By John Cabezas
with LIV AZ Realty
I recently had a conversation with a client who said he was going to wait until the housing market crashed again before purchasing a home. His reasoning was, as he put it, “Everyone keeps telling me that the pandemic will drive another housing crash.” He believes that the market will become a buyers’ market before the end of the year.
I explained to him that those that know and understand the real estate market are predicting a strong sellers’ market into 2021 and perhaps beyond. Unlike the previous real estate market crash, lenders guidelines are as strict as they have ever been. Those that can purchase, and have purchased, were and must be well-qualified.
At the start of this year, Realtor.com released their Housing Recovery Index. The index is a weekly guide. The index shows if and how the COVID-19 outbreak impacted the real estate market. The index looks at four key components of the housing industry:
1. Housing Demand – Growth in online search activity
2. Home Price – Growth in asking prices
3. Housing Supply – Growth of new listings
4. Pace of Sales – Difference in time-on-market
The index compares the current status “To the January 2020 market trend, as a baseline for pre-COVID-19 market growth. The overall index is set to 100 in this baseline period. The higher a market’s index value, the higher its recovery and vice versa.”
The graph below charts these four components. It shows how the real estate market started out strong in early 2020, and then dropped at the beginning of March, when the COVID-19 outbreak shut down the economy. More importantly, it shows the strength of the recovery since the outbreak.
The current index of 107.7 is at its highest point of 2020. This includes the time prior to the COVID-19 economic shutdown.
All Indicators Show The Momentum Still Building
Yes, there is some evidence that the overall economic recovery may be slowing, but the real estate market is still strong and getting stronger.
On a weekly basis, Zillow.com consistently tracks the number of homes that go under contract. In fact, their latest report confirms the continued strength of the market. Buyer demand is steadily and dramatically outpacing last year, and the percent increase over last year is growing. All in all the indications are for a strong real estate market well into 2021, and perhaps beyond.
Frank Martell, President and CEO of CoreLogic, explains it best: “On an aggregated level, the housing economy remains rock solid despite the shock and awe of the pandemic.”
If you are waiting for the market to become a buyers market, you will be waiting well into 2021 and perhaps 2022. Arizona is experiencing a large influx of new residents from multiple states. California, Illinois, and Washington are where most new residents are coming from. Arizona has never been in a better position for continued growth.
A Cuban born immigrant and businessman, John spent 25 years as an executive in corporate America, has co-written a real estate ‘How To’ book, is a three-time guest on Real Estate Matters (960AM) Talk Show and is currently a partner and Realtor at LIV AZ Realty. In his 20 years as a Realtor, John has been involved in major remodel and renovation projects throughout the Valley. View his real estate blog at livazrealty.com.