. 11,974 last month – down 8.1%
- Pending/Under Contract: 7,215 vs. 5,969 last month – up 20.9%
- Monthly Sales: 7,450 vs. 6,461 last month – up 15.3%
- Monthly Avg. Sales $ per Sq. Ft.: $185.11 vs $182.20 last month – up 1.6%
- Monthly Median Sales Price: $295,000 vs. $289,900 last month – up 1.8%
Want to know more about a specific Zip Code or City?
Housing walks away relatively unaffected when compared to other parts of the economy during a pandemic scare but that isn’t to say that housing won’t be indirectly impacted. We have been saying for some time now that the US and Arizona economy, as well as AZ housing, have been on a hot streak, and that it would take a large exogenous event to change the scenario.
It remains to be seen whether or not COVID-19 will have an adverse impact on the health of the Phoenix housing market, and we are monitoring levels of demand and the contract ratio for any noticeable drop-off; nothing yet, but if we see something we will be sure to report it. However, there are still a few ways that a pandemic, particularly one affecting the output of China, can affect Arizona real estate:
1. The Wealth Effect: The Wealth Effect is a behavioral economic theory suggesting that people tend to spend more as the value of their assets (stocks) rises. More affluent home buyers tend to hold large portions of their capital in stock, and a drop in stock prices such as what we’ve seen in the last two weeks tends to dampen the luxury market. The wealth effect is not nearly as pronounced throughout the rest of the housing market, but still exists.
2. Tourism: In 2019, Spring Training and related tourism brought in more than $500 million in additional revenue to Phoenix businesses and supports over 6,500 jobs. Due to the timing of the coronavirus hitting mainstream news, we would not be surprised to see reduced travel, lighter restaurant, ball game, and event attendance. We would not be surprised to see event cancellations which would not be good for local GDP. If business revenues are impacted, it is only logical that wage growth would be impacted to some degree, and potentially cause a drag on the housing market should a large enough disruption occur.
3. Imported Materials: Factory closures in China to this degree remind us how small the world has become due to global trade. While a noticeable portion of new construction materials are manufactured in China, a more significant portion of remodeling materials come from China. We would not be surprised to see some disruptions in the home remodeling business supply chain over the next few weeks, potentially extending into the summer.
$/Square Foot for Major Cities in Phoenix:
Avondale – $133.60/ft
Buckeye – $139.22/ft
Chandler – $185.46/ft
Fountain Hills – $230.53/ft
Gilbert – $176.05/ft
Glendale – $156.08/ft
Goodyear – $145.61/ft
Mesa – $171.77/ft
Paradise Valley – $471.12/ft
Peoria – $163.60/ft
Phoenix – $182.97/ft
Queen Creek – $146.95/ft
Scottsdale – $291.65/ft
Surprise – 147.35/ft
Tempe – $197.14/ft
We are constantly looking for new trends and data to give our clients an edge when it comes to buying or selling their next home.
If you or someone you know is thinking about making a move and would like help navigating this market, we would like to extend the invitation to talk to our team.
We hope you’ve found this market update useful, and look forward to the opportunity to work with you in the future.