By Scott Gaertner
A Case-Shiller report released April 28 showed that Phoenix topped the nation in home price growth immediately before the COVID-19 crisis hit. According to the report, Phoenix’s 7.5% year over year growth beat out Seattle and Tampa for the top spot in the nation. While the report was released at the end of April, the data used was through the end of February. (Note: February 27 was the night of our 2020 market forecast event discussing the unprecedentedly good real estate market.) That honestly seems like a lifetime ago now.
Early-Pandemic Panic
The COVID-19 pandemic hit fast and hard, catching real estate buyers, sellers, and certainly this real estate broker, flatfooted. We are blessed to be selling in Scottsdale North with communities so many people want to be a part of, but March and April were brutal months. Buying or selling homes with no clue where the national economy is headed, to buyers who often can not even physically enter the home, is challenging. Everyone was on edge and cancellations were higher than I can ever remember with terrible reasons for canceling. Due to the prolonged seller’s market, buyers saw the pandemic as an opportunity to have the upper hand in negotiations for the first time in months. But for many, that same uncertainty that created the opportunity proved too large of an obstacle and they backed out of the purchases.
Another reason for higher cancelations is that out-of-state buyers are making offers without actually visiting the properties. Often the buyer’s agent does not share the fact that the buyers have not visited the property with the seller’s agent. This is important information to know when evaluating the strength of the offer, particularly if you have multiple offers.
Pro tip: If the buyer’s agent only communicates via text and e-mails, and never speaks to your agent, there is a good chance this is the reason. They are afraid a conversation will reveal the weakness in the offer. We are having every agent attest by e-mail whether the buyer has been in the home or not.
Speaking of this early pandemic phase, Tina Tamboer, senior housing analyst for The Cromford Report, says home sales in the existing resale market were sharply lower in April, reflective of the six-week decline in accepted contracts following the stock market crash at the end of February. Tamboer says, “Travel restrictions caused by stay-at-home orders and struggling investment portfolios put a damper on the luxury market and retirement communities, which were benefiting the most from inbound migration.”
Things Are Beginning to Turn
I write these articles almost three weeks before the newspaper hits your mailboxes, but as of this writing, things have begun to turn. The country’s economic future is still unclear, but the road ahead for real estate is looking good.
The state dropped the stay-at-home directive and mortgage applications are up significantly, which means buyers are gearing up. The listings under contract statistics have stopped their free fall and also begun to go up. The Cromford Chart below shows that they reached the bottom on April 15 and began moving up.
What Comes Next?
Even though housing supply is 28% higher than it was seven weeks ago, metro Phoenix is still in short supply of resale homes, with under 13,000 active listings. At this time of year, anywhere between 25,000 and 30,000 listings would be what we consider a “normal” market. Clearly there is more demand than what we have for sale right now.
As Michael Orr from Cromford says it: “A clear case can be made that the housing market will not be dramatically affected by the pandemic over the long term, no matter how severe the jolt may be in the short term…Even with the gloomiest of forecasts, Central Arizona has more demand for homes to live in than it has homes available. This is not 2006.”
So if you are looking to buy, the pandemic has created a window of opportunity. If you are looking to sell, now is a great time while the world economy sorts out the real-world effects of all these unprecedented job losses and the acquisition of unheard of governmental debt. Either way, we are here for you.
For more updated information or suggestions on how to succeed in the market as it exists today, give us a call at 480-634-5000. Now more than ever, nobody sells more homes in Scottsdale North than the Scott Gaertner Group.
Scott Gaertner is an Associate Broker with Keller Williams Northeast, who for the past 25+ years has helped more people to find their lifestyle niche in the Scottsdale North area than anyone else. He also contributes his thoughts on lifestyle interests in the area.
