Supply Down 51%, Slim Pickings in 2021

SUMMARY:  The main headline for 2021 housing market news so far is LOW INVENTORY. In fact, earlier this month we had the lowest number of homes on the market for sale in at least 20 years. Demand for housing continues to increase, from June to December of last year housing demand increased to 35% above normal. Historically low interest rates are fueling the demand.  In December, 33% of all sales closed over the asking price and only 10% included seller-paid closing costs in the 4th quarter. New construction home sales are booming but the builders are not keeping up with the demand.  Median home prices have risen 15.5% year-over-year.   There simply is not enough housing inventory for the number of buyers in the Phoenix Metro Area and buyers need to be prepared, pre-qualified with a lender, and ready to pay full price with no closing cost assistance from the seller if they want to win against the competition.

Full Commentary by Tina Tamboer, Senior Housing Analyst with The Cromford Report:

For Buyers:

There were 111,036 new listings added to the Arizona Regional MLS (ARMLS) in 2020, only 38 more than 2019, while 100,650 sold. As of January 10th, 2021 there were only 6,162 listings still active in the MLS, which is the lowest supply count recorded in at least 20 years. To make matters worse, 10% of those properties are outside of the Greater Phoenix boundary.

While the number of new listings barely changed last year, demand for homes accelerated between June and December to 35% above normal. Luxury sales over $1M soared after the pandemic restrictions were lifted. While they were already up 7.7% over 2019 at the end of June, by the end of December annual luxury sales were up 48.7%, securing an enormous record for 2020 at 2,575 sales over $1M.

Outside of the MLS, new home developers have been struggling to meet demand as well. Despite the roadblocks in production due to the pandemic, forest fires and supply line disruptions, as of November builders still managed to sell 14% more homes and obtain 28,204 more single family permits for future supply, up 24% over 2019. The median price of a new single family home only rose 6% from $333K to $353K and considering the median price of a resale home is $335K, that’s extremely competitive.

As supply began to drop last month, December saw 33% of sales closed over asking price and only 10% in- involved seller-paid closing costs in the 4th Quarter.

Bottom line for buyers starting their search in 2021, be on top of your loan and be ready to pounce on every new listing that fits your needs. Many new listings will be on the market for less than a week prior to ac- accepting a contract.

For Sellers:

The state of Arizona ranked 3rd in the nation for population growth behind Texas and Florida in the latest 2020 Census release. When the full report comes out later this year, we expect to see California as the #1 source of inbound migration for Greater Phoenix. Moving companies such as Atlas, United Van Lines and North American have released their annual migration reports and 2 out of the 3 list Arizona in their Top 5 states for inbound moves. United Van Lines specifically cites “retirement” as the primary reason for 37% of inbound moves, 70% were over 55 years old and 63% made incomes over $100,000 per year.

While median home prices have risen 15.5% year-over-year, the median rental rates through ARMLS have also risen 12.9% from $1,550 to $1,750/month. This increase, combined with historically low mortgage rates, has fueled more demand to purchase.

As the population continues to grow, the housing gap is becoming harder to close. After a decade of under-building, this will take more than a few months or a year to correct. However as prices rise and affordability quickly drops, it’s reasonable to expect some demand to drop with it. With that expectation, home prices are still projected to rise throughout 2021 but possibly at a slower rate in the latter half of the year. It will be another great year for sellers.

Commentary written by Tina Tamboer, Senior Housing Analyst with The Cromford Report ©2021 Cromford Associates LLC and Tamboer Consulting LLC 

Have any questions about how you can buy a home in the Goodyear area just outside of Phoenix?  Or are you thinking about selling your home in the Goodyear area?  I'm here to help!  Contact me at 623-252-9350, I'd be happy to help you get a game plan together for finding a new home.  My goal is to set you up for success with less stress!