Housing market is heating back up
Source: Arizona Republic | Catherine Reagor
Metro Phoenix’s housing market slowed quickly in the early days of COVID- 19 but is showing signs of bouncing back.
New listings and home sales cancellations climbed in March when many homeowners and homebuyers were worried about making mortgage payments as unemployment soared.
The Valley’s real estate industry didn’t stop though. Real estate agents, mortgage brokers, title agencies, home builders, appraisers and home inspectors donned masks, gloves and figured out how to keep home sales going during the health and economic crisis.
Now, pending home sales in the Phoenix area are climbing again, prompting housing analysts to call for less of a housing market slowdown this summer than previously expected.
“We have very low inventory, which will keep the housing market from collapsing,” said Mark Stapp, real estate expert and director of the Master of Real Estate Development program at ASU’s W.P. Carey School of Business. “It will take until early to mid-July to see the full impact on the market.”
He said how much the Valley’s housing market cools will depend on how many people receive benefits from the government stimulus package and if those benefits are enough to help people avoid credit problems, evictions, foreclosures and taking on more credit-card debt.
No crash expected
Metro Phoenix’s housing market started 2020 so strong, housing analysts said it would take a catastrophe to slow it.
Then when the novel coronavirus hit the U.S., housing experts forecasted home sales could slow by as much as 80% during this summer.
But based on an almost 50% increase in contracts signed to buy Valley homes since then, Tina Tamboer, senior real estate analyst with the Phoenix-based Cromford Report, said COVID-19’s impact on the housing market likely will not be that extreme.
“Home sales have turned the corner, and it doesn’t look like prices will be impacted significantly,” Tamboer said. “More sellers are offering concessions, but we aren’t seeing a big decline in home prices.”
She and other housing market experts don’t see a crash looming for the Valley’s housing market.
Less of a slowdown than expected
Metro Phoenix’s median home price hit a record of $302,500 in March based on sales contracts signed pre-pandemic in January and February.
Home sales, a lagging indicator, still will be down during late spring and early summer.
“It’s clear now Phoenix-area home sales are better than our initial projections,” said Arizona housing expert Jim Belfiore. “We are now projecting second- quarter sales will come in 50% below where they were last year.”
He said while resale home prices have moderated, new home prices continue to climb due to demand from buyers.
March 2020 was the best month for new home sales since the housing boom in 2005.
Real estate industry kept going
Metro Phoenix’s real estate industry quickly transformed to deal with the requirements of a state on coronavirus lockdown.
Arizona Gov. Doug Ducey, who issued a stay-at-home order that lasted some six and a half weeks, deemed certain industries, including real estate, as essential and allowed them to continue to operate.
Real estate agents, home inspectors and those who work at title agencies, mortgage firms and home builders shifted more services online, provided masks to employees and customers and installed makeshift hand-washing stations.
“People need a place to live. Home sales aren’t going to stop,” said Phoenix real estate agent Christa Lawcock of Realty Executives, who continued to hold open houses. “We just need to be careful.”
Virtual home tours jumped during the past few months, and technology made real estate transactions easier and faster.
Sheryl Palmer, CEO of Scottsdale based Taylor Morrison, said that 20% of the home builder’s April sales were done via technology and not in person from start to finish.
That’s more than double from last year.
The stock market crash due to COVID- 19 has impacted the Valley’s luxury housing market the most, which is typical as those buyers and sellers lose the most money when share prices fall.
But metro Phoenix fares better in recessions that aren’t real estate driven.
“Remember in 2008, the stock market crashed because of real estate,” she said. “Real estate doesn’t crash because of the stock market.”
Belfiore is forecasting third-quarter Phoenix-area home sales will be 30% below 2020’s third-quarter pace.
What home buyers can expect
It’s still a seller’s market in metro Phoenix, but there are fewer bidding wars on the most affordable homes.
More sellers are offering concessions now, including paying some closing costs.
Mortgage lenders are requiring higher credit scores because of economic concerns.